April 21, 2006
On Markets, Micro Economic Observations from the MENA region
Since I am tired of being reflective about the bloody cancer and since the fine drugs given me (with increasing reluctiance by the prudish American medical staff all worried that I am some sort of narco fiend), and since I was moved by the Aqoul threads of late....
Well, lots of reasons, what was the subject? Ah yes, Markets in MENA, some close up Lounsbury thoughts on market liberalisation as seen from the micro-economic perspective. Note, these comments are fueled by drugs and therefore may have cerrtain inherent inaccuracies.Do not take these comments as an offer to sell any given product. Caveat Emptor.
In fact I was inspired by an exchange with my JV partner which was substantially (and I may add comfortingly) grounded in the arcane detials of various kinds of replacement water heating systems presently on the market in our fine little MENA country, the various challenges of installation as well as whether we could hire away the prime contractor of BNP Paribas to do our facade and terrace.
As to the later question, the answer is yes. I suspect this may be connected with the type of shirts that my JV parnter tends to wear and the fact we pay in cash, half up front, half on completion. None of this 90 day rubbish, plus my JV partner overseeing things is more encouraging to the lads than some fat bastard sucking on a cheap cigarette.
Now, then, in the process of all this discusion, and on the heels of the JV partner spending a month in the United States, we had some occasion to reflect on a number of things.
First of all the fairly remarkable degree of market liberalisation seen in the past 5 years, and especially 10 years. As I noted, it is very much in the MENA travellers' spirit that one can get the best deals when overseas - so you end up with really stupid requests on materials to bring back. Mentalities have not caught up with reality - which is both locallly produced and imported (but locally sadly less so than imported) goods available in the major metropolis are more or less what one can get most of the general consumer products one might expect in say a medium sized provincial city in the West. And even some very nice cutting edge products.
A far cry away from the autarchic mess of things 15 years ago, when smuggled cheapie boom boxes and third rate French made appliances were priced to go at 200 percent markups from the world market price.
Now, one sees some price differential, but it's not such that any but the truly professional should be motivated to skim it (which is to say, retail smuggling doesn't look like a good way to do business, the margins are too thin).
In many ways, this is a positive step forward. The upcoming urbanites can consume at reasonable prices and have some of the labour saving but more than labour saving, life saving conveniencies that the average fat assed Westerner expects. Such as frigos. Good ones or at least pretty good ones with reasonable efficiencies. Product ranges meaning that with pricing that even the urban poor can have a frigo. That, I may add, is a rather more significant thing than one might think, when one factors in food loss, food poisoning and the like.
Having more consumer products pass through organised distribution chains rather than the Back Pack Express also helps develop a formal set of commercial knowledge and management expertise that while perhaps seeming trivial and even risible to the outside observer, I consider an important (if incomplete) building block to this and other MENA countries building up a proper market economy, with real competition spurred on by managers who have something approaching a clue.
That being said, of course, there is a problem with the wave of imports, the speading choice and the like that has come with market liberalisation. The non-existance of exports. Or the thinnes of the export growth as compared to the explosiion in import growth that allows me to talk about arguing with me JV parnter about various models of water heaters and BTUs, and the like.
There are a lot of reasons why MENA export growth (as a regional phenomena) has been medoicre if not outright crappy. I am not going to try to jump on that, this is a micro economy reflexion.
However, a macro economic tie in certainly can be expressed rapidly for countries like this one, in the Lower Income range of the region - non-Hydrocarbon producer. Meaning an import bill for hydrocarbons. Meaning a strong structural incentive for the government to maintain an overvalued exchange regime to subsidise consumer and sometimes even industrial hydrocarbon consumption.
I would, perhaps ordinarily run on in macro terms about petrol consumption and the like, but in this instance I want to descend to the personal and the micro economic to illustrate.
