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TIC LLC Home > 2008/ 2009 Consulting Assignments << Back to Recent Consulting Assignments
2008/ 2009 Consulting Assignments

1.  "Think Tank" for a Major Conglomerate:

In 2008 Tiara International Consulting was appointed as a "Think Tank" for a major Conglomerate in Southeast Asia. In this capacity, Tiara was expected to review the Government Policies in specific areas as identified by the Management of the Conglomerate and come up with ideas and suggestions for the improvement of Policies for the National Government. The following areas were identified wherein Tiara was requested to examine the current policies of the National Government and come up with ideas and suggestions for Improvement which would benefit the people's living standards, develop the country's resources and in effect improve the overall economy.

  • Law of the Sea, Maritime Security & Piracy:
    This was given a high priority by the Conglomerate. They were of the opinion that UN Law of the Sea has to be reviewed which would enable one to understand as to what the status is of various treaties which have been
    • entered into
    • commenced but not fully implemented
    • contemplated
    by the various players in Southeast Asia and South Asia. This would enable them to advise their Government as to the latter's position relating to Territorial Waters, Exclusive Economic Zones (EEZ) and demarcation of Continental Shelves. The opportunity was availed of to review Maritime Security and its success in reducing the "acts of piracy" in Malacca Straits and the roles of the respective Governments.
  • Policies on Shipping for the Archipelagoes in Southeast Asia:
    It was noted that there was a lot of "cabotaging" by foreign flag ships. However, the national governments did not have enough fleet of national flag vessels to carry out the cabotaging. As the Government outlined the new policy in that regard, the Consultant examined its adequacy in terms of assuring the economic viability of new entrants into shipping and the support needed from the national government in that regard.
  • Ship-building & Government Support:
    Even though Southeast Asia has a lot of archipelagoes, no country has any ship-building industry to speak of. Even the ones that they have appear to be old and outmoded. The only countries that have excellent ship-building facilities of world class are South Korea and Japan. China is entering this club gradually. The Consultant developed a road map of how to establish a ship-building industry and what support is needed from the government.
  • State of the Fishermen, the Role of Private Sector & its Opportunities and National Priorities:
    The lot of the fishermen in one country was examined initially. Thereafter, this was compared with two other benchmarked countries in an effort to find out some of the best practices and what steps could be taken to elevate the lot of the fishermen. It was observed that big conglomerates could certainly contribute in improving the lot of the fishermen not only monetarily but also in significant other ways that would make a difference including but not limited to providing for their education in handling contemporary equipment and facilities. Some of the practices of the Government were criticized in this regard because the system consumed a lot of resources with very little benefits to the fishermen. This was an eye-opener for the Conglomerate and they decided to immerse themselves with some of the activities as recommended by the Think Tank Group.
  • Overfishing & Poaching into Other Countries' Exclusive Economic Zones:
    This was observed as one of the major problems in Southeast Asia. It is not as if the respective governments are not taking any interest in stopping it or in the first phase reducing it. They have introduced various measures to curtail these; however, the conduct of persons who are supposed to implement these is far from satisfactory. As of date, this problem still remains not fully resolved. The Think Tank made certain recommendations but again pointed out that there has to be full cooperation of various entities for the plans to succeed.
  • State of Aqua-culture in Southeast Asia
    Some of the countries in Southeast Asia are quite aggressive as it relates to the development of aqua-culture in their national activities. There were a few big farms while the majority of the farms were highly fragmented. The Think Tank came up with suitable recommendations as to how the Government could help the process reducing such fragmentations and making the operation more profitable.
  • Renewable Energy
    A Southeast Asian Country was compared with benchmarked countries for each one of the following renewable energies:
    • Wind Energy: The nominated country was compared with USA, Germany, Denmark Spain and India. India was then chosen as the benchmarked country and some of the best policies and practices as sponsored by the Government of India were recommended as "Policy Issues" for the nominated country. These were expected to act as incentives for the private sector to participate with capital investments in wind energy development.
    • Geothermal Energy: The nominated country was compared with USA and the Philippines and it was decided to benchmark the "Policies" as embraced by the Philippines. Thereafter, the results for the nominated country were forecast if they followed the "Policies" of the Philippines and how it would improve their output with a lot of participation from the private sector.
    • Tidal Wave Energy: The example of the US, especially in the East River was taken up and it was pointed out as to how the nominated country would benefit by adopting some of the policies and practices.
  • Biofuels:
    Two types of "biofuels" were studied as to their production technology and practices and these were ethanol as produced by Brazil with sugarcane and biodiesel from Jatropha Biodiesel Value Chain. These are briefly discussed below:
    • Ethanol: Since Brazil has done well in ethanol production, whose cost is very competitive arising out of sugarcane grown in Brazil, the latter was benchmarked and the "policies of the Government of Brazil" were emulated.
    • Biodiesel: Since India has made a head-start with biodiesel by dedicating major areas, i.e., one million acres in the northern State of Uttar Pradesh, endeavoring to produce around 890,000 tons per annum period, the nominated country would endeavor to emulate India in this regard.

