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Strength in Numbers Evolving Cities, World Investment Report, Fiscal Woes, Arab Spring, Energy, CIVETS, Factoring, Automotive, Sustainable Growth, OECD 50th Anniversary, Environment, Professional Coaching + International Financial Centres feature including Q&As with leading IFCs, analysis of jurisdictions and captive focus 1
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Strength in Numbers If one was to believe the news coming from some quarters it would appear the world is inexorably headed for a meltdown in every way, shape and form. Yet, as is so often the case if you look behind the hysterical headlines and apply some disciplined analysis, patterns begin to emerge, opportunities become evident and some sense of order and perspective is restored. What is apparent is that there is strength in numbers right now. Investors, governments, industry sectors – all are showing a greater tendency to join forces than ever before to achieve a common purpose. This is the age of treaties, trading blocs and alliances and this sentiment is borne out in virtually all the areas we look at in this edition of the Business Annual. PPPs are the order of the day in the regeneration sector, eurozone economies have united in re-committing themselves to the long term viability of the institution, OECD member countries have come together in a show of strength in an effort to recoup lost tax revenues, while IFCs have busied themselves with forging Tax Information Exchange Agreements and Double Taxation Agreements so as to comply with new regulations, whilst ensuring they remain potent and attractive financial hubs for HNWIs. There are signs that small IFCs will unite further too, to form a more powerful voice at the international voting table, and so defend their common interests. Space agencies across the globe are cooperating more than ever before, as manifested in the form of the ever growing International Space Station (ISS). Meanwhile, back on Earth, though not always enjoying unanimous support FDI, environmental, crime fighting, aid and conflict resolution strategies are being addressed at the global level in unprecedented fashion. The global village becomes more of a reality with each passing day, and with emerging economies increasingly signed up to the principles of the free market economy, that we’re all in this together will only become more apparent. BRIC and CIVETS growth stats continue to impress in the main, with the established G7 economic heavyweights only able to dream of these numbers as their emerging economy counterparts consolidate their recent advances, continue on their march to mass consumption, and sate the needs of their rapidly growing and ambitious young populations. The result of all this is that many economies are now having to face up to a new dawn where a long-held sense of entitlement is being fiercely challenged. Sticking their heads in the sand is no longer an option. They will need to excel to thrive, and this return of excellence and the need for businesses to both re-strategise and draw on all their resources to flourish and fulfil their potential is something we should all welcome.
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Contents Comment 6 Evolving Cities Frances Law explains how with the appropriate mix of public and private involvement and a clear vision, city evolution can benefit all stakeholders
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IFC Feature 25 Conclusions from ‘The Value of Europe’s International Financial Centres to the EU Economy’ A report prepared for the City of London Corporation and TheCityUK by Europe Economics 26 New and Improved Services Being Rolled Out in the Cook Islands Planned enhancements to the Cook Islands’ service offering
52 Automotive Industry a Force for Good International Organisation of Motor Vehicle Manufacturers (OICA) explains why automakers are an integral part of developed, and developing, society
Time Travel in Samoa Samoa is set to leap forward in time by one day from 2012
28 Economic Liquidity, Efficiency and Jobs The IFC Forum details how small IFCs contribute to capital market liquidity and job creation in the global economy 10 Key Messages from UNCTAD World Investment Report 2011 12 CIVETS Open New Avenue for GCC Investors Criselda Diala details how CIVETS countries hold massive potential for investors seeking alternative markets to park their money 14 What U.S. Fiscal Woes Teach China by Yukon Huang, Senior Associate in the Carnegie Asia Program
30 Q&A with David Kinloch at Labuan IBFC David Kinloch, CEO at Labuan International Business and Financial Centre (IBFC) details the manifold reasons behind the enduring success of this jurisdiction strategically located in the heart of Asia 32 Labuan: Comprehensive and Progressive Malaysia’s IFC perfectly positioned to service booming Asian demand 34 Q&A with Jenner Davis at the Cook Islands FSDA We ask Jenner Davis, CEO at the Cook Islands Financial Services Development Authority (FSDA) to share with us the key attributes and plans for the future of this long standing IFC with its enviable Pacific location between China and North America 36 Turks and Caicos Islands TCI’s subscription to the principles of ‘transparency’, ‘accountability’ and ‘responsibility’
Anguilla Ongoing changes enhance efficiency
37 Jamaica has Good Shot at IFC Success Jamaica’s imminent entrance into the IFC market 16 World Nuclear Association Nuclear Century Outlook A projection of nuclear energy’s potential contribution to meeting global clean energy needs 19 Smart Grid Deployment Key to Asia-Pacific’s Energy Future Supplied by the Asia-Pacific Economic Secretariat 20 Impact of the Arab Spring on Business Globally Grant Thornton’s International Business Report shows the global impact of the Arab Spring 21 Global Factoring Industry in Rude Health by Peter Ewen, Chairman of the International Factors Group (IFG) Board 22 The 50th Anniversary of the OECD Speech by Hillary Clinton, US Secretary of State and Chair of the 2011 OECD Ministerial Council Meeting, at the commemoration of the 50th anniversary of the OECD, 25 May 2011
38 Q&A with British Virgin Islands International Finance Centre We quiz the BVI IFC on the reasons behind its continued popularity as a global financial hub 40 Cayman Islands Special Feature
What is a Captive? Supplied by the Insurance Managers Association of Cayman (IMAC)
42 Benefits of Captives Supplied by the Insurance Managers Association of Cayman (IMAC)
Captive Developments Trends within the Cayman Islands captive insurance sector
45 Twin Pillars and Beyond: the Future for Cayman Diversification beyond international financial services and tourism 46 Seychelles Special Feature
Proactive Seychelles Details of recent and forthcoming reforms
48 Q&A with Steve Fanny at the Seychelles International Business Authority (SIBA) SIBA CEO explains to Joanna Gray why Seychelles ought to be the IFC destination of choice 50 Seychelles’ Rich Investment Climate A strategy of long-term sustainability is being employed throughout the Seychelles economy 51 Jurisdictions Move towards Full Tax Transparency OECD Global Forum on Transparency and Exchange of Informa tion for Tax Purposes issues 12 new peer review reports
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54 International Cooperation in Space Space agencies unite to administer the International Space Station Programme
Space Agency Senior Managers Meet to Discuss a Global Exploration Roadmap Senior managers representing 10 space agencies from around the world meet to advance a Global Exploration Roadmap for coordinated space exploration
55 International Coach Federation (ICF) Challenges Common Coaching Misconceptions Professional Coaching generates solid ROI for clients 56 World Bank says Developing Countries Need to Shift from CrisisFighting to Policies that will Sustain Growth Political turmoil in the Middle East and North Africa has cut sharply into domestic growth, but spillover effects to other economies are expected to be modest 58 UNEP Green Economy Report Outlines Investment Strategies to Help Reduce Water Scarcity Improving the efficiency and sustainability of water use is vital if the world’s increasing energy demands are to be met 60 Getting Started in Aerobatics by Mike Heuer, former International Aerobatic Club (IAC) President 62 The Evolution of Golf Simulators Mitchell Woll explains how with a Golf Simulator you can play all year around whatever the weather or time of day 64 Organise a Scotch Whisky Tasting The Scotch Whisky Association explains how tasting Scotch Whisky is an experience involving all five senses 65 Heli-skiing The ultimate off-piste experience 66 US Competitiveness Ranking Continues to Fall; Emerging Markets Are Closing the Gap Details from ‘The Global Competitiveness Report 2011-2012’
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Evolving C ities Photo CC by Paul Hart
By Frances Law
Evolution of cities can be piecemeal, fractious and often downright messy. But with the appropriate mix of public and private involvement and a clear vision, city expansion doesn’t always have to disadvantage the original inhabitants
Finnieston Crane, Clyde Waterfront, Glasgow, Scotland
To be civilised is to live in a city, successfully with your neighbour. The word civilisation derives from the Latin words civis, meaning citizen and civitas meaning city or citystate. The essence of ‘development’ rests on our ability as humans to design sufficient sewerage, water and food supply and transport systems to enable us to live in close proximity to our fellow man. This can feel counter-intuitive: consider (with face protected and handkerchief over your mouth) the London 2011 riots, the slums of Mumbai or the shanty towns of Johannesburg. These suggest in no uncertain terms that city life ought to be avoided in favour of the relative tranquillity of rural life. Try telling that however to the 1.25million people moving from rural conditions to towns each week or the Chinese who are building 100 new cities. What some are calling, ‘the largest single migration in human history’ demonstrates that for every cramped living condition, open sewer and reduced life expectancy, moving to the city offers the prospect of a better life. Indeed cities have historically driven social improvements and economic growth. Take Cholera. If it were not for the 1854 outbreak of cholera in London Dr John Snow wouldn’t have established the water-borne theory of disease transmission and pushed forward the resulting public health improvements – namely not building water pumps next to cesspits! Such Victorian discoveries are still vital to the functionality of developing world cities and continue to drive the debate
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about how best to develop cities in today’s globalised world.
Developing world city expansion: getting the right infrastructure
One only needs to glance at the skyline of Aachen, Charlemagne’s 8th Century capital in Germany to realise that no matter how old the city, it will invariably continue to grow, decline, re-emerge, expand, retract and regenerate as the vicissitudes of politics and economics dictate. However there are broadly two types of growth in cities: those that occur after a city has experienced a sharp slump in prosperity and those that are still developing. In both instances, success can only be achieved with a subtle balance between government and private investment and a clear vision to ensure the reasonable living standards of its present and future inhabitants.
Curitiba in Southern Brazil shines as a beacon in the ‘sustainability’ debate. Following the rapid industrialisation of Brazilian agriculture in the 1950s, immigration into cities rocketed and urban squalor intensified. In the same way that Lee Yuan Kew is the ‘architect’ of Singapore’s success, architect Jaime Lerner identified the problems and designed, and later as Mayor implemented the Curitiba Master plan that was adopted in 1968.
when urban planning is successfully achieved, it is a mecca for investors Whilst much is made of China and India’s city building programme, with for example £28billion being spent on urban development in Shanghai alone, bringing its population to 23million and rising, the exemplar developing world city expansion occurred first, 40 years ago across the ocean in the Americas. And when urban planning is successfully achieved, it is a mecca for investors.
The key to its success was a first class transport system. Rather than adapting transport to growing population, Lerner designed infrastructure, chiefly the BRT (Bus Rapid Transit) that could guide the city’s expansion. So successful is the transport system that car usage has decreased by 30 percent while the population has trebled in a 20-year period. In addition Curitiba is home to many multi-national industries, especially from the automotives including Nissan, Renault, VW, Audi and Volvo. While crucial, the bus system functions as part of a wider plan for the city which includes approximately 50 square metres of park per person, a pedestrianised down town area and extensive cycle tracks, resulting in the fact that 99 percent of its inhabitants want to live there, its economic growth is 7 percent higher than the national average of 4 percent and per capita income is 66
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percent higher than the Brazilian average. The ‘Sustainable Cities Database,’ states, ‘Curitiba’s success in creating a green clean city can be accredited to active participation by all players, including the public and the private sector, as well as ordinary citizens. Financial incentives are one way of engaging private commerce in the creation of a green city. For instance local contractors get tax relief in Curitiba if their projects include green areas. The green areas in Curitiba serve several purposes and not just recreational ones. For instance, the city has solved its problem of dangerous flooding by building lakes in park areas to hold back large quantities of water.’ Curitiba’s successful urban design ensures it is economically vibrant. Compare this to the sprawling cities of flood-prone Bangladesh’s Dhaka and Khulna whose development plans covering the period 1995-2015 have not kept up with the astonishing population growth. With the urban population set to double to 74million by 2035, without sufficient infrastructure and sanitation, the country will not achieve its social or economic potential in the same way that Brazil is doing. Developing world city expansion: getting the right balance between government, private enterprise and foreign aid Little over 100 years ago Dar es Salaam was a small colonial fishing port. Vestiges of this remain where traditional dhows still sail alongside cruise liners and cargo ships. Three million people live in the city with 7 out of 10 of them residing in unplanned
settlements, and the population is set to increase to 5 million in the next decade. Dar es Salaam is an example of organic growth that doesn’t completely undermine the city’s economic potential. With large ex-pat populations the city is enough of an international hub for sufficient levels of infrastructure to function. The fact that one third of the Tanzanian government’s budget comes from foreign aid helps to ensure that basic infrastructure is maintained.
Financial incentives are one way of engaging private commerce in the creation of a green city However, the success of the city lies in the economic viability of the port. When the government recently relinquished port administration monopolies, foreign investors came calling, port traffic increased and demand arose for a second container terminal. Set to begin construction in 2011, Dredging Today reports that, ‘The terminal would have the capacity to handle twice as much as Dar es Salaam’s present terminal, which has a capacity of between 250,000 and 310,000 TEUs.’ By such small steps Dar es Salaam will continue to thrive and Tanzania will continue to drive the sub-Saharan African economy Developed and developing world city expansion: give cities identities While it’s true that the majority of China’s new cities are being built using traditional construction and energy sources, Tianjin Eco-City aims to serve as an example to the
future of a city that was designed at the outset to be economically viable, energy efficient and easy on the environment. A joint venture between China and Singapore the city is sited 40km from Tianjin centre and 150km from Beijing. With investment of $9.7billion the city is set to house 350,000 residents, half of whom should work within the eco-city which is being powered by a combination of traditional energy, solar energy, geo-thermal heating and hydropower. Due to be fully developed in the 2020s the project is already positioning itself as leading the green urban planning agenda. In this respect it’s shoring up its future viability by becoming more than just another functioning business city – it will export out its green credentials. As Ho Tong Yen, CEO of the Tianjin Eco-City project explained, “I think that in time to come, this will be a model that many people will study. Some cities will replicate certain aspects of the concept we have developed here. I think as long as some ideas are replicated elsewhere, then we would have made a very big contribution to sustainable development.” Starting from scratch is of course the urban planners dream but a blank architectural sheet of drawing paper is not requisite to simply design a city’s vision. Chicago is a case in point. Following a decline in its industrial heritage Chicago looked for a while as if it had lost its way. The foresight of its Mayor Richard M. Daley (1989-2011), who offered incentives for sustainable developments, turned Chicago from flagging industrial city into America’s foremost ‘green city.’ When the political lead is taken firmly in one direction, private investment will follow.
Photo CC by O Palsson
Marina City, Chicago, USA
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Photo CC by Karen Chan
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‘Turning Torso’, Malmo, Sweden
Totemic of the ‘green city’ agenda is Chicago’s famous Green City Market which has been flourishing for 12 years and receiving up to 200,000 visitors throughout 2010. Its mission, ‘is to provide a marketplace for purchasing sustainably grown food that educates, promotes and connects farmers and local producers directly to chefs, restaurateurs and the greater Chicago community. Our vision is to create a national marketplace model for distributing, promoting and educating about local sustainably-grown food.’ By forming such a brand Chicago has been able to attract leading alternative energy companies to the city. In 2010 America’s largest solar power plant opened in Chicago – the Exelon City Solar. The 32,292 solar photovoltaic panels will generate 14,000 megawatt hours of electricity per year. This is a visible example of visionary politics turning into practical reality. Of course ‘green’ and ‘sustainable’ are the current buzz words in urban planning, but a vision of a city isn’t confined to these two concepts. For example, the Slow Food movement and the World Health Organisation ‘Healthy Cities’ concepts are spreading around the globe, but whether these translate into boosts for economies is harder to say. Developed world cities: regeneration No matter how solid a city’s industry, whether it’s based on alternative energy or slow cured pancetta, at some point in the future it will decline. After the Second World War well established industrial cities in Europe and America collapsed and many
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are still undergoing the post-industrial regeneration that is required to attract business back. Glasgow is a case in point. Whilst it still retains two major shipbuilding yards, it is some way off from the 25,000 ships that have been built on the Clyde. With the diminishment of the area’s major industry, social conditions fell and politicians were left rudderless.
No matter how solid a city’s industry, whether it’s based on alternative energy or slow cured pancetta, at some point in the future it will decline Decline turned to optimism in 2001 when Glasgow City Council and Capella Developments joined together with a clear vision of harnessing the River Clyde and creating Clyde Waterfront, a vibrant mix of business, housing, social and environmental projects. The project is a masterful example of mixed-use sustainable development where recent developments such as global human resources firm Ceridian’s opening of new offices at Titanium Business Park, Braehead are complimented by initiatives such as the launch of Creative Clyde, the imminent construction of the NHS South Glasgow Hospital, the opening of the Scottish Hydro Arena in Spring 2013, and Skypark in Finnieston which is set to be Scotland’s first business hotel concept. Moreover, initiatives such as the
proposed £10 million Broomielaw Quay restaurant and leisure project aim to further make the river a focus of people’s everyday lives in Glasgow. To date £3.5billion has been invested since 2003 with a further £2billion commitment on the back of proven success. With the recent completion of the M74 motorway extension to reduce journey times, Clyde Waterfront has an excellent case for businesses looking to relocate, expand or start-up. What is happening on the Clyde is the largest regeneration project that has ever been undertaken in Scottish history. Its success is already reaping dividends not only for the region but the country as a whole. Malmo in Sweden with a population of 300,000 suffered a similar postindustrial crisis to Glasgow’s Clyde, but its redevelopment is now attracting new business to the city. Nicola Bacon from Young Foundation which is working with the municipality on its regeneration projects explained what happened, “The closure of the Kockums shipyard presented real scope for the transformation and creation of a new district in the city - Västra Hamnen, the City of Tomorrow. Thanks to this structural facelift, the city has now once more renewed its ties with the sea. In the former shipyard area, we now see students, business people and residents bustling about their lives and work. These used to be the Kockum workers. The area covers about 140 hectares and currently has a number of projects which are at the planning and construction stages.” Whether being designed from scratch, creating a new ‘brand’ of city, or regenerating an existing one, evolving cities will continue to attract the brightest people and the smartest businesses.
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CLYDE WATERFRONT - A RIVER OF OPPORTUNITY!
The scale, pace and diversity of its regeneration has revitalised the Clyde, not only making it one of Britain’s biggest and most advanced regeneration projects, but also creating many opportunities for businesses and the public to invest, locate and live!
Clyde Waterfront Strategic Partnership comprising the Scottish Government, Scottish Enterprise and Glasgow City, Renfrewshire and West Dunbartonshire Councils (www.clydewaterfront.com) facilitates and promotes the Clyde’s regeneration from Glasgow city centre, via Renfrew to Dumbarton. With £3.5 billion spent or committed since 2003 by the public & private sectors across 250+ projects in the area, 20,000 new jobs, 9,000 new homes and 320,000 metres2 of new commercial space have been created. Clyde Waterfront’s economy is now far more diverse than before, with several centres of excellence, for example:Financial Services: Glasgow’s award winning International Financial Services District (IFSD) www.ifsdglasgow.co.uk has attracted £1bn+ of investment to date via global companies like Aon, Aviva, Barclays, BNP Paribas, HSBC, Morgan Stanley, National Australia Group, Santander and Tesco, creating 15,000 new jobs since 2001. New occupiers, 1 million ft2 of new Grade A offices, the Tradeston “Squiggly” bridge and exciting leisure plans for the Broomielaw quayside all add fresh impetus. Creative Industries: Pacific Quay & SECC is now being marketed to the creative sector as Creative Clyde (www.creativeclyde.com).
STV and BBC Scotland are firmly established here and 50 more creative SMEs are based in Medius, The Hub and Film City Glasgow respectively. A Floating Village is planned for the Canting Basin and opposite the 12,000 seat Scottish Hydro Arena opens in 2013, reinforcing the area’s credentials as a world class entertainment and conferencing venue. Shipbuilding: Over the next 6-8 years, the 4,000 highly skilled workforce at BAE’s two shipyards in Govan and Scotstoun will complete six Type 45 Destroyers and build key sections of the two 65,000 tonne Queen Elizabeth Class Aircraft Carriers. Medical Science: The £842m redevelopment of the NHS Southern General, has expanded its maternity hospital and is building two new hospitals, creating Europe’s largest medical campus, employing thousands and able to treat 725,000 patients per annum. Leisure: The newly opened £74m Riverside Museum (housing Glasgow’s transport collection) designed by acclaimed architect Zaha Hadid, is well on track for over 1 million visitors in its first year and will compliment other major Clyde attractions such as the Glasgow Science Centre, the Glenlee Tall Ship, Xscape and the Titan Crane. Retail: Clyde Waterfront has some great retail destinations. Braehead near Renfrew, already Scotland’s busiest shopping centre, is due a £150m expansion. Glasgow’s Buchanan Street has been voted the UK’s best shopping street and the £100m refurbishment of the St Enoch’s Centre boasts the biggest Hamleys outside London. Housing: Over 9,000 new homes have been built since 2003 along the Clyde,
such as the award winning £1.2bn Glasgow Harbour development which has further shops, restaurants and hotels planned. At Ferry Village near Braehead 6 developers are building a range of 2,000 apartments and detached homes by Clyde View Park. Education: Our free on line resource (www. clydewaterfronteducation.com) offers teachers 200 lesson plans that link 12 Clyde themes with 8 subjects as per Scotland’s Curriculum for Excellence. These lesson plans are reinforced for schools when they go on Clyde Marine Services’ “Classroom on the Clyde” river trips. Tourism: We have produced 150,000 Heritage Guides to attract the public to the river (www.clydewaterfrontheritage.com) and in 2011 Clyde Link and Clyde Clippers started new ferries linking with three new public pontoons, complimenting other river services like Seaforce, Loch Lomond Seaplanes and the Waverley Paddle Steamer. The Future: Its skilled workforce, cost competitiveness, excellent communications and new infrastructure give Clyde Waterfront a real momentum, with many previously empty brown field sites revitalised. However, looking to the future, this attractive and thriving waterfront location has another £2 billion of identified commercial, retail and residential opportunities for developers, investors and companies to realise. Contact Clyde Waterfront, Atrium Court 50 Waterloo Street Glasgow G2 6HQ +44 (0) 141 229 5420 www.clydewaterfront.com/ba
The United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2011 2010 saw FDI flows to Africa fall.
Highlights Global foreign direct investment (FDI) has not yet bounced back to pre-crisis levels, though some regions show better recovery than others. The reason is not financing constraints, but perceived risks and regulatory uncertainty in a fragile world economy. The World Investment Report 2011 forecasts that, barring any economic shocks, FDI flows will recover to pre-crisis levels over the next two years. The challenge for the development community is to make this anticipated investment have greater impact on our efforts to achieve the Millennium Development Goals. In 2010 – for the first time – developing economies absorbed close to half of global FDI inflows. They also generated record levels of FDI outflows, much of it directed to other countries in the South. This further demonstrates the growing importance of developing economies to the world economy, and of South-South cooperation and investment for sustainable development. Increasingly, transnational corporations are engaging with developing and transition economies through a broadening array of production and investment models, such as contract manufacturing and farming, service outsourcing, franchising and licensing. These relatively new phenomena present opportunities for developing and transition economies to deepen their integration into the rapidly evolving global economy, to strengthen the potential of their home-grown productive capacity, and to improve their international competitiveness. Unlocking the full potential of these new developments will depend on wise policymaking
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and institution building by governments and international organisations. Entrepreneurs and businesses in developing and transition economies need frameworks in which they can benefit fully from integrated international production and trade. I commend the report, with its wealth of research and analysis, to policymakers and businesses pursuing development success in a fast-changing world.