Now, to preface these remarks, I confess having grown up with a father who was a positive Nazi with respect to energy efficencies (it led me to a suprise later in life to find that not all political conservatives were not also madly concerned with energy efficiency even at the cost of government imposed regs). I grew up in horror of leaving the Frigo open for more than the x number of allowed seconds. Perusing the Frigo? A deep and grave sin in the Lounsbury household, the Frigo was a semi-divine instrument to approached with a puprose, such as extracting the milk. Pondering its contents, oh no. Waste!! To be met with comments such as, "Have you quite made up your mind yet, or do intend to waste more energy pondering" if the door to the Frigo stayed open more than the maximum allowed time.
As such, I might have more than the average Anglo Saxon sense of efficiency and dislike of waste.
But moving to the micro economic in MENA.
Among the various horrors, to someone such as myself where each BTU expended is sacred (more so than sperm certainly), one finds in region is a complete and utter inattention and indeed, incomprehension as to the basics of thermal efficiency in modern usage.
The sins include running the air conditioner with windows open, and worse, in the winter, heaters with windows ajar. Or hot water heaters placed outside for saftey reasons. The saftey reasons having to due with the high prevalence of gas run heaters, off of little butagaz cylinders helpfully sold at all corner stores etc., lovingly assembled and cared for by the local butagaz monopoly (state), but with a charming habit of exploding now and again.
So, these fine little open faced heaters are typically installed, for those who are not suicidal or otherwise disposed to getting blown to bits, on the outside of the house, exposed to the elements.
As you might imagine, this has some effect on their overall water heating efficinecy, and the vast amount of waste actually pains me - however understandable. Of course in a city of this size, there is not a really solid excuse for there not being an investment in a centralised distribution system, other than the existing system of subsidies and the like (for cylinders, for the actual gas, etc) makes it short term more efficient to have these treacherously cute little cylinders of death in your house. Although again, usually mounted on an outisde wall, so as to direct the explosion at the neighbours, who no doubt deserve to be rained with molten heater parts for some reason or another.
The most irritating part of this tale is the degree to which state subsidies to butagaz bottle production helps disincentive the city from investing in a safer and overall more efficient system. Never mind the inherent inefficiencies of usage.
This randomly brings me to a connected issue to close out this moderately random rant, which is windows and their inefficencies as a sign of lack of energy efficincy awareness. I do not mean slum dweller makeshift windows but proper windows of residences where people like myself live.
Again, I may be slightly more obsessive in this area than most, due to a somewhat warped childhood - sadly having learned about BTUs and temperature losses at an early age, such that I could since a wee age and can not pass by a festive window dressed up for say Xmas in some northern land without silently thinking, what a bloody waste of energy, that was to X sq meters of glass, and..... - but this aside, in the MENA region for middle class construction there is a staggering inattention to even the basics of energy efficicencies in window construction and installation.
Now, with respect to the actual quality of the windows, I will give a pass on the mediocre offer. Across the region the consumer is very price conscious when it is not an instance of wealth display (and dowdy efficient windows are not such). There is no getting around that.
However, the quality of installation and general inattention to sealing up frames and the like - and the inattention on the part of the consumer (who does indeed intervene, say when the same shoddy work is tried in tiling) - are suggestive of the wider issue in terms of micro economics, of lack of consumer conciousness of energy efficincies and indeed basic energy saving practices long drummed into the consumer's head in most Western countries as a matter of course since the 1970s. Of course, I have noted Americans seem to have willfully forgotten much of the same, but what can we say?
Returning to the MENA region and the offensive presence in my very own apartments of gaps between the window from and the wall (never mind the poor design of the windows for either summer or winter usage), here I suggest that again among the main sources of evil are government subsidies to the main forms of heating and to a lesser extent cooling. The infamous butagaz heaters of course play their role, although why one would want these little bombs inside one's living quarters escapes me until I get chilled enough. Cooling of course is usually electric run and there you run into some variation on pricing, with subsidies not being so evident in most places.
