5 September 2012 | Vol. 3, № 34.

From the Editor’s Desk

Dear FDI supporters,

Welcome to this week’s edition of the Strategic Weekly Analysis. This week, Indian Ocean Research Manager, Leighton Luke, analyses Indian attempts to recoup revenue from companies exploiting the so-called “Mauritius Route” in attempts to minimise tax. Also in South Asia, the Food and Water Programme identifies and analyses the catalysts for Pakistan’s emerging water security crisis. Focusing on Burma, we critique the on-going implications of political reforms. Senior Visiting Fellow and noted Burma analyst, Andrew Selth, examines the rationale behind the renewal of economic sanctions against the Burmese Government by the US. Correspondingly, we scrutinise late-August’s other reforms. Moving west, we reflect on the long-term forecast for the Non-Aligned Movement as Iran takes leadership. In the Caribbean, Energy Security Research Manager, Liam McHugh, discusses attempts by Trinidad and Tobago to stimulate the economy by promoting its hydrocarbon potential. Other challenges remain, however, particularly in connection with security and the overall economic situation.

Next, the Food and Water Programme considers the role of ‘sustainable diets’ in future food policy research and development. Continuing the on-going focus on the National Food Plan, we consider lessons from San Francisco and synergies with Australia. We conclude this week’s edition with a report on a recent Greenpeace publication detailing legislative deficiencies in Papua New Guinea. These issues have resulted in dramatic increases in foreign land-ownership, threatening the well-being and living standards of local citizens. After three years based at Desborough House in West Perth, this week Future Directions will move to new premises in nearby Dalkieth. Consequently, there will be no Strategic Weekly Analysis for the week commencing 10 September. Publications are expected to begin again on 17 September. I trust that you will enjoy this edition of the Strategic Weekly Analysis. Major General John Hartley AO (Retd) Institute Director and CEO Future Directions International

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*****

Mauritius under Pressure from India to Amend Taxation Treaty

India and Mauritius are yet to agree on changes to the double taxation arrangements that have seen

New Delhi miss out on tax revenues of up to US$600 million annually.

Background

Concerned at the amount of tax revenue lost to Mauritius-based companies under existing arrangements,

India is continuing to seek a renegotiated taxation treaty with the island state. Indian officials have

estimated that the “Mauritius route” results in the loss of some US$600 million in tax revenues each year.

Comment

Mauritius is coming under renewed pressure from India to renegotiate the double taxation treaty that has

been in place between the two countries since 1983. The first negotiations took place in 2006 and the

latest round on 22-24 August 2012, once again without reaching agreement. The impetus for India now is

the substantial amount of revenue that is lost annually as companies operating in India channel funds

through Mauritius. As India’s economy slows and international ratings agencies, such as Standard and

Poor’s, threaten to downgrade India’s credit rating, maximising revenue is assuming ever greater

importance.1

By nominally maintaining offices in Mauritius, without being either incorporated in Mauritius or having

management located there, non-resident businesses – both Indian and multinational – gain exemption

from Indian taxes under the provisions of the Double Taxation Avoidance Agreement (DTAA). Instead,

they are only liable for the significantly lower taxes levied by the Mauritian authorities. India levies a

capital gains tax of up to 40 per cent, while Mauritius has none and applies a corporate tax rate of only 15

per cent. Neither do companies domiciled in Mauritius pay New Delhi’s 15 per cent tax on dividends or its

20 per cent tax on interest payments.

Mauritius is the largest source of foreign direct investment (FDI) in India. Between April 2000 and March

2012 it amounted to US$64.17 billion, or 38 per cent of the total. 2 Given the importance of the financial

sector to the Mauritian economy – it accounts for five per cent of gross domestic product and employs

15,000 people, Mauritius is anxious to preserve the advantages it enjoys under the current agreement. It

has rebuffed the draft General Anti-Avoidance Rules proposed by New Delhi that would tighten the tax

regime between the two countries. Port Louis has sought assurances from India that the island’s economy

would not be harmed by any changes and has stated that it will not introduce a capital gains tax.

