Roaming Tiger on the Belt and Road: Is Malaysia the Victim of Politically Motivated Cyber-Attacks?

The unexpected and stunning election victory of veteran politician Mahathir Mohamad in Malaysia this May caught both the Malay elite and international observers off guard, throwing out what many decried as a corrupt long-standing governing class primarily concerned with enriching themselves, a running sore which culminated in the widely reported IMDB scandal which saw billions being stolen from the Malaysian national wealth fund by politicians and their friends.

US justice department investigations of the 1MDB scandal resulted in a breakdown in relations with Kuala Lumpur and Washington as the Malaysian government resented what it saw as unwarranted US intervention.

The Malaysians instead turned north to forge ties with Beijing, who famously make non-interference a cornerstone of their foreign policy. Already a major trade partner, Chinese firms were soon backing major infrastructure projects like the East coast rail line which will have the effect of deepening Chinese economic ties and further cementing political relations.

But the election of Malaysia’s new government threw a major spanner in the works, the new administration in Kuala Lumpur wasted little time in reviewing relations with China and soon suspended several major projects following allegations of bribery and concerns over pricing. Probes into the IMDB scandal were given new life (the previous government had blocked them) and the former Prime Minister Najib Razak was arrested. Low Taek Jho a financier implicated in the scandal remains on the run, allegedly in China.

The affected projects include the multi-billion dollar East Coast rail line which could have transported Chinese goods via Malaysia and a major pipeline project. These have significant commercial and geopolitical implications for China and represent a major pushback of its Belt and Initiative, it also left some wondering how China would react to such a rebuff.

In the last week, cybersecurity firm FireEye identified Malaysia as the target of cyber attacks originating from China as it allegedly sought to punish Malaysia for suspending its projects. The firm suggested that Chinese threat actors were targeting Malaysia through targeted malware in an effort to collect intelligence on infrastructure projects in the country.

If true these incidents highlight the possibility of China using cyber attacks through proxy groups such as Roaming Tiger and TEMP.periscope to target companies, infrastructure or nations that deviate from or backtrack on commercial or diplomatic promises, particularly those concerning its flagship Belt and Road initiative. Using proxies gives China the ability to distance themselves from attacks.

Russia has demonstrated the effective use of cyber warfare in recent years, the release of the Democratic Party emails has shown it can be low cost and highly effective. Compared to an invasion such as Crimea which provoked an international diplomatic and economic backlash.

FireEye identified that Roaming Tiger used malware to attack Western European Foreign ministries (via Toysnake), the Cambodian elections using Litrecola malware, other attacks have been made on Tibetan independence organisations.

There should also be a fear that these developments could be the tip of the iceberg, as Chinese backed threat actors develop their abilities and gain confidence they could go after ever more high profile targets.

A Sino-Malaysian summit this week highlighted strong ties between the two and the desire to increase already substantial trade, but delicately skirted around the issue of the suspended investments. Publicly China has been demonstrating a humble attitude to recent developments and there has not been an outburst of anti-Malaysian propaganda.

Both sides face major losses if the infrastructure projects are called off as preliminary work has already begun. It remains to be seen whether Prime Minister Mahathir has suspended the projects as a bargaining ploy to get a better deal on the projects from China, or perhaps for the Chinese to hand over fugitive Low Taek Jho and help bring a conclusion to the IMDB scandal or does he genuinely see the projects as an unnecessary drain on an overstretched national budget and is just allowing the Chinese to save face by not immediately cancelling the projects.

More broadly China’s use of cyber-attacks on other countries will be a trend worth watching, will Beijing target countries that resist China or attempt to interfere in national elections and how will nations hit by such attacks respond.

Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

The Rise and Fall of Minegolia: Where Chinese Demand Will Drive the Mongolian Economy Next

Thanks to demand from China – Mongolia’s coal prices enjoyed a spectacular appreciation in value in 2016 and 2017, the price of coal from the country has doubled over the two years and continues to rise. Long queues of coal-laden trucks are a regular feature at the Chinese – Mongolian border. This has been a welcome fillip to the Mongolian economy which is dependent on commodity exports of which coal contributed a significant 12% share 2015 (a distant second behind dominant copper with 47%). But Mongolia has reason to be wary of this gift from their southern neighbor.

Just a few years ago Mongolia was awash with miners, financiers and entrepreneurs all attracted by the world’s highest rising GDP and the opening of its crown jewel Oyu Tolgoi a mine stuffed with gold, silver and copper. But “Minegolia” suffered a classic commodity boom and bust cycle as global prices fell away a few years ago, but perhaps the biggest blow came from the Chinese economic slowdown, the country which is the source of 90% of Mongolian demand.

The crash caused political ructions and the fragile fiscal and balance of payments situation the nation’s new government faces today. So when Chinese coal production fell and demand for Mongolia’s produce shot up so dramatically in less than half a year Mongolian’s should have felt the benefit but many in the country are rightly suspicious of commodity-led growth, as they have been burned by Chinese led booms so recently.  The demonstration that shifts in Chinese energy policy can change the price of coal so dramatically underlines how over-reliant the Mongolians are on their neighbor’s economy.

Tavan Tolgoi

This concern around overdependence on China and convoluted negotiations with foreign investors from the US, Japan and China that have promised to fund the mine has delayed the go-ahead of Tavan Tolgoi mine project in Mongolia (surveys suggest it has the largest proven coal reserves in the world). Resource nationalism and memories around the sharp disputes with foreign investors over the Oyu Tolgoi are competing with the need to maintain and improve government revenues. The government issued shares in the mine to all citizens back in 2011, but were embarrassingly forced to buy them back after the planned IPO failed, but this makes the project extremely politically sensitive.

Rio Tinto the U.K listed mining giant has lined up $4.4 billion in financing from leading investment banks for the project – but the Mongolian parliament has yet to pass the necessary legislation to allow the project to go ahead.