However, the generic lesson remains in the MENA region, that the micro level market in home comfort devices and home energy consumption is seriously fucked up by badly conceived governmental intervention (yes, I would properly and normally have to prove this assertion, but let's leave well enough alone for the moment, the chemo has fucked up my hands again, this was painful enough, although amusing), and that they have created queer incentives for uneconomic consumption of hydrocarbons, directly or indirectly, that put pressure on macroeconomic policy to maintain an overvalued exchange rate (so as to mitigate the import bill( that in turn tends to price out own exports......
There was a connexion but bloody hell, I will have to come back to this, bloody hands are too bloody sore. Fucking goddamned chemotherapy rubbish.
Posted by The Lounsbury at April 21, 2006 06:26 AM
Filed Under: Biz - Private in MENA
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That was amusing.
In re the butagaz, although having my own cute little explosion-waiting-to-happen under my kitchen counter is a bit unnerving when I stop to think about it (I console myself that as a white guy living in Beirut, I would at least get my picture on the cover of a few newspapers during the period of time that everyone was speculating about what terrorist organization might have plotted my demise, thus possibly sending a few extra hits 'Aqoul's way), I also am not VERY comforted at the thought of miles and miles of gas-carrying pipes threaded along under Beirut's pavements. It doesn't sound like an idea that could possibly end well.
Posted by: Tom Scudder at April 21, 2006 04:30 PM
Well Beirut has some certain market characteristics.....
Posted by: The Lounsbury at April 21, 2006 05:05 PM
I committed a slight faux pas while interviewing a member of the PM's econo team. Couldn't keep from snickering when he mentioned Lebanon's modern IPR law.
Posted by: Tom Scudder at April 21, 2006 05:28 PM
I grew up in horror of leaving the Frigo open for more than the x number of allowed seconds. Perusing the Frigo? A deep and grave sin in the Lounsbury household, the Frigo was a semi-divine instrument to approached with a puprose, such as extracting the milk.
My dad was a nut about those things too. His obsession was the space heater in the den. If someone left the den without turning it off, even for a few minutes, he'd roar "who is wasting BTUs?" He frightened a couple of my friends that way.
I blamed this obsession on the fact that he was an engineer. And, he was one of the 4 or 5 people in America who really liked Jimmy Carter (also a parsimonious engineer)
Posted by: mary at April 22, 2006 10:48 PM
I've always been a waster of electricity. It exists to make life convenient, abuse it. The whole point of modernity is not to have to count firewood.
Posted by: matthew hogan at April 23, 2006 03:23 PM
Unless you've got a neat little woodstove and like to count firewood. Of course I never turn the main heat off while I have the fire going. That would certainly drive a parsimonious engineer nuts.
Posted by: pantom at April 23, 2006 06:54 PM
BTW, they keep the water heaters on the outside of the house in Mexico too, at least the parts I've been to. My wife spent her entire life before her mid-twenties, it seems, getting up at 4 am to light a match to the water heater so she could have heat for her shower when she woke up for good a couple of hours later. Her mom didn't believe in keeping it on overnight. Another parsimonious one...
Posted by: pantom at April 23, 2006 06:57 PM
Leaving aside personal probity or parsimony, I was actually hoping to get at more general problem of lack of efficient conservation measures in developing economies that would help them address the challenge of hydrocarbons dependency.
Posted by: The Lounsbury at April 24, 2006 05:23 PM
As I noted, it is very much in the MENA travellers' spirit that one can get the best deals when overseas - so you end up with really stupid requests on materials to bring back.
Heh. What's amazing is how often this trumps other concerns. A friend of mine at university comes from a conservative Muslim country. Before going back for a vacation, he'd invariably get a long list of stuff to bring back with him, including large quantities of women's undergarments, often with embarassingly exacting specifications.
I have fond memories of watching him engage in animated and detailed discusions on the merits of various bra styles with somewhat bemused female shop assistants who were obviously unused to having such a discussion with any man, much less an obviously middle-eastern man sporting a full beard.
Posted by: Anonymous at April 24, 2006 07:07 PM