Mauritius has put forward other proposals of its own, such as introducing a requirement that companies

demonstrate a greater presence in Mauritius to claim the benefits of the treaty, among which might be a

certain number of company meetings or a minimum level of expenditure. A report that appeared in the

Times of India stated that Mauritius was even willing to cede the Agalega Islands to India in exchange for

1 Bahree, M. and Ball, D, ‘Tiny Tax Haven Roils India’s Ways’, Wall Street Journal, 30 August 2012, p. 1.

2 ‘Fact Sheet On Foreign Direct Investment (FDI) From April 2000 to March 2012: Section E - Share Of Top Investing

Countries FDI Equity Inflows (Financial Years)’, Department of Industrial Policy and Promotion: New Delhi, March

2012.

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keeping the DTAA in its current form3. This was subsequently dismissed by Mauritian Trade Minister Arvin

Boolell as untrue.

Both sides have announced their commitment to working co-operatively on the taxation issue and they

have a history of close relations to draw upon. Nevertheless, the possibility that it will place a previously

unknown amount of stress on the bilateral relationship cannot yet be ruled out.

Leighton G. Luke Manager Indian Ocean Research Programme lluke@futuredirections.org.au

*****

Imminent Challenges to Pakistan’s Future Water Security

Erratic weather, surface water depletion and inadequate infrastructure could result in a severe water

crisis in the near-future.

Background

Infrastructure damage in a major city of Pakistan has drawn attention to the possibility of future water

crises. Pakistan is at risk of developing water shortages due to inadequate structural investment and a

changing climate. The country’s high birth rate is producing an additional 4 million people each year,

placing further strain on a population already vulnerable to water insecurity.

Comment

The rupture of a major water pipeline in Karachi, Pakistan’s largest city, has exposed the rundown state of

the country’s infrastructure. The rupture was the result of a severe power cut in early August, which

affected almost half the city’s population. This particular pipeline carries more than 20 per cent of

Karachi’s drinking water. Those who lost water access were forced to turn to exorbitantly priced tankers

or long queues at public taps. Sporadic protests and mild unrest also arose as the scale of the temporary

shortage increased.

The chaotic scenes in Karachi highlight the precarious state of water security in parts of Pakistan. A recent

study, carried out by the World Bank and the state-run Karachi Water and Sewerage Board (KWSB), points

to the vulnerability of Pakistan’s infrastructure as a major threat to the country’s water security.

Investment in the water and sanitation sector falls short of what is required for a water-secure

environment, with many Pakistanis living without access to basic services. The lack of investment

combined with poor hygiene practices, have led to significant economic costs through lost productivity

and greater healthcare costs. The situation is also causing disease, environmental degradation and has

contributed to premature deaths.

3 Sidhartha, ‘Mauritius offers India 2 islands in effort to preserve tax treaty’, Times of India, 6 July 2012.

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Pakistan faces mounting challenges that will jeopardise its future water security. The World Bank has

listed Pakistan as one of 17 countries predicted to encounter severe water shortages by 2025, with

Karachi especially at risk. In addition to the problems of minimal investment and poor infrastructure,

Karachi is poised to lose a significant proportion of its water source due to decreasing flows in the Indus

River. The river currently provides 86 per cent of the city’s water supply. According to the KWSB, glaciers

in the Himalayas, the source of the Indus, will melt at faster rates in the future. This will deplete frozen

water reserves and reduce water flows in the long-term.

Further, climate change is expected to worsen Pakistan’s already erratic weather, which has had

devastating effects on the livelihoods of Pakistanis in recent years. The future state of local and national

water security will depend on the relevant governments’ abilities to deal effectively with the approaching

challenges.

Jay Vella Research Analyst Global Food and Water Crises Research Programme jvella@futuredirections.org.au

*****

US Sanctions Against Burma: Neither Rhyme Nor Reason

US sanctions may achieve the opposite to what is intended by weakening the ability of the Burmese

president and his supporters to carry out the anticipated reforms.

Background

The Obama Administration has declared that the renewal of US economic sanctions against Burma

represents ‘insurance’ against the Thein Sein government backsliding on its reform program.

Congressional supporters of this policy claim that such pressures actually prompted the reforms and are

needed to keep Naypyidaw on the right track.