SPECIFIC PROJECTS FOR THE PRIVATE SECTOR ARISING OUT OF THINK TANK ISSUES:

2.  Strategic Options with Shipping in several segments:

  • Coal Segment: The total quantity of coal to be moved within the country from one port to another was of the order of 106 million tons per annum. This is cabotaging and was carried out by foreign flag vessels. The government would like to have the country's own flag vessels to carry out the tasks. This would call for 10 vessels of 60,000 tons capacity, 13 vessels of 45,000 tons capacity and 367 of smaller vessels of capacity 6,000 tons. This would demand for a total investment of the order $3.10 billion. The Internal Rate of Return (IRR) and the simple payback period for this project were 31.64% (nominal) and 4.25 years respectively. The Expected Value using Monte Carlo Simulation was of the order of $4.52 billion with a very low probability of destroying Shareholder Value at 1.00%.
  • Tanker Segment: The total quantity of petroleum stocks to be moved from port to port within the country was of the order of 58 million tons. To do such cabotaging, the country needed its own flag vessels of 8 x 30,000 tons, 12 x 20,000 tons, 22 x 11,500 tons, 40 x 6,000 tons and 143 x 2,500 tons accounting for a capital investment of the order of $1.40 billion. But the project had very good economics with nominal IRR at 3.70% and simple payback period at 4.28 years with Monte Carlo Simulation of Expected Value almost at $2.00 billion with hardly any probability of destroying shareholder value.
  • Container Segment: The country needed 5 x 143 teu, 5 x 286 teu and 4 x 714 teu vessels for transport of goods from port to port within the country with a capital investment of the order of $86 million. The project economics showed that the nominal IRR, simple payback period and Monte Carlo Simulation Expected Value would be 21.73%, 5.79 years & $55.6 million respectively with probability of destroying SH value hardly at 5.00%.
  • General Cargo Segment: The total cabotaged general cargo to be hauled was of the order of 3 million tons and the vessels needed for this purpose would be 10 x 1,500 tons, 10 x 3,000 tons & 6 x 6,000 tons with an investment value of $54 million. The economic indicators for the project showed a nominal IRR of 56.4%, a simple payback period of 2.73 years and a Monte Carlo Simulated Expected Value of $205 million. There is hardly any probability of destroying SH value.

3.  Ship-Building in Southeast Asia & its Economic Viability:

Establishing a nominal ship-building yard turning out 25 vessels a year of General Cargo at 30,000 tons would cost around $631 million and a lead-time of 5 years. However, with a good JV partner from Korea or Japan, the shipyard could take off and have fair return of nominal IRR 22.6%, a simple payback period of 4.4 years and a Monte Carlo Simulated Expected Value (MCSEV) of $830 million. The probability of destroying SH (PDSHV) value is moderate, i.e., 20%.

4.  Acquisition of Major Aqua-Culture Farms in Southeast Asia:

One of the aquaculture farms was quite extensive with substantial exports of around $350 million supporting at the same time large number of "plasma" farmers in the country. While the acquisition value was estimated at $369 million given the performance of the farm over the last few years, it was not recommended for acquisition as the economic indicators were not good (nominal IRR 12.5%, simple payback period at 8,64 years, MCSEV ($50MM) and PDSHV 52%)

5.  Establishing "Marine Products" Industries in Southeast Asia

Many of the countries in Southeast Asia produce substantial quantities of seaweed. However, they export this mostly as raw material to other countries to produce carrageenan and semi-refined carrageenan (SRC). It was therefore recommended to put up a plant for carrageenan at a cost of around $5 million which would have very good economic viability with a nominal IRR over 50%, simple payback period of 2.8 years and MCSEV around $30 million with very little PDSHV at 2%.

6.  Establishing Aqua Culture Farms for Special Fisheries for Exports to Japan, EU & USA

Some of the countries in Southeast Asia do have problems of overfishing. In spite of this, there are selective areas where certain types of fisheries such as yellow-fin tuna available which could be captured, processed and exported to overseas "sashimi" markets such as the ones in Japan, USA and EU. A typical project would call for an investment of only $2.1 million. The total tuna captured would be of the order of 788 tons p.a. for the export "sashimi" market, whereas part of the balance tuna captured of around 315 tons p.a. could be sold in the domestic markets of these countries as "frozen tuna" while the balance of 473 tons p.a. could be sold as canned tuna. The project would call for an investment of a little over $ 2 million, with the nominal IRR over 100%, simple payback period of l.6 years and MCSEV at $78 million with nil PDSHV. This is due to the fact that with good quality yellow-fin-tuna, there is significant value added to the product in the market especially when the product is air-freighted to maintain its freshness and quality.