Perhaps there should be more urgency, Mongolia has seen its budget deficit soar and its foreign debt increase to USD 23.5 billion (twice the value of its economy), so a turn to the IMF in February 2017 for a US$5.5 billion rescue package was no surprise. The government now led by the recently elected Mongolian People’s Party has already imposed typical austerity measures – a spending freeze and trimming civil servants pay, the fear is that the IMF will impose harsher measures in an attempt to tame its budget. There is an alternative, China could provide a loan, but this would make Mongolia further reliant on its southern neighbor something they are desperate to avoid.

There is widespread disillusionment among Mongolians that the last commodity boom was wasted and poverty levels have increased and there is little to show for the years for the years of stellar economic growth. Infrastructure and services have not seen sustained improvement and poverty levels have returned to pre-boom days.

The current coal prices should be feeding into the wider economy, but unfortunately because of a lopsided deal the state-owned Mongolian coal entity ETT is selling to Chinese firms at a much lower realized price compared to the high spot price and private companies have to also reduce their realized prices to compete. The Mongolian government realizes its poor position and is negotiating a new “one window policy” which will allow it to standardize coal prices and collect taxes more efficiently.

Unfortunately for Mongolia, the coal boom may also be short-lived depending on how long China takes to enact further measures to reduce coal’s hold over energy production, or there may be a shift back to Chinese domestic production which would reduce demand from its northern neighbor. Mongolia will be tied to the flux of commodity prices and Chinese demand for years to come, it must find a way to ensure future booms are not squandered in the same way they have been in the past.

Petropolis To Ecopolis: Can Emerging Market Cities Become Sustainable?

Cities in emerging economies face massive huge hurdles in the struggle to reach their full potential.  Perhaps the central problem many face is successfully absorbing a rapidly expanding population as people continue to migrate from the countryside, but without becoming overcrowded dystopias.

Urban areas in emerging and developed economies also face extremes of poverty, pollution, waste and increasingly the malign effects of global warming such as flooding, at times it must seem that these are insurmountable challenges, but around the world cities and towns have been successful at finding at least part solutions to these problems.

As someone who has spent a lot of time in emerging economies I realise that getting cities “right” is key to our future, the best cities are intense concentrations of humanity which produce the world’s leading businesses, art and ideas and to live in them gives you a constant sense of excitement and wonder. Who cannot fail to feel that tingle of excitement as they enter one of the globe’s major cities for the first time? Just as I have when first experiencing cities like Shanghai, Delhi or Saigon.

However while even the most unpleasant cities on earth can provide that buzz, they can also make life extremely uncomfortable for its inhabitants. Adapting the world’s most unhabitable and unpleasant cities to make them more liveable is clearly one of this century’s key  challenges.


Curitiba is proof that you don’t need huge budgets to change a city. Curitiba’s mayor Jaime Lerner started his tenure in the 1970’s and quickly decided that the city shouldn’t fall into the trap that other Brazilian cities had becoming increasingly dominated by cars with shanty towns around the edges along with soaring crime rates and widespread corruption.

Instead the mayor resisted developers and insisted on green spaces, so now there are 50 sq metres of parkland per inhabitant, making it Brazil’s greenest city. The innovative mayor pedestrianised major streets practically overnight to avoid objections by shopkeepers but in doing so revived the city centre. Again swimming against current trends he avoided building a costly underground system and instead invested in an innovative bus network.

Other schemes also developed, city dwellers can trade rubbish for tokens and cash in a scheme designed to help alleviate poverty and litter. While the city is far from perfect it does provide a superior environment to many other Brazilian cities which are beset by pollution, poverty and overcrowding.

Tianjin New City

Chinese urban dwellers have increasingly suffered from unchecked air and water pollution as well as chronic traffic problems and so it is no surprise that China took the lead in promoting the concept of a sustainable city, the result is the Sino-Singapore Tianjin Eco-city, as the name suggests it is joint venture between Singapore and China whose vision is to be “A thriving city which is socially harmonious, environmentally-friendly and resource-efficient – a model for sustainable development”.

This city was newly constructed close to Tianjin and was built with public transport, cycling and walking in mind. The city also has extensive vegetation and water to enhance the environment of the city. The success of the project is measured by 26 key performance indicators such as air quality, carbon emissions per unit of GDP, recycling rate, proportion of green trips and proportion of affordable public housing.

Compared to the majority of Chinese cities, Tianjin New City is in a different league in terms of liveability, the question is how can China emulate its approach in other new developments which will continue to grow as the mass migration from rural to urban areas continues.

The InterAmerican Development Bank

Another approach to sustainable cities has been taken by the Inter-American Development Bank – which works with established cities in Latin America and Caribbean on comprehensive action plans in an effort to make them more sustainable.

Cities like Nassau, Montego Bay and San Jose undergo a program which firstly involves a diagnostic that identifies the problems faced by the city, these are then prioritised and a plan is formulated to tackle them, studies are made and a monitoring system is designed, then finally the action plan is implemented which attempts to tackle the city’s economic, social and environmental problems head on in a co-ordinated manner. Like Tianjin key performance indicators are monitored such as:

  • Percentage of the population with access to wastewater collection.
  • Time required to obtain an initial business license.
  • Number of homicides for every 100,000 residents.

These are published and so the success (or not) of the program is transparent to everyone. These cities are all living examples of how the developing world has improved life for at least some of its inhabitants. In the next article I go into more depth on the future of sustainable cities and how they can adapt to existing and future challenges.


Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

From Vietnam To Vanuatu: Financing The Clean Energy Revolution In Emerging Economies

China faces an unprecedented water crisis; years of overuse, unchecked industrial pollution and urbanisation have pushed its rivers, lakes, wetlands and streams to breaking point, many have dried out or have turned vivid colours through chemical contamination killing aquatic life. Water resources are swallowed up by the enormous demands of agriculture and industrial uses such as cleaning coal. Wells now have to be dug ever deeper to tap supplies, putting more pressure on the water table.

The air in Chinese cities is in a similar sorry state, deadly smog which keep the elderly and infirm at home is increasingly common, even on “good” days the air is often thick with dust and pollutants, the result is a public health disaster with over 1 million deaths attributed to air pollution every year. These scenes are now being repeated across other fast industrialising emerging economies such as India and Indonesia.