Some of the poorest regions continued to see declines in FDI flows. Flows to Africa, least developed countries, landlocked developing countries and small island developing States all fell, as did flows to South Asia. At the same time, major emerging regions, such as East and SouthEast Asia and Latin America experienced strong growth in FDI inflows.
by Ban Ki-moon, Secretary-General of the United Nations
International production is expanding with foreign sales, employment and assets of transnational corporations (TNCs) all increasing. TNCs’ production worldwide generated value-added of approximately US$16 trillion in 2010 - about a quarter of global GDP. Foreign affiliates of TNCs accounted for more than 10 per cent of global GDP and one-third of world exports.
Key Messages FDI trends and prospects Global foreign direct investment (FDI) flows rose moderately to US$1.24 trillion in 2010, but were still 15 per cent below their pre-crisis average. This is in contrast to global industrial output and trade, which were back to pre-crisis levels. UNCTAD estimates that global FDI will recover to its pre-crisis level in 2011, increasing to US$1.4–1.6 trillion, and approach its 2007 peak in 2013. This positive scenario holds, barring any unexpected global economic shocks that may arise from a number of risk factors still in play. For the first time, developing and transition economies together attracted more than half of global FDI flows. Outward FDI from those economies also reached record highs, with most of their investment directed towards other countries in the South. In contrast, FDI inflows to developed countries continued to decline.
State-owned TNCs are an important emerging source of FDI. There are at least 650 State-owned TNCs, with 8,500 foreign affiliates across the globe. While they represent less than 1 per cent of TNCs, their outward investment accounted for 11 per cent of global FDI in 2010. The ownership and governance of State-owned TNCs have raised concerns in some host countries regarding, among others, the level playing field and national security, with regulatory implications for the international expansion of these companies.
Investment policy trends Investment liberalisation and promotion remained the dominant element of recent investment policies. Nevertheless, the risk of investment
Photo CC by Zoomion
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protectionism has increased as restrictive investment measures and administrative procedures have accumulated over the past years. The regime of international investment agreements (IIAs) is at the crossroads. With close to 6,100 treaties, many ongoing negotiations and multiple disputesettlement mechanisms, it has come close to a point where it is too big and complex to handle for governments and investors alike, yet remains inadequate to cover all possible bilateral investment relationships (which would require a further 14,100 bilateral treaties). The policy discourse about the future orientation of the IIA regime and its development impact is intensifying. FDI policies interact increasingly with industrial policies, nationally and internationally. The challenge is to manage this interaction so that the two policies work together for development. Striking a balance between building stronger domestic productive capacity on the one hand and avoiding investment and trade protectionism on the other is key, as is enhancing international coordination and cooperation. The investment policy landscape is influenced more and more by a myriad of voluntary corporate social responsibility (CSR) standards. Governments can maximise development benefits deriving from these standards through appropriate policies, such as harmonising corporate reporting regulations, providing capacity building programmes, and integrating CSR standards into international investment regimes.
Non-equity modes of international production and development In today’s world, policies aimed at improving the integration of developing
economies into global value chains must look beyond FDI and trade. Policymakers need to consider non-equity modes (NEMs) of international production, such as contract manufacturing, services outsourcing, contract farming, franchising, licensing, management contracts, and other types of contractual relationship through which TNCs coordinate the activities of host-country firms, without owning a stake in those firms.
In today’s world, policies aimed at improving the integration of developing economies into global value chains must look beyond FDI and trade Cross-border NEM activity worldwide is significant and particularly important in developing countries. It is estimated to have generated over US$2 trillion of sales in 2009. Contract manufacturing and services outsourcing accounted for US$1.1–1.3 trillion, franchising US$330–350 billion, licensing US$340–360 billion, and management contracts around US$100 billion. In most cases, NEMs are growing more rapidly than the industries in which they operate. NEMs can yield significant development benefits. They employ an estimated 14–16 million workers in developing countries. Their value added represents up to 15 per cent of GDP in some economies. Their exports account for 70–80 per cent of global exports in several industries. Overall, NEMs can support long-term industrial development by building productive capacity, including through technology dissemination
2010 saw global industrial output and trade back to pre-crisis levels
and domestic enterprise development, and by helping developing countries gain access to global value chains. NEMs also pose risks for developing countries. Employment in contract manufacturing can be highly cyclical and easily displaced. The value added contribution of NEMs can appear low if assessed in terms of the value captured out of the total global value chain. Concerns exist that TNCs may use NEMs to circumvent social and environmental standards. And to ensure success in long term industrial development, developing countries need to mitigate the risk of remaining locked into low-value-added activities and becoming overly dependent on TNC-owned technologies and TNC-governed global value chains. Policy matters. Maximising development benefits from NEMs requires action in four areas. First, NEM policies need to be embedded in overall national development strategies, aligned with trade, investment and technology policies and addressing dependency risks. Second, governments need to support efforts to build domestic productive capacity to ensure the availability of attractive business partners that can qualify as actors in global value chains. Third, promotion and facilitation of NEMs requires a strong enabling legal and institutional framework, as well as the involvement of investment promotion agencies in attracting TNC partners. Finally, policies need to address the negative consequences and risks posed by NEMs by strengthening the bargaining power of local NEM partners, safeguarding competition, protecting labour rights and the environment. Reproduced with kind permission of UNCTAD. Established in 1964 UNCTAD promotes the development-friendly integration of developing countries into the world economy.
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CIVETS Open New Avenue for GCC Investors
Cape Town, South Africa
By Criselda Diala The credit crunch has highlighted a tectonic shift in the global economic landscape as investors pour more money into emerging markets instead of the once-favoured developed economies. Investments into emerging markets have remained buoyant over the past years, according to statistics published in June by the Institute of International Finance (IIF). Net private capital flows in 2010 have been recorded at $990 billion (Dh3.64 trillion), up by nearly 54 per cent from $644bn in 2009. This uptrend is anticipated to continue in 2011 with $1 trillion and in 2012 with $1.06trn. Made famous by catchy acronyms, emerging markets such as BRIC (Brazil, Russia, India and China) and MENA (Middle East and North Africa) have already caught investors’ attention. However, a relatively new group of economies have started to appear on the investment radar and their fundamentals could prove appealing to petrodollar-rich GCC financiers, analysts say. CIVETS – representing Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa – holds massive potential for Gulf investors seeking alternative markets to park their money, says Khalid Howladar, Vice President-Senior Credit Officer of the Financial Institutions Group at the Dubai office of Moody’s. “[CIVETS economies] are fast-growing and relatively populous countries that, in most cases, require significant capital investment in both the public (particularly infrastructure) and private sectors. Capital is something the GCC has plenty of, which, when coupled with the lack of economic diversification at home, means that they need to look to overseas markets for wider
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investment opportunities,” said Howladar. An indication of the high stake that fund managers are placing into this group was the launching of Standard & Poor’s (S&P) CIVETS 60 Index in May, which provides exposure to 60 leading companies through ten highly liquid stocks trading in each of the CIVETS countries. Charbel Azzi, Director and Head of Client Coverage-Middle East and Africa for S&P Indices, says they believe the six countries are second-generation emerging markets characterised by dynamic, rapidly changing economies and young, growing populations.
[CIVETS economies] are fast-growing and relatively populous countries that, in most cases, require significant capital investment in both the public (particularly infrastructure) and private sectors “The CIVETS 60 Index will provide GCC investors exposure to new markets beyond BRIC, which have been [in] play for some time. Asset managers are always looking for new ideas to create a product around or even launch a fund benchmarked to the CIVETS. As of June, the [annualised] return of the index [has been] 22.8 per cent,” Azzi said. Rosy economic outlook for 2011, 2012 The International Monetary Fund (IMF), in its World Economic Outlook released in
April, predicted significant real GDP growth rates for the CIVETS economies in 2011 and 2012, with the exception of Egypt, which has suffered serious fiscal backlash due to the political turmoil that erupted in the first quarter. Colombia’s economy is seen growing by 4.6 per cent this year and 4.5 per cent in 2012, according to the IMF forecast. Indonesia, the largest economy in Southeast Asia, will expand by 6.2 per cent in 2011 and 6.5 per cent next year while Vietnam is expected to register the highest growth figure among the CIVETS economies at 6.3 per cent and 6.8 per cent, the IMF noted. Unsteady political climate, coupled with mounting public discontent and high unemployment rate, will see Egypt’s fiscal growth stifled at a measly one per cent this year. However by next year, provided that the political situation improves, Egypt’s economy will likely record a four per cent growth, the global lender predicts. Turkey, which holds strategic geographic importance as it sits between Europe and Asia, could see its GDP jumping to 4.6 per cent and 4.5 per cent, as per the IMF estimates. Jarmo Kotilaine, chief economist at Saudi-based National Commercial Bank (NCB), said their in-house forecast for the Turkish economy has also been optimistic, putting the growth rate at 5.9 per cent this year and 6.4 per cent in 2012. Last but certainly not least, South Africa’s economic growth level is predicted to be equally healthy at 3.5 per cent and 3.8 per cent in 2011 and 2012, respectively. Aside from their robust economies, CIVETS nations – like many emerging markets – have rich demographics and strong policies that prove enticing to foreign investors, says Maria Laura Lanzeni, Head of Emerging Markets Research at Deutsche Bank.
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“Those countries offer superior economic growth rates (compared with developed markets) [and] in some cases, large and growing populations with rising incomes and increasing consumption, much-improved macroeconomic policies and relatively low debt levels,” she explained. Strong incentives for attracting FDI CIVETS countries, which span across four continents, have a combined population of nearly 600 million as of July this year, according to CIA World Factbook statistics – making them fertile ground for international companies looking to diversify their product and service reach. Lanzeni says sectors that cater to domestic consumer or in the case of Indonesia and South Africa, industries related to natural resources, could be top bets for foreign investors. Martin Kohlhase, Vice President-Senior Analyst at Moody’s Corporate Finance Group, believes that CIVETS offer opportunities that would attract foreign direct investments from the Gulf region. “Access to cheap labour, both as a production base as well as the inbound source for GCC production facilities and certain types of commodities (especially food, which GCC countries heavily rely on) are areas that GCC investors will be interested in,” Kohlhase says. NCB’s Kotilaine says the Islamic background of Egypt, Turkey and Indonesia have been enticing GCC investors, particularly in the fields of Islamic finance and pilgrim tourism, in addition to conventional sectors such as construction, telecommunications, banking, consumer goods and agriculture.
opportunities here are similar to Egypt and Turkey: financial services, construction, tourism [and] agriculture,” he said. Moody’s Howladar agrees that the appeal for these three countries will primarily be economic, but there is undoubtedly a shared and growing empathy for Islamic finance that will strengthen ties between them and businesses in the Gulf region. Azzi of S&P says to have three Islamic states in an index such as the CIVETS 60 is a positive indicator for fiscal growth because it reflects the maturity and liquidity of these countries’ bourses.
CIVETS countries, which span across four continents, have a combined population of nearly 600 million “GCC investors, [whether] Islamic or conventional focused, will look at these opportunities more closely to generate alpha on their investments,” the S&P analyst said. Politics highlights risks in emerging markets
countries have to deal with elevated levels of political and event risk, but the regulatory and investor regimes are quite likely to be underdeveloped and subject to various inefficiencies that can diminish or even destroy returns from potential investments,” says Howladar of ratings agency Moody’s. Lanzeni of Deutsche Bank says political and institutional risks are some of the last few differences between emerging and developed countries. “The challenge for CIVETS and other [emerging markets] in general [is] how to secure the rule of law and develop robust domestic institutions,” says Lanzeni. She was quick to point out, however, that many emerging markets have made enormous progress over the past decades in addressing this concern. Despite these challenges, recent market assessments by IIF emphasise potential opportunities and financial promises from the emerging economies. Egypt’s political crisis saw private capital flight of about $16bn, which also resulted in a dent in the MENA’s aggregate capital flows for 2011 and 2012. This contraction, however, will be buffered by an anticipated rise in foreign direct investments, the IIF report said.
With no immediate resolution in sight, Egypt’s shaky political situation appears to be sticking out like a sore thumb among fellow CIVETS markets’ seemingly sound economic fundamentals. Analysts noted that political risk is not unique to Egypt, but in fact prevalent in many emerging markets.
“Overall, however, private capital inflows [to the Africa and Middle East region] are projected to slip to $56bn this year from $77bn in 2010. An increase in foreign direct investment to $62bn will help offset an outflow of portfolio equity and a drop in inflows from banks and other private creditors,” the institute mentioned.
“Emerging market countries in general are high risk. Not only does investment in those
This article first appeared in Alrroya.com
“There is an obvious cultural affinity and concrete existing opportunities in areas such as umrah/hajj [pilgrimages],” Kotilaine says of the three Islamic CIVETS countries. “Great opportunities for Islamic finance, which have begun to be explored in Turkey, but the cultural/religious angle will likely mean that many [GCC] investors would consider these countries before [other markets].”
Kotilaine mentioned likewise that Indonesia, the most populous Muslim country in the world, is increasingly on the radar screen of GCC businesses. “Some GCC companies have been eyeing the Indonesian market from their current operations in Malaysia. The main
Catedral Primada, Bogota, Colombia
Photo CC by - Pedro Szekely
He added that Turkey, which like Egypt has a large population, has been drawing huge attention from the Gulf because of its “greater prosperity and the added advantage of proximity to Europe.”
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Photo CC by - Wenjie Zhang
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What US Fiscal Woes Teach China The Oriental Pearl Tower, Shanghai, China
By Yukon Huang As the largest foreign buyer of US government securities, China can only fret as the value of its holdings is held hostage to a fractured political process in Washington. But while the longer-term implications of these developments are likely to hurt the United States’ democracy and human rights agenda as far as China is concerned, ironically, they will help its international financial situation. On the political front, China’s leadership will quietly welcome comparisons with the relative ease with which its system is able to move on collective action within a tightly-controlled political process. This will reinforce self-serving messages as the Communist Party celebrates its 90th anniversary, especially as the party has been under considerable pressure lately to redefine itself, as its society is no longer isolated, rural, and poor, but is now globally integrated, urban, and fixated on wealth accumulation. And, while China struggles to achieve a ‘soft landing’ from its economic stimulus programme, the fiscal problems in the United States will be used as a reminder to its restless constituents that democracy doesn’t guarantee that the right compromises will
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evolve to support the common good. Nor will the problems in Europe in forging a collective sharing of looming default burdens, or the continued decline of the Japanese economy, strengthen the case for liberalising China’s political system. Indeed, all this will make it even harder to bridge the cultural divide that separates China from the West over the way they view global issues.
(China) is no longer isolated, rural, and poor, but is now globally integrated, urban, and fixated on wealth accumulation But on the economic front, recent developments are likely to push China’s leadership to move more aggressively to reshape the policies relating to the country’s exchange rate and trade regime that have exacerbated tensions with the United States over the past decade. The United States’ fiscal woes will reinforce the view that it makes little sense for China to continue generating trade surpluses that must then be used to buy US securities, which may only diminish in value over time. Any lingering notion that
mercantilist tendencies still drive Chinese policymakers should now be discarded. Some estimates suggest that with unchanged external policies, China’s foreign exchange holdings could increase from the current $3.2 trillion to $5 trillion by 2015. But with the prospects of all three major reserve currencies under a cloud, parking such amounts in foreign securities is unappealing, making it unlikely that these levels will materialise. China’s overseas direct investments—which amounted to less than $5 billion seven to eight years ago, but now run around $60 billion annually—are another option for channelling these surpluses. But sensitivities among OECD countries make it unlikely that China can find enough attractive opportunities in the resource-and technology-based industries to make this a serious alternative. While growth in overseas investments will be brisk in the coming years, this won’t satisfy China’s desire to diversify its holdings, and returns would still be vulnerable to exchange rate fluctuations. As a result, China’s leadership no longer sees much to be gained from accumulating foreign reserves. Its former preoccupation with job creation from export production makes less sense as its population ages and
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the labour force begins to shrink within the next few years. Increasingly, the challenge is to meet the job expectations of unemployed college graduates as their numbers have doubled over the past decade, instead of just trying to create largely menial positions. The pressure is now on to develop more highvalued services and knowledge-intensive product lines—with quality rather than quantity being the primary concern. For these objectives to be achieved, though, more rapid appreciation of the renminbi rate will help rather than hurt. But exchange rate changes alone won’t be enough. Much more important is reversing the tax, subsidy, and interest rate policies that discourage the requisite high-value service activities from emerging. The shift away from mercantilist objectives will be reinforced by the desire to move more rapidly to internationalise use of the renminbi. The authorities see greater use of the renminbi abroad as a means of insulating themselves from the instability and declining value of the dollar, euro, and yen. They also welcome the prestige factor and advantages in having the renminbi as an international reserve currency. But they face the predicament that the preconditions for being an international currency are that it must be freely traded in global markets, with its value and availability subject to market forces rather than government controls.
For the moment, China will push much harder for the renminbi to be used for settling trade and services transactions, but continue to be cautious about freeing up capital flows. However, these artificial separations can’t be sustained. China is moving down a slippery slope and, over time, the pressures to liberalise capital flows and allow the value of the renminbi to be shaped by market forces will prove to be overwhelming. This will force the country to accelerate the process of creating the necessary institutions and
regulatory safeguards for the renminbi to be a true international currency. In doing so, it will complement other policies that will help reduce China’s trade imbalances. And the current US fiscal woes will have at least one beneficial side-effect—they will help to lower the tensions that have arisen during the recent ‘currency and trade wars’ between the two countries. This article first appeared in ‘The Diplomat’ Yukon Huang is a senior associate in the Carnegie Asia Program, where his research focuses on China’s economic development and its impact on Asia and the global economy. Previously he was the World Bank’s country director for China (1997–2004) and Russia and the former Soviet Union Republics of Central Asia (1992–1997). Earlier he served as lead economist for Asia and chief for Country Assistance Strategies. He has also held positions at the U.S. Treasury and various universities in the United States, Tanzania, and Malaysia. Huang has published widely on development issues, recently co-editing the book ‘East Asia Visions’, a collection of papers by noted Asian scholars on future prospects for the region. He also just completed a volume entitled ‘Reshaping Economic Geography in East Asia.’ He is an adviser to the World Bank and the Asian Development Bank, as well as various governments and companies.
Photo CC by - David Dennis
For the moment, China will push much
harder for the renminbi to be used for settling trade and services transactions, but continue to be cautious about freeing up capital flows. As such, the world will probably see the emergence of a hybrid-type global currency that will be used relatively freely to settle current account transactions, but remain controlled in terms of the volume and purpose of renminbi-denominated capital flows. This would, in principle, still allow China to retain tight control over its monetary policies and exchange rate adjustments.
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Comment
World Nuclear Association (WNA) Nuclear Century Outlook The World Nuclear Association’s Nuclear Century Outlook is:
• A conceptualisation of nuclear power’s
potential worldwide growth in the 21st Century; and
• An evaluation of nuclear energy’s
and environmental role, the Nuclear Century Outlook also offers perspective on two questions:
• Will nuclear energy’s contribution
depend heavily on introducing nuclear power into new nations?
• In meeting global clean-energy need,
environmental contribution.
The Outlook is unique in nature and scope. Many nuclear projections extend just to 2030 and assume business-as-usual behaviour. The Outlook encompasses these scenarios but looks further into the future - with both optimistic and pessimistic assumptions. In gauging nuclear energy’s potential growth
what is the relationship between nuclear power and renewable energy technologies?
The Outlook is built on country-by-country assessments of the growth potential of national nuclear programmes, based on estimates of need and capability, with projected population a key factor. For each country, the Outlook posits upper and lower
growth trajectories, with the low reflecting the minimum nuclear capacity expected and the high assuming a full policy commitment to nuclear power. When summed globally, these trajectories yield boundaries within which the future is likely to fall. The WNA secretariat maintains this analysis through an on-going dialogue with the WNA’s worldwide industry membership and with experts in leading energy organisations, such as IEA, WEC, IAEA and OECD-NEA. The secretariat welcomes advice from all quarters as it continues to update the Outlook analysis. The latest Outlook tabulation can be seen below;
Outlook Boundaries 12000
High Boundary = Maximum nuclear commitment in most nations
Nuclear GW
10000
Low Boundary = Minimum global nuclear capability expected
8000
6000
High Boundary
4000
2000
Low Boundary 0 2000
2010
1725 GW (84%)
Current Nuclear Power Countries Future Nuclear Power Countries
16
2020
2030
2040
2050
2060
2070
2080
9150 GW (83%)
2090
2100
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These aspects of the Outlook bear emphasis:
• The low and high global trajectories
are not growth ‘scenarios’ as such, but rather the boundaries of a domain of likely nuclear growth.
• Even the low boundary of about 2,050
GW represents more than a five-fold increase over today’s nuclear capacity of 370 GW.
• Growth within the Outlook boundaries
is postulated on the assumption that fuel availability will pose no constraint in operating a much larger global nuclear fleet. Most experts support this view on the grounds that a combination of factors – new ore discoveries, advanced mining techniques, use of uranium ‘tailings’, more reprocessing, introduction of the thorium fuel cycle and, ultimately, employment of breeder reactors – will ensure ample and affordable nuclear fuel supplies into the distant future.
• The Outlook country projections are
implicitly based on the assumption of global environmental stability. This assumption will be vitiated if and as the pace of worldwide conversion to clean-energy technologies proves insufficient to avert catastrophic climate disruption. The essential goal of the Nuclear Century Outlook is to assess and demonstrate the pace of global nuclear growth necessary to prevent that outcome.
The Central Challenge: Decarbonising Energy How do the nuclear capabilities projected in the WNA Nuclear Century Outlook relate to the global environmental challenge? In short, how essential is the contribution from nuclear energy in the 21st Century?
Today a global population of 6.6 billion is rising toward 9 billion by 2050, as energy demand grows explosively to meet human needs and aspirations worldwide. The current path is unsustainable. The UN panel composed of the world’s leading Earth scientists (IPCC) warns that global greenhouse gas (GHG) emissions must, by 2050, be cut by 70% to avert catastrophic change in our planet’s climate system. Achieving emissions cuts on this scale will require sweeping technological change in the world economy. Emissions-reduction strategy must be comprehensive, embracing conservation and efficiency, plus pervasive changes in industrial processes, farming and forestry. But the central task must be a global transformation in energy - because most GHG’s come from the use of fossil fuels. The crucial challenge in GHG curtailment is to decarbonise an ever-expanding worldwide energy system.
Components of a Clean-Energy Future
1) More and Cleaner Electricity:
• Full transformation of electricity to emissions-free technologies
• Greater use of electricity in industrial processes and heating
• Electrification of transport (trains & battery-powered cars).
2) New Elements (using clean electricity or clean heat):
• Direct use of heat output of zero-
emission plants for industrial process and heating.
• Desalination of sea water to meet an intensifying world water crisis
• Hydrogen production for fuel cells. Future ‘Global Clean-Energy Need’ can be projected as the combined output for clean ‘EHDH’:
• Clean Electricity (including battery power)
Fundamental questions remain about future clean-energy technologies:
• Clean Heating (process and factory/
Future Transport: What will be the comparative efficacy of advanced batteries vs. hydrogen fuel cells?
• Clean Desalination
Clean Fossil Fuel: Will large-scale Carbon Capture and Storage (CCS) prove feasible, affordable and sustainable? Renewables Technology: Can New Renewables (wind, solar, biomass, geothermal, tidal) overcome obstacles of cost and intermittency to contribute on a major scale? Despite these technological unknowns, the essential components of a global cleanenergy economy are already well understood:
office/home)
• Clean Hydrogen production.