Comment

Current US policy towards Burma represents an awkward compromise. The Obama Administration has

publicly acknowledged the failure of past economic sanctions. It has stated that it wants to encourage

President Thein Sein’s ambitious reform program, and to achieve certain foreign policy goals — such as

severing Burma’s defence relations with North Korea. To these ends, Washington has made a number of

concessions to assist the government in Naypyidaw. Yet Congress contains some implacable opponents of

Burma’s hybrid civilian-military government, who refuse to acknowledge the extraordinary paradigm shift

that has occurred over the past 18 months. They seem convinced that continued pressure is required to

produce a real democracy in Burma.

The White House is unwilling to pick a fight with Congress on this issue. It faces other problems that have

a higher priority. Consequently — and probably reluctantly — it has endorsed Congress’s position.

However, as David Steinberg suggested recently in an insightful and persuasive piece for East Asia Forum,

the US’s hard line seems to represent wilful blindness in the face of clear evidence that sanctions did not

prompt the current reform program. In fact, after 20 years of US pressure Burma’s military regime was

stronger than it had ever been. That was probably one reason why the armed forces felt able to hand

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over power to an ‘elected’ administration in March 2011. Nor will sanctions encourage further reforms.

Indeed, they are likely to have the opposite result.

The US’s approach is not only misguided, but potentially quite harmful. For economic sanctions are bound

to hurt many ordinary Burmese. Also, Washington’s hard line will impede the implementation of reforms

— most of which will depend on foreign capital, technology and expertise. It also weakens the position of

the president and other reformers in Burma, and strengthens the hand of conservatives opposed to the

scope and pace of change. US policies alone will not cause the reform process to stall but, should that

occur, Washington would have to accept some responsibility for the resulting political and social crises.

To all those who saw the Obama Administration’s ‘pragmatic engagement’ policy as a positive step, the

renewal of US sanctions is a real disappointment. It may reflect other agendas in Congress, but at the

international level it sends entirely the wrong message — to the Thein Sein government, to the Burmese

people, to regional countries and to the wider international community. Granted, in human rights terms

Naypyidaw still has a long way to go, and in foreign policy terms it has resisted taking some important

steps, such as cutting ties with Pyongyang. Yet there is now a wide consensus that the best way of

encouraging progress on these fronts is through closer engagement and practical assistance. This has

been recognised by every country in the world except the US, which stands alone in imposing sanctions

against Burma.

Andrew Selth

Senior Visiting Fellow

*****

Burma: Reshuffle and Reforms Confirm Positive Trajectory

A Cabinet reshuffle and the further lifting of media and travel restrictions confirm the reform process

started by President U Thein Sein in 2011.

Background

Political and economic reform in Burma continued with a major Cabinet reshuffle in late August 2012, the

largest since the military junta ceded power in March 2011. The removal of over two thousand names

from the Burmese Government’s travel “black list” and the release and pardon of three United Nations

workers jailed in June, followed soon after, confirming the reformist agenda. Media censorship was also

relaxed. These changes have encouraged the return of a growing number of Burmese expatriates.

Comment

After six months of rumours, the Cabinet reshuffle shows further movement away from military rule.

President U Thein Sein himself has recently expressed a willingness to leave behind those who do not

support the reformist agenda. In the reshuffle, nine out of the thirty-three cabinet posts were changed, as

academics and technocrats were brought into Cabinet and 15 new deputy ministers were appointed.

A prominent change was the replacement of hardliner Kyaw Hsan as Information Minister by Aung Kyi. A

retired major-general, Mr Aung is a moderate who previously liaised between the government and

opposition groups. Although Hsan remains in the government, the shuffle certainly strengthens the

reformist agenda.

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In another development in late August, officials from the Press Scrutiny and Registration Department

announced the end of media censorship. Although films remain an exception, the move still allows for

work to be published without prior submission to the state censors. Going one step further, Minister

Aung announced on 3 September that he expected private publications would be permitted to publish on

a daily basis in early 2013, ending the monopoly enjoyed by state-owned newspapers.

The government has also removed names from the so-called “black list” of people forbidden to travel to

Burma. Further removals are intended, according to presidential spokesman Nay Zin Latt, and this will

encourage many Burmese citizens living abroad to return. The names removed included government

critics, foreign journalists and public sector workers, who fled Burma during military rule.

