How Economics (Not Technology) Will Save Our Climate
I'm here to talk about Southeast Asia. If you were to charge your Tesla in Palo Alto, it's going to charge you about 46 to 48 cents on a kilowatt basis, kilowatt hour. But if you go to Beijing and drive your BYD, you're going to get charged about four to five cents per kilowatt. You go to Jakarta, which is a developing economy, you get charged five cents, because that's the rate at which that the populace could only afford. It's a bit paradoxical the way China is only charging you four to five cents, because China is a developed country, but it charges people at a rate that developing economies could only afford.
It thinks of itself as a developing economy from a purchasing power standpoint. If you take a look at this map, it gives you a sense of how the planet is divided into what's developed and what's developing or less developed. 15% of the population of the planet, they resonate to the rhetoric of sustainability, as uttered in every one of the summit trees that we've attended ever since Copenhagen, all the way to Norway. But what I sense, and I attended some of them, what I've sensed is that there is a little too much of elitism in the way the sustainability narrative has been narrated.
It doesn't resonate to the people in the villages in Nigeria, much less Congo, much less Papua. And Southeast Asia is predominantly developing, with the absolute exception of Brunei and Singapore, which earned about ten thousand dollars, at least Singapore is about eighty-five thousand. However, Indonesia earns only five thousand dollars per capita per year.
And Southeast Asia is about seven hundred million people, which is a good chunk of about six point five billion people that it's still developing, whereas the rest occupy the fifteen percent of the planet which are developed. The ten countries in Southeast Asia are mostly using non-renewables, including Singapore, most of which is natural gas, which is mostly bought from Indonesia. They're starting to consider buying from the United States because fracking has been so efficient, so effective, and very cost-effective. The exceptions in Southeast Asia are predominantly Cambodia and Laos, thanks to the help from China, who's been building massive capacities and hydro capabilities. But I think the way forward is that we've got again on a renewables bandwagon. This is a simplified a bit.
The pre-existing power generation capabilities of Southeast Asia would be about four hundred thousand megawatts. If you take a look at the electrification on a per capita basis, Singapore and Brunei are at about nine thousand five hundred to ten thousand kilowatt hour per capita. That's a sign of modernity.
I define modernity at about six thousand kilowatt hour per capita, whereas the other eight countries are electrified at much less than ten thousand, much less than six thousand. Even Malaysia, which earns more than ten thousand dollars per capita per year, is electrified only to the extent of about five thousand kilowatt hour per capita. Whereas Indonesia, just like India, is electrified to the extent of about one thousand kilowatt hour per capita. The million dollar question, or the billion dollar question, or the trillion dollar question is, what would it take for Southeast Asia to become a modern region? What would it take for Southeast Asia to move the needle from the pre-existing level to six thousand kilowatt hour per capita? It needs to be about a terawatt worth of power generation capabilities.
That's a million megawatts. How much would it cost? About two to three trillion dollars. Now if you take a look at the pre-existing monetary space, the pre-existing fiscal space, it's an impossibility.
Geopolitically, mathematically, economically, socially, culturally, and every other dimension you can think of. Because Indonesia, which is 43% of the population of Southeast Asia, 43% of the GDP of Southeast Asia, only has a money supply to GDP ratio of about 43%, only has a tax ratio of 9.5%. A typical OECD country has a tax ratio of 33%. A typical developing economy has a money supply to GDP ratio of about 150%. Singapore, again, is the LeBron James.
It's got a money supply to GDP ratio of 200%. So take a look at the FDI in terms of capital formation into Southeast Asia. On a yearly basis, Southeast Asia gets about $200 billion, $200 billion, of which Singapore has been getting about $100 to $140 billion annually. The remaining nine countries have been getting about $10 to $20 billion, namely Vietnam, Thailand, Malaysia, and the Philippines. Indonesia has been getting about $25 to $31 billion per year in the last 10 years. So I think this really hits at least me and most people in developing economies.
