instructions: 1. read country brief. 2. select one ...wbgx+f4d01x+1t2017+type@asset+block@... · 1...
Post on 27-Dec-2019
0 Views
Preview:
TRANSCRIPT
1 of 23
Week 2 Assignment: Hypothetical Scenarios
Instructions:
1. Read country brief.
2. Select one scenario to read.
3. Answer questions for that brief (no more than 500 words).
2 of 23
Contents
Country Brief – Frelandia ................................................................................................................. 3
Scenario 1: Agriculture - Boosting Cocoa production in Frelandia ................................................. 7
Scenario 2: Agriculture - Frelandia Hazelnut Project ...................................................................... 8
Scenario 3: Agriculture - Food Security and Agribusiness Potential in Refugee and Local
Communities ................................................................................................................................. 10
Scenario 4: Energy - Lighting Up Frelandia – Country Energy Access and Efficiency Case Study . 12
Scenario 5: Energy - Safe, Clean and Reliable Energy for Refugees .............................................. 14
Scenario 6: Energy - Powering-up Rural Communities ................................................................. 16
Scenario 7: Urban Development - Improving public and private urban governance for
investment and growth ................................................................................................................. 18
Scenario 8: Urban Development - Transportation for economic growth, jobs and profit ........... 20
Scenario 9: Urban Development - Investing in the business potential of displaced people in cities
....................................................................................................................................................... 22
3 of 23
Country Brief – Frelandia
RECENT DEVELOPMENTS
In recent years, Frelandia (population 13 million) is continuing to recover from slipover effects
from the six years of civil war (2005-2011) in neighboring Andravia. Fought mainly along tribal
lines, the brutal conflict led to an influx of Andravians, primarily women and children, fleeing the
fighting and, for a brief period in 2009 some guerrilla fighting in the forested northern uplands.
While many of the refugees returned home, a considerable number (est. 130,000) remain in
informal settlements on the outskirts of the Capital, Quema and northern towns of Timbre and
the eastern settlement of Marshtown. An additional number of de-mobilized men (est. 10,000),
also crossed into Frelandia, looking for income and settled in the capital, in the north and west.
Already mired in poverty, the influx of weapons and underlying tribal tensions led to increase in
urban crime and violence in these areas. Severe drought conditions in the country’s northwest -
where most of Frelandia agriculture before the war- has displaced families to urban areas, in
particular the capital.
4 of 23
POLITICAL ECONOMY
Democracy is brittle in Frelandia. There has not been a coup since 1994. The Frelandia Progress
Party has won every election since the first free election in 1998. President Julius Nelson has
seen his approval plummet in the last two years– based on the failure of the economy to pick-up
and the lingering social effects of the refugee crisis. Elected in 2012, Nelson is the youngest son
of a former dictator who mysteriously died in 2011. Nelson’s charismatic father came to power
via a coup d’état in 1994 and established a multi-party democracy in 1997. Nelson Jr.’s
popularity has been waning for the last two years.
The country has yet to undergo the litmus test of a grounded democracy: a peaceful transition
to the opposition. Nelson got elected in 2012 on a political manifesto which heavily relied on
subsidies and import tariffs to protect local industry. Initially, the government’s budget profited
from the ‘peace dividend’ after the Andravia truce. Regional economic growth picked up a little
and development partners and multilateral development banks transferred large amounts of
ODA into the region, including Frelandia which was long seen as the poster child for the
international community. Press freedom improved significantly in the last two decades but a
recent ‘advertising tax’ has financially crippled critical media outlets. Nelson is actively lobbying
for a second term in elections scheduled for November this year.
GEOGRAPHY
Situated in the coastal plain Frelandia has a diverse environment, from the dry north-west
through the two fertile river valleys (the Deema and the East River) in the central zone to the
swampy south-east. The extremely biodiverse, forested, north-east watershed provides all of
the freshwater needs of the population. Once self-sufficient, the livelihoods of coastal
communities, such as Cape Gurnard, are suffering due to mangrove clearance and resulting
coastal erosion and overfishing by international fleets.