The relaxation of travel restrictions, improving job prospects and more relaxed social conditions, have led

to the return of many Burmese who had been working in neighbouring countries. Direct foreign

investment is also creating more jobs in Burma, at the expense of countries like Thailand, which now faces

a growing labour shortage as Burmese workers return home. With so many workers returning, Burma will

need to continue to attract foreign investment, since it is not a certainty that all returnees can easily be

absorbed back into the workforce.

Another positive aspect of the return of a wide cross-section of former exiles and other expatriates is that

it is adding the expertise gained by people who have lived abroad. This further contributes to an

environment of increased openness and social acceptance.

Zamaris Saxon FDI Research Assistant Indian Ocean Research Programme

*****

The Non-Aligned Movement May Launch a New Global Approach

Whether the Non-Aligned Movement, under Iranian leadership, can energise itself and become capable

of dealing with emerging global issues, should become obvious during the next six months.

Background

There are two general views on the outcomes of the Non-Aligned Movement (NAM) meeting recently

concluded in Tehran. Both are influenced by national or ideological outlooks. On the one hand, the NAM

is seen to have a new and relevant role in global decision-making. Alternatively, it is perceived as Iran-

centric, likely to have difficulty with contemporary issues, and unlikely to have answers to the most

pressing transnational problems.

Comment

The NAM has a chequered history. Initially, it focussed on decolonisation, moderating Cold War tensions

and promoting greater economic and political equity. Since the collapse of the Soviet Union, however, it

has lacked its original clarity and purpose. US “unipolarity,” especially after the Iraqi invasion, became

something of a rallying call. But global trends, including the global financial crises, Obama’s more

conciliatory approach and the perceived decline in American global influence, have undermined this

belief.

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So what, if anything, does the NAM stand for today and what can be expected in the future?

Apart from Iran’s attempts to undermine the attitudes and policies of those who seek to challenge its

nuclear developments, two issues appeared to attract the support of NAM members.

Firstly, despite the wealth of a number of its members (four are members of the G20), there is a general

perception that global politics and economic opportunities favour the major powers. Global governance

structures, including the Security Council, the IMF and the World Bank, were seen as outmoded.

Secondly, the Nuclear Non-Proliferation Treaty was seen to be discriminatory; non-nuclear states are

prevented from acquiring nuclear weapons, while nuclear-armed states, despite promises to do so, have

yet to disarm.

The coincidence of Iran’s hosting of the NAM, and its subsequent three-year chairmanship, adds

considerable significance to the route the NAM might take. Many NAM members, for instance, appear to

accept Tehran’s statement that it is pursuing a peaceful nuclear policy. This may be reinforced by the fact

that some are annoyed by perceived double standards, whereby Israel has acquired such weapons.

Understandably, both sides of the argument seek to emphasise their point of view, often suggesting a lack

of objectivity or deliberate disinformation by the other side. For instance, UN Secretary General Ban Ki-

moon’s attendance was portrayed as a victory for Iran; his call on Iran to develop international confidence

in its peaceful nuclear developments was either ignored or seen as representing a pro-western outlook.

Equally, President Mohamed Morsi’s rejection of Iranian support for the Assad regime received

considerable coverage in the Western press, while his call for a Palestinian solution was barely

mentioned.

The most significant question is what happens next.

There is little doubt that Iran will attempt to exploit the meeting. Iranian official statements and media

releases have highlighted the level of attendance and the general agreement on a number of issues, while

ignoring the statements about its own nuclear developments and its policy of support to the Syrian

regime.

Iran will also claim to have recaptured the initial principles of earlier NAM meetings, claiming not to be

influenced by the either Western or Soviet-era attitudes; it will see itself as ideally placed to represent the

NAM. It may attempt to influence the composition of the Security Council, to increase NAM membership,

to have more frequent summits and to organise a permanent secretariat and other supporting bodies.

The NAM, however, faces a challenge in coherence and cohesion. Its membership and political diversity

are significant. While it may agree on general principles, like non-intervention and global economic justice

and opportunity, these will need to be translated into hard-hitting policies and actions. To date there has

been little evidence of this happening.

