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Tibet's Economic Development: My Accidental Walk (Part II)

posted Mar 23, 2011, 5:19 PM by The Tibetan Political Review
By Tsewang Namgyal
(Tibetan version attached as PDF below)
 

According to Charles Darwin, “survival is ultimately dependent on the ability to change and evolve," and not on one’s size. The demise of Lehman Brothers, the Soviet Union and the Dinosaurs has all given credibility to this insight. Tibet’s and China’s future are equally unpredictable. We as a community need to get out of the mentality as if China has all the power. If we do so, this will automatically give them real power and weaken our position. To quote President John F. Kennedy, “let us never negotiate out of fear, but let us never fear to negotiate.” The success of both regions will depend more on the vision and flexibility of the Tibetan and Chinese people than on any other factors. One area where I believe both sides have a unique opportunity to build trust is on the economic realm.

Deng Xiaoping may have been bad for Tibet but for China there is no denying the fact that he directed her to a more positive direction compared to the Mao era. One of Deng’s greatest accomplishments was to develop China’s private sector and release her entrepreneurial energy. In the spirit of his words that “it does not matter whether a cat is black or white so long as it catches mice” I believe both Tibetan and Chinese leaders can craft a mutually beneficial arrangement. In the end development of Tibet’s economy is beneficial to China and vice versa. Here, I would like to humbly suggest a two-step process in the hope that aspects of it may be of some use in the future.


Step One: Independent / Feasibility Studies

(a) Policy Critiques

Independent qualified third party agreeable to both Tibetan and Chinese leaders conduct an economic fact-finding study. The study should be funded by a respected organization such as the Gates Foundation to prevent it appearing bias. The scope of the study should include an in-depth analysis and critique on the current Tibet development policies.

China’s current unfair current policies towards the Tibetan people is well known among our people: lack of feedback on the policies from the local Tibetan public on their own future; Tibetan officials working for the Chinese government lack of control in the allocation of resources; use of Chinese as a business language puts Tibetans in an unfair advantage; and political motives in economic development to name a few. However, it is important we need to also recognize that we Tibetans also have “policies” in place that does not help the Tibetans in Tibet economically. I have mentioned in my previous opinion article related to our lack of discretion between good and bad projects. In addition, I believe we have certain negative attitudes such as aversion to a reward / risk system; communistic mentality; expect things for free; sense of entitlement; and blame China for almost everything.

It is natural for human nature to love praise and hate criticism. I believe if an independent body, respected by all parties, generates an independent finding with recommendations it may make it easier for all sides to digest.

(b) Feasibility Studies

In parallel to a review on the policies, I believe an in-depth feasibility studies should be conducted on five primary sectors of Tibet’s economy that has potential to become the economic pillars in the region. These are: (i) tourism; (ii) natural resources (including mining); (iii) agribusiness (including Tibetan medicine); (iv) cottage industries (primarily Tibetan rugs, woodcraft and handicrafts); and (v) energy (primarily hydroelectricity). The feasibility studies scope of work should include: (i) a situational and SWOT analysis of each sector, (ii) technical and financing sources, and (iii) community, social and environment impact. It is critical that the specialists from each sector head each of the study and not be politically motivated.


Step Two: Set up of a Private Equity Fund (Fund)

After Step One is complete, a Request for Proposal (“RFP”) is developed by a chosen experienced entity such as the US development agency - Overseas Private Investment Corporation (“OPIC”), IFC and other development banks. Socially-oriented private equity funds should then be invited to bid for it. My appreciation on the potential of socially oriented Funds was most developed during my past internship with OPIC. At OPIC, I had an opportunity to intern in their Investment Funds Group while I was doing my MBA (if you are a US citizen I would encourage any young college going student to consider it). Later while working for a German Investment Bank I had an opportunity to analyze and recommend investments in two large energy focused private equity funds. These experiences further allowed me to get a better appreciation of the Fund world.