Thanks to its recent Five Year Plans and vocal demand from its citizens China is witnessing the start of an unprecedented effort to tackle the huge problems of waste, scarcity and pollution. Where China leads other emerging economies will follow suit, countries like Vietnam, Turkey and Egypt have their own growing problems, but they are not yet on the scale of China’s endemic levels of pollution and waste and have a chance to act before they run out of control. As this environmental crisis gets worse the need to find answers becomes more urgent, which is where environmental technology comes into play.

Environmental technology is a wide ranging sector but includes renewable energy, energy efficiency, public transport or any technology or applications which can reduce pollution, limit greenhouse gas emissions or improve people’s well-being. More often than not these solutions are often fairly obvious, there aren’t many cities that don’t want emission free modern bus fleets or newly installed super-efficient municipal heating systems, but of course not all cities can afford these ambitions.

Budget constraints are a feature of all governments but are even more keenly felt in developing countries, but there are options on the table for cities and states to access funds that will pay for environmental technology.

The Clean Technology Fund is run by Multilateral Development Banks (MDBs) like the Asian Development Bank and African Development Bank, they utilise the fund and invest it their countries of operation working with the governments to help match the money to their national and regional goals. So far US$3.8 billion has been invested – the MDB’s credibility also attracts private money increasing the impact of the project and helping to develop a self-sustaining market for environmental technology.

The Fund has backed everything from Turkish geothermal energy projects to Moroccan solar to public transport in Colombia. These help wean emerging economies away from fossile fuels and towards a more sustainable future. Despite the success and scale of these projects it is still a fraction of what is required to tackle the problems of climate change, pollution and waste that they are designed to solve.

The Scaling Up Renewable Energy Fund is aimed squarely at frontier markets who typically still lack the market for environmental technology but do have fast growing energy needs. Rather than turning to damaging yet tempting fossil fuels the Fund enables countries support the growth of clean energy. By backing early stage projects the Fund can help develop a market and expertise around solar and wind which provides a powerful demonstration effect, which along with the fact it is done in conjunction with MDBs provides a lure for private money even in frontier markets.

When the Pacific island of Vanuatu wanted to develop more sustainable energy sources the Fund backed by the World Bank was on hand to finance a solar powered rural micro grid which aims to connect the scattered population across many islands. The scheme also plans to extend access to electricity to 90% of the population (it was only 25%) by investing in new solar panels, hydro projects and measures such as installing energy efficient modern street lighting. This kind of infrastructure is invaluable for isolated nations like Vanuatu which traditionally face high energy costs.

The World Bank are also on hand to help governments determine the right policies and laws to help encourage clean energy and efficiency such as:

Mandatory standards and labelling of energy efficient white products.

Ensuring tariff and VAT legislations is reformed to make solar panels more attractive.

Legislation enacted to allow Public Private Partnership risk sharing schemes to encourage the private sector into the renewables sector.

These Funds are the ideal bridge between public and private finance as well as creating a market for environmental technologies, without them many projects would be considered too risky. In addition the influence of the MDBs on governments can often bring about real change in policies and legislation which create the right environment for a flourishing environmental technology sector.


Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

How Morocco Is Making A Bid For The Crown In Clean Energy Tech In Emerging Markets

Anyone who has gone windsurfing in Essaouria or has felt the sun on their back while trekking through the Moroccan Sahara will understand why the country is a renewable energy leader among emerging economies. Morocco’s physical environment allied with a relatively stable political scene and supportive legal framework means the country already recieves 32% of its electricity needs from renewables sources.

Now the government wants to build on these achievemens and ramp up the use of clean energy technology to ensure that 52% of the country’s power comes from solar, wind and hydro by 2030 as well as begin exporting its expertise to the rest of Africa.

Morocco’s strategy of moving towards clean energy was originally borne out of weakness, lacking the abundance of gas and oil reserves enjoyed by its neighbour Algeria meant it faced heavy import bills for hydrocarbons, this cost as well as a desire to reduce greenhouse gas emissions and embrace the future led the country’s government to embrace renewable energy wholeheartedly.

There is little doubt the Kingdom has the environment for such ambitious plans, Essaouira has an average wind speed of between 7 to 8.5 m/s at 10 meters, while the Saharan sun provides around 3000 hours of sunshine a year. But physical attributes need to be allied with the right policies and political backing.

The Moroccan government’s renewables strategy is a combination of funding from international financial institutions (IFIs) such as the African Development Bank, new state policies such as cutting fossils fuel subsidies alongside encouraging private foreign investors to back clean energy projects. The centre piece of this drive is the 580 megawatt Noor (Arabic for light) solar power farm near Ouarzazate, closely followed by the Tarfaya wind farm – a 300 megawatt project which is the biggest of its type in Africa. Both these projects were heavily backed by the government and IFIs to make them a reality.

This environment offers opportunities for those looking to finance energy projects, supply and construct solar and wind facilities or like Elum Energy provide innovative solutions to power issues. Elum Energy is a software as a service company which has developed an energy intelligence platform which uses artificial intelligence to save money on electrical bills. By taking forecasts and monitoring supply Elum uses software to analyse the best time to deploy and save energy.

Now more foreign investors are taking an interest, US firm Nano PV are planning a new solar energy plant in Tangier. Chinese firm Chint are teaming up with Saudi firm ACWA energy to build the Noor VI solar facility which will provide energy at relatively cheap US$ 4.79 c kWh. A wind farm in Taza built by French firm EDF Energies Nouvelle and Japanese Mitsui should come online this year.

Morocco is also using its expertise in renewables to help invest in other African countries. Many African countries have large sections of the population which lack access to electricity, this creates the opportunity to construct new energy infrastructure around renewable energy rather than fossil fuels. African countries can learn a lot from Morocco – it has more financial clout than other nations the continent, but the falling cost of solar and wind installations combined with the increasing efficiency of the equipment means that it is an increasingly viable option and often cheaper than coal and gas. Perhaps most of all Morocco is proof of what can be achieved in terms of clean energy in a frontier market.