Quantifying Clean-Energy Need As a unit of measure in projecting global EHDH-Need and capability, the Outlook uses ‘Nuclear Gigawatt’ - the energy delivery capacity of a 1,000 MW reactor. To project global clean-energy need, the Outlook:
• Takes as a numerical starting point for
EHDH-Need the urgent necessity to decarbonise world electricity consumption (which in 2000 equated to 2,000 Nuclear GW).
This order-of-magnitude estimate of future Clean-Energy Need gains credence from an alternative calculation. Today the IEA judges that nuclear power’s 370 GWe (approx 1100 GWth) represents 6.3% of world primary energy consumption.
18000
16000
14000
12000
If so, world energy consumption corresponds to the output from 5,875 Nuclear GW. If total primary energy consumption doubles by 2050, 85% of energy must be supplied by clean technologies in order to attain a 70% GHG cut from 2000 levels.
10000
8000
6000
4000
Current World Electricity Capacity
2000
2000
2010
2020
2030
2040
2050
2060
2070
2080
On that basis, Clean-Energy Need in 2050 would be 9,990 Nuclear GW. 2090
2100
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Comment
• Accepts energy analysts’ expectation
• Assumes that growth in EHDH-Need
then slows, growing 40% in 2050-2100, as global population stabilises at about 9 billion while economic development continues.
that global energy use will double between 2000 and 2050, while electricity consumption triples or quadruples.
• On the additional assumption that clean Heating, Desalination and Hydrogen will become substantial, posits a five-fold increase in EHDH-Need by 2050.
This approach yields an estimate of CleanEnergy Need at mid-century of about 10,000 Nuclear GW, rising by a further 40% in 2100. This means that our world will be chasing a clean-energy target that is receding - in effect, running away as we strive to reach it.
Supplying Clean-Energy Need To place nuclear projections into context, the Outlook makes these assumptions concerning overall clean-energy delivery in the 21st Century:
• Hydropower growth stops at midcentury.
• New Renewables grow steadily and
robustly, to a capacity by 2100 that is more than double the total of today’s world electricity output.
Global Clean-Energy Need & Supply
• Fossil Carbon Capture and Storage
(CCS) makes a substantial contribution during the 21st Century, serving as a bridge technology, but does not grow indefinitely.
Even with robust growth assumptions for Renewables and Clean-Fossil, the
18000
Clean-Energy Gap closes in the 21st Century only when nuclear growth rises significantly above its Low boundary - to a capacity of about 8,000 GW
• Nuclear grows within the range defined
16000
by the WNA Outlook boundaries.
Nuclear GW
12000
Maximum Nuclear Commitment
Clean-Energy Need 10000
8,000 GW
14000
8000
Implications for Global Strategy
Nuclear Low
6000
The WNA Nuclear Century Outlook, although speculative, is fair-minded in design, draws heavily on respected expert analysis, and serves to underscore the full magnitude and urgency of the global environmental challenge. The Outlook carries important implications for strategy and action:
Fossil CCS 4000
New Renewables
2000
Hydro 2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
The Nuclear Gigawatt The Nuclear Century Outlook expresses future clean energy demand in terms of ‘Nuclear Gigawatts’, whether discussing nuclear electricity, nuclear process heat, energy from renewables or fossil fuels with carbon capture and storage. A Nuclear Gigawatt represents whatever capacity required to generate the same energy delivered as a 1 GWe nuclear reactor operating with a high capacity factor. A 1 GWe nuclear reactor can generate around 7 TWh of electricity a year. A coal or gas fired power station may generate a similar amount if operated continuously in baseload generation. Because of the intermittent nature of wind, one GWe capacity of wind turbines may only generate 20-40% of the electricity of a 1 GWe nuclear plant. The capacity of turbines needed to generate 7TWh in a year would be somewhere in the region of 3-4 GWe. If the Nuclear Century Outlook only dealt with clean electricity production we could use electrical output (TWh) as a common measure of the performance of different technologies. But the Nuclear Century Outlook includes heat generation, as well as electricity. We use the concept of a Nuclear Gigawatt to give a practical indication of the scale of the task ahead in meeting clean energy needs.
These assumptions, which are incorporated into the following graph, are highly favourable to the prospects for New Renewables, which today contribute only negligibly, and CCS technologies, which today are still unproven.
2100
• While new countries can and
should introduce nuclear energy, over 80% of nuclear growth – and thus most of nuclear technology’s environmental contribution – will occur in nations already generating nuclear power.
• Even with expansive growth in
nuclear power, renewables will also be needed on a large scale, despite their higher cost. In this sense, nuclear and renewables are not competitors but clean-energy partners.
• Conversely, even if renewable and
clean-fossil technologies meet extremely optimistic assumptions, a global clean-energy revolution adequate to avert catastrophic climate change will require an enormous contribution from nuclear power and extensive realisation of its worldwide growth potential.
Supplied by the World Nuclear Association www.world-nuclear.org
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Comment
Smart Grid Deployment Key to Asia-Pacific’s Energy Future
Photo CC by Andrés Nieto Porras
Courtesy of the Asia-Pacific Economic Cooperation (APEC) Secretariat As the world moves toward embracing renewable energy solutions, the adoption of smart grid technology is vital to the economic and environmental future of the APEC region. Smart grids are one of the key conduits to increasing the adoption rate of renewable energy technologies, said Dr. Jerry Ou, Director-General of Chinese Taipei’s Ministry of Economic Affairs’ Energy Bureau, at the opening of the August 2011 APEC workshop on addressing challenges in deploying Advanced Metering Infrastructure (AMI) and smart grids. “The adoption of renewable energy technologies and the deployment of AMI and smart grids are potential solutions for energy crises and environmental protection,” said Dr. Ou.
“We need a grid that can automate and manage the increasing complexities and electrical needs of the 21st century.” APEC recognises smart grid development as a way to address climate change and improve energy efficiency. Smart grids also promote green growth, which is a key priority for APEC during the 2011 US host year. AMI systems are viewed as foundational technology for smart grids.
As the world moves toward embracing renewable energy solutions, the adoption of smart grid technology is vital to the economic and environmental future of the APEC region
Developing smart grids and deploying AMI to facilitate the delivery of energy to homes and businesses is also important because it enables the flow of new and renewable energy sources to consumers.
Dr. Ou underscored the value of smart grids and AMI technology to APEC economies because of its economic and environmental significance if it is deployed globally.
“To move forward, we need a new kind of electric grid that is capable of delivering new and renewable energy sources such as wind or solar,” said Dr. Tom Lee, Chair of the APEC Expert Group on New and Renewable Energy Technologies.
The recent disaster in Fukushima, Japan highlighted the need for ‘demand-side management solutions’ to solve electricity shortage crises – problems that may increase with growing environmental and energy demand challenges.
In 2010, the value of smart meters worldwide was US$4.3 billion, and may reach as much as US$15.2 billion by 2016. Currently within APEC economies, about 12 million smart meters are deployed in the US, with penetration rate reaching 8.7%. China has purchased 48 million smart meters in the past 2 years. Chinese Taipei also announced an AMI deployment plan in 2010. AMI is an integral component of smart grid development as it enables two-way communication between consumers and suppliers. An AMI system typically consists of a ‘smart meter’ at the customer’s premises, a communications network between the smart meter and the utility, and a system to monitor the data. “Increasing the adoption rate of renewable energy technologies is dependent on smart grid development, which is in turn dependent on the development of AMI”, Dr. Ou said. “AMI is considered as the key to turn current power systems into intelligent ones, as it measures, collects and analyses energy usage.” For more information, contact: Augustine Kwan +65 6891 9674 at ak@apec.org or Michael Chapnick +65 6891 9670 at mc@apec.org APEC is an Asia-Pacific economic forum the primary goal of which is to support sustainable economic growth and prosperity in the AsiaPacific region.
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Impact of the Arab Spring on Business Globally What impact has the recent political unrest in the Middle East and North Africa had on businesses around the world? Which regions or political groupings have been worst affected, and which the least? The latest research from Grant Thornton’s International Business Report shows the global negative impact of the Arab Spring, and also asks how likely privately held businesses are to continue to do business in those regions. For this survey, conducted as part of the Grant Thornton International Business Report (www.internationalbusinessreport. com), interviews were conducted in May 2011 with 2,700 CEOs and other senior executives from medium to large privately held businesses worldwide. Grant Thornton wanted to find out the impact six months on from the start of the so-called Arab Spring, the wave of demonstrations and protests across the Middle East and North Africa (MENA) which began in Tunisia in December 2010 and spread to Syria, Libya and Yemen. Graphic key of regions affected
• APAC (Asia-Pacific): Australia, Hong
Kong, India, Japan, China (mainland), Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand, Vietnam.
• ASEAN (Association of Southeast Asian
Nations): Malaysia, Philippines, Singapore, Thailand, Vietnam.
• BRIC: Brazil, Russia, India, China (mainland).
• EU (European Union): Belgium, Denmark,
Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Poland, Spain, Sweden, UK.
• G7: Canada, France, Germany, Italy, Japan, UK, USA.
• Latin America: Argentina, Brazil, Chile, Mexico.
• Nordic: Denmark, Finland, Sweden. • North America: Canada, United States of America.
Main findings
• More than a fifth (22%) of privately owned companies globally say that the unrest has had a negative impact on their business.
• This figure is highest in the North America region where a quarter (26%) of businesses reported a negative impact; Turkey was the country most affected (53%).
• In Europe, businesses in Denmark (30%) and Spain (29%) claim to have been most
negatively affected, followed by the UK and Ireland (both 24%).
• In the UK, a quarter (24%) of companies say they have seen a negative impact on business as a direct result of the conflict, but just 6% say this will prevent them from doing business with the MENA region in the future.
• Confidence has been dented in the region, but only 10% globally said they are now less likely to do business there.
• BRIC economies displayed the biggest dip in confidence with 17% less likely to do business in MENA countries; 22% of companies surveyed in mainland China, for example, said they were now less likely to engage. MENA’s long-term opportunities Despite the upheaval, Grant Thornton believes that the region should be viewed by businesses as one with real opportunities for the future. The Grant Thornton view Given historic growth rates and how well the MENA region recovered from the recession pre-Arab Spring, it’s clearly an important place for businesses to be. However, businesses should not expect significant returns in the short term. UK businesses looking to invest in the region for the first time should carefully consider which market they choose as a launch pad. Focusing on the stable states in the Gulf is a good place to start, but for those prepared to take calculated risks there are many attractive pricing options in areas still affected by political unrest. A large majority of the Gulf states have committed to improving social welfare and as such are planning increased investment in infrastructure. Healthcare in particular is a key focus, though the regulatory environment is still a challenge. If you would like to discuss how these issues affect your business, please contact: Jatin Radia International Business Centre Director Grant Thornton UK LLP T +44 (0)20 7728 2320 E jatin.m.radia@uk.gt.com Grant Thornton UK LLP is a leading financial and business adviser with 30 locations throughout the UK. They are a member firm of Grant Thornton International Ltd which includes the knowledge and experience of more than 2,500 partners and 30,000 professionals operating in over 100 countries.
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Photo CC by - Ken Teegardin
Global Factoring Industry in Rude Health by Peter Ewen, Chairman of the International Factors Group (IFG) Board Anyone seeking evidence of factoring’s growing appeal among businesses around the world should look no further than the latest IFG Global Industry Activity Report. Drawing on data from 55 countries, the study provides a snapshot of an industry that grew by a more than healthy 20% in 2010, achieving turnover in the region of $1.4 trillion Euros. As you might expect, those headline figures reflects a sizeable customer base. Last year the industry had 430,000 clients. So what lies behind the expansion of the global factoring industry? Well, clearly there are many causes – not least the flexibility and utility of the product. But economic circumstances are also playing a role. Factoring – along with invoice discounting – is primarily a tool that provides working capital. As the recovery continues – albeit slowly in some cases – access to reliable working capital is precisely what businesses require. It’s not simply that recovery puts strain on working capital resources. It’s almost an article of faith that as businesses gear up to win new business – or perhaps win back some of the customers lost in hard times they inevitably spend upfront on stock, raw materials or staff, knowing that it may be months before they receive payment from client. But given the patchy and sometimes
difficult nature of the current upturn, there may well be other factors influencing cash flow and working capital. Witness Venture Finance’s latest Credit Check survey of UK accountants serving medium sized business.
Large customers in particular are using their market power to exert downward pressure on prices while simultaneously asking for more favourable credit terms The report reveals that many mediumsized companies are being squeezed by customers and suppliers. Large customers in particular are using their market power to exert downward pressure on prices while simultaneously asking for more favourable credit terms. Meanwhile, on the supply side, prices are rising and many suppliers are chasing debts more quickly. The result is that some companies are caught in between, suffering a deterioration in cash flow and a shortage of working capital. I would be very surprised if companies in other jurisdictions are not facing a similar
squeeze – particularly in those countries where growth remains slow. Large corporate buyers who face their own cash flow issues will always be tempted to negotiate a ‘better deal’ with suppliers. Suppliers who themselves have the muscle to negotiate hard will simultaneously be seeking to reduce the amount of time they wait for payment. In this climate, there will always be companies who feel the heat from both sides. And that is why factoring is so important, both domestically and in terms of lubricating international trade. Regardless of credit terms negotiated by corporate buyers, factoring ensures the supplier has cash coming into the business. Equally, important in terms of the global industry, it allows businesses to enter foreign markets without fear of a cash drain. In my view international factoring will continue to grow in importance. Peter Ewen IFG Chairman Managing Director, Venture Finance Contact: International Factors Group scrl Av. R. Vandendriessche, 18 (Box 15) B - 1150 Brussels Belgium Tel: 32/2/772-6969 Fax: 32/2/772-6419 www.ifgroup.com info@ifgroup.com
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Comment
50th Anniversary of the OECD Speech by Hillary Clinton, US Secretary of State and Chair of the 2011 OECD Ministerial Council Meeting, at the commemoration of the 50th anniversary of the OECD, 25 May 2011. This is such an auspicious occasion as we mark the 50th anniversary of the important work that the OECD has done. But before the OECD, there was General George C. Marshall. He realised that a peaceful, stable Europe would need more than rebuilt town squares, railroad tracks and factories. He knew that Europe needed a community of shared economic values. And therefore he, along with President Truman, decided to convene such a community. And what we saw was this remarkable commitment to the rebuilding of former adversaries at the end of a devastating world war because there was a recognition that we needed, as the slogan goes, better policies for better lives, and that through those better policies that would create better lives, there would be a greater chance for peaceful cooperation and real human security. When President Kennedy ratified the OECD convention 50 years ago, he too hoped to help widen the circle of economic cooperation. What followed for the OECD, and indeed for the world, surpassed even his ambitious vision. Because we did not seek economic growth just for ourselves, but we
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understood that we would all benefit from growing the pie, and we welcomed partners into a system designed to help all nations begin to create better lives for their own people. And as a result, together we helped usher in the greatest era of growth the world has seen.
“this is a place where leaders and technocrats, business, labour and civil society can find common ground and produce tangible benefits for our fellow citizens” A group of European nations, along with the United States, became a transatlantic community, and then the global network that we celebrate today with 34 countries, a Secretary-General from Mexico, a Prime Minister from France, a Prime Minister from Japan, and the President of the European Commission, and partners from all over the world. But for all of its changes, the OECD remains as it was in those earliest days, a community of shared values, open and effective markets, human rights, freedoms, and the rule of law, accountable governments
and leaders and free, fair and transparent competition. President Kennedy’s belief was that a rising tide can and must lift all boats. So for five decades this has been a laboratory and a launching pad for smart economic policies to bring those values to life. Member states have improved labour conditions, exposed tax havens, worked in ways large and small to hold ourselves and others to even higher standards. Now, I’m aware that these efforts rarely win a great deal of publicity. This is the hard, sometimes frustrating, difficult work of forging consensus and creating new and hopefully more effective ways of reaching toward our common goals. Because this is a place where leaders and technocrats, business, labour and civil society can find common ground and produce tangible benefits for our fellow citizens. But let me quickly add that success was never a foregone conclusion. That’s why these 50 years are especially worth celebrating. And yet even as we stop and mark this anniversary, we recognise that the work now being done is occurring during a time of dramatic economic changes. Many nations, including my own, are still recovering from the worst financial crisis since the Great Depression. Rising economic powers are gaining a larger share of the world’s wealth and influence. And one of the underlying
Comment
convictions of the OECD is that when one gains in wealth and influence, one also must accept greater responsibilities. Two decades ago, when the Berlin Wall came down, the nations of Eastern Europe turned to the OECD for help not only to build democracies, but also market economies. And today we need to work with a new generation of emerging economies and emerging democracies as they chart their own futures. The values, standards and hardwon knowledge of the OECD are as essential as ever. And it falls to us to promote them in this tumultuous time. I applaud the OECD for its bold vision statement which we are unveiling for endorsement by this ministerial. I believe if this vision statement is followed and implemented through specific, concrete actions, it will help the OECD to have its next 50 years be as successful as its past. I want briefly to touch on three of the most important ideas. To start, many of our nations are seeking a stronger economic recovery. All of us want more opportunities
and more jobs for our own citizens. So the OECD must continue to deliver forward leaning policies that help unlock the potential for inclusive, sustainable economic growth. Sometimes that means raising standards for how our companies operate and compete. Other times, it means making markets more effective and lowering economic barriers.
“The values, standards and hard-won knowledge of the OECD are as essential as ever” For example, we must continue to use this venue to stimulate new jobs from sources like clean energy and more energy efficiency. We need to be serious about eliminating barriers to trade, investment and fair competition both at our borders and behind them. Through its work on such complex challenges such as export subsidies, the OECD is critical. And if we want to unleash the full potential of entire societies, we
must do more to support women and girls who want to learn, work and start their own businesses, which is why I’m very proud to support the OECD’s Gender Initiative. In a few minutes, we will also endorse the OECD’s updated Guidelines for Multinational Enterprises. These guidelines, developed in close consultation with both business and labour, set a new higher standard for how our companies should operate, including an important new chapter on human rights. Second, development was at the heart of the OECD’s founding mission–in fact, the ‘D’ at the end of the title. And it belongs at the centre of our agenda today and in years to come. Each year, the chair chooses a theme to highlight. And since the United States has sought to elevate development within our own foreign policy, we wanted to focus on what the OECD can do to foster more effective development practices. We start by recognising that aid, while it remains essential, is not enough to deliver sustainable growth. Countries must be the
Photo CC by Melissa Thereliz
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Comment
authors of their own development. And we need to make it a priority to help nations mobilise their own resources to create those greater opportunities. But what do we expect of such countries? Well, we expect that they need to fight corruption. They need to be transparent about budgets and revenues. And they need to collect taxes in an equitable manner, especially from their own elites. They need to put in place regulations designed to attract and protect investment. And the OECD is here to help when they ask for it. This is, after all, a body of knowledge that the OECD has been uniquely building for decades. And today, a new set of nations is looking to learn these same lessons. From Latin America, to Africa, to Southeast Asia, and now to the Middle East and North Africa, this is the moment to leverage the strengths of this organisation to deliver transformative growth. And the OECD’s new framework for development marks an important step in that direction. I will return to these issues at greater length, but I wanted to use this 50th anniversary celebration to emphasise their importance.
“Half a century ago there was no guarantee that the world’s great economies would coalesce around a common vision, but that is exactly what happened” The OECD is also deepening engagement with Brazil, China, India, Indonesia and South Africa. And we welcome Brazil’s contributions at the Export Credit Working Group, and South Africa’s leadership on African public debt. We should continue and, in fact, we should deepen our outreach to emerging powers in the spirit of these shared lessons and mutually beneficial cooperation. We have the flexibility, both to reach out and raise standards at the same time. As the OECD enhances its engagement with emerging economies, it must also continue its groundbreaking work to develop multidisciplinary guidelines for
the treatment of state-owned and state controlled enterprises. Now, we recognise that countries will make different choices about how much of their economies to keep in the hands of government. Still, whether they are owned by shareholders or states, all companies should operate on a level playing field consistent with the principles of competitive neutrality. And these companies should be solely commercial, not political actors. Now, I’m well aware that this will not happen overnight. But the great lessons that we have learned from 50 years of incremental progress is that we can raise the standards of fair competition. And when we raise those standards, we help maintain them everywhere. Half a century ago there was no guarantee that the world’s great economies would coalesce around a common vision, but that is exactly what happened. And there were no guarantees that nations from Mexico to Chile to Korea would grow into dynamic developed partners, but they have. The same values and vision needs to continue to guide us, and that’s why the new vision for the future is so critical. “The 50th anniversary of the OECD”, Speech by Hillary Clinton, US Secretary of State and Chair of the 2011 OECD Ministerial Council Meeting, at the commemoration of the 50th anniversary of the OECD, 25 May 2011, OECD Observer No 285 Q2 2011, www.oecdobserver.org.
Photo CC by Matt Barber
And third, we cannot simply raise our own standards or level the economic playing field among OECD nations. A global economy depends on a global network, and therefore, the OECD must continue to build varied, flexible partnerships in service of the standards we have worked to achieve. We have already seen how deeper engagement helps all of us to share lessons and best practices.
Chile formed an environmental protection agency as part of its accession talks. Russia is about to join the working group on bribery, and we hope that Russia will soon accede to the Anti-Bribery Convention. And we look forward to working closely with all working group members on robust enforcement of the convention.
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IFCs
International Financial Centres
IFCs could be forgiven for thinking they have been squeezed from all sides of late
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The phenomenal growth seen across much of the Asia-Pacific region and other global emerging markets has seen a correspondingly explosive growth in the number of HNWIs, many of whom
are seeking specialised and experienced domiciles for the management, protection and growth of their new wealth. It’s no surprise then that IFCs the world over are looking to court these potential clients as their own traditional markets plateau.
Photo CC by Andrew Magill
International Financial Centres or ‘IFCs’ could be forgiven for thinking they have been squeezed from all sides of late. Yet, they are still here and positively thriving, the result of all that peer review and endless regulatory scrutiny being a compulsion to rethink strategy and diversify into new areas. No longer exclusively associated with tax mitigation, these global financial hubs are recognised for their financial expertise and invaluable facilitation of developing world growth in their capacity as gateways for cost-effective investment.
Here, we look at the latest developments across a selection of the key IFCs worldwide and ask four of them to detail their principal distinguishing credentials and plans for the future in the form of a Q&A session.
Conclusions from ‘The Value of Europe’s International Financial Centres to the EU Economy’ A report prepared for the City of London Corporation and TheCityUK by Europe Economics. Financial services are of enormous social value. When Lord Turner and certain economists question whether some components of financial services are “socially useless”, doubtless they mean only to question the value of certain specific complex products, rather than the industry as a whole. But, there is a risk that less sophisticated ears gain the impression that the finance sector, overall, is of questionable social value. There should be no such question: it is of huge value. In the above mentioned report a number of the key benefits were rehearsed (and in some areas quantified), in addition to the jobs, value added and tax generated by the sector itself.