ECONOMY
Frelandia’s strategic and economic importance pivots around its deep-sea port. The country is
an important corridor for the economies in the landlocked countries to the North. The port has
been built in the 1950s, with major investments in the 80s (which also contributed to the 1992
debt crisis). It is in dire need of an overhaul. Frelandia’s strategic position has led to continued
interest from investors in the country, in particular after father Nelson created the special
economic zone. At the same time, the tax-to-GDP ratio has been hovering around 10% for years
and the country’s fledgling public sector is heavily dependent on international support, provided
by many donors. While this support has been credited for facilitating the jump from autocracy
to democracy, domestic revenues keep lagging behind and policy reforms have stalled or failed.
The country, once the world’s largest cocoa producer, has seen a steady decline over the past 20
5 of 23
years of its share in global cocoa export, despite relatively high global prices. Rare earth
production in the north-west, in particular tantalum, has a major share in exports. There is a
sizable hardwood timber production around Timbre, but this threatens the only remaining
habitat of the critically endangered Great Western Gorilla. Concerns have emerged about the
award of one of the major concessions to the President’s kindergarten friend, the opera singer.
In terms of future potential, a recent feasibility study identified shea nut production, as well as
possible expansion of cotton, organic cacao, mung beans and vanilla. A similar study also
identified the potential for eco-tourism development in the pristine northern coastal zone and
the cloud forest areas north of Timbre.
A World Bank study in 2004 identified potential for several small hydro-power plants (total
generating capacity of 25MW) in the upper valley of the Deema, further work being shelved due
to the spillover from Andravia’s civil war and the complexity of the social and environmental
issues that the project would face. The generating capacity would bring attractive regional
export possibilities.
Frelandia has a small but growing middle class, primarily in the urban areas. The middle class’
support for Nelson seems to be declining. Frelandia also has a sizeable diaspora. It is estimated
that around 22% of GDP comes from remittances.
At the other end of the scale, small-scale peri-urban manufacturing includes automotive repair,
textiles and furniture. There is a soft-drink/beer bottling plant and a cement plant, largely
supporting domestic needs. Women play a dominant role in many parts of the economy and
society. There is a vibrant civil society aimed at supporting a growing artisanal niche market for
handicrafts that are now being sold internationally online.
INFRASTRUCTURE
Frelandia is at an increasing regional disadvantage due to its lack of a functioning deep-water
port. Much of the freight serving the region now enters into the state-of-the-art facilities in
neighboring Congania, even though goods have a more complex connection to the landlocked
countries in the dry savanna zone of the continent. Trade is subsequently along the rapidly
deteriorating Coastal Highway. Similar constraints affect the internal movement of goods,
although the newly upgraded highway to Mineville and Congelada have opened up this arid, if
productive zone. There is a desperate need to improve the road to Palmville and Timbre to
facilitate growth of the export market.
Energy production is largely through the aging diesel plant at Quema and smaller diesel plants in
the regional centers. Diesel is imported. Power-cuts are a frequent fact of life in the cities and a
6 of 23
major issue for industry, most of which operates its own generating capacity. Domestic cooking
is still via kerosene and wood, the former of which is heavily subsided by the government.
Due mainly to the insight of a local innovator, who started a cellphone company (now serving
the regional market), cell phone penetration in Frelandia is over 80%.
Laid in 1998, the offshore XAFIRCA fibre-optic cable has yet to make landfall in Andravia due to
regulatory issues, notably the unwillingness of the government to issue guidance on use-rights.
EMPLOYMENT
Frelandia’s youth population (15-24 year olds) is estimated to be the fastest-growing in the
region, although reliable data are missing. 20% of the population falls in this category,
comprising 40% of the workforce. Most of these youth rely on jobs in the informal economy and
are underemployed. Some 45% of Frelandia’s population lives in rural villages and practices
subsistence agriculture taking advantage of vibrant market centers to generate modest cash
income. In the cities, employment is largely in government service, retail, peri-urban industries
and in the few mid-sized industries.
SOCIAL SERVICES
Based on advances made in the 1980’s and 1990’s Frelandia has regionally high literacy rates
(72% M 55% F). Both the education and health systems remain comparable to its neighbors but
have been strained by the refugee crisis and chronic lack of investment. Donor activity has been
focused on primary education and basic health services, the latter to counter HIV/AIDs and
threats of zoonotic disease. Retention of trained teachers and medical staff remains a concern
and many facilities are operated by international charities and religious organizations.
