Retrospective on Daniel Grande, “Rethinking Aluminum in Iceland’s Economy: Balancing Risk and Reward” from Post-Crash Iceland: Opportunity, Risk, and Reform PerspecƟves on Business and Economics, Volume 29, 2011 Daniel Grande ’11 is now Project Leader at Boston ConsulƟng Group. Is the aluminum industry still the largest contributor to Icelandic Exports? While Aluminum smelƟng is sƟll a prominent figure in Iceland’s industrial sector, it has since halted being the country’s course of economic over-dependence. In 2019, the country’s three aluminum plants accounted for more than 15% of its exports compared to 39% in 2008 (Fjeldsted et al., 2020). AddiƟonally, “The Icelandic Economy 2020” study recorded a drop in global aluminum prices, which forced Iceland’s producƟon plants to reduce output in 2020. Yet, this reducƟon did not cause broad economic malaise, thanks to diversificaƟon of the country’s industries since 2011, increased tourism, and an increased focus on environmental improvement. Are there still concerns over Iceland’s overdependence on aluminum? Concerns over Iceland’s overdependence have waned since 2011 because of new and rapidly expanding industries, including “health technologies (including pharmaceuƟcals), biotechnology, geneƟcs, biomedical engineering and IT-based equipment producƟon for food processing” (Government of Iceland, n.d.). Furthermore, the iniƟal idea of data server farms proposed in 2011 took root and has since expanded significantly with an addiƟonal 18% growth projected from 2020 to 2022 (Fjeldsted et al., 2020). Tourism has also provided a large economic boost to Iceland in the past decade due to its resilience despite the global coronavirus pandemic. Were Grande’s recommendations for alleviating overdependence on aluminum—decoupling electricity contracts from aluminum prices, diversifying manufacturing, and attracting other energyintensive industries to Iceland— implemented? There are no signs of decoupling electricity contracts from aluminum prices. However, in February 2021 Rio Tinto Aluminum and the power company Landsvirkjun established an agreement that “will deliver a more compeƟƟve power price and energy flexibility” (Rio Tinto, 2021) as well as improved job security for smelter employees. In contrast, Iceland has diversified the manufacturing sector, adding data centers and silicon plants (Fjeldsted et al., 2020). It has also fostered other energyintensive industries, such as food producƟon and aquaculture, and plans to expand algae culture as well. References Fjeldsted, A.S., Guojonsson, K.S., & Bartolozzi, S. (2020). The Icelandic economy 2020: Current state, recent developments and future outlook. (23rd ediƟon). Iceland Chamber of Commerce. Government of Iceland. (n.d.). Industry. www.government.is/topics/business-and-industry/ industry/. Rio Tinto. (2021, February 15). Power agreement delivers improved compeƟƟveness for ISAL smelter. [Press release]. RetrospecƟve by Sidney Jankanish ’23, PoliƟcal Science and InternaƟonal RelaƟons . November 2021 Iceland, Turkey, New Zealand EdiƟon Martindale Retrospectives MarƟndale Center for the Study of Private Enterprise Lehigh University College of Business Rauch Business Center, 621 Taylor Street, Bethlehem, PA 18015-3117 Tel: +1.610.758.4771 | Fax: +1.610.758.6549 | www.lehigh.edu/marƟndale
Retrospective on Kristin (Giglia) Deliso,“The Failure and Reform of Iceland’s Financial Regulatory System” from Post-Crash Iceland: Opportunity, Risk, and Reform PerspecƟves on Business and Economics, Volume 29, 2011 KrisƟn Deliso ’11 is now Associate at Sullivan & Cromwell LLP. Have the supervisory systems taken up their responsibilities since the ϐinancial crisis in Iceland? In response to the financial crisis of 2008, the Icelandic supervisory systems have focused on improving their framework, economic policy, and supervisory management. In 2012, Iceland published a framework for financial stability, which proposed “providing a common plaƞorm for the operaƟons of the CBI and the FME” (Bingham et al., 2012) and “bringing all financial sector legislaƟon…under a single ministry” (Bingham et al., 2012). Doing so would provide the financial insƟtuƟons with stronger accountability and beƩer leadership regarding financial regulaƟon, which in turn would prevent a repeat of unregulated bank growth. In 2014, the Financial Stability Council was established to be the common plaƞorm spoken of in the report that was necessary to strengthen economic governance. Its duƟes currently include formulaƟng stability policies, monitoring imbalances and risk systems, and assessing macroprudenƟal tools. AddiƟonally, the Central Bank of Iceland (CBI) and the Financial Supervisory Authority (FME) merged in 2020 into a single body with combined powers (Government of Iceland, n.d.). Has Iceland’s ϐinancial reform been adequate in preventing another collapse? According to the Framework for Financial Stability in Iceland, “The financial market situaƟon has changed