Capitalism — the separation between providers of capital and those with entrepreneurial ideas and management acumen — is, in a modern economy, largely a reflection of the financial sector. Capitalism
Households use the financial sector to save and borrow, allowing them to obtain expensive goods and services that would otherwise be out of reach and to smooth consumption rather than being forced to cut back dramatically with every twist and
The financial sector promotes trade in the European Single Market turn of life. Families also insure themselves against disasters in which, though money may not always solve everything, it very often helps. Businesses use the financial sector to invest (e.g. purchasing new companies), to borrow (e.g. to finance new plant and machinery), to manage cash-flow, and to manage business risks.
tax receipts are temporarily low. Indeed, when the financial sector is more developed, economies grow more rapidly, generating additional tax revenue over-and-above the revenues of finance firms themselves. The financial sector promotes trade in the European Single Market, providing loans, savings products and insurance across borders, bonds and bank loans for businesses in other countries, loans to governments of other member states, and job opportunities. None of this is to say that there do not need to be changes to regulation and supervision in the financial sector. But, in pondering such changes, policymakers should recognise the huge social value of the sector and the danger that mis-regulation might damage it. July 2011
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The payments system and money are, in a modern economy, almost entirely facets of the financial sector. These make the exchange of goods enormously easier and more efficient.
promotes social mobility (allowing those without wealth but with ideas to become wealthier), innovation (allowing new ideas to flourish that would otherwise be lost), and efficiency (allowing those with capital to gain greater returns).
Governments use the financial sector, especially to borrow to fund public expenditure, keeping things going when
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IFCs
New and Improved Services being Rolled Out in the Cook Islands Photo CC by Robert Young
The Cook Islands can point to a longstanding pedigree as an IFC built up over 30 years and is known for its strong, much aped legislation. Its Pacific location lends it a natural advantage in serving the needs of the booming Asian HNWI market. The jurisdiction enjoys global pre-eminence in the field of asset protection trusts, as well as key strengths in banking, insurance and corporate entity formation. Recent developments such as the TIEA with the Republic of Korea and TIEAS with a number of other influential OECD jurisdictions bear testimony to the Cook Islands’ drive to be supremely well regulated and should assist in efforts to penetrate new client markets. Furthermore, there is a strong FSC enforced legal and regulatory environment and continued government support for international financial services at strategic and increasingly at operational level.
These are exciting times for the Cook Islands with many planned enhancements to the service offering including managed trustee companies, foundations, QROPS/ QNUPS, mutual funds and segregated cell
These are exciting times for the Cook Islands with many planned enhancements to the service offering companies, as well as amendments to the International Companies, International Trusts and Insurance Acts which will allow for captives. On the foundations front draft legislation is currently being reviewed which once passed it is hoped will herald significant
volumes of business. The impact such a roll-out of new and improved services will have is sure to be a positive one in terms of both increasing business with existing clients and attracting new custom from those looking for jurisdictions that can offer comprehensive corporate and private wealth planning services. The jurisdiction is chiefly associated with the trusts sector and particularly asset protection trusts where increasing globalisation and wealth levels in locations such as China have brought a demand beyond the traditional US market for wealth protection and preservation through relevant entities in the Cook Islands. In such instances advisors work to craft a structure that adheres to home country regulations yet affords clients long term growth and protection.
The South Pacific island nation of Samoa is set to leap forward in time by one day from 2012 by moving across the international date line. It is anticipated that this will bring with it increased commercial opportunities with its key trading partners in the Asia-Pacific region such as Australia, New Zealand and China, and certainly enhance its status as an IFC in the region. In this respect Samoa’s prowess in the banking, trusts, companies, segregated funds and insurance fields is noteworthy, while it is also especially popular with Mainland Chinese and Hong Kong investors, having long standing strong diplomatic
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links with those regional powerhouses with their rapidly increasing volume of HNWIs and demands for wealth management services. To this end an embassy was
Samoa is set to leap forward in time by one day from 2012 opened in Beijing in 2010 meaning that registration and notarisation of documents is a straightforward process for the Chinese investor. Not only this, but incorporation in Chinese is also permitted.
Samoa can also point to political and economic stability and a willingness to embrace new global regulations that saw it as the first South Pacific nation to be white listed by the OECD in 2009. Meanwhile, on the legislative front the introduction of the Electronic Transactions Bill 2008 which allows for the electronic registration of companies further illustrates the jurisdiction’s proactive spirit. This is also evidenced in the availability of new corporate vehicles, most recently in the form of international mutual fund offering which can be public, private or professional.
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IFCs
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Economic Liquidity, Efficiency and Jobs IFCs stimulate jobs in the global manufacturing sector
Small IFCs provide tax neutral platforms for global business and investment. How does this activity contribute to capital market liquidity and job creation in the global economy? Financial intermediation conducted through international financial centres has made a significant contribution to the substantial increase in world prosperity over the last 30 years. IFCs are essential lubricants in the globalisation process, making them important symbiots for both developed and developing countries. In addition to stimulating trade and efficient capital flows, economists commonly recognise IFCs as contributing to investment, employment and the improvement in tax and regulatory policies in nearby countries. IFCs also promote efficient and competitive financial markets. For example, a leading American economist notes that “by every measure credit is more freely available in countries proximate to IFCs, reflecting the degree of banking competition and the resulting stability of IFC financial architectures”. (James R. Hines Jnr.; “International Financial Centres and the World Economy”; September 2009, page 4) IFCs perform the following functions to assist with the delivery of uncontroversial financial and commercial transactions:
• pooling funds to act as portals for efficient collective investment into and
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out of the major countries. (Funds do not stay in IFCs of course - their markets are too small and underdeveloped to absorb the capital flows and so investment is redirected to onshore markets);
• facilitating the management of pension assets promoting consumer choice and competition, so reducing costs, enhancing investment returns and facilitating investment diversification;
IFCs promote efficient and competitive financial markets • allowing companies to manage sudden risks, like foreign exchange fluctuations;
• provision of insurance and reinsurance facilities for onshore risks; and
• provision of liquidity to markets, lowering the cost of capital to business. The use of IFCs for collective investment funds (i.e. unit trusts or mutual funds) neatly illustrates how they provide solutions for unintended and otherwise economically punitive outcomes. Onshore tax systems are complicated and often unintentionally inhibit investment in a
particular jurisdiction. IFCs provide a tax neutral platform which allows for efficient pass through of important financial flows in situations where unnecessary or uncertain tax rules operate to make the transaction otherwise unattractive. Returns from investment funds are potentially subject to tax at three levels: (i) in the companies where the profit is made, (ii) when the fund receives a dividend or capital gain from the company, and (iii) when the investors receive their return from the fund. Where all of these elements are in a single jurisdiction domestic tax policies would normally limit multiple taxation. However, where the investments are cross-border, there is a strong likelihood of multiple taxation, arising from the fact that onshore tax systems are seldom fully integrated with foreign regimes. Tax neutral platforms reduce the risks of multiple taxation, while still leaving funds available to be taxed under the laws of the jurisdiction(s) where the profit is earned or where the investor is resident. These same advantages accrue to pension funds, benefitting a wide sector of the population who may have no idea that their institutionally managed retirement funds rely on the use of IFC structures. If tax neutral platforms were damaged, (onshore) retirement savings would be reduced and current problems for governments in making adequate pension provision for their
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populations would be exacerbated. Tax neutral platforms also contribute directly to the creation of jobs in the major developing countries. IFCs provide efficient portals for foreign direct investment and so enhance shareholder returns, increasing
There are many misunderstandings in the world about the role of international financial centres revenues ultimately available for taxation in the investor country. Cross-border investment is also generally associated with enhanced access to foreign markets so resulting in higher export activity (and jobs) in the capital exporting country.
Photo CC by Andrew Magill
The provision of well understood and regulated tax neutral structures to the international economy also contributes significantly to the creation of onshore jobs. For example, American manufacturing jobs in Seattle from aircraft sales are stimulated by the use of special purpose vehicles for aircraft financing. Jurisdictions like Bermuda also provide essential reinsurance cover (in some cases not available onshore)
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for activities perceived as risky, such as nuclear and medical facilities. Without this reinsurance jobs in those sectors, e.g. in the United States, would be jeopardised. There are many misunderstandings in the world about the role of international financial centres. Damage to IFC platforms would adversely affect the economies, jobs, investment facilities and retirement savings in the regions they service. The current shrill debate over the role of IFCs in the global economy risks unintended and unquantified consequences. We place the crucial benefits of IFCs for all of us in jeopardy at our peril. Supplied by the IFC Forum The International Financial Centres Forum is an organisation established to provide authoritative and balanced information about the role of IFCs in the global economy and so address common misconceptions. For more information visit www.ifcforum.org
Q: What do you perceive to be Labuan’s key credentials as an IFC?
Labuan David Kinloch, CEO at Labuan International Business and Financial Centre (IBFC) details the manifold reasons behind the enduring success of this jurisdiction strategically located in the heart of Asia.
A: Our comprehensive legal framework allows for a wide range of products and services to be established in Labuan. For example, Labuan now offers Protected Cell Companies for both insurance and fund management, together with Limited Liability Partnerships, Trusts and Foundations. In addition, Labuan now offers an international Shipping Registry, which combined with our banking, leasing and insurance structures makes it a practical one stop centre for international shipping operations. Labuan is a leader in the provision of Islamic financial services. The passing of the Labuan Islamic Financial Services and Securities Act 2010, the world’s first omnibus legislation covering all aspects of Islamic financial services, has further entrenched our position as a global hub for Sharia compliant business. Labuan IBFC’s access to a large number of the double taxation agreements (DTAs) entered into by Malaysia is another key selling point. As the 24th largest trading nation in the world, Malaysia has more than 70 comprehensive agreements, making it one of the widest treaty networks in the region. It is also worth noting that Labuan provides:
• A strategic location in the centre of Asia and at least a portion of the Malaysian working day overlaps with the North Asian, Australasian, European, African and Middle Eastern business hours.
• A one stop regulator, which licenses, regulates and supervises all businesses in Labuan IBFC.
market segment. And as earlier mentioned, the introduction of Limited Liability Partnerships and Protected Cell Companies has further expanded wealth structuring opportunities in Labuan. Without a doubt, the comprehensive range of financial entities and products offered has elevated Labuan IBFC to Asia’s most complete international business and financial centre.
Q: There has been an explosion in numbers of HNWIs and UHNWIs in the Asia-Pacific region with IFCs all over the world competing to court them. What is it about Labuan from a wealth planning perspective that particularly recommends itself to this relatively untapped rich new resource? A: Labuan IBFC offers one of the widest range of wealth management entities and vehicles available in Asia. The fact that many of these entities are available in a Sharia compliant option is a feather in Labuan’s cap. The Labuan Islamic Financial Services and Securities Act 2010, is the world’s first omnibus legislation governing all Sharia compliant business in an international business and financial enviroment. This clearly adds value to our offerings to the global Islamic community. The Act has also enhanced the role of the Sharia Supervisory Council, a body already renowned for the quality of its Islamic scholars, to a level at which its rulings may be deemed admissible in Sharia Courts globally. It is also worth nothing that all Labuan wealth management and investment holding companies need not be taxable, adding to Labuan’s appeal as one of Asia’s wealth management centres of choice.
• English speaking professional service providers and advisors, both in Labuan and Malaysia’s capital, Kuala Lumpur. Finally, Labuan provides a simple tax framework where entities pay a headline tax rate of 25%, unless they conduct Labuan business activities, in which case they can opt to pay either 3% or a flat rate of US$6,500. Investment holding companies in Labuan are not taxable.
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Q: Labuan has an extensive and expanding DTA network - how helpful has this been in attracting business to the jurisdiction? A: Access to Malaysia’s extensive DTA network has been crucial in the development of Labuan IBFC. The Labuan trading company is unrivalled in its class due to access to this treaty network. Numerous international trading companies are known to use Labuan as a conduit to their Asian markets due to the allure of this treaty network.
Q: How has the recent reform and product expansion process changed the way business is done in Labuan, and how has it changed the way the jurisdiction is perceived internationally?
Malaysia is constantly updating and expanding its network, which can only benefit Labuan companies with international trade links.
A: We are starting to see a significant number of wealth management entities being domiciled in Labuan mainly due to the range of new products introduced in 2010, such as Special Trusts, Purpose Trusts, Private Trust Companies and Foundations.
Q: Labuan is considered by many to be the global hub for Islamic Finance. How do you propose to consolidate this status over 2012 and beyond?
Labuan IBFC is the only common law jurisdiction in the region to offer both an array of common law trust structures as well as civil law foundations; hence we expect continuous growth in this
A: Malaysia, including Labuan IBFC is the world leader in Islamic finance, having spent more than three decades offering this ethical path to business and investments.
Heightened interest in Islamic finance brought on by the 2008 financial crisis has been rewarding for Malaysia as is evidenced by the growth in Sharia compliant banking assets which grew an average of 20% annually since 2006, reaching MYR$ 350.8billion (USD$ 112 billion) at the end of 2010. In the area of Islamic re insurance or re takaful, Labuan IBFC reported an unparalleled increase of 44% and 27% of premiums generated in 2009 and 2010 respectively. The introduction of the Labuan Islamic Financial Services and Securities Act 2010 further entrenches our leadership position. Moving forward, Labuan IBFC can expect to be the centre of product innovation by helping fuel the development and structuring of more complex, liquid and long-term Islamic products that will satisfy the broad needs of investors and issuers.
Q: Are there any new products, services or pieces of legislation due to be rolled out in the short to medium term? Which areas do you see as exhibiting the greatest potential for growth over this period? A: As a progressive jurisdiction we acknowledge that, to compete effectively, the provision of financial services can no longer be tied to a dedicated physical locality and hence it is now possible for certain Labuan licensed entities to have a presence in Kuala Lumpur or any other location within Malaysia. This option allows Labuan entities the benefits of domiciling in Labuan IBFC whilst having access to Malaysia’s first class infrastructure, facilities, human capital and professional services. Presently, holding companies, banks, investment banks and insurance entities are all allowed to colocate, and it is expected that this flexibility will soon extend to trust companies and international registration agents.
David Kinloch, CEO, Labuan IBFC
Q: In the long term what are Labuan IBFC’s goals? A: Labuan IBFC currently leads the way among Asia’s international financial centres with a comprehensive range of modern products supported by a simple fiscal system and one of Asia’s most extensive double taxation treaty networks. Our goal is to continue to offer ourselves as Asia’s most complete jurisdiction, by refining and expanding our product range to keep up with global developments whilst ensuring we remain responsive to the needs of the market. We are also keen to deepen our penetration in Europe by engaging closely with corporate advisors and wealth managers there.
Q: The prevailing global winds of the day have put IFCs all over the world under much scrutiny. Would you say Labuan has embraced these winds of change?
A: Labuan has always practiced effective exchange of information with its treaty partners and hence we have found very little difference to our methodology since the revised exchange of information requirements were introduced in 2009. In fact, the changes Labuan adopted to adhere to the latest international standards in effective exchange of information were purely administrative. The increase in the number of Labuan companies formed, assets managed or leased, bank deposits, insurance and reinsurance premiums are all indicative of the level of interest Labuan receives. Malaysia (Labuan) complies with the Organisation for Economic Cooperation and Development Model Tax Convention on Income and Capital and is a white listed jurisdiction. In addition, Labuan is an active member of several international regulatory and supervisory associations including the International Association of Insurance Supervisors, the Offshore Group of Banking Supervisors and the Asia Pacific Group on Money Laundering, to name but a few.
Q: Have you identified any external factors that could retard Labuan’s future growth e.g. competition from other jurisdictions, or exacting international compliance requirements? If so, how do you intend to address these? A: Our biggest challenge is to ensure that the range of products and services Labuan IBFC offers is always ahead of other leading financial centres whilst ensuring we remain fiscally competitive. Clearly, the introduction of a range of wealth management products, along with a Shipping Registry, a Partnership structure, Captives and Protected Cell Companies has gone a long way towards ensuring that we stay relevant. In addition, we need to ensure these developments are appreciated by the marketplace. The setting up of Labuan IBFC Incorporated, the promotional body for the jurisdiction has greatly assisted towards achieving the goal of communicating the benefits of Labuan IBFC. We continue to make significant steps towards enhancing ties with international advisors, sharing with them the benefits of Labuan IBFC over other more conventional jurisdictions.
Q: How do you, David Kinloch measure success in your role as CEO? A: I will only be successful once the “Labuan IBFC story” is heard and understood. Here in Labuan we have an excellent value proposition. Once this is understood and accepted by the international community, I might have achieved some of the success due, not to me, but to the efforts of the many people who have made Labuan “the premier international business and financial centre in South East Asia”.
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IFCs
Photo CC by McKay Savage
Labuan: Comprehensive and Progressive The focus of the global IFC sector has inexorably switched to service booming Asian demand of late. In this respect those IFCs located in the Asia-Pacific region find themselves at an advantage from the outset. Their innate understanding of this market’s investment requirements and geographical proximity to these investors not only affords them status as an investment platform into China and India, but makes them the natural domicile for HNWI and family assets. Yet location is nothing without the proper portfolio of modern, relevant financial entities, products and services. In this regard, however, Labuan International Business and Financial Centre (IBFC) in Malaysia lacks for nothing. It is the complete package. Labuan takes the safeguarding of assets and the long-term sustenance and growth of wealth seriously and offers a range of asset protection, estate planning, legal, investment management, banking and taxation solutions to make the jurisdiction a truly cost-effective option for private wealth management, as well as for holding companies and Islamic finance, insurance, captive insurance and fund management activity. Not only this, but a raft of legislation in 2010 has seen many new flexible structures made available such as the Labuan Special Trust allowing for directors to administer a trust without trustees having power of intervention. When you also consider the introduction of Purpose Trusts, Private
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Trust Companies, Foundations, LLPs and PCCs, it’s small wonder that a significant volume of wealth management entities are now domiciled in Labuan. It is further noteworthy that all Shariahcompliant structures be they trusts, foundations or funds are able to be applied Islamically. Islamic Finance is in fact an area Labuan wisely identified some time ago as set to grow hugely in importance on the world stage. In the process it has carved out for itself the leading global role
Investors are reassured through a noteworthy proactive legislative and regulatory policy that has seen a region leading DTA network established and has seen interest soar following the 2008 global financial crisis. Activity in the sector is governed by the groundbreaking LIFSSA 2010 legislation, while investors also have access to Labuan IBFC’s own Shariah Advisory Council for endorsement and advice on the likes of Sukuk issuance and listing, takaful and re-takaful, syariah compliant captive structures and Islamic Trusts. The future promises further development of the sector with more complex long-term Islamic products likely to feature.
Other developments include an international shipping registry now being offered which ties in effectively with Labuan’s banking insurance and leasing structures to provide international shipping interests with a fully comprehensive service. In other developments there are moves to court business from Europe by targeting wealth managers and advisers there. Furthermore, certain Labuan licensed entities
such as holding companies, banks, investment banks and insurance entities are now permitted to marry the benefits of Labuan domiciliation with a physical presence elsewhere in Malaysia, so affording access to a much wider infrastructure. It is likely that trust companies and international registration agents will also stand to benefit in similar fashion in the near future.
Investors are reassured through a noteworthy proactive legislative and regulatory policy that has seen a region leading DTA network established, potent anti-money laundering and counter terrorism financing measures put in place, and a commitment to international business best practice such that the jurisdiction is held in high regard in international circles. Labuan is also synonymous with clarity on the fiscal front. It can for example point to a straightforward tax framework where there is the choice for Labuan business activity to be taxed at either 3% of audited profits, or alternatively at a flat rate of US$6,500 p.a. Advance tax rulings on any transaction or arrangement involving a Labuan entity allows for further precision planning, while Labuan non-trading activity is not subject to tax.
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Q: In short, what do you consider to be the Cook Islands’ principal credentials as an IFC? A: Location. Legislation. Service.
The Cook Islands
Located halfway between Asia and North America, the Cook Islands is an ideal jurisdiction as more and more companies and high net worth clients have cross-border professional and personal ties. Being the last country east of the International Date Line gives the Cook Islands an edge in having more time to literally complete things yesterday for Asian clients. The Cook Islands is regarded as having some of the strongest legislation for its international financial services and many jurisdictions have copied it. With 30 years of experience, clients are confident in the strength of the legislation and how it can work for them.
e ask Jenner Davis, CEO at the Cook Islands Financial Services Development Authority (FSDA) to share with us the key attributes and plans for the future of this long standing IFC with its enviable Pacific location between China and North America.
Clients will not find trust companies and banks on every corner in the Cook Islands, as is the case in many Caribbean jurisdictions, but the volume and quality of work produced by the trust companies is significant. The owners, managers, and employees of the service providers have outstanding credentials and appreciate the value of providing truly exceptional customer service. They welcome sophisticated high end work that provides them with challenging opportunities.
Photo CC by Benedict Adam
Q: How would you summarise the FSDA’s role in attracting HNWIs and corporate entities to the Cook Islands and the value of the offshore sector to the national economy and population’s social well-being? A: The FSDA is responsible for marketing the jurisdiction internationally to potential clients and their advisors. FSDA needs to ensure that the services offered match those demanded by the marketplace. Working with the service providers and clients allows FSDA to map out the best way forward for growth in the industry and garner support at the government level. Giving the industry a voice within government (and vice versa) is another responsibility of FSDA.
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The international financial services sector accounts for nearly 10% of the Cook Islands GDP. It is the #2 industry behind Tourism and is the only industry that does not impact on our fragile island environment. Nearly a third of the lawyers on the island work for the trust companies and 84% of the trust company employees are women.
Q: There has been an explosion in numbers of HNWIs and UHNWIs in China and India with IFCs all over the world looking to court them. What is it about the Cook Islands as a jurisdiction that particularly recommends itself to this rich new reservoir of investors? A: The Cook Islands is particularly attractive because of its location between China and North America. Also, most of the trust companies here have offices in Hong Kong and Singapore as well which makes easier complex transactional work and client banking. The longevity of the industry here is also a draw as clients are comforted by the stability of the industry and have case law that reinforces the strength of the legislation that underpins various structures. Service providers in the Cook Islands are able to provide sophisticated planning and administrative services for clients. They offer much more than simple entity registration and maintenance. Clients know the Cook Islands can deliver results to meet their complex needs. Q: The Cook Islands has an extensive number of TIEAs including one recently signed with the Republic of Korea. Are there more in the pipeline? A: The Cook Islands has agreed to TIEAs with Fiji, Germany, Canada, Greece, Spain, Belgium, and Portugal. The Cook Islands will continue to seek out and respond favourably to requests for TIEAs. Q: Are there any pertinent new products, services and/or pieces of legislation due to be rolled out in the short to medium term and what do you anticipate the impact of these to be? In the long term what are the FSDA’s goals? A: We are reviewing draft legislation for foundations now. Following that, we will be creating new insurance legislation allowing for captives as well as mutual funds and segregated accounts legislation. Our International Companies Act will be updated over the next year also. QNUPS will be available in the Cook Islands over the next several months opening up a new option for non-resident UK citizens, and we have begun the process of a possible Double Taxation Agreement with the UK which would allow us to also offer QROPS. These new services and updates of our existing entities will allow us to capture more opportunities from our existing client base and at the same time attract
Photo CC by Robert Young
new clients from new markets. Diversity of services will lead us to an optimally diverse client base to keep the industry secure and allow steady growth. FSDA’s long term goal is to encourage, promote, and develop the Cook Islands financial services industry so as to achieve sustained growth, in a manner which is economically beneficial, socially responsible and reputable. It would be great to one day see international financial services surpass tourism as the biggest revenue generator for the country.