How are we going to be able to attain carbon neutrality by 2050 or even 2060? Because if I did the math correctly, for India and Indonesia, for these two large developing economies to move the needle from electrification per capita at 1,000 to 1,300 kilowatt-hour to 6,000, it's going to take more than 100 years, which is completely irreconcilable with the 26-year remaining period until 2050 or even 36-year remaining period until 2060. So this gives you a sense of affordability of most countries. We like to charge $0.09 in Indonesia, but the real affordability is $0.05.
Singapore can afford to charge more than $0 .20. Japan can definitely charge much more than $0 .20. But I think the real pulse for a typical developing economy is at about $0.05. So this requires an optimal intersection between technological capital allocation and economic capital allocation. You meet up with so many guys in Silicon Valley that have thought out the solution from a technological standpoint, but it's still going to cost at least $0.15
on a kilowatt-hour basis. Not affordable for Nigerians. Not affordable for Indians.
Not affordable for Congolese. Not affordable for Indonesians and most Southeast Asians. So how do you bring the cost down and how do you bring up purchasing power? So I think the real intersection is when that purchasing power moves up from $0.05 to
$0.06, $0.07, $0.08, $0.09 or $0.10, and when that technology moves down from $0 .15 to $0.14 and thereafter. I think it's easier to prognosticate when the technological capital is going to come down as opposed to when the purchasing power is going to come up at the rate that there's so much neurosis and psychosis in so many political calculations in developing economies. The reality on the ground is in developing economies, there is not much of a good intersection between power and talent.
There is scarcity, much less deficit in good governance. Again, in Southeast Asia with the absolute exception of Singapore. Singapore has proven itself to usher forward the three words, meritocracy, integrity and accountability. I think it's a tough call for most people on the planet to get those three words out in the open so that money will come. And I say this as an irony because there is so much liquidity. If I take a look at the M2 or the money supply or the liquidity that's floating around in the G7 countries, it's actually well in excess of $100 trillion.
And I say this on the back of the recent interest rate declination that took place just a few days ago and that's likely to continue on for the next three years, which begs the question, where would these capital allocators allocate capital or reallocate capital to? And I do sense that I think Southeast Asia is a region that is poised for greatness until and unless it gets its act together. This is the picture of the preexisting agility of Southeast Asia. Right there, you know. The ability of the average Singaporean to attract FDI is close to $20,000, whereas the ability of the other Southeast Asians to attract FDI is between $100 to $400 on a per capita, per year basis. That speaks of the lack of transparency, lack of integrity, lack of competence, lack of accountability.
And I think that's going to stay on for a long time, which I think will entail a prolonged, irreconcilable interval or gap between what's being narrated at the future COP meeting and what's being narrated in the villages in Southeast Asia, much less sub-Saharan countries. The tax ratios are between 9% to 16% in most Southeast Asian. This is not an ideological reflection. I'm not saying Southeast Asians are Republican. They're just poor in collecting taxes. So what's the way forward? This is my last page.
Really up the ante on education. Singapore has just toppled China as number one in PISA ranking. PISA is the measurement of the lingual and STEM proficiencies for the 15-year-old. China is now number two.
Indonesia is number 69 out of 81 countries. Cambodia is number 81 countries, number 81 out of 81 countries. So in Southeast Asia, now there's two countries that have scored above the global average of PISA, the global average being 488. Those would be Singapore and Vietnam.
Let's not forget, Vietnam was still in the bushes in 1975. They came out of the jungle, moving out the ladder. And that, I think, is a reflection of the remaining Southeast Asian countries, which have been somewhat inspired by Singapore, more inspired by what Vietnam has been able to do.
Southeast Asia is one of the many, if not few, regions that's trying to climb up the global order in the context of an order that's becoming more and more like a transactional bazaar, reflected or manifested in less rules, more players, and more volatility. It needs to embrace what I think the Indians have done very, very effectively in the last few years. I call this the omnidirectional policy posturing. I think Southeast Asia, if it were to embark on this omnidirectional policy posturing, it might be able to tap into not just the technological capital, but hopefully the economic capital.