Another area in where emerging economies can emulate Morocco is through its legislation. The correct legal framework is important for countries keen to encourage renewable energy, allowing the construction of facilities and easy integration with national grids. Moroccan Law 13 – 09 was passed in 2010 and governs renewable energy in the Kingdom. The law was updated in 2015 to include a metering scheme for renewable projects connected to the grid – private investors are be able to sell some of their surplus energy to the grid. In the past the Office National de l’Elecriticite (ONE) controlled the generation of electricity, now private firms can do the same.

In Morocco renewable projects are typically structured in a particular way:

  • A Special Purpose Vehicle (SPV) is created to operate the project.
  • Long term power purchase agreements are signed between the SPV and ONE or MASEN the Moroccan Agency for Solar Energy.
  • Financing typically comes from international finance institutions IFI’s such as the European Bank for Reconstruction and Development (EBRD) and the Clean Tech Fund but local banks like BMCE have also been heavily involved.
  • The SPV is financed by MASEN which borrows from IFIs who benefit from a state guarantee. MASEN also offtakes the electricity generated by the project. This is done via long term power purchase agreement – the price is based on a tariff tendered by a bidder. MASEN then on sells electricity to ONE.

Now other renewable energy firms can join the party and benefit from the country’s renewables boom the number of private firms looking to invest in the country should rise rapidly. If Morocco can continue to attract private and public investment the falling cost and increasing efficiency of renewables could mean that it beats the emissions targets it set out in Cop22 UN Climate Conference in 2016 in Marrakech.


Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

China: World’s Largest Greenhouse Emitter Suddenly Wants To Become A Climate Hawk

Anyone walking around outside in Beijing or indeed most major Chinese cities would probably laugh at the suggestion that China could be providing leadership in the global fight against greenhouse gas emission and climate change, but some are now claiming that the Chinese government is doing just that.

Although China has already transformed the rest of the world through its commercial clout, in the long term the biggest impact it will make on the globe is via its commitment to preventing man made climate change. While many are already lauding China’s new status as a climate hawk pointing to a government ready to put words into policy and practice, others are more sceptical highlighting its huge carbon emissions and suggesting Beijing just looks good in comparison to the Trump administration and its retreat from the 2015 Paris Agreement.

China’s ability to move to a low carbon economy will be a key part of the fight against man made climate change, fail to reduce carbon emissions rapidly and it will help ensure the world shoots beyond the maximum 2 centigrade temperature increase recommended by scientists and thus endure catastrophic climate breakdown, but succeed in rapidly and dramatically reducing the release of greenhouse gases and the worst effects of climate disaster could yet be averted.

The bad news is of course that China’s industrialisation has meant it has already claimed the mantle of world’s largest green house emitter, not a strong position with which to claim global environmental leadership upon. Of course much of this is down to the fact that it has the world’s largest population and when emissions are measured per capita the picture is less damning, that said China is an energy intensive economy where there is widespread use of outdated factory equipment and inefficient vehicles.

China is also a heavy user of coal, the worst offender in terms of emissions in the fossil fuel hall of infamy. Heavy coal use has created a series of cities which suffer from toxic smogs and polluted waterways, the result is a public health disaster which is killing 1.6 million Chinese people a year through air pollution.

But change is in air, the Chinese government’s latest five year economic plan has policies now being enacted which promise to reverse these trends. Local governments and cities are also pushing change through designing more sustainable cities and investing in public transport. What perhaps is most striking is the speed in which China has come to dominate clean energy industries, five of the top 10 wind turbine manufacturers are Chinese and five out of 6 solar panel producers are Chinese. Crucial of course to these firm’s success was government backing in the form of subsidies, so much so that that it has led other governments to accuse them of unfair trade practices.

Whatever others might think this has allowed China to rapidly build up domestic capacity in renewables and begin exporting overseas. Now the Chinese National Energy Authority has announced it will spend US$ 360 billion on renewables through to 2020. This could turn the tide against fossil fuels and demonstrate how a major developing energy market can be successfully transformed to a lower carbon density profile.

Chinese investment in renewables overseas is also beginning to make an impact – with around US$ 32 billion invested in 2016 a figure the government has promised will jump further, solar and wind projects are now appearing along the Belt and Road initiative as well developed countries and South America. That said China also continues to invest in fossil fuel plants like coal fired power stations in Pakistan.

Beijing is launching the world’s biggest emissions trading scheme this November, this will follow on from seven pilot schemes and eventually it will create a trading system across the whole country involving around 10,000 firms in key sectors like steel, power, petrochemicals and aviation. By issuing permits on how much carbon can emitted annually and by putting a price on these emissions, and then allowing companies to trade them the scheme will create strong incentives for firms to become more carbon efficient. If the scheme is enacted in the right way companies will invest in energy saving buildings and equipment to save money.

China also has a fast emerging green bonds market, the country issued US$ 36 billion (40% of the global market) in 2016 from virtually nothing in 2015, the funds issued through the bonds should be used for environmentally friendly investments, but there are doubts that all the funds are being used in the right way as reporting standards are hazy and transparency is not the Chinese financial markets strong point.

If these initiatives and policies continue China could truly lead the way in preventing climate breakdown, but there is also a danger the reform process may run out of steam and the drive to become a lower carbon economy could become unstuck. Rapid change is possible – China has shown that in the last 30 years as it moved from a rural backwater to global industrial giant, now it must repeat the challenge and become a low carbon economy.


Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Where Now For India’s Solar Revolution?

When I first visited India fifteen years ago, solar panels were rare, their use largely limited to the farsighted NGOs I met with who typically used them for jobs like powering pumps for small rural water cleaning facilities, they certainly posed no competition for coal fired power stations. But even fifteen years ago the terrible pollution caused by motor vehicles, power plants and factories in India was stark, Delhi’s air felt thick with dust and dirt, being outside near major roads quickly resulted in a headache. Fast forward fifteen years and India’s economy and power demands have grown enormously, and its pollution problem is now a public health crisis.