The next six months should determine the likely course of action. Whether the Tehran Plan of Action

results in any form of meaningful outcome should be revealed by then.

Major General John Hartley AO (Retd)

Institute Director and CEO

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*****

Oil and Gas to Revive Trinidad and Tobago’s Economy

The Government of Trinidad and Tobago hopes to arrest the decline of the island-nation’s economy by

promoting opportunities in offshore oil and gas.

Background

The Global Financial Crisis has resulted in a significant decline in the economy of Trinidad and Tobago,

with its GDP contracting by more than 4 per cent since 2010. To stimulate growth, the Government has

developed a dual platform, releasing offshore acreages and developing a supportive policy for investors.

While this response is likely to succeed, it is not without challenges; economic, political and security

factors conspire to undermine confidence in the economy.

Comment

Following a five month bidding round, 4 September marks the deadline for production applications for six

deep-water hydrocarbon blocks off the coasts of Trinidad and Tobago. The blocks are located on the

islands’ north-eastern and eastern coasts and the Ministry of Energy and Energy Affairs in April invited

international companies to tender for production sharing contracts. The potential reserves are located at

various water depths and hydrocarbon plays.

Oil and gas are of vital economic importance to the Caribbean nation. Although production has existed

since 1908, it was not until the 1970s that Trinidad and Tobago fully began to capitalise on its

hydrocarbon potential. In the 1990s, an intensive exploration programme led to significant finds, that in-

turn led to major gains in drilling, producing and refining. Petroleum currently constitutes 42.5 per cent of

Trinidad and Tobago’s GDP.

Following elections in 2010, Prime Minister, Kamla Persad-Bissesar, and his People’s Partnership Party

pledged to use hydrocarbon revenue to transform the economy and improve living standards. This

platform, however, coincided with the Global Financial Crisis. In 2011, the island’s GDP contracted by 1.4

per cent, further compounding 2010’s 0.02 per cent and 2009’s 3.3 per cent decline. Understandably, the

on-going recession is likely to undermine investor confidence.

In an effort to combat the poor economic outlook, the government has attempted to stimulate interest

through a number of economic incentives. Most significantly, petroleum profit tax has been cut from 50

to 35 per cent. Similarly, Mr Persad-Bissesar has made a commitment to increase state participation and

support to the oil and gas industry.

Such efforts to foster an attractive investment environment will likely pay dividends, as demand for

energy, particularly gas, continues and deep-water project costs decline. Moreover, Trinidad and

Tobago’s approach to investment runs in stark contrast to recent developments in Latin America and the

Caribbean. Across the region, resource nationalism, including expropriation, has taken hold; the islands’

political stability and support for enterprise will promote investor confidence.

In addition to the slowing economy, security and corruption challenges also pose a threat to the islands’

industry.

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In 2011, Trinidad and Tobago placed 91 on a list of 183 countries in the annual Transparency International

Corruption Perceptions Index. In particular, ineffective protection of private property rights and a lack of

transparency in the procurement process are likely challenges for the oil and gas sector.

The island’s security risks are significant. Trinidad and Tobago’s high crime rate poses the most substantial

threat. While analysts believe there is no evidence to suggest foreign workers are targeted, the

opportunistic nature of local criminals’ behaviour makes it likely that a growing expatriate population will

translate to an increase in foreign victims of crime.

More significantly, piracy and sea robbery blight the region. Reports suggest groups operate in the waters

adjacent to nearby Venezuela, with several attacks concentrated on the central port-city of Puerto la Cruz.

While boasting one of the largest navies of the Caribbean nations, Trinidad and Tobago still lacks the

ability to fully patrol its porous borders. Austerity and other security commitments have resulted in

decreased support from traditional European partners. Although far from the scale of piracy in the Gulf of

Aden, nuisance attacks will increase insurance premiums and challenge the economic viability of offshore

projects.

In reality, the economic and security challenges Trinidad and Tobago faces are significant, but are easily

negotiated, particularly for an industry as resilient as oil and gas. Given Mr Persad-Bissesar’s strategic

policy, coupled with the importance of securing hydrocarbon projects due to their significance for the

national economy, the islands can have a justified confidence in a positive trajectory for the national oil

and gas sector.