7 of 23
Scenario 1: Agriculture - Boosting Cocoa production in Frelandia
Frelandia, despite its travails, remains among the world’s largest producers of cocoa beans and
their export is a mainstay of their economy.
Nearly all cocoa production in the country comes from small farmers, many of whom belong to
farming cooperatives. Yet logistics has historically proved a major challenge for those farmers,
as bad roads lead to problems with damaged vehicles, and proper maintenance and repair has
often proved to be prohibitively expensive.
Local farmer cooperatives have access to short-term financing through exporters, but the
duration of those loans has generally prevented them from access to new trucks. Thus they have
resorted to second or third-hand vehicles which involve huge maintenance costs. Cocoa
collection via existing or older trucks is the largest component in the farmer cooperative cost
structure.
There exists a business opportunity for a big multinational to secure a reliable supply of cocoa,
in order to meet a rising global demand for cocoa and chocolate. Improving the coops’
profitability by reducing the burden of maintaining old trucks may mean a stronger cocoa value
chain and a more reliable supply of cocoa beans for the multinational.
This would require adding a financing arm to service the local farmer cooperatives with
medium-term finance arrangements. With access to finance, coops could lease trucks to more
easily and efficiently collect beans from the fields.
Questions:
1. How would you structure the financing of leases to the local coops?
2. How do you mitigate (or share) the credit risk among investors.
3. The credit arrangement can be replicated for other crops in Frelandia and beyond, giving
farmer cooperatives across Africa access to medium-term finance to cut costs and improve
profitability. Who can catalyze this scale up across sectors and countries? How?
4. What else will be required in addition to finance/credit, e,g business development and other
non-financial services for cooperatives?
5. How would you prevent cooperatives from being captured by some elite farmers? Would you
consider options to cooperatives such as aggregators or contract farming?
8 of 23
Scenario 2: Agriculture - Frelandia Hazelnut Project
The ability of the private sector in Frelandia to be more competitive and to generate jobs is
constrained by several key obstacles, notably,
(a) Weak business enabling environment. Frelandia is ranked 155 of 189 countries according to
Doing Business Indicators 2015.
(b) Limited access to (concessional) finance. Main constraints include low business and financial
literacy on the part of entrepreneurs, and a lack of information and experience in assessing
MSMEs on the part of financial institutions.
(c) Insufficient skills to seize market opportunities. Potential business opportunities have not yet
been well-leveraged by firms—particularly because of limited market knowledge and business
skills.
Given that three quarters of Frelandia’s population live in rural areas, improved performance in
agribusiness has the potential to be highly beneficial for Frelandia.
Frelandia had committed more than US$100 million of international loans and grants to the
agricultural sector. However, these existing projects were focused mainly on the supply side of
the agricultural industry (irrigation, dams, and extension services). Two other key constraints to
growth have not yet been systematically addressed: access to finance and access to markets.
Your business venture is to provide young hazelnut trees to poor farmers, who would grow
them on degraded or fallow land. Processing facilities would have to be constructed and
operated, and supply chains developed to move your product to market.
This business venture should focus on a three-part mission:
• Be commercially profitable and sustainable.
• Provide economic opportunities to rural farmers and communities.
• Provide environmental benefits, as trees planted in degraded areas would reduce soil erosion
and sedimentation of rivers.
Traditional venture capital sources are unlikely to provide funding. Frelandia has no past private
investment, is remote, fragile, and poor. Finally, the company needs a relatively small amount
of capital—most venture capitalists needed to put larger amounts of money to work, with
commensurate expectations on returns.
9 of 23
Questions:
1. Who could be the potential investors in this business venture?
2. What are the tradeoffs between different sources of finance – i.e foundations, private sector,
crowdsourcing, international organizations such as the IFC?
3. Supply Chain – What key supply chain issues, e.g. where to procure the trees, transport
logistics, training, collection facilities, etc, exist?
4. How could financial risk be mitigated by the business venture?
5. Can the project be designed to be replicable in other countries (assuming there is continued
strong demand for the hazelnut)?
