Click to read the report

Governor Bill Richardson, chairman of APCO Worldwide’s Global Political Strategies (GPS), offered a summary of his latest trip to North Korea and an assessment of what to expect from the country in the coming months at APCO’s International Advisory Council monthly meeting on April 25, 2013.

Highlights of the governor’s discussion included how the latest proclamations from Kim Jong Un affect the stability of the region, the critical role that China can play and a potential path forward toward peace on the peninsula.

Click here to read the full analysis.

Click here to view the full report.

Clearly the president faces an increasingly worrying economic situation at home. Faced with public anxiety over growing unemployment (which passed 5 million in March this year), the worrying state of public finances, plus the recent announcement that France has gone into recession, Hollande seems to have little room to maneuver over the coming months. With opinion polls already showing low levels of public confidence in his government, he is under pressure from Europe to launch significant reforms to achieve the targeted €60 billion savings in public spending. In addition, his majority relies on a very fragile consensus, with the rift between social democratic colleagues and the socialist left being felt at every level of the government.

While he has obviously had to revise his original target to reduce unemployment and the public deficit to under 3% by 2013, President Hollande confirmed at his recent press conference that he will stick to the existing direction he has laid out.  Of his 60 election campaign promises he has made progress on 27 and already delivered 14 – including the passage of an employment law, the creation of a public investment bank to promote SME growth and special efforts to reduce corporation taxes to help businesses invest.  He confirmed his government’s continued focus on employment with the creation of “emplois d’avenir” (jobs with a future), “contrats de generation” (to pass on knowledge between generations) and above all, a 10-year investment plan for the digital economy, energy, major transport infrastructure and health care – financed, he hopes, through partnerships with the private sector, foreign capital and foreign investment funds.

The next year will undoubtedly be crucial, not only for France, but also for the wider European Union. Influential milestones on the horizon include the elections taking place in Germany this September; the UK government’s attempt to negotiate some powers back from the EU; Greece, and then Italy, set to take over the presidency of the EU; and the start of negotiations for a free trade agreement between Europe and the United States. In France, the European parliamentary elections in June 2014 could favor extremist parties that reject the constraints imposed by Brussels.

This report aims to offer an informed analysis of the political and economic situation facing Hollande, and then focuses in on a few key sectors:

Business taxes: The balance between promoting growth and business constraints?

The digital economy: Fertile ground for reform

Industrial and employment policy: The key measures are yet to come

Energy: A limited revolution ahead

Click here for the analysis in French.

As reported in an earlier post, with two auctions already behind it, California must now determine how best to spend cap-and-trade revenues. Many proposals have been floated from environmental, transportation, clean tech and other industry advocates, ranging from supporting existing climate mitigation programs to establishing a Green Bank to incubate new emissions reducing technologies. Unfortunately for these advocates, Governor Jerry Brown’s May budget revision instead proposes shifting $500M in cap-and-trade revenue to the General Fund to help balance the budget.

State law requires California to spend cap-and-trade funds on efforts that reduce carbon emissions, in line with California’s landmark global warming law, Assembly Bill 32. As such, any shift to the General Fund would need to be temporary – a “loan,” if you will. Given the first two auctions have only brought in around $140M, the Governor’s proposal anticipates more allowances to be sold at auction in the coming fiscal year, all of which would go to the General Fund. He has not put forth a repayment schedule, although he has said it would be paid back with interest.

CalEPA Secretary Matt Rodriguez has publicly supported the Governor’s proposal, calling it “prudent” and positioning it as giving the state more time to figure out how much money can realistically be expected from future auctions and which programs should be top of the list for funding. The Legislature still has to approve the revised budget, and must also decide how to deal with several bills introduced earlier this session proposing alternate cap-and-trade funding schemes.

Yes, California is strapped for cash and, yes, there are important budget gaps that cap-and-trade revenues can help relieve, at least in the short-term. However, as the first state to establish an economy-wide carbon trading program – and with the rest of the country and world watching – we have a real opportunity to show how market-based systems can have a real impact on advancing climate mitigation projects and technologies, thereby creating jobs and improving the economy along with the environment. California can and should do better.

Three years ago I predicted the coming armageddon for brands by discussing databases and highlighting the Good Guide mobile app. If you haven’t heard of it, that’s the app where you scan the barcode of a box of cereal in a store with your smartphone and the app tells you that the cereal manufacturer “violated the Clean Water Act” or has some controversial ingredient in it. It also offers any number of “higher rated” substitute products that more closely meet the app founder’s standards. Back then I tried it and then I wrote:

And then I realized it’s just a matter of time before I’m going to learn if a company discriminates against gay people, or is a union buster, or has a CEO that denies climate change, or has a political action committee that gives only to Republicans, or has a slew of OSHA violations, or doesn’t pay any taxes, or has another product that’s being recalled – ALL AT THE POINT OF SALE.

The good news about Good Guide is the database is responsibly curated – while the owners of the database are of the west-coast, granola-crunchy variety, they are at least open to discussion with people from other points of view or agendas.

That’s all changed. Welcome to Buycott, the new wild west of social activism.

This is the app brands should have spent the past three years preparing to address. It’s the app that has the best chance to politicize purchasing decisions more than we’ve ever seen. It’s deep enough to offer tools that sophisticated activists want, like a corporate “family tree” that lets you identify corporate partners and parent companies. It’s open enough to let users crowd-source the database and it’s social enough to let people start or join causes and specific boycotts. And it’s audacious enough to get good press.