Liam McHugh

Research Manager

Northern Australia & Energy Security Research Programmes

lmchugh@futuredirections.org.au

*****

Vital Insights from the FAO for Sustainable Diets and Biodiversity

Consideration of sustainable diets will be important for future food policy research and development

Background

Following an International Scientific Symposium on Biodiversity and Sustainable Diets the FAO has

released a publication detailing the topics presented. It is entitled Sustainable Diets and Biodiversity:

directions and solutions for policy, research and actions. It contains some fundamental insights and

provides an excellent starting point for anyone seeking to better understand global food production and

consumption, research into sustainable alternatives, and directions for the future of food policy, research

and development.

Comment

An International Scientific Symposium on Biodiversity and Sustainable Diets, held 3–5 November 2010,

was organised by the Food and Agriculture Organization of the United Nations and Biodiversity

International. The main agenda was to promote biodiversity and nutrition as crucial elements of

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sustainable development and poverty alleviation. One product of the symposium was an agreed definition

for sustainable diets:

‘Sustainable Diets are those diets with low environmental impacts, which contribute to food

and nutrition security and to healthy life for present and future generations. Sustainable diets

are protective and respectful of biodiversity and ecosystems, culturally acceptable, accessible,

economically fair and affordable; nutritionally adequate, safe and healthy; while optimizing

natural and human resources.’

(Food and Agriculture Organization of the United Nations: Biodiversity and Sustainable Diets

Symposium, November 2010)

Following the symposium, the FAO released their publication, Sustainable Diets and Biodiversity:

directions and solutions for policy, research and actions. This is a collection of analyses and case studies

presented at the symposium, which together examine the concept of sustainable diets, consider

biodiversity in food production and suggest how sustainable diets can, and in some cases have been,

practically achieved.

Some proposed actions to enhance food production and security are discussed in the first chapter. These

include increasing local production, promoting agro-ecological methods (which combine local knowledge

of specific environments with modern agricultural concepts and methods) and encouraging short-distance

consumption patterns. In some cases, agro-ecological methods have been found to perform up to 180 per

cent better than agro-industrial systems in producing food in developing countries. Maintaining

nutritional quality in the processing of food (especially cereals) is also examined, as is the importance of

education and information availability on nutritious food consumption.

Later articles focus on sustainable food production and consumption, outlining the emerging challenge to

achieve ‘Sustainable Crop Production Intensification’; that is, to produce more food while using fewer

resources and mitigating environmental impacts, by increasing efficiency, decreasing waste and

developing innovative management systems. One of the methods proposed for achieving this is an

‘ecosystems approach’, emulating natural ecosystem processes in agriculture. A key aspect of this

approach is to increase biodiversity within agricultural production systems. Increased biodiversity has

been shown to increase productivity, conserve resources and make agricultural systems more resilient in

coping with environmental stresses such as drought. At the level of the organisms themselves,

maintaining animal genetic diversity, plant genetic diversity and aquatic biodiversity are all important in

retaining genetic resources for future breeding of more productive and resilient plants and animals.

Case studies are presented to illustrate a range of traditional food production systems, production and

nutritional challenges, along with some interventions and solutions that have been implemented in a

wide variety of countries. The link between cultural diversity and biodiversity in food production is also

recognised. It is stressed as a vital element in maintaining sustainable and nutritional food production.

The studies conclude with a closer examination of ‘the Mediterranean Diet’, which is presented as an

example of a potentially sustainable pattern of production and consumption.

Biodiversity and Sustainable Diets: directions and solutions for policy, research and actions, presents an

extensive examination of global food production and consumption patterns, requirements for nutritional

and sustainable diets, and possible solutions to the food security challenges the world now faces. It is an

informative and valuable collection of information, demonstrating local case studies and the global

significance of promoting biodiversity, high-nutrition foods and environmentally sustainable practices. It

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provides an excellent starting point for anyone seeking to better understand current global food issues,

sustainable food production, new directions for research and policy, and the possible challenges for the

future.