radically since 2008. The assets of the financial system as a whole are less than half (49% according to CBI staƟsƟcs) of what they were at the height of the banking boom in the first half of 2008” (Bingham et al., 2012). This can be aƩributed to the improved responsibility of the financial enƟƟes as well as the three new banks that replaced Landsbanki, Kaupthing, and Glitner. Unlike the “old” banks that were primarily focused on the internaƟonal markets, the “new” banks Arion Bank, Landsbankinn, and Íslandsbanki are more focused on domesƟc markets. The tourism industry also rose in success aŌer the crisis of 2008 and provided Iceland with a stable, resilient source of economic income for the recovering country (Fjeldsted et al., 2021). In conjuncƟon, leaders also placed heavy restricƟons on foreign exchanges iniƟally aŌer the collapse. However, most have been removed as the years have progressed. In other words, “with capital controls removed, the financial sector has regained stability” (The Heritage FoundaƟon). References Bingham, G., Sigurðsson, J., & Jännäri, K. (2012, October) Framework for financial stability in Iceland: RecommendaƟons of the group of three to the Minister of Industries and InnovaƟon and the Minister of Finance and Economic Affairs. Ministry of Industries and InnovaƟon. Fjeldsted, A.S., Guojonsson, K.S., & Bartolozzi, S. (2020). The Icelandic economy: Current state, recent developments and future outlook. (23rd ediƟon). Iceland Chamber of Commerce. Government of Iceland. (n.d.). Economic affairs and public finances. www.government.is/topics/ economic-affairs-and-public-finances/. The Heritage FoundaƟon. (2021). Iceland economy: PopulaƟon, GDP, inflaƟon, business, trade, FDI, corrupƟon. www.heritage.org/index/ country/iceland. RetrospecƟve by Sidney Jankanish ’23, PoliƟcal Science and InternaƟonal RelaƟons Martindale Retrospectives 2 November 2021
Retrospective on Stephen Buryk, “The Battle for Europe’s Southern Gas Corridor: Nabucco v. South Stream” from Turkey: Bridging Two Worlds PerspecƟves on Business and Economics, Volume 28, 2010 Stephen Buryk ’10 is now in Strategy|Corporate Development at Centrica CBS. Was the author’s concluding prediction that Turkey will build the Nabucco pipeline accurate? In the arƟcle, the author, Buyrk, predicts that the Nabucco pipeline will be the one built because “It offers the Turks an undeniable opportunity to make their country of vital importance to the EU in addiƟon to securing diversified gas supplies for the development of the young, dynamic country.” However, in 2013 the Nabucco project was cancelled due to the lack of a supplier being chosen for the natural gas, the current costs not seeming like they would outweigh the future benefits, and the eventual exit of each country that supported the deal (Weiss, 2013). This gave Russia the ability to conƟnue with their planned South Stream pipeline and potenƟally steal the deal with Turkey. AddiƟonally, parƟally due to Nabucco’s failure, Turkey did not become a member of the European Union. As of July 1, 2021, The OrganizaƟon for World Peace stated that “A Turkey that is a member of the EU now seems further away than ever as only 16 out of the 35 negoƟaƟon chapters have been opened, with a single one being completed and another one closed” (Duffy, 2021). In short, the EU did not get their pipeline, and Turkey did not get its deal with Europe or its EU membership. Which pipeline plan did Turkey choose and why? As stated above, Turkey did not choose the Nabucco pipeline plan. Turkey also did not choose the South Stream pipeline proposed by Russia. In 2014, a year aŌer Nabucco was called off, President Vladimir PuƟn declared the cancellaƟon of South Stream. Some reasons for this decision include the inability to conƟnue funding the project, legal issues with the European Commission, and PuƟn’s lack of willingness to renegoƟate details of the proposiƟon. In 2015, Turkey and Azerbaijan began their own pipeline project known as the Trans-Anatolian Natural Gas Pipeline (TANAP), which expands across all of Turkey, connecƟng Azerbaijan and Europe. “TANAP’s shareholders are Azeri state energy company SOCAR (51%), Turkish pipeline operator BOTAS (30%), and SOCAR Turkey (7%)” (Sezar et al., 2019), all of which hoped to lessen Russian gas dependence with this pipeline. As of 2019, TANAP’s construcƟon was completed, and they are currently awaiƟng the compleƟon of the Trans AdriaƟc Pipeline (TAP) in order to connect the two. References Duffy, J. A. (2021, July 1). Turkey's accession to the European Union: An overview of the current circumstances. The OrganizaƟon for World Peace. Sezar, C., Kucukgocmen, A., & Char, P. (2019, November 30). Turkey and Azerbaijan mark compleƟon of TANAP pipeline to take gas to Europe. Reuters. Weiss, C. (2013, July 13). European Union's Nabucco Pipeline Project aborted. World Socialist Web Site. RetrospecƟve by Sidney Jankanish ’23, PoliƟcal Science and InternaƟonal RelaƟons Martindale Retrospectives 3 November 2021