India has seen demand for electricity rise roughly 10% a year over the last decade, driven by fast economic growth and energy intense industrialisation which in turn has made the government look increasingly towards using renewable technology to help meet the country’s requirements. Energy demand is expected to double by 2030, at the same time around 300 million people have limited or no access to electricity.

The falling cost of renewables (particularly solar) in the last five years, the devastating human cost of pollution caused by fossil fuels (over one mllion deaths a year are caused by air pollution in India according to the Health Effects Institute) which is evident to anyone who has visited major Indian cities, these factors along with the need to reduce carbon emissions has made solar and wind power increasingly attractive.

The government has acted through renewable energy targets, currently the ambition is to install 100 GW of solar capacity and 60 GW of wind capacity by 2022 (right now solar capacity is 8 GW). The Renewable Purchase Obligation for solar power now means that project developers building thermal power plants will have to supply 8% of the energy from renewable sources. In 2015 the government also instructed government owned entities like the mighty Indian Railways to add solar and wind capacity to their energy supply mix.

There is little doubt that renewable energy has taken off in India, it is hoped that the country can meet about 25% of its energy projects from renewables by 2030, projects like SB Energy’s project in Andhra Pradesh and Adani Green Energy’s farm in Tamil Nadu show that renewable capacity is being installed at scale. Current tariff levels are also encouraging – an auction in Rajasthan delivered a record low price of Rs 2.44 kWh (US$ per mWh) last year, representing a 40% drop in price over a year and undercutting fossil fuel prices in the process.

These new projects have help propel India to become the world’s fourth largest renewable energy market, some observers like Tim Buckley a director of the Institute for Energy Economics and Financial Analysis attributed this to the Indian Government’s long term commitment to renewable energy and well considered policy environment, which has created certainty for investors, all these efforts have helped attract foreign investment in renewables worth US$ 1.77 billion over the last three years.

The falling cost of clean energy has also helped prompt plans to cancel new coal fired power stations, which in the current energy market are no longer be viable.

However there are risks in India’s blooming solar scene, low tariffs and tough competition have driven down costs, but this could be to the detriment of some energy company’s long term health. Indian dependence on Chinese solar panels (which account for around half of project costs) have increased which has made the cost of future plants rise. There are also reports that falling tariff levels has resulted in some States waiting for further falls in costs before signing agreements.

In another case 15 solar project developers were asked to reduce the tariff for the project, normal practice straight after an auction where bidders are asked to match the lowest bid, but not a few years later when the development costs have been sunk and energy is about to be supplied. All these factors could result in problems for the industry as it matures (like clean energy ventures failing) and could delay the deployment of clean energy. Doubts have grown and the Lok Sabha’s standing committee on energy recently called the 100 GW target unrealistic and recommended a rethink.

But India must push the rollout of renewable technology, the forecast increase in energy demand cannot be met by fossil fuels without a further devastating impact to public health and threatening India’s Intended Nationally Determined Contribution (INDC) which confirms its aim to reduce greenhouse gas emissions intensity by 20 – 25% by 2020 by increasing the share of renewables in newly installed capacity by up to 40% in 2030. As well as the benefits for the environment, renewable energy can produce much needed jobs across the India, a recent IRENA report indicated that a million new jobs in solar and 180,000 in wind could be generated by 2022 if targets are met.

By reducing dependence on fossil fuels India will also improve its balance of payments position and reduce exposure to geo-political shocks that could disrupt supplies of oil. And above all as a major energy user of the present and future its commitment to renewable technology will be a key plank of the global battle to reduce greenhouse gas emissions.


Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Can Chinese Firms Dominate The Emerging Global Battery Market?

An obscure anonymous suburb on the outskirts of a Ningde, a third tier city in China’s South East is an unlikely launching pad for a technological revolution, but a giant new battery factory being built there promises to outproduce the likes of Telsa and Samsung in electric car batteries.

Once complete the facility will produce batteries for 3.5 million electric cars a year making it the world’s biggest and through economies of scale (and subsidy) drive down the cost of production making these vehicles more affordable, changing the economics of car production forever.

The global march of renewable energy technology continues around the world, last year saw record breaking amounts of solar and wind capacity financed and installed. Despite this success questions remains hanging to cast doubt in the minds of sceptics and the public, what happens when the wind isn’t blowing or the sun isn’t shining, and why are electric cars still so expensive?

These limitations have held renewable energy back for a long time, but now the prospect of vastly improved battery capacity and efficiency promises to make affordable batteries for electric cars, the home and even national grids a reality.

Much attention has been placed on Telsa thanks to their high profile founder Elon Musk and his ambitious Gigafactory in Nevada, but much less attention has been placed on the activities of Chinese battery makers.

Chinese firms are quietly making a major leaps in battery technology, positioning domestic manufacturers for the next majpr shift in renewable energy technology. The dull sounding battery maker Contemporary Ameprex Technology CATL – located in the Chinese city of Ningde was recently valued at a hefty US$ 11.5 billion.

Perhaps an overvaluation fuelled by hype, but not if the company delivers on its promises which means outproducing the Telsa/Panasonic factory which has opened its doors in Nevada.

China’s leadership has staked much on becoming a leader in ion-lithium batteries, by encouraging producers and subsidising electric car makers who will ultimately lead the mass market for batteries.

Chinese battery firms have acquired foreign technology and now heavily protected by their government are ramping up production. While CATL lead the charge there are several other major firms such as Lishen and BYD China who are also looking to compete. The Chinese government restricted the sale of car batteries in China to domestic firms, neutralising competition from Korean and Japanese rivals.

The government hope to have five million electric cars on the road by 2020, this in turn will further develop the domestic market for batteries and eventually open the door for Chinese firms to take a global lead. China hopes to snatch leadership in battery production from South Korea and Japan and ensure the US does not take the throne.