The second is really moving forward this new political culture of perfectionism and superlatives so that we can actually get better in articulating. We don't have storytellers in Southeast Asia. I've been saying this.
If you want to hear the stories about Southeast Asia, the first thing is you call the Singaporean ambassador. Because of this predisposition that the Singaporeans are smart, well-educated, and great storytellers. I long for the day when a Cambodian gets called, a Myanmarese gets called, a Thai gets called, a Filipino gets called, a Malaysian gets called, a Indonesian hopefully gets called, just to get a sense of what's going on in Southeast Asia. The third is really to move the needle on the monetary space so that we can move up from 45% of GDP in terms of money supply to hopefully 100%.
And the last bit is really, if we get our act together on the non -tertiary education, the tertiary education, I think we might be able to help the world with remultilateralizing. Thank you very much. How do we mobilize the public, private, blended finance, both at a particular point in time for particular projects, particular startups, so forth, but also over time as we scale these projects and startups and industries? difficulty yeah right because the the public part in the typical developing economy is has structural challenges right at the rate that you know the intersection between power and talent is is likely to be questionable for a long time unless there is serendipity right with what we saw in Singapore you know how serendipitous they were to be able to get a guy by the name of Lee Kuan Yew how serendipitous Korea was to be able to get a guy forgive me David by the name of Park Chung-hee right and and I think leadership is is a serendipitous undertaking right and and I pray every day I burn the sense every night so that we go through this type of serendipitous moment as to be able to usher a new kind of leadership that speed that's going to be able to you know basically show greater accountability transparency competence and integrity without which I think the private side will have to take a view and and I I would go back to what Jeep and Dave alluded to you know out of this hundred trillion dollars worth of liquidity about 60 are being managed by about 17 transnational investment firms the biggest one of which is black rock and Dave and Jeep you know they work on the same kind of philosophy that black rock works on where they've got a recycle capital over seven years at the most ten years and that doesn't reconcile with the development plan of most developing economies which have to be thinking about 20 30 40 50 years so that is a structural challenge so I think the private side needs to restructure its pre -existing philosophical nuance if if we want to see better development in developing economies without which I think it's just going to be a case of mediocrity to be quite honest without serendipity yeah right and and just to infuse AI into this Indonesia produced about 800 million tons of coal last year of which we sold 250 million tons to China and China has been on this massive bandwagon of building renewables but what people don't talk about is that China actually built about 43,000 megawatts worth of coal fired power generation capabilities last year on the back of their intention to AI themselves into this supremacy that they're trying to attain over the US so with with this kind of stuff I I hate to say this but I'm a realist I think conventional wisdom is gonna be around for the next 50 to 100 years I don't see the planet being able to shift in a really good way from conventional wisdom to new wisdom you know I don't think renewables are going to be the only game in town I think non renewables will still be the game in town unless the Chinese and the Americans hold back in terms of AIing themselves to a level of supremacy that they're all trying to aspire to but you know when you listen to the Jensen Huang's of the world when he's talking about improving upon the pre -existing H100 GPU capability he's talking about 10Xing or 30Xing the pre-existing capacity that that actually entails 10X energy requirements or 30X energy requirements where is that gonna come from you saw the announcement a couple of weeks ago Microsoft acquired the pre-existing 3 month capability just because of the shortage of renewable energy just because of the shortage of conventional wisdom so I I I do not trying to sound desperate here but but I think if one talks about public private the public you've got a price in the pre-existing mediocrity the private I think has a bit more exponential wisdom and that I think needs to take a more proactive view by way of getting out of this corridor of seven -year recycling you know philosophy without which I think you're just gonna see China in the u.s. taking everybody else's lunch as much as Singapore is a very much developed economy I assure you Singapore relies on Southeast Asia right and I think Singapore is structurally limited in conclusion I think Southeast Asia at best is only going to be a tech-enabled region. It's not going to be a tech creator.
Korea will be the tech creator, China will be the tech creator, but I think when it comes to AI, I think it's China and the U.S. Thank you, let's have a great round of applause to our incredible.
2024-12-27 22:59