6. Would you consider investment in SMEs as an option as large companies are likely to invest if
some aggregation is already happening?
7. There are tradeoffs between economic returns and social/environmental returns. How can
the project stay true to its social/environmental mission while ensuring a financial return for its
funders? How can it ensure that the stakeholder incentives are aligned?
10 of 23
Scenario 3: Agriculture - Food Security and Agribusiness Potential in Refugee and Local
Communities
Scene Setting
Agriculture is the backbone of livelihoods for the majority of people in conflict and post-conflict
situations. Roughly about 40,000 of the remaining Andravian refugees live in a settlement near
Marshtown. Most of the refugees already returned to their country after the civil war ended.
Refugees in Marshtown, mostly farmers, could not go back due to land disputes and destroyed
land and infrastructure back at home. The conflict has had a devastating impact on agriculture,
with food markets and supply chains dysfunctional, much of the irrigation and other
infrastructure destroyed and farmers and livestock keepers left with no other option than to
abandon their fields and animals. The ones who remained could not access markets or afford
seeds, fertilizers and other inputs. Meanwhile the influx of refugees also impacted agriculture in
Frelandia.
Challenge
Not too far from the EastRiver, Marshtown has good farmland potential however productivity is
low and the distribution channels are close to nonexistent. Traditionally rice plantations have
flourished in this area. But lack of investment, warehousing and distribution channels hurt this
business in the last five years. EastRiver floods during the rainy season pose a risk to the
farmland. Food security is a critical issue both for the local population of 100,000 as well as the
refugees. Some refugees have been growing their own food in the settlement with limited
resources and productivity.
Recently, US$50 million of concessional financing has been made available by a donor to boost
Frelandia’s support to the region, focusing specifically on children and adults who are facing
hunger and malnutrition. A similar loan was also approved for Andravia. Recent feasibility
studies identified shea nut and vanilla production as potential for the area. A few global firms
have been working with farming communities in the neighboring countries to develop capacity
for vanilla and cacao production.
Questions:
1. Please identify 3 potential business ideas and top 3 risks based on the above scenario?
2. How can the Frelandia government leverage the WBG fund to bring in additional
resources to the area?
11 of 23
3. Do you see any partnership opportunities that could produce sustainable solutions that
benefit both locals and the refugees in the region?
4. What role can technology play?
12 of 23
Scenario 4: Energy - Lighting Up Frelandia – Country Energy Access and Efficiency Case Study
Scene Setting
Only 35% of the Frelandian population has access to electricity. Electricity service is
concentrated in and around the capital, Quema, and remains unreliable even there. Those with
access to electricity receive power for an average of only five to ten hours per day. Outside the
capital, electrification rates drop to an average of 10%. Frelandia depends on imported
petroleum for 85% of its electricity generation, exposing the country to volatile fuel costs, and
diverting a significant portion of budget to importing a fuel that has negative impacts on human
health and the environment. Existing electricity infrastructure is aging and poorly maintained. In
2011, one-thirds of total electricity production was lost to technical inefficiencies or theft,
posing immense challenges to the sector’s financial viability. Industry accounts for more than
40% of electricity consumption. In 2012, all 19 registered textile manufacturers in Frelandia had
their own diesel generators on site. Frelandia has no nationwide electricity grid. It has nine
isolated electricity grids—covering major population centers.
Challenges
Frelandia’s installed operating capacity of 244 MW will have to more than tripple over the next
decade to meet expected demand and improve reliability. This will still leave large amounts of
rural populations without access. Despite significant subsidies, the national electric utility (NEU)
is in severe debt, and thus unable to invest in the infrastructure needed. Improved metering,
billing, management, and enforcement are key to electricity sector reform.
Government has made energy and the environment two of its five major priorities. The 2008–
2017 Energy Sector Development Plan highlights solar, wind, hydropower, and bagasse as viable
sources to offset the fossil fuel use. Major policy and regulatory changes are necessary to make
this a reality.