Development banks and certain consulting firms have experience in developing the RFP structure, the bidding process and monitoring their investments. The RFP process helps to attract the best management team, bring transparency and interest to the maximum number of participants. I believe many aspects of the model has proved effective and could be customized towards creation of a socially oriented Tibet focused Fund. Related to this I believe it is important in our efforts in the Tibet world to think of leveraging existing organizations and experience rather than trying to reinvent the wheel.

In order to increase the neutrality of the fund, a diverse range of investors should be invited to back the financing for the Fund. In addition, it is important that the fund size and incentives to be reasonably large enough to attract the most qualified managers. In my experience I believe if the Fund size is less than $50 MM we may be able to attract a decent level of Fund managers’ interest. As an incentive, the Fund managers can be promised that if they are able to achieve a certain level of social and economic rewards they can be rewarded by increasing the size of the Fund.

In the outside world, most Fund sizes are in the 100s of millions of dollars. The larger the size of the Fund, the more attractive it is for the managers as they get a percentage from the Fund size. The work involved in managing a large or a small Fund is not much different.

For some brief background, private equity funds make equity investments in firms and are managed by the fund’s general partners. The investors in the funds are known as Limited Partners. The general partners are individual with diverse skill sets and experience. In addition to making investments in companies, they are able to complement the strengths of the management of what is then referred to as portfolio companies. The funds lives are usually approximately 10 years. For the first three years the funds are involved in investing in different portfolio companies, the next 4-5 years are involved in growing the company, and the remainder in exiting their investments. Exits are usually carried out in the form of an initial public offering (IPO), sale to a strategic investor or a management buyout..

I believe the portfolio companies can then become pillars of the Tibetan economy allowing them to grow independently after the initial helping hand. For example, the portfolio companies could be a firm that runs a chain of eco resorts, a Tibetan natural food company which sells products around the world, a Tibetan mining company, a Tibetan energy firm that is involved in the development and operating of hydro electric plants etc. If we are able to develop few larger firms, this would naturally allow the creation of independent family owned firms to supply or subcontract from the larger firms.


Conclusion

There are much things where we do not have control. However, if we do take into actions areas where we have control it will help us achieve our goals. For young Tibetans about to go to college in particular I believe this is the time to consider careers in areas such as mining, hydro electricity, infrastructure, agribusiness and tourism. In my experience I believe the best way to learn more about these areas is to read about it; attend conferences (even if it means volunteering at such events if one cannot afford the conference fees. I have done it and it is a great way to meet the attendees.); develop and nurture contacts; do not expect things to fall in your lap but work hard for it; intern in firms in your areas of interest even if it does not pay well; back pack to other countries if you can afford it; and be persistent in your job applications. Personally, one of my most humbling experience in America has been looking for jobs. Many a times your resumes do not even get acknowledged but then when you least expect it something works out.

For young Tibetans going to High School it is important to broaden your horizon. My biggest regret, while living in India, is not spending a winter vacation with my uncle selling sweaters in the streets of Jaipur. I believe if I had done this by now I would understand India even better, appreciate small business enterprises and improve my Hindi. Volunteer in Tibet related activities whether political, educational, social and cultural. It was through the kindness of His Holiness and many others where we are now and by giving back we will benefit all.

We need to become or develop the next Tibet’s John D. Rockefeller, Dhirajlal H. Ambani and Dr Zhengrong Shi. We should not be afraid to think big. To use a metaphor we need to stop thinking of only getting better seats in the airplane but becoming the pilot. However, saying this we should not only dream but work hard and be practical.

I note that a political conflict exists in the region, and I do not intend to reduce the Tibet China issue to pure economics. The very fact that refugees from a relatively economically booming Tibet flee every year to an economically impoverished Nepal indicates that political problems exist.. However, as indicated in my earlier article I do not believe a political solution will lead to an economic solution. History and current cases around the world have shown that politics and economics are interdependent, but the relationship is not simply that of cause and effect. What I am most convinced is that a poor Tibetan population benefits neither Tibet nor China.

The author is an MBA graduate from the Thunderbird School of Management and currently works in the Investment Banking field in New York City. He can be reached at densang123@yahoo.com

Published on Phayul.com on February 14, 2009
 
 

 

 
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