So now when mom walks into a store, she has an entire social movement or two on her phone. And she has so much more data at her fingertips than just three years ago. The advice I gave three years ago, however, still applies:

So there are a few things companies should be doing YESTERDAY to protect their reputations and their brands:

• Upgrade your social media monitoring efforts to see what’s written about you in all these mobile-accessed databases. Good Guide is a start. Make sure the info is accurate. Contact them if it’s not.
• Build relationships with the folks who make these databases and these apps. Understand their motivation, work with them to make sure you’re presented in the best possible light.
• Partner with credible organizations to build your own databases and applications. Support some of these groups by underwriting some of the cost, providing technical support, and letting them know they can work with you.
• Promote responsible efforts to give consumers all the information they want and need to make smart decisions. Consumers reward the companies that advocate for them.

Or, sit back and wonder why people stopped buying your stuff.

Now it’s a bit harder to build those relationships, but at least we know where to look.

Click to read the report in English

Mr. Letta’s government will now need to tackle tough challenges, starting with the current economic downturn while reassuring international partners of both the political stability and financial credibility of the country. The new government is a “Grand Coalition” resulting from the support of the Democratic Party (centre-left), the PDL of Silvio Berlusconi (centre right) and the Civic Choice (centre) led by former Prime Minister Mario Monti. Cabinet posts have been apportioned among the main forces to foster balance and solidity.  This strength in leadership will be needed if the government is to confront the country’s institutional architecture with radical reforms, while promoting a path forward to sustainable economic growth.

The Opposition is composed of the 5 Star Movement, an online-based political movement brought to a quick and unprecedented success by former comedian Beppe Grillo and by two other minority parties, SEL (left/green) and the Northern League (Northern federalists), former allies of PD and PDL respectively.

Click here to read the analysis in Italian

The new government, strongly supported by President of the Republic Giorgio Napolitano, has outlined three main objectives:

1. Mitigate the severe economic crisis affecting Italy through a series measures aimed at quickly re-launching the Italian economy, with particular attention to the labour market and especially vis-à-vis the younger generations.
2. Work in partnership with the other EU Member States towards a more efficient and integrated European Union, potentially spearheading the efforts for an agreement that looks beyond the austerity-only recipe.
3. Design and implement substantial institutional reforms to allow for a more effective, transparent and accountable political action.

Mr. Letta has stated publicly that his Government will need at least 18 months to design and implement the necessary reforms. This could be an ambitious target considering the traditionally less-than-ideal relationships between the two main supporting parties and their differences on several key issues. In addition to this, the political campaign for the 2014 European Elections may increase tensions within the majority coalition and tempt the more popular parties to break free.

However, Mr. Letta has a proven track record as an effective mediator.  He is a well-respected across the aisle, supported by a solid international profile and has a well-established pro-Europe approach. He faces an uphill climb, but after a prolonged political stalemate his leadership merged as the best and only real option to put Italy back on track.

Five years ago this fall, California voters approved Proposition 1A, authorizing $10 billion in state funds for the construction of a high-speed rail line from the Bay Area to Southern California. Fast forward to today and construction has yet to begin, as supporters continue their quest to secure the necessary public and private capital to make this project a reality.

So what happened between 2008 and today? Not only did cost projections skyrocket after voter approval (current cost estimates hover around $68 billion), but the state also entered a major recession from which it has yet to recover. Not surprisingly, a survey conducted last month by the Public Policy Institute of California found that Prop. 1A would not have passed today – only 43 percent of likely voters support it.

Yet high-speed rail has an advocate in Governor Jerry Brown and he is not giving up. He has urged the California Air Resources Board (CARB) to allocate proceeds from the state’s newly launched cap-and-trade program to high-speed rail, arguing that it supports the goal of reducing greenhouse gas emissions. CARB owes a plan to the Governor this month on how cap-and-trade revenues will be spent, and most don’t expect high-speed rail to be a part of it, given the number of programs being considered that have a more immediate impact on reducing emissions – and more popular support.

With favor waning at home, the Governor’s latest push for high-speed rail came last week during a trade mission to China. Joined by his economic advisor and the head of the California High Speed Rail Authority, Brown met with high-ranking Chinese officials and business leaders, lauding the rail system the Chinese have built and promoting the investment opportunity in the U.S. With the financial backing of the Bay Area Council, he also announced the opening of a trade and investment office in Shanghai – California’s first overseas trade bureau since the last one closed in 2008. A second trade office in Beijing is scheduled to open its doors later this year.

And the Governor didn’t stop there. He also signed environmental cooperation agreements with Chinese officials, including one with China’s Minister of Environmental Protection to strengthen and coordinate efforts to improve air quality, such as “activities that support joint-ventures, partner-agreement and capital investments in the design, construction and operation of projects that reduce air pollution.” Hard not to read high-speed rail between the lines there.

Construction of the first segment connecting the Central Valley towns of Madera and Bakersfield is set to begin this summer. But will that be the end of the track? Some have opined that we’re going to need to see more upfront investment from the state before we can really attract foreign investment from China or others, and I agree.  It’s hard to ask out-of-state and foreign investors to commit to a multi-billion dollar, California-centric project if our own government, financial and business leaders aren’t invested in its future.