There are competing priorities and interests. Numerous government agencies with overlapping
(and sometimes opposing) mandates and priorities can be involved in various aspects of
planning and regulation. Public institutions that are responsible for planning and regulating the
power sector—including the Ministry of Energy Security and NEU—often face a shortage of
qualified personnel and have limited capacity to design, implement, and monitor energy and
electricity policies. NEU, managed by a cousin of Frelandia’s President for the last 10 years,
recovers only 22% of its generation costs. Frelandia does not have an independent electricity
regulator.
13 of 23
Opportunities
Tremendous opportunities exist to improve service and build an electricity system that is
economically, socially, and environmentally sustainable. Frelandia has abundant renewable
energy resources, including solar, wind, and modern biomass, as well as a growing number of
renewable energy practitioners.
Hydropower is currently the country’s cheapest source of electricity generation (approx. 5 U.S.
cents per kWh). Wind and solar PV in good locations (approx. 10 U.S. cents per kWh) are fully
competitive with coal power, , even without internalizing societal costs associated with fossil
fuel combustion. By developing small and micro-hydropower, Frelandia could add at least 102
megawatts (MW) of power capacity. Several of the country’s most promising sites are located
near Quema, presenting opportunities to supply large populations at relatively low cost.
Perceived risk and a lack of institutional and finance capacity in Frelandian banks contribute to
high interest rates and a lack of long-term loans. Most private international finance institutions
do not provide sustainable energy loans in Frelandia without assurance through a sovereign
guarantee that debts will be repaid. Bilateral and multilateral development assistance
increasingly targets sustainable energy.
Nearly USD 2 billion is sent to Frelandia each year in remittances from members of the diaspora;
an estimated 10–25% of all remittances end up being used to pay for some form of fuel, mainly
kerosene and petrol.
Questions
1. Identify three key areas for private sector participation and/or potential business ideas based
on the scenario?
2. How can the Frelandia government leverage development assistance and interest in
renewable energy to bring in additional financial resources to the area?
3. What aspects of sector reform and institution-building should be prioritized?
14 of 23
Scenario 5: Energy - Safe, Clean and Reliable Energy for Refugees
Access to modern energy services is a basic human need, but for displaced people access to
safe, secure and reliable energy is often inadequate. Furthermore, refugees and internally
displaced persons (IDPs) overwhelmingly use traditional biomass (primarily firewood) and
charcoal to cover their basic energy needs and this is unsafe, unhealthy and inefficient. This is
environmentally, socially, and economically unsustainable. Dependency on primitive fuels is a
cause of premature death for some displaced people as well as respiratory and heart conditions
affecting children and the elderly.
Sustainable energy initiatives can deliver benefits to refugee and displaced populations,
enhancing safety, security, health and livelihoods. Reducing the time and distance that refugees
travel to collect firewood frees additional time for livelihood activities and increases security,
particularly for women and girls. A change of approach can transform the mindset about how
camp residents are perceived – from ‘beneficiaries’ dependent on handouts – to agents able to
choose, produce, consume and take part in the running of their own communities.
According to Moving Energy Initiative only 11% of the people who live in refugee camps have
access to reliable energy sources for lighting. There are about 130,000 refugees in Frelandia,
spread over three main settlements. Most of these people have been refugees for more than 6
years. In this period they have not paid for the limited energy that they have used. There is lack
of reliable data on energy usage and costs by refugees. At the same time there is overall energy
shortage in Frelandia and wood, and charcoal is the predominant cooking fuel among the
population. An NGO proposed to introduce efficient cookstoves to replace solid fuels.
Encouraged by UNHCR, Frelandia government is beginning to look at how displaced people
access and pay for energy services, and how private-sector expertise can be leveraged through
innovative tendering and private–public partnerships. The government is bringing together a
steering committee/advisory panel consisting of public private organizations representatives to
address this issue. An overhaul of energy service procurement policy and standards is required
to engage a wider cast of private-sector actors in energy service delivery and equipment sales.
Questions
1. What are the core elements of a new safe, clean reliable energy plan for the refugees
and the local population?
2. Where will the financing come from? What are the possible roles for private or
foundational funding?