Retrospective on CJ Berzin, “Turkey’s Automotive Industry: Driven to Grow” from Turkey: Bridging Two Worlds PerspecƟves on Business and Economics, Volume 28, 2010 CJ Berzin ’10 is now Sr. Finance Manager-Business Development at the PharmaceuƟcal Companies of Johnson & Johnson. Since 2009, has Turkey decreased the tax on fuel and implemented permanent auto tax breaks as the author suggested? In 2010 the current VAT (value-added tax) of Turkey was 18% and the gas tax was raised by 8%. Since then, the automoƟve market hit its lowest point in 2019 due to rising interest rates and decreasing consumer confidence. In response, the following year “Turkey increased its special consumpƟon tax on mid-range and expensive cars…, but also liŌed the lower thresholds at which the duty is imposed, meaning that more vehicles could be taxed at unchanged lower rates” (Sezar & Lawson, 2020). Despite not implemenƟng a permanent auto tax break, this led to a decline in interest rates, which in turn resulted in an increase of sales. In contrast, fuel taxes have done nothing but increase. As of May 2020, “Turkey raised the special consumpƟon tax on some petrol and diesel oil types, liquefied petroleum gas, propane and butane by between 54189%, prompƟng hikes in pump prices” (Dinar et al., 2021). This could prove very detrimental for Turkey’s economy due to the predicted 0.4% rise in inflaƟon these gas taxes could cause and the deterrent it might provide to auto investors. Is the automotive industry still the cornerstone of the Turkish economy? Has the Turkish automotive industry completed the transformation it had started from a manufacturing hub to a regional center of excellence and development? As of 2017, the Turkish automoƟve industry was considered a thriving sector with a plan to increase its exports. However, due to the coronavirus outbreak in 2019, automoƟve sales all over Europe plummeted sharply as a result of lockdowns being enforced. “FromJanuary toNovember, the market shrank by 25.5%, to around 9 million units, the data showed” (Daily Sabah, 2021). Yet, Turkey’s industry managed to end the year of 2020 in a stable state due to increased demand. Thus, even with all of the obstacles presented, the automoƟve industry has managed to conƟnue its role as Turkey’s economic cornerstone. Yet despite the steady growth of the industry, “Turkish manufacturers must conƟnue researching and invesƟng to maintain a technological edge against compeƟtors conƟnually improving the quality of their output” (Güven, 2017) in order to become a regional center of Turkish excellence and development. References Daily Sabah. (2021, January 7). Turkey bright spot in European auto industry in pandemic year. Dinar, M., Sezar, C., & Butler, D. (2021, May 20). Turkish fuel price hike expected to raise inflaƟon by 0.4% - economists. Reuters. Güven, S. (2017, August 8). Turkey's automoƟve industry on steady growth track. WardsAuto. Sezar, C., & Lawson, H. (2020, August 30). Turkey raises tax on cars but liŌs lower rate thresholds. Reuters. RetrospecƟve by Sidney Jankanish ’23, PoliƟcal Science and InternaƟonal RelaƟons Martindale Retrospectives 4 November 2021
Retrospective on Eileen Mazzochette ,“Fueling the Future of New Zealand’s Electricity” from New Zealand: New Challenges in Paradise PerspecƟves on Business and Economics, Volume 27, 2009 Eileen MazzocheƩe ’09 is now a HapƟc Hardware Engineer at Apple. How much progress has New Zealand made toward its goal of generating 90% of the country’s electricity from renewable resources by 2025? Since 2009, New Zealand has made substanƟal progress with its country-wide goal toward electricity generaƟon through renewable resources. In 2011, renewably generated electricity was already at 79.96% and by 2020 it had risen to 80.78% (Granwal, 2021). AddiƟonally, New Zealand has been growing its geothermal generaƟon. SƟll, two things constrain its expansion: limited access to resources and half of the country’s sources being parƟally or fully protected. However, “There is now a more posiƟve mood in the industry following the government seƫng objecƟves for greatly reduced GHG (greenhouse gas) emissions by 2050” (Lawless et al., 2020), which should help with some of the regulatory constraints regarding future projects. The Kiwis also established a Smart Grid forum in 2014. The purpose of this forum is to allow businesses and agencies to share informaƟon and knowledge, hold discussion panels, and host workshops about renewable projects. Per the author’s suggestion, has New Zealand diversiϐied its energy generation sources to combat water and wind shortages? A substanƟal amount of New Zealand’s energy is generated via hydropower making the country sƟll highly reliant on the method. In 2021, a series of dry spells caused New Zealand’s water sources to drop significantly, which resulted in hydropower producƟon also dropping. “When hydropower levels began falling, New Zealand