This strategy uses the same template China utilized to become the world’s leading manufacturer of solar panels; which involved heavily subsidizing producers, which drove the cost of panels sharply downwards, but with the effect of putting foreign firms like Solarworld out of business and with it creating political recriminations and allegations of unfair trade practices.

China also has a big advantage at the start of the production chain, its worldwide network of mining firms such as Tianqi Lithium and China Molybdenum have secured deposits of lithium and cobalt which are crucial elements in modern batteries. China’s dominance in this sector will help battery firms ride out big increases in raw material prices and ensure a well-diversified secure supply of these vital rare metals.

There is also hope that batteries can be produced on an industrial scale to store energy. An obscure Chinese firm Dalian Rongke are currently building the world’s biggest energy storage facility, namely a 800 Mwh vanadium flow battery which promises to store large amounts of energy as well as provide peak-shaving and enhance grid stabilization.

Right now the best way to store energy from renewable sources is to use the energy in peak solar/wind periods to push water uphill in a hydro facility then allow it fall through turbines when the sun is not shining generating power. The use of large batteries like the one Dalian Rongke are building could completely change the way in which grids are managed.

The next few years will see a global race to develop more efficient and cheap batteries that could see Chinese firms take an unchallengeable lead, or it is still possible that they will be outmanoeuvred by foreign firms like Telsa or Samsung or as yet unknown new nimble upstarts.

Many industry observers believe that Korean firms still lead the Chinese in terms of technology and produce superior car batteries, in particular their products offer greater performance in terms of energy density which allows cars to travel a greater distance on a single charge.

The reality is that the rapid growth of the global battery market means that there is likely to be a number of international giants from various countries that will dominate the industry.


Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Six Ways Green Technology Will Be A Game Changer For Belt And Road Countries

A digital Belt and Road?

The Belt and Road initiative promises massively increased interconnectivity across Eurasia and most people think of improved trains, rail and roads, but there is another overlooked element to the Belt and Road – which is the promotion of a “digital belt and road” which promises to improve connectivity through greater use of technology and to facilitate an Eurasian wide internet of things platform which will allow for huge improvements in logistics, transportation and information sharing.

The mass use of sensors and tracking devices in factories, transport systems and products should allow for efficient sharing of information and huge productivity gains. The internet of things will also make use of 5G wireless technology (due to be in widespread use by 2020) which will allow infrastructure to become increasingly efficient in terms of energy use.

China has embraced this approach and hopes to create digital network across Eurasia in tandem with its physical constructions. That is the theory at least, but what is not yet clear is how effective the internet of things will be in actually managing complex logistical chains and whether it will really deliver the energy and time efficiency savings promised by its advocates.

Can Kazakhstan’s new economic path embrace green technology?

Kazakhstan is a key transport partner for China and the Belt and Road as whole. The Central Asian giant is a major transit route hosting rail lines that run from China to Europe carrying increasing amounts of goods from East to West.

Chinese firms are also heavily imbedded in the Kazakh oil and gas sector who are there to serve the vast energy needs of China. Unfortunately this imported gas and oil is a major contributor to greenhouse gas emissions and air pollution and China is now looking to invest funds in renewable technology in the country, the growing appetite for clean energy along with a more accommodating legal and regulatory environment has opened the door for Chinese firms like DA 1 and Hydro China International Engineering who are planning wind projects on the Central Asian steppes.

Kazakhstan has set a goal to obtain 3% of its energy from renewables by 2020 and 50% by 2050. The Government’s Nurly Zhol (Bright Path) economic development programme which aims to modernise and diversify the Kazakh economy should encourage both Belt and Road and renewable energy projects, but the nation’s dependence on fossil fuels runs deep and renewable energy may take a long time to gain traction.

Wind Vs Coal in Pakistan

Pakistan is very much the poster child of the Belt and Road initiative with over $40 billion and a great deal of political capital being pumped in the China Pakistan Economic Corridor (CPEC), the success of which will be very much a litmus test for the Belt and Road overall.

CPEC is focused towards transport projects, but there are many energy projects as well, coal is the major beneficiary of China’s approach, but there are a number of renewable energy projects including the Dawood wind project based in the Southern Sindh region, which will provide 50 MW of power and is being built by HydroChina and financed by the Chinese Industrial and Commercial Bank.

However the Chinese were not the first on the scene  Pakistan’s first wind project the Jhimpir Wind Power Plant which provides around 100 MW of power was built by a Turkish company ZorluEnerj and financed by the Asian Development Bank.

Given Pakistan’s power generating capacity is 24,830 MW and it faces a shortfall of around 4,500 MW these renewable projects are a drop in the ocean in the nation’s overall energy needs, but they can provide a powerful demonstration effect which will help launch others so that Pakistan can begin the long march away from fossil fuels.

Record low solar prices in the Gulf

While the Gulf region remains synonymous with oil there are fast moving plans to harness the plentiful sunlight of the area by encouraging the use of renewable technology. Marubeni and JinkoSolar recently teamed up (in a rare Japanese and Chinese collaboration) to sign a power purchase agreement (PPA) with the Abu Dhabi Water and Electricity Company (ADWEC) for a 1.18GW photovoltaic power plant to be built near the town of Sweihan.

As well as being the largest solar project in the region Marubeni and Jinko also submitted a record-low bid for 1.17GW at a weighted 2.42 US cents per kilowatt hour (kWh) to supply energy to the Emirate, a sign of the rapidly falling cost of solar energy and the potential for this technology in the region.

The Gulf region is also expected to see demand for solar panels soar and Chinese firms like Jinko and Trina Solar and Suntech Powern are the largest suppliers of this technology and are in a prime position to take advantage and dominate the market.

Can China help green Kenya?

Kenya and East Africa represents a spur of the maritime part of the Belt and Road initative and a country in which China has been an extremely active investor in. Chinese investment has often resulted in disaster for the environment, but there is hope for a more sustainable future as China looks to invest in renewables.

The Northwest city of Garissa is the new home of the country’s biggest solar farm which will eventually produce 55 MW of power. Jinko Solar in combination with Jiangxi Corporation will work together to build the farm backed by the Exim Bank of China. Kenya is moving towards renewables in a bid to reduce dependence on expensive fossil fuels and cut pollution.