15 of 23
3. How can the specific risks in this type of situation be quantified?
4. How can new clean energy technologies best be financed and deployed in this scenario?
16 of 23
Scenario 6: Energy - Powering-up Rural Communities
Only 35% of the Frelandian population has access to electricity. Electricity service is
concentrated in and around the capital, Quema, and remains unreliable even there; those with
access to electricity receive power for an average of only five to ten hours per day. Outside the
capital, electrification rates drop to an average of 10%. Frelandia depends on imported
petroleum for 85% of its electricity generation. Existing electricity infrastructure is aging and
poorly maintained.
While energy access has remained low, cell phone coverage has rapidly increased in the last 8 to
10 years and became almost universal. This technology has induced demand for power from
rural users who want to keep their cell phones charged—and from their mobile phone
providers. This has helped incentivise mobile phone companies to provide off-grid customers
with cheap small-scale distributed clean energy.
Tongali, a rural farming community of about 15,000 people in western Palmville had been
without electricity for decades. Over the years, the community adapted. The rich set up rooftop
solar panels that supplied a single light bulb or ceiling fan. Poorer people used kerosene lamps.
In 2013, the villagers pooled $780 and asked the local electricity board for a connection, but
they never got it. A chance encounter last year between the community chief and an NGO
activist brought the group to Kongali. The NGO wanted to set up a solar village to show the
government that it is possible to power rural communities with renewable energy. Initially, the
excitement in the village was profound.
Over three months, engineers set up 200 kW of photovoltaic panels on the rooftop of public
buildings scattered throughout the village. They installed 600 batteries to store the power. The
installation cost $500,000. All families received one compact fluorescent light bulb and a wall
outlet to charge their mobile phone. The power would be free for six months and then cost $1
per month, which is too high for some families who earn 30 cents a day. Well-to-do families
already had rooftop solar panels but many of them signed up, as well since a shared
infrastructure system, like a microgrid, promised to be more reliable.
The day the power came was one of celebration. Villagers, rich and poor alike, ate sweets. Then,
the wealthy families plugged in energy-inefficient televisions and refrigerators. With the power
suddenly facing heavy demand, the batteries drained within hours. The microgrid operators
scrambled to fix the problem. The village electrification committee decided to restrict electricity
supply to five hours at nighttime. The NGO put up posters telling people not to use energy-
hungry appliances such as rice cookers, electric water heaters, irons, space heaters and air
coolers.
17 of 23
When the state governor visited the community, disappointed villagers lined up to protest,
chanting, “We want real electricity, not fake electricity!” By “real,” they meant power from the
central grid, generated mostly using solid fuels. By “fake,” they meant solar. Participation rates
in the solar microgrid declined. Ahead of the elections, the governor promised reliable
electricity from the petroleum-based central grid to the community. In the meantime, the NGO
called in a few mobile companies to discuss a rescue operation for the project.
On-Grid Solar - On-Grid Systems are solar pv systems that only generate power when the utility
power grid is available. They must connect to the grid to function. They can send excess power
generated back to the grid when you are overproducing so you credit it for later use. These are
simplest systems and the most cost effective to install. These systems will pay for themselves by
offsetting utility bills in 3-8 yrs.
These do not provide power during a grid outage.
Off-Grid/Hybrid Solar - These systems allow you to store your solar power in batteries for use
when the power grid goes down or if you are not on the grid. Hybrid systems provide power to
offset the grid power whenever the sun is shining and will even send excess power to the grid
for credit for later use. Provides power for your critical loads when the power grid is down.
Cannot be expected to provide power for all your loads since the cost and volume of batteries
would be prohibitive. Off-Grid systems require a lot more specialized equipment to function that
is more costly and more complex to install. Specifically they require a central/string inverter, a
charge controller as well as a batteries.
Questions:
1. Identify the immediate steps that could be taken to help support the sustainable
operation for the mini-grid system in place in this scenario?
2. How can the Frelandia government best support clean, distributed energy systems in
rural settings?
3. Do you see any partnership opportunities that could produce sustainable solutions that
benefit both locals and businesses in the region?
4. What role can the provision of power systems for cell tower operations play in providing
community energy needs?
18 of 23
Scenario 7: Urban Development - Improving public and private urban governance for
investment and growth
With the civil war ended in neighboring Andravia, the government of Freelandia declared that
the period of centralized governance is over. The government is now devolving authority, while
strengthening capacity, legitimacy, transparency, and accountability at every level of
government. These are seen as prerequisites for restoring the rule of law and attracting
investment amid massive investment needs for rehabilitating infrastructure. In addition to
national and local formal governance systems, there exist informal networks and traditional
governance structures. Trust in formal institutions is low and corruption widespread,
undermining public confidence in the government.
