Activity Report

Towards the realization of KAITEKI through the consumer market of developing countries

Developing countries in Asia and other part of the world are expected to become increasingly urbanized as the burgeoning economy spurs growth in population and people’s income. In particular, income levels are quickly rising for the so-called BOP (Base of the Pyramid), the class of people who earn less than 3000 USD per year, and they will soon emerge as a gigantic middle class that will significantly alter the spectrum of the world’s consumer market. What is important at this time for Mitsubishi Chemical Holdings Corporation (MCHC) group and other companies looking to be active in this imminent new market is to engage with the current BOP. The KAITEKI Institute believes that conducting businesses for the BOP, as well as preliminary market research and branding activities in developing countries are important for the creation of a more KAITEKI society on a global scale in the future.

Modernization in developing countries often progress along different paths than in first-world countries, and in some cases, the lack of infrastructure acts as a positive aspect for development. “Technological leapfrogging” refers to the phenomenon when developing countries skip some stages of development that highly industrialized countries went through with negative consequences, such as polluting technologies and industries, and instead move directly to cleaner, more advanced ones. Often cited examples are the technologies of mobile phones and distributed electrical generation.

In Bangladesh, which is classified by the United Nations as a Least Developed Country (LDC = a country in which average annual income is less than 700USD), the number of fixed-line phones just exceeds one million, but because of the slow installation process that can take several months, the prevalence rate has hardly shown any growth in recent years. In stark contrast, the percentage of people with mobile phones has grown rapidly to equal roughly 60% of the country’s entire population, and there are currently over 95 million subscriptions. The advantages of the mobile phone is obvious, such as not requiring much infrastructure or complicated installation, and it is no wonder that it has completely overtaken the traditional fixed-line phone in Bangladesh.

Mobile phones are rapidly on the increase in Bangladesh.

Some background factors that supported the proliferation of mobile phones in Bangladesh are the cost difference of infrastructure compared to fixed-line phones, and the fact that mobile phone companies offered products lines specifically targeting the developing country market and ICT service companies offered communications and financial services that match the needs of users in this country.

The situation of electricity in Bangladesh also shows a leapfrog phenomenon, with increasing proliferation of decentralized solar power generation, i.e., power generation by individual households that do not reply on the power grid. The power grid in Bangladesh is far from comprehensive; the prevalence rate of the grid for the whole of Bangladesh is said to be about 50%, and it differs greatly depending on the region, with the rate in cities such as Dhaka as high as 75%, while it is around 25% in rural areas. Furthermore, approximately 70% of primary fuel to generate electricity comes from natural gas produced within Bangladesh, but with gas fields concentrated in the eastern region of the country, there is great difference in prevalence rate between the east and west parts of the country (East= 80%, West = 20%). Depletion of natural gas has also become a major concern in recent times, and further expansion of the electrical grid has been halted since 2010, effectively prohibiting new electricity contracts. In areas that are connected to the grid, blackouts are frequent occurrences.

Under these circumstances, IDCOL (Infrastructure Development Company limited) began the Solar Home System (SHS) Program in 2003 to install solar power panels in individual homes as decentralized electricity generation systems, with an initial target of 50 thousand homes by 2008. The project moved forward at a much faster pace than expected, and the most recent target set in 2011 is 2.5 million homes by 2014. Local NPOs such as Grameen Shakti and other civilian organizations are also proving to be a strong force driving this initiative forward.

This very rapid rate of adoption shows just how great the expectation is for solar panels as a sustainable and safe method of power generation in Bangladesh.

Progress of SHS installation by IDCOL
Based on “IDCOL Solar Home System Program in Bangladesh” Nov. 1~2 2012

Mitsubishi Chemical Holdings Corporation has been pursuing the development of lightweight, thin, and flexible solar panels, and is currently selling a model made of amorphous silicon, as well as developing organic thin-film photovoltaics. These types of flexible and lightweight thin-film solar panels can be installed onto rooftops that are not very sturdy, easily stowed away in times of bad weather, as well as shared among multiple households. The unique characteristics of these solar panels offer many benefits over existing ‘hard and heavy’ crystalline silicon solar panels, enabling them to be used in innovative new ways.

Installing a thin-film solar panel onto a rooftop in Bangladesh.

Currently, TKI and the Alliance Forum Foundation is working on a joint project, which has been selected by the Japan International Cooperation Agency, to conduct research in Bangladesh aimed at developing new ways to utilize these solar panels, as well as discern the potential of the technology to be used widely in developing countries.

In order to reach the market of developing countries and conduct business that will truly bring about a more KAITEKI society in these parts of the world, companies must cooperate with local partner organizations to discover people’s needs in a way that will bring them real benefit and value. At the same time, we think it is crucial for companies to move forward and introduce their products in developing countries and other markets, and work with actual consumers at each locale, in order to discover potential new uses and create additional value for the products.

January 29, 2013