Global Glance: March 28, 2016
A quick look at intriguing international stories
By John Bostwick, Managing Editor, Radius
Welcome back to Global Glance. This week we look at:
- How Uber’s growth and related conflicts are a sign of the times
- Malaysia’s city of the future
- A US telecommunications firm investing in Tanzania
Uber’s Growth and Related Conflicts a Sign of the Times
Perhaps no business better illuminates the evolving global economy than Uber. Its software and services are rapidly spreading into all regions of the world, facilitated by wireless technology, the extensive use of smartphones and the growth of the sharing economy.
As my colleague Gareth Jarman explained in a blog post last November, Uber and other companies in the sharing economy are successful in part due to the low labor costs they incur. Most workers in the sharing economy are contract laborers that “are responsible for covering their own retirement, sick leave and other benefits, making them less expensive for employers, who also appreciate the flexibility of hiring on demand without having to continue the relationship.” Many of these workers are part of the so-called precariat, young people who have been unable to find traditional, benefits-eligible work in a persistently sluggish global economy.
This divide — with millions of mostly young workers in contract jobs on one side, and an older generation occupying jobs with benefits and worker protections on the other — has led to tensions, particularly in Europe but not confined to that region. Last Wednesday, for example, The Miami Herald ran an AP report of an Uber driver in Nairobi who took a fare to a remote part of the city, where four men attacked him and set fire to his car. The report concludes: “Traditional taxi drivers say they're suffering unfair competition from Uber, which has faced legal challenges around Europe. Uber argues the Kenya's taxi sector needs to catch up with the times.”
Those “times” are increasingly turbulent. Similar stories involving Uber and violent conflicts are proliferating. Last Thursday, The Wall Street Journal reported that there were 20 incidents in Brussels over the prior weekend in which Uber drivers were attacked “in a burst of violence highlighting tensions in Europe over the growth of the California car-hailing company.” The Journal notes that the incidents followed similar recent attacks in Amsterdam. An Uber spokesman in the article is quoted as saying the Belgium outbreaks ranged “from throwing eggs to taking keys, stealing phones to violence toward passengers, who were dragged out of the car by taxi drivers.”
Uber drivers are not the only ones coming under threat; Uber itself is vulnerable to local legislation — much of which is evolving to account for companies in the sharing economy — and in some cases to dubious business practices from equally ambitious competitors that have adopted Uber’s own business model.
The PanAm Post reported earlier this month that Colombia’s Ports and Transport Superintendency had levied a six-figure fine on Uber for “violating the rules of public transportation” and has requested an investigation into the company’s “unfair competition practices.” In the US, Politico reported this month that a dispute between local authorities had broken out over whether to allow Uber drivers access to Newark’s Liberty Airport. The article notes that “taxi drivers and a union … [have] been pushing for stronger enforcement against Uber” and that “Uber drivers operate in defiance of municipal ordinances in a number of cities, like Newark, or in legal gray areas.”
For a good story about Uber’s cutthroat corporate competition, check out “Uber Accuses India Rival of Dirty Tricks,” published last Thursday in The Financial Times. Uber has filed a $7.4 million suit against India-based rival OlaCab for unethical business practices. According to the Times, Uber alleges that OlaCab created nearly 100,000 false Uber accounts to make fake bookings and essentially send Uber drivers on wild goose chases while OlaCab drivers scooped up actual passengers.
Malaysia’s City of the Future
For a fascinating look at city planning and global marketing, check out Country Garden Group’s Forest City website and its 16-page PDF brochure. Country Garden is a Chinese real estate developer working to build what it calls a “sustainable and green city” on four manmade Malaysian islands in the Straits of Johor, between Malaysia and Singapore. The buildings in the brochure’s concept renderings emphasize that sustainability and greenness — they’re all draped with foliage, like a modern reimagining of overgrown Mayan ruins.
Those renderings are fantastical, and so is the brochure’s language, which has been poorly translated into English. Much of it is written in the present tense, as if all the plans have been fully implemented. Here’s an excerpt, quoted verbatim from page 10: “Showcasing the global implementation of urban and vertical green, Forest City build vertical green walls, supertrees that dominate the environment, rooftop horticultural gardens in the sky and the entire development is covered densely with flora and fauna creating an iconic lush green city of the world.” (I hope those charged with implementing the architectural plans don’t actually try to cover the buildings with “fauna.”)
This month, Wired magazine published a story on Forest City. It explains that while plans have been “in the works for years,” Country Garden revealed them just last month. The author of the article visited one of the islands of Forest City, noting that “little is actually built,” that work is “expected to take decades,” and that there is a concerning “gap between marketing guff and reality,” including fake foliage inside the “main marketing suite.” Moreover, an expert quoted in the article questions whether such a city — which if realized could have “the highest population density on the planet” — could actually be sustainable and green as promised.
Wired notes that the developers of Forest City hope to attract not Malaysians — who on average have modest incomes — but “Singaporeans looking to retire or expats working in the city but not keen on paying its higher rents — the marketing example is a Beijing-based businessman.” Country Garden’s marketers pointed out to Wired that immigration laws would be no bar to prospective expat residents, provided they’re wealthy. Foreigners that deposit the equivalent of about USD$33,000 into a local bank can apply for the Malaysia My Second Home visa program, which according to Wired “has no minimum stay and doesn’t tax your overseas earnings.”
US Telecommunications Firm Invests in Tanzania
Barclays’ recent decision to gradually pull out of Africa after a century of operations there came as more bad economic news for a struggling region. As an article in The Economist last October observed, other multinationals such as Nestle overestimated Africa’s economic promise, particularly the potential growth of its middle class, and have recently scaled back or terminated operations on the continent. The article indicates this is a worrying trend: “The middle class that has emerged [in Africa], small as it may be, is also vulnerable; even mild economic shocks may be enough to push households back below the threshold of poverty.”
A bit of welcome news came last Monday when Boston-based American Tower Corporation agreed to purchase 1,350 communications towers in Tanzania from Bharti Airtel Limited, India’s largest telecommunications company. A press release explains that under the agreement, which is subject to regulatory approval, “American Tower may acquire up to approximately 100 additional sites currently in development for an additional consideration. Airtel will be the anchor tenant on the portfolio under a lease with a ten-year initial term.”
The release quotes American Tower’s president Hal Hess as saying, “With a young, growing population, tremendous growth potential and a complementary location relative to our existing African operations, we view Tanzania as a highly attractive adjacent market opportunity.” While terms were not disclosed in the release, AFKInsider reports that the deal is worth $179 million.
In vetting the deal, Mr. Hess may have read an April 2015 article in The Wall Street Journal, which explained that Tanzania’s telecommunications sector “has grown rapidly over the past decade and there are now 28.88 million mobile subscribers out of a population of 45 million.” The Journal also indicated that “the telecom market in sub-Saharan Africa is projected to grow faster than any other region in the [world] over the next three years, with service revenues jumping to $65 billion by 2018 from $49 billion in 2013, according to a recent report from Analysys International.”
American Tower is of course betting these projections will pan out in a way that earlier, similar projections about Africa’s middle class — trusted by Nestle’s leaders among others — have not.