Photo CC by Benedict Adam
Q: The Cook Islands is probably best known for its asset protection trusts. However, which other areas of your extensive portfolio of international financial services do you see as exhibiting the most potential for growth? A: Asset protection will continue to see growth. Initial thoughts were that non-US markets would not be interested in the asset protection features of our legislation. However, with globalization of people’s businesses and their families, asset protection is of interest now in markets where wealth levels are rising rapidly. Foundations should see strong volume when the legislation is passed as many civil law clients are less familiar with trusts. All of the services have tremendous growth potential because so many are interrelated and today’s clients are looking for service providers that can help with their corporate planning and their personal wealth planning.
Q: The prevailing global winds of the day have put IFCs all over the world under much scrutiny. Would you say the Cook Islands has embraced or resisted these winds of change? A: The Cook Islands has fully embraced the new mandated regulatory environment and increased scrutiny. To do otherwise is to delay the inevitable with potentially devastating consequences to the industry. The regulatory framework in place and the ongoing use of it by the local regulatory agencies is of the highest caliber. Our framework is better than many of the OECD member countries. The Cook Islands was rated #2 in the Asia Pacific region behind only Singapore after its APG Mutual Evaluation Report in 2009. We are also the only jurisdiction in that region to have 0 non-compliant criteria.
Q: What do you consider are the principal threats and potential
restrictions to the continued growth of the Cook Islands’ offshore sector and how does the jurisdiction intend to combat these? A: Ever-changing regulations and international standards are the new norm. We need to make sure we are ahead of or keeping pace with these changes. Legislative changes in our clients’ home markets is always a concern as it is out of our control, which is why it’s important to maintain a diverse client base.
Q: What do you consider to be the best part of your job? A: Meeting clients and their advisors— existing and potential—and extolling the virtues of this great jurisdiction. We are not as well known as some of our peers but our client roster and quality of work rivals them. Once clients make the decision to use the Cook Islands, they remain clients for many years and usually end up placing as much of their work here as they can. Locally, I enjoy talking with young Cook Islanders about how they can fit into the industry and the opportunities the industry provides to them both internationally and here at home.
Q: How do you like to spend your spare time outside work? A: My daughter is headed off to university soon in New Zealand so I’m making the most of our time with her. When I can, I enjoy retreating to my other home in New York. I’m very fortunate to be both an American and a Cook Islander so I have the best of all worlds. I travel a lot so I like to enjoy our idyllic island paradise on the weekends. There are few places more magical than the Cook Islands!
Jenner Davis, CEO, Cook Islands FSDA
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IFCs
Turks and Caicos Islands
It leads the world for Producer Owned Reinsurance Companies (PORCs), while it is renowned for initiatives such as the Trusts Ordinance which sets out the law relating to trusts and marked by allowing for perpetual trusts, as well as legislation which permits individuals to be licensed as fund managers, investment advisers or dealers. Although not enjoying universal support from the jurisdiction’s population, there’s no arguing that the UK governor controlled administration has seen the return of a culture of fiscal discipline where revenues are rising, public spending has been reduced and where collection is being enforced, such that with unique financial assistance from the UK TCI has found itself less exposed to the worst ravages of the global economic downturn.
The TCI economic framework has for some time been marked by an absence of exchange controls, as well as personal, inheritance or corporate tax. This prevailing state of affairs has recently received renewed commitment from the government, and is balanced by a parallel proactive and responsive legislative environment evidenced by the recent
The TCI government subscribes to the principles of ‘Transparency’, ‘Accountability’ and ‘Responsibility’ 2011/12 Budget which is designed to reintroduce sound financial management, sustainable development and good governance in order to stabilise the country and return it to its status as a long-term sustainable viable investment option. A cornerstone to achieving this is perceived to be the ongoing modernisation of the tax
system with VAT likely to be set at 10% when introduced in 2013/14. The TCI government subscribes to the principles of ‘Transparency’, ‘Accountability’ and ‘Responsibility’ and it’s interesting to note that all developments seem to route back to this mantra e.g. ensuring service providers subscribe to exacting professional standards and that a ‘KYC’ philosophy prevails with regard to investors. This tonic to a quick buck culture is one that is winning TCI new friends internationally and ties in with the prevailing international winds of the day. TCInvest is the government’s dedicated investment agency and acts as a one-stopshop for investors. Its responsibilities have recently grown to include the administration of the processing, approving and issuing of Business Licences. Moreover, the agency has helped to successfully rebrand the country beyond being solely synonymous with highend tourism, and is in a concerted effort to court the still hugely untapped Asian market through participation at events such as the China World Fair.
Photo CC by Justin Otto
The Turks and Caicos Islands (TCI) is able to point to a long-standing pedigree in the banking, captives, mutual funds and trust management sectors, and offers various pertinent products and services, an extensive infrastructure, skilled labour and innovative legislation that has cemented TCI’s reputation in this area.
Anguilla Anguilla boasts an extensive portfolio of products and services in the mutual funds, trusts and company formation arenas. Of particular note is the jurisdiction’s status as the fifth largest and fastest growing captive domicile in the world, as well as its recent move into the foundations arena. Ongoing administrative changes to the Registry (which themselves reflect the strong continuing government support for the financial services sector) have brought in additional resources thereby enhancing efficiency, yet have not affected its reputation for keen pricing, nor its separate commercial status from the FSC. This has resulted in the maintenance of Anguilla’s competitive advantage, which when combined with the firm yet flexible
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prevailing regulatory environment allows it to continue to woo the private sector
Ongoing upgrades to the Acorn online registry have seen it re-written and streamlined Anguilla is set to further diversify into areas ranging from aircraft and yacht registration to business name registration aided by its ratification of the Berne convention. Furthermore, it is successfully courting emerging markets through its pool of worldwide agents with particularly
high volumes of trade with areas of South America and Taiwan, while increased promotional activity is affording the jurisdiction the opportunity to properly target the key BRIC marketplace, assisted by the offer of multilingual companies. Ongoing upgrades to the Acorn online registry have seen it re-written and streamlined so as to provide compatibility with all principal browsers, to offer the ability to conduct transactions on iPhone and Android, and to register foundations. There are plans to license the software to other jurisdictions, and this is likely to consolidate Anguilla’s status as an industry leader in the provision of 24 hour online company registration and associated services.
Photo CC by Darryl Braaten
IFCs
Jamaica has Good Shot at IFC Success
Jamaica has a good shot at success as an International Financial Centre (IFC), Chairman of the Jamaica International Financial Services Authority (JIFSA), Eric Crawford, told the Diaspora Convention in Ocho Rios, Thursday June 16 which was being held under the theme, ‘One Nation: Jamaica and its Diaspora in Partnership’. “It’s a very high value added industry everywhere it exists. In fact, the wealthiest economies in the world are international financial centres, and Jamaica has a very good shot at making a success of an international financial centre,” he stated. “If we make it as successful, as we believe it can be, the implications for the economy will be far reaching and significant,” he explained. He noted that annual registration fees to establish the companies and other entities are significant, and would mean additional taxes for the Government, as well as significant earnings for professionals in terms of audit, legal and other professional fees. Mr. Crawford also noted that some of the world’s wealthiest countries boasted international financial centres of their own, including Bermuda, which has the highest per capita income of any country in the world. He said the initiative would represent a significant diversification of the Jamaican economy, as the island was already providing a fairly significant number of services to international markets.
“This financial centre will be targeted at international markets. It will not be targeted at Jamaicans or Jamaican businesses,” he explained. He also noted that, as the country has already accomplished much, in terms of call centres and telemarketing businesses, an international financial centre would be an addition to the suite of services offered to the global market.
Mr. Crawford noted that those who believe Jamaica was coming into the business of international financial services too late are wrong “We are ideally situated to have linkages in the other service sectors, such as the hotel industry. It would mean a boom for the real estate developers, professionals, people who make office supplies, and it would establish Jamaica as another major force in the international markets,” he argued.
He pointed out that, for international businesses to take advantage of the services that financial centres offer, they have to establish more substantial presence in jurisdictions where their entities reside. For this reason, it is believed that there is a tremendous opportunity for Jamaica to
utilise its cadre of professionals. He noted that the country has an excellent regulatory infrastructure, which has been developed over the years, based on the experiences of the nineties. “We have significantly strengthened our financial regulation, and therefore we’re finding great resonance with the international business community that utilises these services to operate in Jamaica,” he said. Mr. Crawford also noted that those who believe Jamaica was coming into the business of international financial services too late are wrong. “The timing is great, because the rules have changed significantly. No longer is it possible to operate a centre that is based on secrecy, and the offering of services that foster money laundering and tax evasion. There have been very significant developments internationally that is making it unviable for financial centres to operate on the basis of secrecy,” he argued. He said Jamaica now has the opportunity to enter the business, when the rules have changed dramatically and the country has the infrastructure to be successful. Supplied by the Jamaica Information Service (JIS) JIFSA is made up of a 12-member board which includes representatives of the Bank of Jamaica, the Financial Services Commission and the Ministry of Finance and the Public Sector.
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British Virgin Islands (BVI)
Q: In a nutshell what do you perceive to be BVI’s key credentials as an IFC? A: The BVI has a reputation for high standards of transparency and excellence in regulatory affairs, and it is that combination which has ensured that funds, trusts, company formations, captive insurance, shipping and other areas in which the territory excels continue to confirm the Jurisdiction an attractive place in which to do business.
Q: How would you summarise BVI IFC’s role in attracting investment to BVI and the value of the offshore sector to the national economy and population’s social well-being? A: The BVI has a thriving economy with low levels of unemployment. Crucially, during the years of boom and bust, we did not overstretch ourselves. Our economy – with its twin pillars of financial services and tourism - has proved to be more stable than many of our competitors. We have a diversified financial services sector with BVI vehicles well known worldwide, easy to use and supported by robust and fair regulations, an efficient and effective regulatory environment, stable government and quality infrastructure. In fact, we recently won an award for ‘Best for Quality of Life’ and were runner up in the ‘Best Human Resources’ division in rankings compiled by the Financial Times’ Foreign Direct Investment Intelligence Division from an independent collection of data across 31 Caribbean and Central American countries. Our economy remains in good health as underlined by the International Monetary Fund report published in October last year which indicated that the global financial crisis had not affected the health of BVI financial institutions.
he Business Annual quizzes the British Virgin Islands International Finance Centre (BVI IFC) on the reasons behind its continued popularity as a global financial hub 38
Q: BVI’s fees have remained consistently low while bureaucracy has been kept to a minimum. What other factors apart from cost and ease of incorporation do you consider the most important contributing factors to BVI’s continued success in attracting new business to the jurisdiction? A: Our revenue remains steady and we continue to attract business because we are viewed internationally as a well regulated, internationally cooperative and compliant jurisdiction with a strong legal framework and a competent financial services industry. BVI vehicles are easy to use and supported
by robust and fair regulations, a favourable tax system, and stable political environment. Other factors also at play include an excellent telecommunications services, no currency controls, the use of the US dollar as the official currency, and a well respected commercial court. A strong partnership between the public and private sectors is a constant theme running through the IFC’s policies. The results are there for all to see: more than 450,000 companies are registered in the BVI, around 3,000 of them hedge funds making the BVI the predominant IFC for company registration and the second most popular jurisdiction for the establishment of institutional and hedge funds.
Q: There has been an explosion in numbers of HNWIs and UHNWIs in China and India with IFCs all over the world competing to court them. What is it about BVI as a jurisdiction that particularly recommends itself to this rich new reservoir of investors? A: The BVI is one of the main sources of foreign investment in China while in 2010 outward investment by Indian companies to the BVI more than doubled compared with the previous year, with the figure topping more than $0.5bn. The International Finance Centre along with delegations from the private sector regularly conducts successful tours of Asia and India including visits to Shanghai, Singapore and Hong Kong and Mumbai. Over the years we have formed a close and mutually beneficial relationship with Asian India and Brazilian HNWIs and UHNWIs who are interested in finding out more about our full range of products and ancillary services including funds, trusts, corporations, captive insurance and shipping. The BVI is a leading domicile for incorporations with BVI vehicles being used for a wide range of reasons including being used as part of trust structures for family succession purposes, for transactional purposes, to hold mutual funds or business entities. BVI vehicles are well known worldwide, easy to use and supported by a sound legal infrastructure and experienced local practitioners.
Q: BVI has an extensive number of TIEAs. Are there more in the pipeline? A: The BVI continues to meet international standards around tax transparency. It has an independent regulator, the Financial
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Services Commission, and has now signed 22 Tax Information Exchange Agreements – most recently with India and the Czech Republic. In addition the Jurisdiction has an ongoing programme where it seeks to sign agreements with further significant partners.
Q: Are there any new products, services or pieces of legislation due to be rolled out in the short to medium term? In the long term what are BVI IFC’s goals? A: The BVI is the second largest jurisdiction in the funds space with approximately 3,000 open ended funds recognised or registered with the BVI’s Financial Services Commission (“FSC”). The BVI has a nimble approach to providing fund services as confirmed by the amendments made to its funds regime by the recently enacted Securities and Investment Business Act, 2010 (“SIBA”).
Tortola, BVI
Whilst much of the regulation of the BVI funds industry remained unchanged under SIBA, SIBA codifies some of the practices already undertaken by funds domiciled in the BVI. Amongst new changes to the regulation of BVI funds was an extension to the window in which a professional fund can trade without being licensed by the FSC, by the extension of this window from 14 days to 21 days (provided that the license application is submitted to the FSC within 14 days of launching). This therefore speeds up time to market for fund managers with professional funds (which is the most popular category of BVI fund). This change also demonstrates the BVI’s commitment to having a dynamic fund industry, able to move quickly on new products and set an appropriate level of regulation.
Photo CC by D’arcy Norman
The BVI has been at the forefront of international financial services for decades and as exhibited by its SIBA legislation, it continues to innovate and adapt to the constantly changing global financial environment. The BVI’s financial landscape is built on the premise that jurisdictions that are committed to working to ensure businesses have the maximum opportunity to thrive within the correct legislative framework will be the ones that will help lead the world into a new era. The BVI’s IFC is committed to keeping the Jurisdiction at the forefront of the world’s financial centres and has always set the highest standards of transparency, regulation, collaboration, enforcement and cooperation, as this has always been a key part of our strategy for retaining our competitive edge.
Q: Which areas of your extensive portfolio of international financial services do you see as exhibiting the most potential for growth?
A: We have seen an uptick in investor capital raising and new fund formation in the past year and expect this activity to continue to grow in the long term as market confidence continues to return. Currently, new capital raisings by fund managers favours established fund managers who are able to demonstrate a strong track record to investors. However, in the longer term, we anticipate a further pick up in new fund activity by start-up fund managers, which will supplement the current pick up in new fund activity amongst established fund managers.
Q: The prevailing global winds of the day have put IFCs all over the world under much scrutiny. Would you say BVI has embraced or resisted these winds of change? A: The last twelve months have proved testing ones for the global financial community. While parts of the world are recovering, other countries are performing less well. The BVI however can point to an economy that remains in good health. An International Monetary Fund report published in October last year indicated that the global financial crisis had not affected the health of BVI financial institutions. Revenue remains steady, with the BVI continuing to attract business because it is viewed internationally as a well regulated, internationally cooperative and compliant jurisdiction with a strong legal framework and competent corporate services.
Q: What do you consider are the principal dangers and potential restrictions to the continued growth of BVI’s offshore sector and how does the jurisdiction intend to combat these? A: The past few years have posed challenges for all countries in the world. However of all the lessons that have been learned, there is one overarching theme. It is that jurisdictions that are committed to working to ensure businesses have the maximum opportunity to thrive within the correct legislative framework will be the ones that will help lead the world into a new era. We at the BVI IFC are committed to keeping our jurisdiction at the forefront of the world’s financial centres. As a financial centre of major importance to the global financial system the BVI has always set the highest standards of transparency, regulation, collaboration, enforcement and cooperation, as this has always been a key part of our strategy for retaining our competitive edge. We will maintain this policy, because we believe it is the right way to succeed in a globalised world.
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IFCs
Cayman Islands Special Feature The Cayman Islands enjoys the status as one of the world’s leading international finance centres which has given this small Caribbean jurisdiction the 14th highest GDP per capita in the world (1). Its comprehensive portfolio encompasses company formation, banking, funds, structured finance and ship and aircraft registration, but it is perhaps most closely linked with the captive insurance sector where it is one of the world’s principal captive domiciles. This sector is a key driving force behind the jurisdiction’s enduring success, with its health or otherwise being a reliable barometer of Cayman’s economic well-being. Here we look at the background to captives and their benefits before going on to detail the most recent and imminent policy and legislative initiatives set to impact the industry
What is a Captive? Supplied by the Insurance Mangers Association of Cayman (IMAC) A widely accepted definition of a captive insurance company is ‘a wholly owned insurance subsidiary of an organisation not in the insurance business whose primary function is to insure some or all of the risks of its parent or stakeholders.’ This definition has expanded over time as the industry finds more and more creative ways of using captives to support the business objectives of its stakeholders.
Single Parent Captive – This is an insurance or reinsurance company that only insures its parent of affiliated companies
It is generally owned through a common interest which is not engaged primarily in the business of insurance. This interest may be a single-parent shareholder or a group of shareholders.
Association Captive – This is a company owned by a trade association and used to meet the insurance needs of its members.
A significant portion of the risks written are ‘captive’, related in some way to the risks of shareholders, or third-party risks which the shareholders control. In this respect a captive is ‘an insurer that writes risks whose origins are restricted, or those risks to which it has unique access.’ Typical coverage includes:
• Primary policy - coverage provided
directly to the parent or stakeholders
• Fronted policy - coverage provided
through the traditional insurance market covering risks of the stakeholder group
• Excess coverage - coverage provided by the captive and then reinsured to the traditional reinsurance market
• An umbrella or stop-loss policy -
coverage acquired by the captive in the traditional reinsurance market
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Types of Captive
Group Captive – This is an insurance company that insures or reinsures the risks of either a homogeneous or heterogeneous group of companies who may, or may not, be owners of the company.
Agency Captive – This is a company owned by an insurance agency which utilises it to take risk on some of the business they place in the insurance market.
(A captive) is generally owned through a common interest which is not engaged primarily in the business of insurance Segregated Portfolio Company (‘SPC’) – This is a company which is set up with a ‘core’ which usually doesn’t take risk and various segregated cells which take a particular risk. The assets and liabilities of each cell are segregated from each other. Ownership of the assets in the cell can be by way of either a non-voting preferred share or through a participating agreement. This is a useful vehicle for
those programmes not large enough to set up their own captive or who do not wish to manage their own captive. Risk Retention Group (‘RRG’) – This form of captive is available in U.S. domiciles and is an insurance company (RRG) licenced under the Federal Risk Retention Act of 1981, as amended in 1986, which allows an insurance company licenced in one state to write business in all states without going through the fulfilling requirements to get licenced there. An RRG is owned by its insureds and can only write liability business. (1)
CIA The World Factbook
The Hon. McKeeva Bush, Premier of the Cayman Islands
The
Right Choice for Captive Insurance Management in the Cayman Islands
Kensington Management Group, Ltd. is one of the leading providers of innovative solutions within Cayman’s Captive Insurance Marketplace. Let us help you “take
control of your insurance destiny”.
For further information, please contact us at 345 946 2100 or visit www.kensingtonmanagement.ky
Cayman Islands Special Feature
IFCs
Benefits of Captives George Town, Capital of the Cayman Islands
Insuring the uninsurable - provision of coverage either not readily available in the commercial market or priced prohibitively. Cost reductions - reducing expenses such as administration and settlement of claims, loss control expenses, various state and federal taxes, brokerage commissions, and other acquisition costs and consulting fees. Risk retention, risk management and loss control - achieving lower premium by retaining its own risk when a company has a better loss history than its industry average. Cash flow benefits - earning investment income and using more flexible premium payment plans. Access to the reinsurance market - accessing directly the reinsurance market which can be less expensive than
conventional direct excess and umbrella coverage; there is also the opportunity to reduce costs by combining two or more lines of risk. Diversification into a profit centre diversifying into open market insurance operations and operating as a separate commercial profit centre, including any profits generated from third party unrelated business. ‘Unbundling’ of services unbundling technical services provided by its conventional insurer, such as separating risk control and claim handling services from the actual purchase of insurance cover. Reduction of government regulations and restrictions - domiciling in a professional, yet flexible regulatory environment, widening investment opportunities and the facilitation of
legitimate international movement of funds. Tax minimisation or deferral - creating the potential to minimise or defer tax payments through properly structured and adequately capitalised captive insurance arrangements. Information supplied by The Insurance Managers Association of Cayman (IMAC). For more information visit www.imac.ky IMAC is a non-profit organisation run by the insurance managers of the Cayman Islands. IMAC’s membership includes Associate and Overseas members, comprising not only the Captive Insurance Companies in the Cayman Islands but also the service providers that support the industry both here and in other jurisdictions. The aim of IMAC is to act both as regulatory liaison with the Cayman Islands Government and to promote the Cayman Islands as the domicile of choice for Captive Insurance Companies.
Captive Developments Recently published statistics up to the end of June 2011 show Cayman’s captive sector being in fundamentally good health and having exhibited resilience against challenging market conditions with total premiums being at their highest ever level of US$9.06 billion. Recent policy and legislative initiatives include a Memorandum of Understanding between the Insurance Managers Association of Cayman (IMAC) and the Financial Services Secretariat which formalises the details of the working partnership between government and the industry with a view to consolidating the promotion of the captive sector worldwide, as well as updates to the Insurance Law which have created distinct sub-categories for international
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insurers with appropriate regulation for each. Consequently, there are now four main categories of insurance licences:
companies would apply for the old Class B licence, which had no defined capital requirements.
Class ‘A’ insurers are those licensed to conduct domestic insurance business in Cayman and can be incorporated either locally or overseas.
Class ‘D’ insurers meanwhile are those only conducting reinsurance business, as well as ‘any other business as may be approved in respect of any individual licensee’, thus affording scope for flexibility within the regulation if necessary.
The new changes see Class ‘B’ insurers divided into three sub-categories dependent on the extent to which for non-domestic insurance business the net premiums written originate from the insurers related business. The figures are respectively; (i) 95%+, (ii) 5194%, (iii) 50% or less. Class ‘C’ is a new category for insurers issuing catastrophe bonds where previously
Alongside workers’ compensation Cayman is principally associated with healthcare captives and in this respect it is the leading domicile worldwide. Originally inspired by an unprecedented increase in liability claims and subsequent increase in the cost of commercial insurance in the 1970s, Cayman cemented its reputation in the late 1990s on the back of a runaway culture continued on page 44...
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The Cayman Islands as a Captive Insurance Domicile
Dispelling the Myths Supplied by Kensington Management Group Ltd
While some uninformed readers may still “tag” the Cayman Islands with the stigma of being a “haven for tax evaders”, or a “contributor to the global economic meltdown”, nothing could be further from reality when you consider the following: The all crimes anti-money laundering legislation of the Cayman Islands has been evaluated by the IMF and by the FATF as being one of the very best in the world. • The Cayman Islands have full income tax transparency with the USA, proactive tax reporting with 27 members of the European Union, and full Tax Information Exchange Agreements with 23 countries around the world, well exceeding the number required by the OECD. • As a member of the International Organization of Securities Commissions (IOSCO), the Cayman Islands have full “regulator-to-regulator” disclosure with all IOSCO regulators. • The Cayman Islands Monetary Authority (CIMA) has formalized procedures with the four main United States banking regulators for the exchange of supervisory information relating to banks and banking institutions that operate in both territories. In addition, the Cayman Islands are regularly recogonized for their expertise and level of international business value-added, with a recent example of this being The Banker publication, which placed Cayman first in
the category of specialized financial centres in its 2010 IFC ratings. This result comes at a time when statistics from CIMA note that Cayman maintains US$1.8 trillion in deposits and interbank bookings, is the world’s largest domicile for hedge funds and catastrophe bond transactions, is the second largest domicile for captive insurance, maintains a vibrant stock exchange and is also the preferred shipping registry for the world’s mega-yachts. Additionally, CIMA provides a very proactive and client-focused regulatory environment, thereby widening investment opportunities and the facilitation of legitimate international movement of funds.