For further information, please refer to Sustainable Diets and Biodiversity: directions and solutions for

policy, research and actions, and Biodiversity International.

Sarah Metcalfe

Research Assistant

FDI Global Food and Water Security Programme

*****

Reducing Waste and Greenhouse Emissions: San Francisco’s Success

and Potential for Australia

Lessons from San Francisco could be useful as Australia prepares its National Food Plan.

Background

San Francisco has achieved significant results in its municipal waste recycling and composting program;

diverting 78 per cent of the city’s waste from going to landfill and creating a more sustainable food cycle.

A trial program in Western Australia has also shown positive results, using composted municipal solid

wastes in a range of agricultural applications. A sustainable food system must include conscious disposal

of food-waste and composting biodegradable matter is one of the most environmentally sustainable

means to address this issue. It also has the added benefits of landfill reduction, reduced greenhouse

emissions and the potential to sequester carbon.

Comment

San Francisco’s biodegradable wastes are used as fertiliser for food production. To achieve this, the city

has made several legislative changes. In 2003, the city set a goal to achieve ‘Zero Waste to landfill’ by the

year 2020, having already achieved 52 per cent waste diversion from landfills by 2001. Although the

recycling facilities have been largely successful, the authorities argued that the level of voluntary

participation in municipal waste recycling was insufficient to achieve the Zero Waste goal. Consequently,

the Mandatory Recycling and Composting Ordinance was passed in 2009, requiring all San Francisco

residents and businesses to participate in the recycling and composting program. This requires practical

assistance from the city, in the form of free bins and equipment. The collected biodegradable waste is

then processed at a composting facility less than 100km from the city, the compost is used as fertiliser at

surrounding farms and much of the produce is sold back to San Francisco’s residents.

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A similar initiative, the Compost Market Development Project 2006, has been trialled in Western

Australia, to promote the development of a market for composted municipal solid waste amongst

farmers. Since its formation, it has become one of the largest commercial farm compost demonstrations

performed in Australia. The trial was conducted over two growing seasons at 46 study sites,

encompassing a wide range of farms and crops. The results demonstrated notable improvements in soil

fertility, crop yields (up to 42 per cent increases) and, in some instances, improved produce quality.

Estimates indicate that a potential 300,000 tonnes of compost could be produced per year from Perth’s

municipal solid waste, if wide-scale composting was implemented. This would be enough to exceed the

estimates of demand for the area within 150km radius of Perth. Using compost as fertiliser offers both

agricultural and environmental benefits. Compost is rich in trace nutrients and organic carbon and acts as

a ‘low release fertiliser’ as the organic matter decomposes and releases additional nutrients. Thus it

reduces the need for synthetic fertilisers, which can pollute groundwater through leaching and do not add

organic matter to the soil. Compost also improves the soil structure, which increases water retention and

consequently reduces irrigation requirements and improves resilience to drought. Microbial soil

organisms, which can reduce plant root diseases as well as improve nutrient availability, are also

enhanced by compost application. Other environmental benefits include decreasing wastes sent to

landfill, where decomposition releases large amounts of methane and other greenhouse gases under

poorly aerated conditions. Compost fertiliser also has the potential to contribute to carbon sequestration,

through burial of organic matter.

Programs such as San Francisco’s mandatory recycling and composting system and the Western

Australian Compost Market Development Project, illustrate improvements in waste disposal and a more

sustainable food production cycle. Initiatives like these will become increasingly important as the global

population expands, landfills reach capacity, and available land becomes more limited. Densely populated

urban centres, where the highest concentrations of municipal waste are produced, will be particularly

important areas to target for sustainable waste reuse.

As Australia works to develop a National Food Plan, the potential for food and organic waste to be

reduced through composting programs and reused to enhance food production, is of vital importance. As

the case of San Francisco shows, legislative changes are necessary to achieve a truly substantial reduction

in landfill waste. For this reason, wide-scale and efficient ways to reduce waste and produce compost

should be given high priority in current policy development. Creating municipal composting programs for

Australia’s major cities would be an outstanding move toward a more sustainable food industry.

For more information, please refer to SF Environment: Zero Waste, Where No City Has Gone Before: San

Francisco Will Be World's First Zero-Waste Town by 2020, and the Municipal Solid Waste Compost Market

Development Project, 2006.