7.  Feasibility of establishing canning factories for fisheries:

A small tuna canning factory would call for an investment of less than $3 million. However, with the level of competition for tuna export sales to the US and Japan, the project does not show even acceptable economic indicators. The PDSHV is at 35% with a payback period of almost 6 years.

8.  Economic Viability of manufacturing & marketing Omega Fatty Acid with Concentrate in Southeast Asia

While there is abundance of fisheries available to manufacture these products including derivatives, the current global market is not attractive enough to have fair returns. Even PDSHV is in the region of 27%

9.  Feasibility of introducing Contemporary Fast Ferries (Roro) in the following markets in Southeast Asia:

  • Market I: The current ferries for many of the Southeast Asian countries are very old, some of them as old as 40 years. This is observed even in some of the highly frequented routes. Certain highway road traffic, which depends on these ferries to move from one island to the other faces a lot of congestion and delays with the existing ferries. For Market I, which has a passenger traffic of 2.6 million and vehicular traffic of 1.5 million, even with a capital investment of $28.5 million, which would include some Capex on Jetties as well at 2.60 million, the project economics looks good with a nominal IRR of 32.41%, simple payback period of 4.49 years and a MCSEV of $68.8 million. The value of PDSHV is of the order of only 6%
  • Market II: The economics of this project is slightly less attractive as compared to the earlier one as below:
    Nominal IRR = 13.78%
    Simple Payback = 6.70 Years
    MCSEV = $25.17 million
    PDSHV = 19.0%

10.  Benchmarking some of the best locations for Renewable Energy & Establishing the same as National Priorities:

  • Wind Energy: Countries such as Germany, Spain, USA, Denmark and India have made substantial strides in the generation of Wind Energy. India, generating wind power at the level of 10,000 MW in 2007, is producing almost one-third of total energy produced by some of the Southeast Asia countries. India was therefore benchmarked and the project yields for an investment of $1.40 million per 1 MW, a nominal IRR of 20.6% and a simple payback period of 4.7 years with PDSHV at 4%.
  • Geothermal Energy: USA and the Philippines produce geothermal energy of the order of 2,100 MW and 1,900 respectively. As compared to that, some of the SE Asian countries such as Indonesia have substantial potential to develop since they are literally sitting on a chain of volcanoes. Philippines was benchmarked which for an investment of $2.85 million provides for a nominal IRR of 20.3% with a simple payback period of 5.15 years and a PDSHV at 2%.
  • Tidal Wave Energy: Studies for identifying the scope for generating tidal wave energy are still in stages of infancy in some of the Southeast Asian countries. The standing benchmark given here is the Verdant's Roosevelt Island Tidal Energy (RITE) Project in East River, New York, which shows significant power generation for small investment. For a capital investment of $14 million, the nominal IRR is 24.2% with a simple payback period of 5 years and PDSHV at a negligible level of 2%.

11.  Ethanol Project: Benchmarking Brazil:

While some of the countries in Southeast Asia have significant potential for producing ethanol from sugarcane, many of them are surprisingly importers of sugar and as such there may not be immediate potential for them to produce ethanol from sugarcane. Nevertheless, benchmarking Brazil is considered the right standard for ethanol with very good overall project economics, which for capital investment of $48.6 million shows a nominal IRR of 42.8%, a simple payback period of 2.74 years, MCSEV of $148 million with a low PDSHV of 2%.

12.  Establishing Jatropha Biodiesel Value Chain Industry:

This is one of the current hot topics. Practically every country in Southeast Asia is a net importer of diesel fuel and as such would make incremental savings if they switch over to biodiesel to substitute even a fraction of their imports of diesel oil. The project also assists in rural development and creates a lot of jobs. It certainly needs vast tracts of land. The minimum land required to develop a successful jatropha biodiesel value chain project would be of the order of 10,000 hectares. India was chosen as the benchmark as the country is establishing a major jatropha farm in their northern state of Uttar Pradesh for one million acres to produce biodiesel. If we do not take into account any capital investment on land, the rest of the investment would be of the order of $50 million and the project would yield results such as nominal IRR at 25.2%, a simple payback period of 5.05 years and MCSEV of $55 million with a PDSHV at 13%.

13.  Excel Spreadsheet Ranking all the above Projects:

Please refer to the Excel Spreadsheet which initially ranks all the projects on the basis of the "Risk Profile" of the projects i.e., "Probability of Destroying Shareholder Value" (PDSHV) and thereafter within the same PDSHV it arranges the projects on the basis of Simple Payback Periods. It will be observed that we have ranked 17 projects in all for the year 2008.

14.  Market Entry Strategy for an East Asia Company into Russia for Women's Lingerie Products:

This is one of the current on-going projects. With a significant increase in the middle class and upper-class population in Russia, there appears to be a huge market in general for apparel and more particularly women's lingerie products. We have already made some headway into this project. We hope to complete it by the first quarter of 2009.

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