Cayman is home to 725 captives writing more than $9Billion in annual premium and having total assets in excess of $57Billion The above success is no better evidenced than in the area of captive insurance, where Cayman is the leading domicile for healthcare related captive business and the second largest overall captive domicile behind Bermuda. Cayman is home to 725 captives writing more than $9Billion in annual premium and having total assets in excess of $57Billion. The continued success of the Cayman Islands as a captive domicile is fueled by the unique partnership of a sound and business-focused regulatory regime, combined with the unwavering support of the Cayman Islands Government and the Insurance Managers Association of Cayman (“IMAC”) in the promotion and protection of Cayman’s reputation as the domicile of choice for captive insurance. This only goes to show what can be done when a domicile truly works together towards a common goal.
IMAC’s annual Cayman Captive Forum is a great opportunity to network with and learn from industry experts. The 2010 event attracted over 1,000 delegates and featured a wide range of speakers and educational presentations on all aspects of the captive and insurance industry. The 2011 event is scheduled from Nov 29-Dec 1 at the Ritz Carlton, Grand Cayman and is already on track to match the previous year’s attendance. When companies first look into captives, it is normally due to a negative experience, e.g. a lack of availability or reduction in coverage, and/or premium increases. As a result, there is an overriding desire to “take control” of their insurance destiny and to insulate themselves from the fluctuating cycles of the traditional insurance market. This can be achieved by establishing your own captive insurance vehicle, or by joining an existing one. Either way, a captive can offer many benefits, including such aspects as coverage and program design flexibility, insulation from market fluctuations, control of costs, improved cash flow, an improved negotiating position, an enhanced safety and claims management “culture” throughout the organization, flexibility with investment opportunities and the retention of investment returns. Should you wish to learn more about why the Cayman Islands is the right domicile to meet your captive insurance needs, please contact Mike Gibbs, the President of Kensington Management Group, Ltd, one of the largest independent captive managers in the Cayman Islands, with a diversified portfolio of single parent and group captive clients.
Contact details +1 345 814 7000, mgibbs@kensington.ky, www.kensingtonmanagement.ky.
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of litigation in the US that saw premiums skyrocket for healthcare providers. Cayman’s popularity in this field is down to a number of factors, not least its recognition that pure captives do not require high levels of capital. Furthermore, and particularly in recent turbulent times Cayman has shown the potential for such captives to benefit the parent through dividends, grants or parental loans, subject to approval from the regulator. Moreover, the inherent economies of scale in being the world’s largest domicile for healthcare captives ensure that costs remain reasonable, whilst the experience and quality on the part of the service providers is second to none. Looking to the future, with US healthcare reform high on the agenda the likely result is a further increase in the number of medical malpractice captives and the risks they insure as new healthcare networks look to avail themselves of opportunities for risksharing. The big area of concern on the horizon is the Solvency II Directive where the impact on Cayman domiciled captives is not yet entirely clear. The Directive amounts to a fundamental review of the capital adequacy regime for the European insurance industry and aims to establish a revised set of EU-wide capital requirements and risk management standards that will replace the current solvency requirements. The costs of compliance and burdens of regulation are likely to increase such that
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Cayman Islands Special Feature capital efficiency will need to be improved so as to ensure captives remain cost-effective. The changes could hit younger and smaller captives particularly hard. Moreover, the not inconsiderable costs associated with implementing the directive will ultimately be shared with the private sector. On the plus side for commercial insurers there are much anticipated improvements to risk sensitivity, market sensitivity, supervision of groups and transparency.
Cayman’s captive sector (is) in fundamentally good health Yet, for captive insurers there are a number of unresolved grey areas of concern besides cost in relation to Solvency 2 where they run the risk of being adversely affected by new blanket legislation that does not naturally apply to them. These include the concept of proportionality where captives are neither of sufficient size, risk nor complexity to pose the significant systemic risk that the directive is designed to combat. Likewise, the idea of improved group supervision is one that is considered by many unnecessary for the captive sector, while there are compelling arguments that the captive sector will unduly suffer in respect of changes regarding transparency, concentration of risk and the definition of beneficiaries.
The Cayman Islands Monetary Authority (CIMA) is addressing these concerns on an ongoing basis through engagement with stakeholders to ensure the jurisdiction is readied for any changes when they come, as well as by participating in the consultation processes of the European Insurance and Occupational Pensions Authority (EIOPA). Other developments pertaining to the captive sector are less of a cause for concern. For example, the potential benefits resulting from Cayman’s TIEA with Canada that came into force in June are such that Canadian Cayman captive owners are now able to repatriate that income from the insurance of non-Canadian risks without incurring a tax liability, thereby making Cayman’s captive industry even more attractive to Canadian multinationals. It is noteworthy that the Cayman Islands Government lends full proactive support to the captive sector, which when combined with the firm yet flexible regulatory authority in the form of CIMA and the activities of IMAC makes for a potent force in attracting captive business to the jurisdiction. All things considered, if the recent increase in enquiries and requests for feasibility studies despite soft market conditions are anything to go by, the evidence points to Cayman maintaining and consolidating its status as one of the key captive domiciles worldwide.
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IFCs
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IFCs
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Cayman Islands Special Feature
Twin Pillars and Beyond: the Future for Cayman International Financial Services and Tourism account for the vast majority of Cayman’s GDP. Moving forwards, however there are concerted efforts to diversify the economy in this Caribbean British Overseas Territory located to the south of Cuba and northwest of Jamaica and which encompasses the three islands of Grand Cayman, Cayman Brac and Little Cayman. The Cayman Islands enjoys the status as one of the key IFCs in the world and boasts a comprehensive portfolio of financial services that generate some 55% of the country’s GDP and which encompass company formation, captives, banking, funds, structured finance and ship and aircraft registration. Recent developments have continued to see public and private sectors working in tandem, and this has served to cement Cayman’s reputation as both a global hub for institutional business and private client offerings, as well as a respected proactive force on the international compliance front. Investors are reassured by solid regulation and the jurisdiction’s stable political and economic climate, as well as being attracted by other attributes such as its tax neutrality, its extensive, highly skilled specialised labour pool and thoroughly modern infrastructure. Furthermore, Cayman has nailed its colours to the mast in developing legislation to ensure it adheres to a range of demanding international standards relating to financial crime and in being signatory to some 23 TIEAs and counting, including a landmark agreement with Canada that recently came into force. As well as being one of the principal world domiciles for captives, Cayman is also very
strong in the hedge fund sector which is one of the key driving forces behind the jurisdiction’s enduring success. Recent data for example points to a current annual growth rate of 12% in net new hedge funds. There are strong prospects for the continued growth across the international financial services sector and in all areas the Department of Commerce and Investment is well placed to act as the first port of call. It constitutes a one stop shop for investment into Cayman with a comprehensive range of services from provision of investment climate data through to information on commercial opportunities and assistance on the regulatory procedures for setting up a business.
Recent developments have continued to see the public and private sectors working in tandem Tourism accounts for much of the rest of Cayman’s GDP, and employs many Caymanians to boot. The industry tends to cater to the luxury market predominantly from North America with an abundance of time share condos, villas, full-service hotels and niche boutique-style accommodation. Pristine beaches include the famous Sevenmile beach along which much of the island’s hotel and resort infrastructure is located, which alongside scuba diving, snorkelling and deep sea fishing ensures discerning high-end clientele keep coming.
Stand out sites include Stingray City off Grand Cayman where tourists can swim with stingrays, as well as the decommissioned warship the USS Kittiwake which was sunk to form an artificial reef early 2011. Also, the Cayman Turtle Farm at Boatswain’s Beach Adventure Marine Park, as well as the Mastic Trail through Grand Cayman’s forested interior provide tourists with popular land based alternatives to water activities. Cayman’s population continues to grow at one of the highest rates in the developed world, testimony to its ongoing success. However, with land resources at a premium and with few sources of fresh water, desalination is necessary to cater for this growing population’s requirements, while the majority of food items and consumer goods are imported. On the economic front the Cayman authorities have been looking at how best to serve this burgeoning community. ‘The Future of Cayman Forum’ is an economic development initiative involving both the public and private sector that is looking at ways to diversify the economy and enhance competitiveness to this end. Following lengthy consultations there has been a meeting of minds concerning proactively positioning Cayman as a hub for high value industries such as medical tourism, film production, and potentially gaming too, as well as consolidating its existing pre-eminence in the financial services sector through focusing on attracting reinsurance companies. To deliver to the fullest extent it is accepted that upfront investment will be necessary, while already business-friendly legislation may need to be amended further.
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IFCs
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Seychelles Special Feature
Proactive Seychelles Only certain IFCs that have adapted to the new world order are likely to offer true savings in the long term to the investor. One such jurisdiction is the Seychelles which is able to point to a long-standing pedigree in the IBC, limited partnership, insurance, mutual funds, securities banking, trusts, foundations and ship registry fields through its array of pertinent products and services, extensive infrastructure, skilled labour, and innovative legislation, thus allowing it the ability to build upon its natural geographical advantage between East and West. Seychelles’ international financial services sector shows consistently impressive returns thanks in part to its service industry status. Tourism and fisheries, the other two pillars of the national economy are conversely somewhat capital intensive. A recent series of bold reforms and liberalisations spearheaded by President Michel have stabilised the country and seen it become a long-term sustainable viable investment option and a country where GDP is predicted to double within the decade. With IMF support all exchange restrictions were dispensed with, interest rates liberalised and the currency floated such that Seychelles found itself less exposed to the worst ravages of the global economic downturn, while its economy was set on a sustainable growth path. Furthermore, the regulatory arm is held in high regard, as embodied in Seychelles’ International Corporate Providers Act which ensures service providers subscribe to exacting professional standards where
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licenses are issued or renewed only after thorough due diligence. Seychelles’ commitment to comply with international regulations is further evidenced by it inclusion on the OECD’s white list, as well as by its positive attitude towards the Global Forum’s Peer Review process which it hopes will assist in creating a level playing field.
Looking to the future there is set to be a full revamp of current legislation, as well as potential diversification into areas including mutual bonds, hedge funds and interactive gambling The Seychelles International Business Authority (SIBA) which administers the sector has under Steve Fanny’s leadership successfully rebranded the country beyond being solely synonymous with high-end tourism such that over 10,000 companies p.a. are now attracted by straightforward incorporation, low fee structures, 24 hour support and an excellent geographical location. The associated ‘know your customer’ due diligence is further evidence of the wish to only court legitimate investors Other incentives include companies operating under a special license (CSLs)
being able to avail themselves of a 1.5% business tax rate on their global income and liberty to conduct business in any other country. The license further allows investment into companies based in countries where a reciprocal treaty is in place which leads to further economies. Moreover, the extensive and expanding DTA network with key jurisdictions like China, the UAE and South Africa attracts investors from these ever more important powerhouse locations and affords access to hundreds of millions of new consumers through Seychelles’ membership of the SADC and COMESA, thus cementing the jurisdiction’s status as a conduit for FDI into mainland Africa and the wider world. Looking to the future there is set to be a full revamp of current legislation, as well as potential diversification into areas including mutual bonds, hedge funds and interactive gambling. Of further significance is the proposed introduction of VAT scheduled for mid-2012 which is designed to improve integration, broaden the economic base, eliminate the potential for cascading, and increase efficiency and fairness. In addition, Seychelles is looking to tap into the massive increase in the Islamic Finance sector. This could include Islamic bonds and would afford access to Africa’s large Muslim population, whilst also leading to an inexorable relationship with key locations such as Dubai which is within its sphere of influence.
Q: What do you perceive to be Seychelles’ key credentials as an IFC? A: We consider Seychelles to offer one of the most impressive total packages of offshore services in the world – all within a rigorous international regulatory framework. Our place on the OECD’s White List demonstrates that we adhere to global best practices and explains why we have become respected internationally as a sound IFC. In addition we are well placed in terms of time zones (+4GMT) between Asia, Europe and Africa.
Republic of Seychelles CEO of the Seychelles International Business Authority Steve Fanny explains to Joanna Gray why Seychelles ought to be the IFC destination of choice.
Q: How would you summarise SIBA’s role in attracting investment to Seychelles and the value of the offshore sector to the national economy and population’s social wellbeing? A: Whilst we have not had research where we can isolate the offshore sector completely, we do know that the financial industry is worth between five to 10 per cent of Seychelles’ economic wealth. Of course, within this larger financial picture, offshore banks are influential within the economy. Indeed the offshore sector is a diversification of the economy. For too many years Seychelles has relied too heavily on fisheries and tourism. Of course these industries are still vital, thriving and growing but having a strong financial sector helps balance the picture. In fact, fisheries and tourism are capital intensive, and the offshore sector is rather more of a service industry which means that the returns are impressive.
Q: Would you consider tax mitigation the key reason for investors availing themselves of Seychelles’ portfolio of international financial services?
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A: Yes of course! It is what our clients are attracted to: it’s all about wealth protection and creation, asset protection, wealth management, rising capital, fiscal benefit and the excellent service we offer.
Q: Under your leadership at SIBA fees have remained low and bureaucracy kept to a minimum. At the same time over 10,000 companies are now being attracted to Seychelles p.a. What other factors apart from the cost
and ease of incorporation do you consider the most important contributing factors to these impressive stats? A: We have worked very hard to ensure that we offer an extremely high level of professionalism in the services provided. We are a service industry and we aim to serve our clients well. By doing so we manage to keep existing clients and attract new ones. We are also well placed to incorporate new structures because of the overall economic environment that has been developed in Seychelles. We are on the Organisation for Economic Cooperation and Development’s (OECD) White List which demonstrates that we have a pragmatic and balanced approach to regulation where we’re able to keep the right balance between regulation and ease of practice.
Q: How has the recent national reform and liberalisation process assisted in attracting investors to Seychelles? A: Owing to Seychelles’ rapid development it has been put on the map in a very short period of time. [Seychelles only achieved independence in 1976 and following the 2008 debt crisis enlisted the help of the International Monetary Fund (IMF) to institute a monetary reform programme.] Since the reforms the economy has grown significantly which has caused a lot of interest from the financial and general media. We have received good reports in ‘The Economist’ and ‘Fortune’ for example. A lot of people have read about Seychelles internationally and seek to find out more.
Q: With financial services one of the pillars of Seychelles’ economy alongside tourism and fisheries, to what extent does SIBA work together with these other sectors to further national goals? A: Under the leadership of SIBA and the Ministry of Investment we promote Seychelles as a whole: as a country, our financial services, the fisheries industry and tourism as one package.
Q: There has been an explosion in numbers of HNWIs and UHNWIs in China and India with IFCs all over the world competing to court them. What is it about
Seychelles as a jurisdiction that particularly recommends itself to this rich new reservoir of investors?
Q: What is SIBA’s position on the Peer Review Process what measures do you propose to take to ensure a positive outcome?
A: Aside from the general advantages that they get as client a lot of investors are using Seychelles as a platform to get into Africa.
A: It’s good – it will help to create a level playing field and it will assist in getting jurisdictions to asses any shortcomings. However, I hope that those pushing for the peer review process will adhere to the outcomes and it won’t simply be the small island nations who submit to the findings.
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Q: Seychelles is a leading conduit for investment into the wider region - how do you propose to consolidate this state of affairs over 2012 and beyond? A: We’ve started to look at Africa very seriously. Historically there are a lot of issues within Africa where the economic environment has not been good for investors. However the continent has such large mineral reserves that it deserves a good economic deal. We’re signing DTAs (Double Taxation Agreements) with Africa [14 to date with 40 targeted]. These treaties again offer investors a great platform into Africa, but we want to ensure that Africa gets a good deal in return.
Q: Are there any new products, services or pieces of legislation due to be rolled out in the short to medium term? In the long term what are SIBA’s goals? A: In addition to a total revamping of current legislations, we are looking into mutual bonds, hedge funds and interactive gambling. We are also studying the possibility of adopting Islamic Financial Structure and offering Islamic bonds, owing to the massive increase in terms of Islamic finances [estimated to be growing at 101-5 per cent and worth $1.2trillion]. Africa has a large Muslim population and our time zones also predispose us to good relations with Dubai where we’re only 4 hours apart.
Q: What do you consider are the principal dangers and potential restrictions to the continued growth of Seychelles’ offshore sector and how do you intend to combat these? A: There is always an acknowledgement that increased regulation can become a burden to small islands states, and while we will always comply, over regulation can kill an industry. And of course the current economic outlook is a concern: Western countries not investing, being heavily in debt and taxing too highly. But, all of these risks come with the territory.
Q: Steve Fanny ‘the man’ - What motivates him? How does he like to spend his spare time? A: I don’t have any time for spare time! And if I do I’m always reading. I am motivated to push Seychelles to become among one of the leading financial services centres, to develop new products, to be the best place for business and investment. I really believe that financial services are so important to Seychelles that I certainly have no time for free time!
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Q: The prevailing global winds of the day have put IFCs all over the world under much scrutiny. Would you say Seychelles has embraced or resisted these winds of change? A: Because we are on the OECD’s White List, we comply, we’ve always complied, and we will always comply. The regulations keep coming, but we attempt to pre-empt further regulations and to stay ahead. Mr Steve Fanny, CEO, Seychelles International Business Authority (SIBA)
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Seychelles Special Feature Photo CC by Taro Taylor
IFCs
Seychelles’ Rich Investment Climate
The Seychelles fisheries sector constitutes one of the three pillars of the country’s economy alongside tourism and international financial services and has been marked in recent years by the employment of a policy of sustainable and responsible fisheries development to safeguard stocks for future generations. Threats to the sector’s continued growth from piracy are being combated by steadfast and ongoing government and coastguard efforts, while there have been marked improvements in the monitoring of the foreign industrial fishing fleets from the EU and Asia through a comprehensive vessel monitoring system. Of further significance are the many solid prospects for growth in the flagship semi-industrial tuna and swordfish longline fishery sector which constitutes a premium incentive-based investment prospect. In addition, there is the potential for the rolling out of new products and the development of a mariculture industry, with investors currently being sought for processing and exporting. Moreover, there have been high volumes of investment in the Port Victoria industrial
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port including new berthing and port facilities and a premium tuna facility run in partnership with Heinz, while there has also been full scale mechanisation of the national fleet in recent years.
The proactive operations and sound long-term sustainable strategies being employed throughout the Seychelles economy are particularly evident in the fisheries sector The proactive operations and sound long-term sustainable strategies being employed throughout the Seychelles economy are particularly evident in the fisheries sector and have created an ideal investment environment where investors can be reassured concerning government stability, financial resources, robust regulation and commitment to international best business practice. Yet, this policy of sustainable development is also clearly apparent in the high-end tourism sector with which Seychelles is particularly synonymous. Desroches Island for example represents the ultimate in remote paradise luxury and has been constructed in harmony with the environment using sustainable building practices. It has helped put Seychelles on the international map and boasts impeccable credentials with previous guests rumoured to include the Duke and Duchess of Cambridge. For investors it offers excellent ROI prospects, in being a project that has already proven its pedigree
to date even against the most challenging prevailing global economic conditions. For those looking to purchase property there, not only do all available properties offer the ultimate in space, comfort and privacy, but they also come with the option of applying for residency status for purchasers and their families, bringing with it no capital gains tax on sale or tax on earnings outside Seychelles, as well as the option to gain income whilst not using the property through it being managed on one’s behalf. The recent opening of a new world-class spa complex has only served to cement its reputation. Eden Island represents another landmark high-end residential project offering as it does ready access to the main island of Mahe’s facilities, as well as the international airport. The development is also positioned away from the main hurricane belt. This Dennis Moss designed development offers a holistic experience with leisure facilities, family activities and a top-end commercial precinct, not to mention a marina that has the capacity to host superyachts of up to 100m in length.
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Key flagship initiatives set to enhance Seychelles’ attractiveness even further as an investment destination include the subterranean fibre-optic link which will revolutionise the telecoms infrastructure, the consolidation of international air passenger and cargo links through recent airport upgrades, as well as opportunities for investment in the world leading fisheries sector with its abundant tuna stocks, and of course the tourism sector with its legendary developments such as Desroches Island and Eden Island.
Eden Island, Seychelles
©OECD
IFCs
Jurisdictions Move Towards Full Tax Transparency OECD Headquarters, Château de la Muette, Paris, France
Reports on Andorra, Anguilla, Antigua and Barbuda, Austria, Bahrain, the Virgin Islands (British), Curaçao, Liechtenstein, Luxembourg, Saint Kitts and Nevis and the Turks and Caicos Islands focus on their legal frameworks which allow for transparency and exchange of tax information. The review of the United Kingdom also considers the exchange of information in practice. In addition, two supplementary reports – for Belgium and the Cayman Islands - show that they are swiftly amending their domestic legislation to address recommendations made by the Global Forum in previous reviews. The reports describe each jurisdiction’s rules for ensuring that information is available to the tax authorities, how it can be accessed by authorities and the mechanisms in place to exchange information with foreign tax authorities. They also identify deficiencies and make recommendations on how to improve cooperation in international tax matters. In all 12 new reviews, the most common deficiencies relate to: the lack of available ownership information as regards trusts and bearer shares; incomplete accounting information for some forms of trusts and partnerships, including foreign or international entities; and some limitations in the international agreements allowing for exchange of information.
Jurisdictions follow up on Global Forum recommendations The supplementary reviews, part of the Global Forum’s new follow-up procedures, show that Belgium’s compliance with the international standards improved significantly when it introduced new legislation lifting bank secrecy related to international tax matters. And the Cayman Islands demonstrated its commitment
The reports describe each jurisdiction’s rules for ensuring that information is available to the tax authorities, how it can be accessed by authorities and the mechanisms in place to exchange information with foreign tax authorities to implementing the international standards for transparency and exchange of information by amending account keeping requirements in relation to companies, partnerships, exempted limited partnerships, and trusts. The Phase 2 reviews of Belgium and the Cayman Islands, assessing their exchange of information in practice, will take place during the second half of 2012.
the Virgin Islands (British), Mauritius, Panama, San Marino and the Turks and Caicos Islands) will undergo supplementary reviews. The Global Forum is also monitoring those jurisdictions which have not provided feedback on actions they are taking. “The Global Forum’s peer reviews have produced real change. Global Forum member jurisdictions are implementing the international standard, signing hundreds of agreements and negotiating many others. Over recent years numerous countries have adapted their legislation to ensure the effective exchange of information. This will improve tax compliance, benefitting all countries. While progress is still required in a number of jurisdictions, for some the speed of change, prompted by the peer reviews, is such that supplementary reviews are already being triggered in order for new progress to be recognised”, said the Chair of the Global Forum, Mike Rawstron of Australia.
©OECD - Andrew Wheeler
Furthering efforts to fight against international tax evasion and bank secrecy, members of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes issued 12 new peer review reports in September 2011.