Iran a country with huge unrealised potential

China has invested heavily in the gas and oil sector across Iran, filling the gap left by Western firms frightened off by sanctions. China took over the running of a number of facilities and is also importing a lot of crude and gas from its diplomatic and economic partner.

Oil and gas has been the mainstay of the Iranian economy for many years, but now renewable technology is slowly starting to make inroads. Iran’s existing power generation capacity is around 74,000 MW but only 200 MW is currently produced by renewables.

But there are ambitious plans afoot in Iran which foresees new facilities which will eventually boost its capacity to 26,000 MW. So far the pace setters have been German and Swiss investors who have backed Iran’s biggest solar farm – the Mokran complex with 20 MW capacity with plans for an even bigger facility are now underway.

Chinese firms like ZTE are playing catch up but are planning solar farms in the country and their ability to build infrastructure quickly and cheaply along with their strong diplomatic ties via Beijing could see them dominate the market especially if other investors shun the country.



Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.


Chinese Renewable Energy: A Transformation Seen Even From Space

In a transformation that can be seen from space, a corner of the Far Western Chinese province of Qinghai has witnessed a remarkable transformation, neat blue-grey rectangles have steadily spread across the land to the point where they cover an area the size of Macau. Together these solar panels have created the world’s biggest solar facility, the Longyangxia Dam Solar Farm, which now creates 850 megawatts of energy, enough for 200,000 households.

With Trump at the helm and the US going backwards in its commitment to green energy, China has an opportunity to forge ahead and become the global leader in renewable energy technology. Already five of the world’s top six solar panel manufacturers are Chinese, as are five of the top ten wind turbine manufacturers.

That said the country itself remains heavily dependent on coal and other fossil fuels for its energy needs, to put it in perspective only 1% or 66.2 GW of its energy mix was met by solar power in 2016. However the country has a government set target to hit 20% of energy production from renewable sources by 2030 and HK$2.82 trillion will be ploughed into the sector to make this a reality.

The strength and reach of China’s renewable tech firms, along with the government’s realisation that it must cut greenhouse gases and improve the nation’s catastrophic air quality are both drivers in the race to reduce dependence on fossil fuels. China needs to meet international targets and keep a populace increasingly unhappy with the environment placated.

China has made major strides domestically in rolling out renewable energy technology, but its firms are now also beginning to make waves overseas, joining Chinese firms which are already leaders in sectors like natural resources, infrastructure and manufacturing. Now Chinese solar panel producers are beginning to export to both emerging and developed markets, and also to manufacture in other countries as the race to become the leader in renewable technology globally heats up.

In China leads the world in solar panel manufacturing and installation, the major producers are TrinaYingliChina Sunergy  Jinniu EnergySuntech Power, and Hanwha SolarOne , CHINT Group Corporation and JA Solar Holdings.

Similarly China is the largest manufacturer of Wind turbines since 2010, the market is dominated by Goldwind (19% market share), followed by Goudian (11% market share) and Mingyang (9% market share). Now these companies have also started to make their impact felt abroad.

Goldwind is headquartered in the far western region of Xinjiang, its wide open spaces are ideal for wind turbines. Goldwind took its postion as global leading in wind turbine production in 2015 overtaking Danish firm Vestas.

Trina Solar is a Jiangsu based firm which recently overtook Yingli as the world’s largest solar panel producer, the firm has global operations and was listed in the New York stock exchange but recently its shareholders voted for it go private as part of a merger with Red Solar. The company has grown rapidly to take the top spot, but now the pressure is on to maintain its explosive growth.

The State Grid Corporation of China is a obscure little known entity, but represents the world’s largest utility company with a staggering 1.9 million employees and revenues of US$330 billion a year comparable with tech giant Apple. With the Chinese government contemplating a shake up of the domestic market the State Grid are looking abroad to expand.

China Three Gorges Corporation are better known thanks to its construction of the world’s biggest hydro-electric facility, namely the Three Gorges Dam which produces 22.5 GW of power. The company has become a world leader in dam construction and now operates over 60 GW of energy production worldwide.

Tianqi Lithium is another less known firm, but that could be about to change as the global rise of electric cars continues. The batteries of electric cars look set to be dependent on lithium and Tianqi just happens to be the world’s biggest processer of Lithium ion thanks to the recent takeover of a Chilean firm.

The next article will look at how Chinese renewable energy firms are making a global impact with rapid expansion abroad.


Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Jewel Of The Indian Ocean: How To Invest In Sri Lanka

This sun kissed island just below India is a minnow compared to its giant northern neighbours, but its emergence from civil war and political crisis has put it on the map for brave investors.

The Sri Lankan Economy

While the Sri Lankan economy has seen decent GDP growth in the last few years, currently it stands at 4.1% growth y-o-y, not impressive, but things could be much worse. The government debt to GDP ratio has risen to 76%, which is uncomfortably high for a small frontier market. The government budget is also faces a deficit of 7.4% – all indicating that the country is living beyond its means and thrift is expected to a feature in the government budget for 2017.

The government is going through an IMF inspired fiscal tightening (in return for a USD 1.5 billion loan), which has helped its finances in the short term, the risk is that this approach will destroy the country’s growth prospects and therefore negate the impact of any reduction in debt and spending. The government is also attempting to push through reforms in tax and regulation which will make it easier for foreign investors.

Compared to (currently) strongly performing Asian peers Pakistan and Vietnam Sri Lanka seems to be lagging behind but there are reasons to be optimistic.

A bright spot for the government has been the inflow of Chinese money into the island, a new seaport and airport at Hambantota, the ambitious Colombo port project which would allow the capital to rise in population to 8 million and become a major financial hub as well as many other smaller infrastructure projects. However much of Sri Lanka’s outstanding debt is in China’s hands and there are fears these projects help Chinese firms but may end up being unproductive and the massive debt burden will cripple Sri Lanka financially and leave the government at the mercy of Beijing.