resorted to coal to fill the gap in energy supply. Last year, the country‘s coal imports were more than double the average of the previous decade” (Wright, 2021). In addiƟon, during the same year, New Zealand also suffered a major power outage due to a winter storm disrupƟng the wind farms. “The outages occurred as record demand coincided with insufficient generaƟon, which resulted in the need to reduce demand to maintain system security” (Withers, 2021) and leŌ thousands without power. While the Kiwis have since managed to rebound from their renewable slip, leaders are unsure of how to combat these issues should they occur again. This lack of diversificaƟon—resulƟng in having to fall back on nonrenewable sources in the absence of renewable consistency—could provide a serious obstacle to New Zealand’s 2025 goal. References Granwal, L. (2021, July 14). New Zealand: Renewable energy generaƟon share 2020. StaƟsta. Lawless, J., van Campen, B., & Randle, J. (2020, March). Future geothermal generaƟon stack: A report for the Ministry of Business, InnovaƟon and Employment, revision D. Ministry of Business, InnovaƟon and Employment. Withers, T. (2021, August 9). Sudden New Zealand power outage raises supply concerns. Bloomberg Green. Wright, S. (2021, August 4). New Zealand's renewable-energy dreams get a reality check. The Wall Street Journal. RetrospecƟve by Sidney Jankanish ’23, PoliƟcal Science and InternaƟonal RelaƟons Martindale Retrospectives 5 November 2021
Retrospective on Kenneth Blanchette, “New Zealand’s Commercial Fishing Industry: Too Many Fish in the Sea?” from New Zealand: New Challenges in Paradise PerspecƟves on Business and Economics, Volume 27, 2009 Kenneth BlancheƩe ’09 is now Product Manager at Verily Life Sciences. Has New Zealand found effective solutions to combat poaching and dumping? Since 2009, New Zealand has implemented creaƟve, new soluƟons to combat poaching. The “Poaching is TheŌ” program implemented in 2006 remains today and acts as a hotline where people can report suspected poachers. The government has also implemented a digital monitoring system as of November 2019 that requires fisherman to electronically log their catch as soon as it happens. This system also involves onboard cameras that are mandatory for all ships and must remain on and transmiƫng while on the seas. Another method they have implemented is ouƞiƫng albatrosses with GPS trackers. Thousands of these birds drown every year when they fly down to eat bait out of dragged fishing nets and get entangled. Albatrosses tend to congregate wherever fishing boats are, aƩracted by the ample food. Taking advantage of this, “researchers said they fiƩed the birds’ GPS units with radar detectors, as poachers who disable their [automaƟc idenƟficaƟon systems] typically rely on radar systems to avoid collisions with other vessels. Sure enough, over a six-month period ending June 2019, the seabirds’ radar detectors picked up signatures for 353 vessels. Nearly 30 percent of them had no corresponding AIS signal” (Ingraham, 2020). Not only is this method effecƟve, but it is also inexpensive and helps save the lives of these waterfowl. Has the rapid growth of New Zealand’s ϐishing industry outpaced regulation and drastically affected the health of the ϐisheries? While New Zealand has had rapid growth in its fishing industry, the country has done fairly well in enacƟng regulaƟons to control it. The Kiwis have also improved their implemented Quota Management System. This involves seƫng moreaccurate limits on catch amount per species through target management plans. “Fisheries New Zealand works in collaboraƟon with others to develop management plans to provide targeted support to fisheries that are not meeƟng sustainability expectaƟons and need closer management or to outline management frameworks for protected species impacted by fisheries” (Office of the Prime Ministers’s Chief Science Advisor, 2020). In doing so, this method will beƩer preserve the sustainable yield of the fishery. The biggest issue the industry seems to face is funding. While New Zealand did spend about $22 million between 2017 and 2020 on fishing research, there are sƟll many gaps. “Limited funding and resources mean that prioriƟsing and allocaƟng funding to the most pressing issues is important. Within a low-trust sector with mulƟple compeƟng interests these prioriƟes are highly contested” (Office of the Prime Ministers’s Chief Science Advisor, 2020). The issues of bycatch and dumping sƟll remain, but hopefully in the future soluƟons for them will be discovered. References Ingraham, C. (2020, September 25). Researchers are now fighƟng marine poaching with GPSequipped sea birds. The Washington Post. Office of the Prime Minister's Chief Science Advisor. (2020). Commercial fisheries in 2020 – PMCSA. RetrospecƟve by Sidney Jankanish ’23, PoliƟcal Science and InternaƟonal RelaƟons Martindale Retrospectives 6 November 2021
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