After reporting changes in their domestic legislation, five jurisdictions (Barbados, Angel Gurría, Secretary General, OECD
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Comment
Automotive Industry a Force for Good Supplied by the International Organisation of Motor Vehicle Manufacturers (OICA) Automakers are an integral part of developed, and developing, society Around the world, the industry provides nations with mobility, which is central to economic and social growth. Through mobility the auto industry provides a means to a better quality of life; mobility is probably one of the most important indicators of economic and social wellbeing and serves as a powerful symbol of freedom and progress. Statistics often show a clear connection between Gross Domestic Product growth and the growth of distance travelled in a particular country. Car, truck and bus makers’ products allow the public to travel whenever and however they want, enabling people to live, work, play and connect in ways that were unimaginable just a century ago; they provide the necessary transportation of consumer goods all over the nations thereby further enhancing consumers’ choice in their goods selection and purchasing decisions. Today’s auto industry is also on the leading edge of global efforts to reduce CO2 emissions. In fact, no other industry has done more to devise, develop and apply technologies that help reduce CO2 emissions. The auto industry’s advancements, however can have an even greater impact if they are considered not as the single solution to climate change issues, but rather just one element of an integrated approach involving many other stakeholders, such as energy providers, for example, which
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can contribute to the improvement of air quality, by ensuring wide availability of high quality fuels and other energy sources for all vehicles. Automakers’ products drive local and national economies – making this industry critical to the global economy’s strength. Vehicle manufacturing and use provide major contributions to government revenues around the world – more than €400 billion in 26 countries alone Producing autos supports the economy: the global auto industry is a key sector of the economy in all of the world’s major
if auto manufacturing were a country, it would be the sixth largest economy countries. In fact, if auto manufacturing were a country, it would be the sixth largest economy. Even during the recession auto manufacturing globally has contributed an output level of more than €1.5 trillion. While the industry directly employs about 9 million people, a full 5 percent of the world’s manufacturing jobs, economists estimate each direct job supports an additional five jobs based on the industry’s dependence on wide-ranging manufacturing sectors including steel, iron, aluminium, glass, plastics, carpeting, textiles, computer chips and more.
Consumer use of vehicles supports the economy: virtually every car trip ends with either an economic transaction or some other quality of life benefit. Motor vehicles bring products to consumers and consumers to products. Whether it is a farmer bringing perishable goods to market, shoppers driving to a local mall or mail-order goods and services being delivered, vehicles provide the personal mobility that accelerates commerce within a city, country or continent – or even globally. The central role played by the industry in the overall economy explains the decision taken by policy makers to support the industry during the recent economic crisis. The auto industry however clearly stresses that such supporting measures should remain truly exceptional and it certainly is not asking for any support that would artificially favour one industry sector against others. Any such support measure should also respect the basic principles of a free and open market and avoid any form of protectionism and market distortion. Continuous innovation is the key The auto industry is a key player in technological development, thereby also driving innovation in other industrial sectors, such as electronics, new materials and much more. Today’s vehicles have reached extremely high levels of sophistication and unprecedented technological innovations, whether in terms of safety systems, propulsion systems, or environmental protection systems. The
Comment
The industry must be positioned in such a way that it is able to contain these cost increases; thus part of the needed approach will be in the form of coherent fiscal government policies in order to keep the new technologies affordable for the average consumer. For example, electric vehicles, at least during their introductory phase, will need supporting measures in order to partly offset the increased costs. Several governments have recognised this fact and have taken the necessary steps to help shape the demand for these new technologies. Policy that is technology neutral is sound, productive policy Automobiles are the most sophisticated, mass-produced product available to the public at large, and are the products of years of research and development. However, by its nature, technology development is inherently unpredictable. Even when it does meet industry expectations, consumer acceptance may vary from one market to another. For those reasons, governments should craft policies that are technology neutral to the greatest extent possible. Technology neutrality can reduce the burden of stillmassive development costs to further allow consumer access to beneficial – yet expensive – product advancements that can still be priced within the consumers’ affordability range.
Broad-based approaches that promote a wide range of vehicle technologies enhance the industry’s ability to provide markets with new ideas and innovations that meet consumers’ demands. Basic and applied research, manufacturing R&D, deployment and commercialisation activities and more can all be enhanced by policies that are technology neutral. On the contrary, policies focusing on design requirements rather than on performance requirements will stifle innovation and technical progress and thereby also reduce innovation competition.
The central role played by the industry in the overall economy explains the decision taken by policy makers to support the industry during the recent economic crisis Harmonising standards is critical to the global and complex automotive industry, even more so as the development of new markets increases the demand for personal mobility Designing and building products – already a multiyear process in the auto industry – is even more complex when products must be made for different geographic areas having varying regulatory targets and timelines. Conflicting regulations slow down progress, restrict consumer choice and present trade barriers. The consistency of regulations, such as technical requirements, helps allow consumers worldwide to have access to new, affordable technology, instead of new, sophisticated technology being isolated to a few markets. Additionally, the approval of
differing sets of requirements also results in poor allocation of national economic resources. It may be appropriate for there to be regional differences, which prevent fully identical regulations in many cases. However, harmonisation calls for removing unnecessary differences and bringing other technical regulations closer together whenever possible, especially regarding test procedures that today are often unnecessarily divergent. Such divergences very often are based on historical reasons, which in most cases are not valid anymore. Additionally, effective harmonisation should not systematically require the most sophisticated technologies everywhere: a careful consideration of each market’s economic situation, infrastructure, climatic conditions and more must be a factor in successful harmonisation efforts. Open trade sharpens competition and benefits consumers Policies encouraging the unrestricted flow of automotive products sharpen competition and allow manufacturers to fairly compete for consumers. This encourages automakers to provide the highest-quality vehicles possible by focusing on supplying safe, environmentally friendly products to the world’s consumers. With open trade, innovation, good design, proper pricing and consumer satisfaction drive success, rather than protectionist government policies that manipulate the market. OICA members represent the global auto industry. They are committed to technological innovation in the areas of safety, environment, fuel efficiency, and seek global harmonisation of safety and environmental standards to benefit all countries. For more information visit www.oica.net
Photo CC by Robert Couse-Baker
auto industry continues to spend enormous resources in R&D, tens of billions of Euros every year, for the further development of current and future systems. Clearly, the technological content of vehicles will continue to increase in the future, with cost increases likely to be the unavoidable consequence.
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International Cooperation in Space The International Space Station (ISS) Programme’s greatest accomplishment is as much a human achievement as it is a technological one—how best to plan, coordinate, and monitor the varied activities of the Programme’s many organisations. An international partnership of space agencies provides and operates the elements of the ISS. The principals are the space agencies of the United States, Russia, Europe, Japan, and Canada. The ISS has been the most politically complex space exploration programme ever undertaken. The International Space Station Programme brings together international flight crews, multiple launch vehicles, globally distributed launch, operations, training, engineering, and development facilities, communications networks, and the international scientific research community. Elements launched from different countries and continents are not mated together until they reach orbit, and some elements that have been launched later in the assembly sequence were not yet built when the first elements were placed in orbit.
Operating the space station is even more complicated than other space flight endeavours because it is an international programme. Each partner has the primary responsibility to manage and run the hardware it provides. Construction, assembly and operation of the International Space Station requires the support of facilities on the Earth managed by all of the international partner agencies and countries involved in the programme. These include construction facilities, launch support and processing facilities, mission operations support facilities, research and technology development facilities and communications facilities. National Aeronautics and Space Administration (NASA) NASA headquarters, in Washington, D.C., exercises management over the NASA field Centres, establishes management policies, and analyses all phases of the space station program. Roscosmos, the Russian Federal Space Agency Roscosmos oversees all Russian human space
flight activities. Moscow Mission Control is the primary Russian facility for the control of human space flight. It is located in Korolev, outside of Moscow. Canadian Space Agency (CSA) The MSS Operations Complex in Longueuil, Quebec, provides the resources, equipment, and expertise needed for the engineering and monitoring of the Mobile Servicing System as well as for crew training. European Space Agency (ESA) The European Space Research and Technology Centre, the largest site and the technical heart of the ESA is in Noordwijk, Netherlands. Most ESA projects are developed here by more than 2,000 specialists. Japan Aerospace Exploration Agency (JAXA) In addition to the JAXA headquarters in Tokyo and other field centres throughout the country, Tsukuba Space Center and Tanegashima launch Facility are JAXA’s primary ISS facilities. Information supplied by the National Aeronautics and Space Administration (NASA) www.nasa.gov
Photo © NASA
Space Agency Senior Managers Meet to Discuss a Global Exploration Roadmap Senior managers representing 10 space agencies (1) from around the world met in Kyoto, Japan 30 August 2011 to advance a Global Exploration Roadmap for coordinated space exploration. Over the past year, the International Space Exploration Coordination Group (ISECG) has developed a long-range exploration strategy that begins with the International Space Station (ISS) and expands human presence in the solar system, leading ultimately to human missions to explore the surface of Mars. The roadmap flows from this strategy and identifies two potential pathways: ‘Asteroid Next’ and ‘Moon Next’. Each pathway represents a notional mission scenario over a 25 year period describing a logical sequence of robotic and human missions. Both pathways were deemed to be practical approaches capable of addressing common high-level exploration goals developed by the participating agencies, recognising that individual preferences among participating space agencies may vary regarding these pathways. The first iteration of the Global Exploration Roadmap will inform and help focus the planning currently underway in each of the
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partner agencies in the areas of planetary robotic exploration, advanced technology development and use of the ISS in preparation for exploration. It was agreed that over the next few weeks, this initial version of the Global Exploration Roadmap would be finalised and released to the public. Mr. Yoshiyuki Hasegawa of JAXA, in his capacity as chairman of the International Space Exploration Coordination Group, noted “We are very happy with the progress of the Global Exploration Roadmap to technically coordinate both near and long term space exploration planning, with world space agencies.” Outgoing ISECG chair Bill Gerstenmaier said “NASA is confident that the release of this product, and subsequent refinements as circumstances within each space agency evolve, will facilitate the ability of space agencies to form the partnerships that will ensure robust and sustainable human exploration.” During the meeting, the senior agency managers also reaffirmed the role of the ISECG to facilitate the ability of space agencies to take concrete steps towards partnerships that reflect a globally coordinated exploration effort, consistent with their respective agency priorities and mission objectives.
The ISECG was established as a voluntary, non-binding international coordination forum, where the partner agencies who contributed to the Global Exploration Strategy (GES) can exchange information regarding interests, plans and activities in space exploration. The GES set forth a shared vision for concerted human and robotic space exploration missions focused on solar system destinations where humans may one day live and work. Another stated goal is to encourage the partners to work together on strengthening both individual exploration programmes and collective efforts. The development of the Global Exploration Roadmap is the second step toward achieving this goal, following the development of the ISECG Reference Architecture for Human Lunar Exploration. Supplied by the International Space Exploration Coordination Group (ISECG) www.globalspaceexploration.org (1) In alphabetical order: ASI (Italy), CNES
(France), CSA (Canada), DLR (Germany), ESA (European Space Agency), JAXA (Japan), KARI (Republic of Korea), NASA (United States of America), Roscosmos (Russia), UKSA (United Kingdom)
Photo CC by Dennis Jarvis
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International Coach Federation (ICF) Challenges Common Coaching Misconceptions
In recent years, coaching as portrayed on TV, spotlighted in magazines, and utilised by celebrities has not always created an accurate perception of professional coaching, according to the International Coach Federation (ICF). In fact, it is through these mediums that many misconceptions on coaching are emerging. The truth is that professional coaching is a proven method of capitalising on the potential of individuals, teams, and organisations. “Any profession that experiences significant growth in a short amount of time will face misconceptions,” said ICF President and Professional Certified Coach Ed Modell. “It’s unfortunate that the only experiences many have with coaching are the parodies they see on TV or ‘quick fix’ coaching they see advertised. ICF sees it as a duty to correct these inconsistencies by educating the public about professional coaching and the documented benefits coaching can offer.” Common misconceptions on professional coaching include: Coaching is not regulated therefore there are no standards for coaches to follow. The ICF established a Code of Ethics, creating standards of professional conduct which ICF members and ICF Credential holders pledge to uphold. Recently, in a joint initiative aimed at self-regulation, the ICF and EMCC (European Mentoring and Coaching Council) have filed with the European Union a common code of conduct as the benchmark for the coaching and mentoring industry. Coaches do not need training. The ICF established core competencies that define
the required skill set of a professional coach and establish the foundation for the professional credentialing examination and accreditation for coach training programs. ICF Credentials identify coaches who have met established standards of knowledge, skills, as well as practice. Coaching is like therapy or consulting. Professional coaching is a distinct service which focuses on an individual’s life as it relates to goal-setting, outcome creation, and personal change management. Unlike a therapist, a coach does not focus on relieving past psychological pain or treating cognitive or emotional disorders. Trained coaches are taught when to refer their clients for therapeutic help. Unlike a consultant, a
Coaching generates solid ROI for clients coach does not provide clients answers or solutions based on expertise or knowledge in a certain area. Trained coaches seek to elicit solutions and strategies from their client; they believe the client is naturally creative and resourceful. Coaching is not proven to produce a return on investment (ROI). Coaching generates solid ROI for clients. According to the 2009 ICF Global Coaching Client Study, the median ROI reported by companies who participated in the study and were able to provide calculations was seven times their initial investment in coaching. Almost 96 percent of Client Study participants indicated that they would repeat the coaching experience given the same circumstances that led them to coaching.
Coaching is for people who do not have their lives in order. A coach is for anyone who is ready to make real changes in their careers or lives. Coaching is helpful to all types of people, from corporate executives to stay-at-home moms. Organisations such as IBM, NASA, and the BBC have implemented award-winning coaching programs that provide documented evidence of how coaching creates extraordinary results for their businesses and employees alike. Consumers have no protection in a coaching partnership. All coaches who are members of the ICF or who hold an ICF Credential subscribe to the ICF Code of Ethics and are subject to an Ethical Conduct Review Process. This process includes a set of procedures that provide for review, investigation, and response to alleged unethical practices or behaviour deviating from the established ICF Code of Ethics. The International Coach Federation is the leading global organisation for coaches, with over 16,000 members in more than 100 countries and over 7,400 credentialed coaches worldwide. ICF is dedicated to advancing the coaching profession by setting high ethical standards, providing independent certification, and building a worldwide network of credentialed coaches. Coaching is a distinct service and differs greatly from therapy, consulting, mentoring, or training. ICF defines coaching as partnering with clients in a thought-provoking and creative process that inspires them to maximise their personal and professional potential. For more information, please visit www.coachfederation.org.
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Photo CC by DVIDSHUB
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World Bank says Developing Countries Need to Shift from Crisis-Fighting to Policies that will Sustain Growth
Recent events in Japan have cut sharply into domestic growth
As they put the financial crisis behind them, developing countries need to focus on tackling country-specific challenges such as achieving balanced growth through structural reforms, coping with inflationary pressures, and dealing with high commodity prices, the World Bank says in its June 2011 edition of ‘Global Economic Prospects’. In contrast, prospects for high-income countries and many of Europe’s developing countries remain clouded by crisis-related problems such as high unemployment, household and banking-sector budget consolidation, and concerns over fiscal sustainability among other factors. The World Bank projects that as developing countries reach full capacity, growth will slow from 7.3 percent in 2010 to around 6.3 percent each year from 2011-2013. Highincome countries will see growth slow from 2.7 percent in 2010 to 2.2 percent in 2011 before picking up to 2.7 percent and 2.6 percent in 2012 and 2013 respectively. “Globally, GDP (1) is expected to grow 3.2 percent in 2011 before edging up to 3.6 percent in 2012,” said Justin Yifu Lin, the World Bank’s Chief Economist and Senior Vice President for Development Economics. “But further increases in already high oil and food prices could significantly curb economic growth and hurt the poor.” Recent events in Japan and the political turmoil in the Middle East and North Africa have cut sharply into domestic growth, but
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spillover effects to other economies are expected to be modest. GDP growth in 2011 will likely be flat in Japan. Among developing Middle-East and North African countries, GDP growth in 2011 will be weakest in Egypt (1 percent), Tunisia (1.5 percent), and Libya (2). While uncertain, growth in both Egypt and Tunisia is projected to pick up in 2012, reaching close to 5 percent by 2013.
Recent events in Japan and the political turmoil in the Middle East and North Africa have cut sharply into domestic growth, but spillover effects to other economies are expected to be modest Strong growth in most developing economies has contributed to a new set of global challenges, including higher commodity prices, rising inflation, and the possible return of destabilising capital inflows as monetary policies tighten and interest rates rise. “Developing countries have been resilient despite remaining tensions in high-income countries,” said Hans Timmer, director
of Development Prospects at the World Bank. “But many developing economies are operating above capacity and at risk of overheating, most notably in Asia and Latin America. Monetary policy has responded, but fiscal and exchange rate policy may need to play a bigger role to keep inflation in check.” Inflation in developing countries reached almost 7 percent year-over-year in March 2011, more than 3 percentage points higher than the low point in July 2009. Inflation in high-income countries has also picked up reaching 2.8 percent in April 2011. The biggest increases in inflation have been in the East Asian and Middle-East and North African regions, reflecting capacity constraints in the former and food prices in the latter. High oil prices and production shortfalls due to bad weather have contributed to higher food prices, which has negative consequences for the poor who spend a high proportion of their income on food. Although domestic food prices in most developing countries rose much less than international prices during the 2010/11 spike (7.9 percent since June 2010 versus 40 percent for international prices), local prices may rise further as international price changes slowly pass through into domestic markets. In addition, if the 2011/12 crop year disappoints, food prices may rise further, placing additional pressures on the incomes, nutrition, and health of poor families.
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In Washington: Merrell Tuck +1 (202) 4739516, mtuckprimdahl@worldbank.org Rebecca Ong +1 (202) 458-0434, rong@worldbank.org
Regional Highlights Growth in the East Asia and Pacific region is projected to slow but remain strong, with GDP gains easing from 9.6 percent in 2010 to 8.5 percent in 2011 and around 8.2 percent in 2012-13. Rising domestic goods and asset prices are a medium-term policy challenge, with inflation in the region having reached 5.3 percent in April 2011. The ongoing tightening of monetary and fiscal policies is projected to contribute to the projected slowing in growth toward more sustainable growth rates. A successful reorienting of demand toward domestic sources is reflected in the decline in the region’s current account surplus from some 9.3 percent of GDP in 2007 to a projected 3.6 percent in 2011, an improvement that is expected to be durable. GDP growth in developing Europe and Central Asia rebounded to an estimated 5.2 percent in 2010, following a 6.5 percent contraction in 2009. Limited credit growth, the deleveraging of household-sector balance sheets, and continued industrial sector restructuring (following the easy-credit fuelled excesses of the boom period) are projected to continue weighing on GDP, which is expected to increase by a relatively subdued 4.7 percent in 2011 and 4.5 percent in both 2012 and 2013. These aggregate figures hide significant variation across countries within the region, with outturns in those countries that were most caught up in the boom period performing least well. High commodity prices will boost incomes of resource-rich economies in the region, contributing to strong import demand and remittance flows, which will benefit other countries in the region with the closest trade and migration ties with them. The Latin America and the Caribbean region
rebounded from the crisis, growing at a 3-decade high rate of 6 percent in 2010. GDP growth is expected to ease to a more sustainable 4.5 percent pace in 2011 before slowing toward 4 percent by 2013, a rate of growth that is consistent with underlying potential. The slowdown will be more pronounced in those economies that enjoyed the strongest rebound from the crisis (for example, Argentina and Brazil), as policy tightening contributes to cooling domestic demand. Growth in the Caribbean will accelerate marginally to 4.1 percent in 2011, reflecting continued strong growth in the Dominican Republic and the reconstruction-
The slowdown will be more pronounced in those economies that enjoyed the strongest rebound from the crisis led expansion in Haiti. Growth in other Caribbean countries will be held back by the projected modest expansion in the tourism sector and in remittances. Growth in Central America (excluding Mexico) is projected to accelerate to 4 percent, as labour markets in high-income countries improve only gradually, keeping remittances and tourism growth to a moderate pace. Photo CC by DVIDSHUB
“The financial crisis for most developing countries is over,” said Andrew Burns, manager of Global Macroeconomics and lead author of the report. “Efforts must now focus on returning monetary policy to a more neutral stance and rebuilding the fiscal cushions that allowed developing countries to respond to the crisis with countercyclical policies. Increasingly, medium-term prospects will depend on the kind of slowacting social, regulatory and infrastructural reforms that generate improved productivity and sustainable growth.” The full report and accompanying datasets are available at www.worldbank.org/globaloutlook. Contacts
The upheaval in the Middle East and North Africa has dominated recent economic developments in the region
The political upheaval in the Middle East and North Africa has dominated recent economic developments in the region. Industrial production in both Egypt and Tunisia fell by more than 15 percent during the first few months of 2011, while first-quarter
2011 international tourist arrivals to these economies were off by 45 percent and by 9 percent for the region as a whole (yearon-year). Although subject to significant uncertainty, GDP is projected to expand by only 1 percent in Egypt and 1.5 percent in Tunisia in 2011, before both economies recover to almost 5 percent growth in 2013. The impact for the region as a whole is less marked, with growth of 1.9 percent in 2011, recovering to around 4 percent in 2013 as capital flows and investor confidence reestablish. After growing 9.3 percent during calendar year 2010, activity in the South Asia Region moderated in the first quarter of 2011, pointing to a projected slowdown in aggregate regional growth to a still buoyant 7.5 percent in 2011. The slowdown partly reflects macroeconomic policy tightening aimed at curbing stubbornly high inflation and reducing large fiscal deficits. Tighter financing conditions and rising food and fuel prices have contributed to a weakening in consumption and investment growth, factors that have been partially offset by strong export growth and resilient remittances. Growth is projected to pick up in 2012-13, reaching 7.9 percent in 2013, led by robust investment expenditures in India, Sri Lanka, and Bangladesh. Pakistan and Nepal are projected to lag, given continued political challenges and associated difficulties with macro-policy implementation. Growth in Sub-Saharan Africa registered 4.8 percent in 2010, up from the 2 percent advance of 2009 and just shy of the region’s 5 percent pre-crisis average growth. The strong performance reflected both the global economic recovery and developments on the domestic front. Excluding South Africa, SubSaharan Africa is one of the fastest growing developing regions, supported by the global recovery, a growing domestic middle-income class with discretionary income to spend, and rapidly rising business confidence. GDP in the region is expected to remain strong over the medium term, expanding by 5 percent in 2011 and about 5.7 percent in both 2012 and 2013. Rising food prices, however, represent a downside risk. Local food prices, which rose 7.3 percent in the 12 months ending February 2011, are accelerating and expected to rise further in 2011 - even as international prices stabilise as the dampening effects on local food prices of good regional harvests in 2010 dissipate. (1) Measured at 2005 market prices and exchange rates (or 4.8 percent in 2010, 4.3 percent in 2011, 4.4 percent in 2012, and 4.5 percent in 2013 when aggregated using Purchasing Power Parity weights). (2) Reliable GDP data for Libya are unavailable and therefore not projected.