The challenge for the government is to attain and sustain a growth rate of around 7 percent in order to attain middle income status and keep unemployment low. The economy remains heavily dependent on the agricultural sector, with commodities like tea, rubber and coconuts which along with textiles make up most of Sri Lanka’s exports. Sri Lankan tourism is a success story, its reputation as a mellower version of India is well founded, the country has great beaches, delicious food and a welcoming atmosphere. The end of the civil war in 2009 has meant a sustained increase in tourist numbers rising from 650,000 in 2010 to 1,784,000 in 2015 an impressive rise in just five years.

Stock market performance

The Colombo Stock Exchange CSE has seen a modest performance over the last five years has seen with some highs in 2015, before experiencing a steady decline in the last couple of years, which could make this a good time to buy. The exchange has 295 entities listed, although trading is fairly thin and the market cannot be described as particularly liquid, there is also the S&P SL index tracking the 20 biggest companies.

For those who want to invest directly into the CSE first they should open a securities account with a participant organization (a local Stockbroker or a custodian bank) and also open a Central Depository System account (which can be done via the Bank). Further details can be found here.

Once the paperwork is complete you can instruct your broker to buy and sell shares. Companies in Sri Lanka have a decent reputation for transparency and honesty with much information available in English, nevertheless investors should try and research companies thoroughly before placing their funds as unless you have knowledge of the local market, or are prepared to put time and effort into researching companies you risk putting money into a small illiquid market which is likely to experience a high degree of volatility.

For those brave enough to take the plunge rather than suggesting individual companies I would suggest that certain sectors offer particular advantages:

Finance – banking in Sri Lanka has a long history of success dating back to the colonial period. Banks appear to be well run and well regulated, a solid bet.

Construction – often a good bet in a frontier market experiencing decent growth, a Chinese inspired infrastructure splurge should be a boost to this sector even if Chinese companies are the main beneficiaries.

Telecoms – like most frontier markets Sri Lanka has enjoyed a boom in mobile phone use, this has some way to run as the rollout of smart phones and 3/4G networks continues apace.

There does not appear to be a Sri Lankan focused ETF on the market, surprising in one respect given there are 1000s of ETFs available, but then Sri Lanka is a small market which is too volatile and focused for this type of product.


Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

AAGC: Has China’s Belt And Road Initiative Met Its Match?

The African Development Bank held its annual conference in Ahmedabad, the capital of Gujarat in May this year. The presence of the African regional development bank’s showcase in India underscored the long lasting and growing ties between them. While far behind rival China, India has invested a lot in the continent particularly in oil and mineral investments, but also in areas like telecommunications.

Indian forays into Africa have been largely private sector led as New Delhi lacks the funds or large state owned enterprises that Beijing has to spearhead investment. India has huge infrastructure needs of its own, so there is a limit to how much capital can profitably go abroad, all of which has limited its role in Africa, but now India’s burgeoning alliance with much wealthier Japan could put it in the driving seat across Africa and beyond.

The Asia Africa Growth Corridor (AAGC) is a proposed project which would be spearheaded by Japan and India, it looks to invest (mainly with Japanese money), US$200 billion in infrastructure, technology, improving skills, renewable energy and on agricultural projects all focussed on African and South Asian countries. This idea was first promoted at a bilateral summit between India – Japan in 2016 and was cemented during the May 2017 African Development Bank meeting in India.

The AAGC vision document was drafted by three institutes namely India’s Research and Information System for Developing Countries (RIS), Indonesia’s Economic Research Institute for ASEAN and East Asia (ERIA), and Japan’s Institute of Developing Economies (IDE-JETRO), all in consultation with African partners.

The four pillars of AAGC are:

  • Development and Cooperation Projects

  • Quality Infrastructure and Institutional Connectivity

  • Enhancing Capacities and Skills

  • People-to-people Partnership

The vision document currently include a lot of vague aspirations and ideas but not much yet in the way of solid plans.

Japan wants to increase its exposure to African markets and sees India as an ideal risk sharing partner. Indian firms are already well entrenched in Africa and its private sector approach has set it apart from China’s state led model.

India like China sees the continent as a promising market, as well as a supplier of raw materials, particularly oil and gas. India’s political capital along with Japanese funds should in theory form a potent partnership but of course the project is right now very much on paper and there has been nothing yet in the way of action, in contrast to China and its One Belt, One Road (OBOR) initiative which already has hundreds of projects underway.

The emergence of the AAGC is also a sign that two major Asian powers are drawing together to provide a serious rival OBOR initiative, which India has broadly rejected fearing an encroachment of its sovereignty and Japan is not part of. The democracies of India and Japan have long had troubled relations with China for both historical reasons and plain economic and political competition.

The AAGC can be viewed as an economic initiative to assist with Africa’s huge development needs, but also a diplomatic one which aims to ensure that countries in Asia and Africa look favourably upon India and Japan and they are not surrounded by pro-Beijing states in places like Sri Lanka, Bangladesh, Malaysia, The Philippines and Tanzania. China is backing a great many projects in these countries which of course usually benefit the host, but at the same time raise the risk of overextending their financial and political indebtedness to Beijing.

India has already made a foray into regional economic diplomacy with its planned expansion of Chabahar port in Iran which will provide a safe passage for Central Asian gas and oil, a project which Japan now looks set to back financially.

India and Japan are already complementary partners in many respects with Japanese technology and capital already well deployed in India, with Japanese firms building a high speed rail link between Mumbai and Ahmedabad and the first part of the Delhi metro and many other infrastructure projects across the subcontinent.

The AAGC could herald a new dawn in economic diplomacy with Japan and India combining to refashion Africa and Asia in its own image, taking on the might of China’s OBOR at the same time, or it could turn out to be a disappointment as the difficulties of coordinating two different nation’s ambitions and mapping them onto other countries proves a challenge to far. Right now AAGC is just a vision, but it will be worth watching closely to see if it does indeed develop into a serious rival to China’s all encompassing Belt and Road project.


Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.