At the local level, the government is engaging Quema, Freelandia’s capital, with addressing its
own challenges with urban governance, planning, and finance. Amid rapid urbanization, the city
has sprawled beyond its originally intended limits with the arrival of 32,000 Andrivian refugees
and 18,000 Internally Displaced People (IDPs) who have moved mostly to informal settlements
around the city. A complex mix of security, economic and other factors have driven
displacement, including a six year civil war in neighboring Andrivia, drought in rural areas and
flooding in coastal areas.
The city is trying to balance immediate priorities of restoring governance with long-term
investments in infrastructure, jobs and growth goals. Limited resources and capacity has
constrained its ability to provide basic services and infrastructure. Water and sanitation services
are insufficient for its rapidly growing population, while hospitals and schools are overcrowded.
Inadequate roads have led to continuous traffic jams and congestion, and there are increasing
levels of environmental pollution. Planning figures are largely based on the last census of 2005,
so it is unclear how many people currently utilize government services and infrastructure.
The city’s decisions and policies for displaced populations are highly politicized and
unpredictable, adding even greater uncertainty to the already precarious plight of the displaced.
The threat of extortion and harassment of Adrivian refugees by the security forces has been
exacerbated by plans to revoke their legal status next year. The city is trying to balance public
services between the needs of long-term residents and displaced persons. Programs targeting
solely displaced persons have excluded longer-term residents of Queman, causing tensions.
Rising rents and other pressures force many displaced families to move further and further
towards the outskirts of Quema in search of affordable and decent housing.
Refugees are not allowed to own land. IDPs, who can formally own land, face discrimination
from landlords and fierce competition, resulting in rising rents. Many longer-term residents have
19 of 23
made significant profits by renting out houses to the displaced. Rising rents and other pressures
force many families to move nearly continually, often further and further towards the outskirts
in search of affordable and decent accommodation.
Despite these challenges, Quema’s city council hopes that once effective governance and the
rule of law are restored, the city will attract early stage investors with local knowledge and
higher risk appetite and collect taxes to increase public finance.
Quema has a thriving informal small and medium sized enterprises (SME) sector, which provides
a significant share of the city’s employment. Formalizing business of SMEs through a registry will
be an important step towards attracting investors, collecting taxes and helping SMEs seek
financing from local banks. SMEs have been poorly served by banks in Quema. While they
represent the backbone of Quema’s economy and provide the bulk of employment, they receive
just one-quarter of all loans and credits. Without official registration of SMEs, banks lack
knowledge about their creditworthiness. As a result, Quema’s banks have little appetite to lend
to SMEs.
Questions:
1. What additional steps should be taken to bring in SMEs into the formal sector?
2. How can the city council improve its capacity to engage and govern new investors in
Quema?
3. What roles should citizens expect the central government, city council and private
sector to play in generating jobs and growth?
4. What instruments might Quema use to reduce investment risk for domestic and foreign
investors?
5. What instruments might attract early stage investors and how might those instruments
lay the ground work for a broader groups of investors?
20 of 23
Scenario 8: Urban Development - Transportation for economic growth, jobs and profit
Rapid and continuing population growth in Quema has been accompanied by an equally rapid
increase in the demand for public transport. The city council of Quema is under pressure to
provide safe, affordable, efficient, reliable and clean modes of transit. A well-functioning transit
system is seen as critical for facilitating transit of workers, which in turn underpins employment
and the city’s economic growth. However, it faces a number of dilemmas on whether to focus its
effort on formalizing the current informal transportation system – which is unregulated but is
thriving and meets the needs of many citizens and employs 15% of the population – or to move
to a formal mass transit system, or a hybrid of both.
Quema’s city government support for transport services has either dwindled, or actively
undermined established operators in the informal sector. This has been accompanied by de
factor privatization of public transport where informal operators have provided service in the
absence of a well-functioning public transit system. The informal sector has been dominated by
largely unregulated share taxi and mini-bus services – a lucrative business owned by a
prominent local politician.