Sarah Metcalfe Research Assistant FDI Global Food and Water Security Programme

*****

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Papua New Guinean Land Grabbing Controversy

PNG will have to have to review its land use legislation to maintain or enhance the living standards of

its citizens.

Background

The Up for Grabs report, released in July by Greenpeace, has shed light on the issue of land-grabbing in

Papua New Guinea (PNG). To date, the country has lost 5.1 million hectares of customary land to the

interests of foreign companies. This is having a devastating environmental and domestic impact on the

local population, according to the Greenpeace report.

Comment

Since 2003, the PNG government’s controversial policies have allowed foreign-owned corporations and

unrepresentative landowner companies to attain 99 year leases over customary land. As a consequence

of this, 5.1 million hectares of land, 11 per cent of the country’s territory, has been signed over to foreign

enterprises. The biggest foreign players are Australian and Malaysian companies, which own

approximately three million hectares of PNG’s forest. The majority of the logs retrieved from those forests

are exported to the People’s Republic of China.

In July, Greenpeace released a report entitled Up for Grabs. It specifically dealt with the issue of land-

grabbing in PNG and, amongst other findings, revealed that 75 per cent of the Special Agricultural

Business Leases (SABLs), concessions that are often granted without the authority of customary land-

owners, are now controlled by foreign logging companies. Many of these companies allegedly exploit a

loophole in the Forestry Act, by using the pretext that they are clearing the forests for major agricultural

projects and road constructions that will benefit the local communities. Once the land is cleared,

however, such developments are unlikely to happen.

There is a growing awareness of land-grabs in the developing world. According to Oxfam, 227 million

hectares have been transferred to foreign investors since 2001. Such deals are often instigated by corrupt

government officials and severely undermine the interests of the local land-owners. Greenpeace Forests

Team Leader, Mr Paul Winn, has labelled the particular situation in PNG a “national scandal”. This is

because the majority of the population of 6.3 million depend heavily on subsistence-based agriculture for

their food security but, despite this, they are losing their land, livelihoods and forests.

The negative impacts of land-grabbing in PNG are also damaging the environment. In fact, if the country’s

48 largest SABLs were logged and deforested, then approximately three billion tonnes of carbon dioxide

would be emitted into the atmosphere. By comparison, it takes Australia six years to release the same

amount of carbon dioxide.

Although PNG has the third largest tropical rainforest in the world, an earlier Greenpeace study in 2008

revealed that this is likely to change. By 2021 more than half of PNG’s trees could be destroyed. Another

concurrent change is the 20 per cent increase in log exports in 2011; this figure is almost entirely

attributed to SABLs.

Pressure from domestic stakeholders pushed the former Somare government to establish a Commission

of Enquiry in May 2011. The Commission’s findings regarding the SABLs will be revealed soon in PNG’s

parliament, but so far its details are unknown. Ideally, the parliament should suspend logging under SABLs

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and either enact new legislation, or amend the current laws, to protect the interests of the local

community.

Greenpeace’s Mr Winn believes that the land-grabbing issue offers Australia an opportunity to improve its

relations with PNG. Canberra could offer both financial and technical assistance in the development of a

new National Land Use Plan. As stated by Mr Winn, the latter would have the “key objectives of

protecting customary land rights and maintaining forest resources for future generations”.

Anna Mitrofanova

Research Assistant

FDI Global Food and Water Security Research Programme

*****

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Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions

International.

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What’s Next?

A Yemeni donors' conference will conclude today in Riyadh, Saudi Arabia.

On 5 September, Kuwait's Constitutional Court will rule on the controversial electoral districts law.

Somalia’s federal parliament is today expected to elect a President.

U.S Secretary of State, Hillary Clinton, will continue a tour of Asia this week. Ms Clinton will visit the Cook Islands, Indonesia, China, East Timor, Brunei and Russia.

Also continuing this week, Chinese Defence Minister, Liang Guanglie, will continue his visit to India to discuss military ties.

In Vladivostok, later this week, Russia will host the 20th Asia-Pacific Economic Cooperation summit.