While the deregulation and privatization of public transport is a phenomenon in most of the
Western world, in Freelandia, these processes have taken place by default rather than
deliberate action. In Quema this has resulted in public transport provision with little or no
government involvement or control. Lack of enforcement of regulations, increasing traffic and
rising crime in some parts of the city have made transit less safe -- incidence of harassment of
women on public transportation has increased; workers en route to work have been robbed;
and there are an increasing number of traffic accidents on Quema’s congested roads.
All modes of transportation used by Quema’s citizens - walking, cycling, and public transport –
are inadequately provided for. Commuting distances are increasing as the city expands and rent
rise in the city center, pushing low income workers to the suburbs. This together with rising fuel
costs have increased the costs of transport are also rising, estimated to be as high as 25 per cent
of household income for those in the suburbs. Higher transport costs have reduced the access of
Quema’s poor to basic services and jobs. Public transportation to and from informal settlements
is limited and expensive.
Transport by private car remains a privilege for wealthy minority - less than 10% of household
trips. While travel by private car meets less than 10% of demand, it incurs over 50% of total
system costs. By contrast, walking meets almost half of trip demand but accounts for only 1% of
total costs.
21 of 23
As the city considers whether to focus on formalizing current informal modes of transit or move
the city to a mass transit system, it is considering implications of each model for financing,
congestion, pollution, safety, reach of transit system and affordability.
The mass transit system will require far greater levels of investment than are currently available
from public sources. The system would also risk crowding-out existing informal modes of transit
– which have been thriving recently with the advent of smartphone apps to order taxi and bus
services.
Questions:
1. Should the city focus on investments in its formal and informal transit systems?
2. What financing instruments would be needed to build a new mass transit system?
3. How might technology – including transport services facilitated by smartphones – shape
Quema’s transportation plans?
22 of 23
Scenario 9: Urban Development - Investing in the business potential of displaced people in
cities
Freelandia’s capital city of Quema is experiencing rapid urbanization as 32,000 Andrivian
refugees and 18,000 Internally Displaced People (IDPs) have moved to informal settlements
around the city. A complex mix of security, economic and other factors have driven
displacement, including a six year civil war in neighboring Andrivia, drought in rural areas and
flooding in coastal areas.
The massive influx of displaced people has strained infrastructure and municipal services
causing frequent blackouts, housing shortages, and limited water and sanitation services.
Educational and health services are also inadequate, although NGOs and CBOs make an
important contribution in this area. Gangs and radical groups have increased their activities and
recruitment in the settlements, particularly among the young male adults.
Differences in access to services, assistance and resources have emerged between those living in
camps and those living outside them. Gated communities for wealthier residents are being built
amid security concerns. Access to power and water is limited in the settlements and there is a
black market for them. Quema’s residents, whether displaced or not, face the challenge of
finding sustainable livelihoods.
Freelandia is requesting financial support from the international community as compensation
for – for providing what it regards as a global public service - hosting refugees from Andivia. A
significant portion of international aid for refugees has been geared towards repatriation and
improving conditions for their return to Andrivia. However, the fluidity of the security situation
has made many cautious about returning permanently, especially without adequate assistance
to rebuild their lives.
With the growing recognition that the displaced population will be settled permanently in
Quema, the local government is now exploring longer-term, durable solutions to integrate
displaced persons into the city’s economy and civic life.
Freelandia has several SMEs owned or operated by refugees. Most work informally without
work permits, many are women. The local government is negotiating with the government of
Frelandia to introduce a work visa program for refugees to formalize their employment.
Meanwhile, an association of refugee women business owners in Quema has applied for a
microfinance program offered to women entrepreneurs by a private bank. Back2Business, an
international NGO received funding from international donors to start an incubator with urban
refugees in the settlements.
23 of 23
Questions:
1. Can you identify three public private alliance opportunities which mutually benefits both
the public and private sectors as well as host communities and urban refugees?
2. What does it take to bring these opportunities to life?
3. Please identify the biggest risks for these opportunities?
4. What are some innovative financing mechanisms that could be deployed?
5. Are there any other partners that can play a role and in which ways?
top related