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Photo CC by Eduardo Amorim
UNEP Green Economy Report Outlines Investment Strategies to Help Reduce Water Scarcity
Investing 0.16 per cent of global GDP in the water sector could reduce water scarcity and halve the number of people without sustainable access to safe drinking water and basic sanitation in less than four years, according to United Nations research released today. Currently, the failure to invest in water services and to collect, treat and re-use water efficiently, is exacerbating water shortages in many parts of the world and contributing to a situation where global demand for water could outstrip supply within 20 years. In the water chapter of its ground-breaking Green Economy Report, released during the August 2011 World Water Week conference in Stockholm, the United Nations Environment Programme (UNEP) said investing in sanitation and drinking water, strengthening local water supply systems, conserving ecosystems critical for water supply, and developing more effective policies can help avert the high social and economic costs resulting from inadequate water supplies. Cambodia, Indonesia, the Philippines and Vietnam, for example, lose an estimated US$9 billion a year, or 2 percent of their combined GDP, due to problems caused by poor sanitation, such as water-borne diseases.
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“Improving access to cleaner drinking water and sanitation services is a cornerstone of a more sustainable, resource-efficient society”, said Achim Steiner, UN Under-SecretaryGeneral and UNEP Executive Director. “The Green Economy Report shows how accelerated investment in water-dependent ecosystems, water infrastructure and water management, coupled with effective policies, can boost water and food security, improve human health and promote economic growth,” added Mr Steiner.
Improving the efficiency and sustainability of water use is...vital if the world’s increasing energy demands are to be met With no improvement in efficiency of water use, water demand is expected to outstrip supply by as much as 40 per cent by 2030. The Green Economy Report shows that improvements in water productivity, as well as increases in supply (from new dams and desalination plants as well as more recycling) are expected to narrow this gap by about 40 per cent, but the remaining 60 per cent will have to come from infrastructure
investment, water policy reform and the development of new technologies. “Without this investment and policy reform, water supply crises will become increasingly common,” said Professor Mike Young of the University of Adelaide, lead author of the water chapter of the Green Economy Report. Improving the efficiency and sustainability of water use is also vital if the world’s increasing energy demands are to be met. As countries become wealthier and more populous, industrial demand for water is expected to increase. In China, for example, more than half of the increase in demand for water over the next 25 years is expected to result from a significant expansion in its industrial sector. Under the green investment scenario outlined in the Green Economy Report, global water use could be kept within sustainable limits and the Millennium Development Goal of reducing by half the proportion of the population without sustainable access to safe drinking water and basic sanitation, could be met by 2015. With an annual investment of US$198 billion, or 0.16 per cent of global GDP by 2030, water use could be made more efficient, enabling increased and sustainable agricultural, biofuel and industrial production. Under this scenario, the number
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The report highlights several case studies where green water investments are producing economic and environmental benefits. As part of its Five-Year Plan for Green Growth, the Republic of Korea, for example, announced a US$ 17.3 billion investment in its Four Major Rivers Restoration Project in 2009. The five key objectives of the project are to secure water resources against water scarcity, implement flood control measures, improve water quality whilst restoring riverbasin ecosystems and develop local regions and cultural and leisure space around major rivers. Overall, it is expected that the project will create 340,000 jobs and generate an estimated US$ 31.1 billion of positive economic effects as rivers are restored to health. Well-planned bioenergy a key part of Green Economy Water use for bioenergy production is the subject of another new report, also released at World Water Week. The Bioenergy and Water Nexus was jointly produced by UNEP, the Oeko-Institut and the International Energy Agency Task 43. Renewable, sustainable sources of energy are an essential part of the transition to a low carbon, resource-efficient Green Economy. All forms of energy have, to a greater or lesser extent, an impact on water resources, and the relation between water and bioenergy (renewable energy derived from organic materials such as wood, biomass or agricultural by-products) is particularly complex. This report finds that bioenergy’s water demands are in large part linked with the cultivation and processing of feedstocks, such as crops, which in turn have important implications for sustainable agriculture, land use and food production.
efficiency and sustainable fertilizer use, and even improve access to water, thanks to water pumping and cleaning powered by bioenergy, and food security in the case of combined food-bioenergy production systems.
In a world where more than 70 percent of global freshwater is used for agriculture, the report says bioenergy development needs to be carefully planned to avoid it adding to existing pressures The report’s recommendations include:
• Taking a holistic approach and a longterm perspective - Consider the context to identify the best use for water. There is no ‘one size fits all’ approach. Apply a life-cycle approach, consider inter-relationships with other resource needs, and take into account the whole watershed.
• Base decisions on impact assessments to ensure sustainable water management - Analyse bioenergy systems from a comprehensive socio-ecological
perspective. Promote sustainable land and water use.
• Design and implement effective waterrelated policies - These should cover feedstock production and energy conversion and monitor competition between sectoral uses of water.
• Promote technology development - New technologies may help relieve pressure on water resources, but they will need a due diligence check before deployment.
• Conduct further research, fill data gaps, and develop regionalised tools - Support international cooperation in research on bioenergy-related water impacts; address emerging and largely unexplored issues such as the potential and risks of coastal zones/microalgae, land-based microalgae and genetically modified organisms; monitoring needs to be done on a regular basis to fill data gaps and check compliance with regulations and sustainable production; Life Cycle Impact Assessment and water footprints are inadequate without regional tools that assess localised impacts. The United Nations Environment Programme (UNEP’s) mission is to provide leadership and encourage partnership in caring for the environment by inspiring, informing, and enabling nations and peoples to improve their quality of life without compromising that of future generations. Visit www.unep.org for further information.
Centre fed irrigation
Photo CC by Doc Searls
of people living in water-stressed regions is 4 per cent less than under the business-asusual scenario, and 7 per cent less by 2050.
In a world where more than 70 percent of global freshwater is used for agriculture, the report says bioenergy development needs to be carefully planned to avoid it adding to existing pressures. This planning needs to reflect the increasing and competing needs for the same raw materials for uses such as food, animal fodder and fibre as the world’s population climbs to an expected nine billion by mid-century. In some cases, these considerations may argue against bioenergy development. However, the report outlines circumstances in which well-planned bioenergy development can improve agricultural practices, including promoting water
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Photo CC by Joshua Davies
Getting Started In Aerobatics
A lot of times, people will walk up at an aerobatic contest or air show and say, “You know, that really looks like fun and I really wish I could get into it, but I don’t know where to start.” There are probably a lot more who would like to take a shot at aerobatics but the very thought of leaving straightand-level flight brings sweat to their palms, tense muscles to their wrists, and a change in colouration.
Getting Started It’s sometimes amazing what a few phone calls to local FBOs will produce. Quite a number have a Citabria or Cessna Aerobat tucked away in a corner. You may have to travel to get at one and to find an instructor who knows how to use it. Obviously, if an aircraft that’s approved for aerobatics is an extinct species in your community, you must face the prospect of journeying to an aerobatic school that advertises in aviation publications. Actually, when you look around, there are quite a few to choose from. The International Aerobatic Club also maintains a list and this can be obtained, free of charge, by writing. If distance is not a discouraging factor, you will want to check out items like the instructor’s qualifications, the airplane used
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for training, and the cost and availability of both instructor and equipment. Write for information or invest in a phone call. Many of the 6,000 members of the International Aerobatic Club can help you, too. No matter who you fly with, parachutes are required equipment when flying dual and should be required by any aerobatic school when flying solo. Few schools, however, permit solo flying for insurance reasons. The school you work with should have a designated training area. No matter where you fly, your minimum altitude for any manoeuvre should be 1,500 feet AGL. If you have already logged a fair amount of straight-and-level time and you feel up to it, you might ask for a demonstration right off of the kind of manoeuvres that will be encountered in your course of training. Make sure you have a good intercom or signal system and can indicate when you’ve had
enough. Remember to tighten your thigh and stomach muscles when pulling positive Gs (this helps prevent blood from rushing to one end of your body.)
Those first few hours will demand tremendous concentration On the other hand, if you’d like to ease into the sport gradually, as most people would, you’ll be content to build up a tolerance to the excitement. It comes on pretty fast anyway. In most cases, aerobatic instructors will try to determine your skill with some fairly simple but revealing activity, like steep turns, Dutch rolls, or lazy eights. Maintaining altitude and allowing for wind are just as important as achieving and holding the angle of bank. Again, we are talking aircraft control.
Photo CC by Cristian Bortes
by Mike Heuer, former International Aerobatic Club (IAC) President
Within the first hour you should also be introduced to or asked to review chandelles and wingovers. Neither are very demanding exercises, but doing them correctly requires coordination, judgment, planning and an understanding of what your control surfaces are doing.
From that point on it becomes a matter of instructor’s preference. Some will get into spins, some might go to rolls, others will introduce you to loops. Those first few hours will demand tremendous concentration and probably leave you feeling quite tired. It takes a while to build up stamina. Learning to relax, while hanging upside down in a slow roll, may require some conscious effort. The point is, every day you fly aerobatics, whether it’s your first encounter or your thousandth, you’ll be learning, perfecting, reaching, and enjoying the experience. In a sense, it’s like skiing or figure skating, where you first have to learn to stand up, then move, turn, stop, and eventually leap. The more you learn, the more demanding the sport becomes and the more you can enjoy a sense of accomplishment. Ask a gold medallist if it’s worth the effort.
Refining the Basics Your instructor will tell you when you’re ready for solo aerobatics and you’ll be told what your limits are. At some point you should start putting manoeuvres together, watching your entry speed and altitude for each one. Do two loops in a row or fly
Photo CC by Stuart Caie
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a loop followed by a roll. When you reach the point that you can put a spin-loop-roll sequence together and fly it with reasonable control, you are eligible for the first of ten Achievement Awards issued by the International Aerobatic Club. The Basic patch should be within reach after a couple of weekends of practice. Over 3,000 pilots have already earned Achievement Awards. If you keep going and decide you’d like to measure your talents against some other people, IAC sanctions over 50 aerobatic contests around the country every year. There are five levels of competition: Basic,
Sportsman, Intermediate, Advanced, and Unlimited. There are also categories for glider aerobatics. These are explained elsewhere in this brochure. The most popular level is Sportsman and a lot of pilots use rented or borrowed aircraft in this category. While it’s a seriously competitive sport, nearly everyone who shows up for a contest enjoys the spirit that develops so quickly at the contest sites. A calendar of events around the world is carried in Sport Aerobatics magazine, the official monthly publication of IAC.
Do two loops in a row or fly a loop followed by a roll Aerobatic instruction and aerobatic aircraft are not cheap, but if you can muster the means and handle the thrills, the art and sport of aerobatics are hard to beat. Aerobatics will improve your proficiency and make you a better pilot. The International Aerobatic Club is the world’s largest aerobatic organisation promoting and enhancing the safety and enjoyment of aerobatics. www.iac.org
Charles Lindbergh: pioneering aviator
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Photo CC by JD Hancock
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The Evolution of Golf Simulators
By Mitchell Woll Thanks to golf simulators, avid golfers from the 1970s and beyond have had the chance to practice and perfect their technique indoors and safe from poor weather. Added kudos goes to the game developers, software engineers and golfers who have refined the golf simulator during more than a quartercentury into what is now an advanced piece of technological hardware. From the days of Jack Nicklaus to Tiger Woods, rudimentary golf simulators underwent many technological advancements to become more enhanced systems. They were hardly respected as helpful tools for golf training and were considered as novelties. But the technology has improved greatly. Just think how much the telephone has progressed into what they are today - the same thing is true of golf simulators. Long ago, the archaic systems projected grainy pictures of golf courses on the screen for golfers to whack balls into. Once contact was made, the golf simulator measured the time it took for the ball to cross two points. With some calculations, the device would surmise how far golfers hit the ball and deposited them at their next location. The next generation of golf simulators had a different look - a more pixelated Super Mario version of the game. Fairways were green strips peppered with yellow and blue geometric shapes that represented what were supposedly bunkers and water hazards. Dictating where the ball went didn’t much improve either.
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Today, we don’t deal with lame golf course recreations. Instead, golf simulators transport you into an immersive 3D environment, complete with software that allows players to choose what time of day they’re playing and the weather. Also, simulators measure way more than just the golf ball’s journey between two spots. Some
Advantages No green fees or tee times Play all year around whatever the weather, whatever the time of day Hone your game in privacy with no pressure Play courses all around the world without travelling anywhere Detailed data on all shots allowing for instant analysis with a focus on the process rather than the immediate result 3D motion graphics, sound and visual effects
simulators are even equipped with cuttingedge camera technology that takes 2,000 photos per second allowing them to calculate the exact ballistics of the golf ball. After years of collecting data from swings and golf balls soaring through the air, there is no shot today’s simulators haven’t seen. They measure the speed, trajectory and direction of the ball with such precision that
you can actually watch the virtual version fly through the air and land right where it would in real life. The golf simulator software also allows golfers to play famous courses from all over the world. From the United States to Abu Dhabi, players have the chance to play around the world. Each course has been carefully studied, so that any digital tilt of the green is exactly like the real one. The system’s software also regulates the ball’s collision to real-life specifications. Now hitting a tree won’t yield the identical results as hitting a rock. (Digital people have not been added to spare you the trouble of yelling, “Fore!”) In all actuality, the shortcomings of your father’s golf simulator might have been hurting his game rather than improving it. In the 1980s, a good-looking drive may turn out to be a poor shot by the standards of today’s golf simulators. Also, old simulators did not factor in weather. Any good golfer knows that a ball’s trajectory and speed can differ from the wind’s direction and gust. Now, golfers can better practice during the winter months indoors. Golf simulation has become more life-like, and for the better. A terrible swing will result in a horrible shot, allowing players to better pin-point their problems. Golfers aren’t simply having batting practice against a screen. New and improved golf simulation deserves a try. Test it out for yourself. Article supplied by SES (Sports Entertainment Specialists, Inc) www. sportsentertainmentspecialists.com
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Organise a Scotch Whisky Tasting Tasting Scotch Whisky is an experience involving all five senses. And to help compare different whiskies, there are some general steps that can be followed. What to taste? There are many ways to approach a Scotch Whisky tasting, for example, tasting whiskies of different ages, from different regions, or those matured in different casks. This is all part of the fun and discovery. Select a suitable glass A tulip-shaped glass will help to compare different whiskies by trapping the aromas in the bottom and releasing them in the small area at the top of the glass. Whisky is also often enjoyed from a tumbler, particularly if drunk with water or as a long drink. Use your eyes Hold the glass up against a neutral background. What you see is important, as colour can give clues about the age of the whisky and the type of cask used for maturation. New-make spirit prior to maturation is as clear as water. After years maturing in the cask, however, it can be a much darker colour. The colour comes from the whisky sitting in the cask over years, ebbing and flowing in and out of the wood. Check the legs Swirl the whisky around the glass, coating its sides thoroughly. Then wait and watch, as the
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liquid runs back down the side of the glass, the ‘legs’ of the whisky. If the ‘legs’ are thin and run quickly, then it may be a younger or lighter whisky. If the ‘legs’ are slow and thick, then it may be a heavier or older whisky. Next the nose Confirm your assumptions and discover more about the dram using your nose. Indeed, a master distiller will use his nose alone to make judgements about a whisky. Don’t worry if it proves difficult to describe the aroma - scientists have discovered a wide range of flavours in whisky and different people will pick up different aromas. With a little practice, it becomes easier. Add some water After ‘nosing’ the whisky, try adding a little still water, then use your nose again. The water will reduce the alcohol content, and raises the temperature slightly releasing more of the whisky’s flavours - and you will see this happening in your glass. And now, finally, taste Sip the whisky and allow it to lie on the tongue and coat the sides of your mouth. You might pick out different flavours to those you were aware of using your nose. Roll the spirit around so that it comes into contact with all your taste buds, sweetness at the tip of the tongue, saltiness along the sides, dryness and bitterness at the back. The wonderful flavours will develop,
unfolding in the mouth. Ask yourself what flavours you are experiencing and how the whisky feels in your mouth. Does the flavour last a long time or does it disappear quickly? This is the whisky’s finish. So what did you taste? Well, there is no right or wrong answer. Everyone and every whisky is different. That is why tasting Scotch Whisky is such an enjoyable and rewarding individual experience. Also remember that when tasting different whiskies, always do so responsibly. Scotch Whisky is a drink to be sipped and savoured. Have water available - this will cleanse the palate and can be interspersed between trying different whiskies. Content and images supplied by the Scotch Whisky Association. Contact: info@swa.org.uk
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Heli-skiing What is Heli-skiing? Heli-skiing is off-trail, downhill skiing that is reached by a helicopter, not a ski lift. The birth of Heli-skiing In April 1965, Hans Gmoser was intrigued by an idea that, although fanciful, seemed practical - an idea that had never been tried by any resort in the world. Hans began using helicopters to transport enthusiastic skiers high into the thin air of the otherwiseinaccessible Bugaboo Mountains in the Rocky Mountains of Canada. Heli-skiing, as it became known, was born and became an instant success. Is Heli-skiing for You? Heli-skiing isn’t for everyone, so before you plan your trip, it’s best to see if a Heliskiing tour is something that will be safe and fun for you. So, is Heli-skiing for you? Ask yourself the following questions. 1. Are you a good enough skier or snowboarder? Heli-skiing isn’t for first timers. You should be both capable and experienced in handling a mixture of conditions, whether they are on one plank or two. You should have considerable skiing experience in a conventional resort setting. Your run choices are predominantly blue/ black and you ski them with confidence in almost any conditions (flat light with dust on crust to give an extreme example!). Your skiing ability has improved year after year and you are capable of multi-day ski trips. You may not have the style of a paid skier, but you have the confidence to keep up with friends and you know when you are making some ‘good turns’. You can make parallel turns with confidence
and if the situation arises, you can; side-slip, step-up sideways, traverse and make kick turns. In the process of becoming a better skier, you have made the transition from novice level equipment to high performance gear and can also spot the difference. You may not have tons of powder skiing experience but you can maintain control in backcountry conditions. 2. Are you fit enough? Skiing and riding powder all day is super fun but it is physically demanding. You need to be of a good level of fitness to get the most from your heli-skiing experience. 3. Can you accept that there are risks involved? Safety is always the number one priority for heli-skiing operators. However, it’s necessary to realise that when you take on mother nature and her mountains, anything can happen. All heli-skiing operations will require you to sign a comprehensive waiver of liability before you can go skiing.
What to Expect While Heli-skiing Heli-skiing Groups On most Heli-skiing tours, heli-skiers are led by an experienced guide who will lead a group of skiers. You may be skiing with as few as six or as many as 12 skiers. This varies depending on which operator your book with, and can change according to the terrain and conditions expected. Most operations offer private heli-skiing charters too. Heli-skiing Tour Length While heli-skiing, you can expect around 5-12 runs or heli-lifts in a day. Your guides will constantly be assessing and searching for the best (and the safest) snow. In some locations, you might take one long run down
the mountain, stopping in various places for breaks. Most heli-skiing operators offer daily, three, four and seven day packages. When avalanche risk levels are high you may end up skiing easier more gentle slopes. Skiing Conditions Heli-skiing conditions can really vary, according to the day you’re skiing and where you’re skiing. However, Heli-skiing is known for its opportunity to allow skiers to access amazing powder and this is your best chance to ski the champagne powder snow. Conditions often vary from run to run due to wind and solar aspects. Be prepared for variable conditions. It’s best to check with your Heli-skiing tour for specific information about the snow conditions and weather prior to booking your trip. Heli-skiing Safety The primary safety concern of heli-skiing operators is the danger of avalanches. Reputable heli-skiing operations employ highly trained guides and pilots who are experienced in evaluating snow conditions, snow stability, and risk management. Don’t worry - most tours will include in the price the use of avalanche transceivers and will provide training on the use of them and other avalanche rescue equipment. And Finally Heli-skiing is the ultimate skiing and boarding experience. Endless acres of deep powder snow and solitude in the big mountains to be shared with friends and family. What more could a skier or boarder want? Article supplied by Bella Cooli Heli Sports www.bellacoolihelisports.com
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US Competitiveness Ranking Continues to Fall; Emerging Markets Are Closing the Gap
Switzerland tops the overall rankings in The Global Competitiveness Report 2011-2012, released 7 September 2011 by the World Economic Forum. Singapore overtakes Sweden for second position. Northern and Western European countries dominate the top 10 with Sweden (3rd), Finland (4th), Germany (6th), the Netherlands (7th), Denmark (8th) and the United Kingdom (10th). Japan remains the second-ranked Asian economy at 9th place, despite falling three places since last year. The United States continues its decline for the third year in a row, falling one more place to fifth position. In addition to the macroeconomic vulnerabilities that continue to build, some aspects of the United States’ institutional environment continue to raise concern among business leaders, particularly related to low public trust in politicians and concerns about government inefficiency. On a more positive note, banks and financial institutions are rebounding for the first time since the financial crisis and are assessed as somewhat sounder and more efficient. Germany maintains a strong position within the Eurozone, although it goes down one position to sixth place, while the Netherlands (7th) improves by one position in the rankings, France drops three places to 18th, and Greece continues its downward trend to 90th. Competitivenessenhancing reforms will play a key role in revitalising growth in the region and tackling its key challenges, fiscal consolidation and persistent unemployment. The results show that while competitiveness in advanced economies has stagnated over the past seven years, in many emerging markets it has improved, placing their growth on a more stable footing and mirroring the shift in economic activity from advanced to emerging economies. The People’s Republic of China (26th) continues to lead the way among large developing economies, improving by one more place and solidifying its position
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among the top 30. Among the four other BRICS economies, South Africa (50th) and Brazil (53rd) move upwards while India (56th) and Russia (66th) experience small declines. Several Asian economies perform strongly, with Japan (9th) and Hong Kong SAR (11th) also in the top 20. In the Middle East, Qatar (14th) solidifies its place in the top 20 while Saudi Arabia (17th) enters it for the first time, followed by Israel (22nd), the United Arab Emirates (27th), Kuwait (34th) and Bahrain (37th). Most Gulf States continue their upward trend of recent years. In sub-Saharan Africa, South Africa (50th) and Mauritius (54th) feature in the top half of the rankings, followed by second-tier best regional performers Rwanda (70th), Botswana (80th) and Namibia (83rd). In Latin America, Chile (31st) retains the lead and a number of countries see their competitiveness improve, such as Panama (49th), Brazil (53rd), Mexico (58th) and Peru (67th). “After a number of difficult years, a recovery from the economic crisis is tentatively emerging, although it has been very unequally distributed: much of the developing world is still seeing relatively strong growth, despite some risk of overheating, while most advanced
economies continue to experience sluggish recovery, persistent unemployment and financial vulnerability, with no clear horizon for improvement,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum. “The complexity of today’s global economic environment has made it more important than ever to recognise and encourage the qualitative as well as the quantitative aspects of growth, integrating such concepts as inclusiveness and environmental sustainability to provide a fuller picture of what is needed and what works.” Xavier Sala-i-Martin, Professor of Economics, Columbia University, USA, and co-author of the report, added: “Amid re-emerging concerns about the global economic outlook, policy-makers must not lose sight of longterm competitiveness fundamentals. For the recovery to be put on a more stable footing, emerging and developing economies must ensure that growth is based on productivity enhancements. Advanced economies, many of which struggle with fiscal challenges and anaemic growth, need to focus on competitiveness-enhancing measures in order to create a virtuous cycle of growth and ensure solid economic recovery.” Source: World Economic Forum. Full report available at www.weforum.org/gcr
GCI 2011-2012 Country/Economy
Rank
Score
Switzerland
1
5.74
1
0
Singapore
2
5.63
3
1
Sweden
3
5.61
2
-1
Finland
4
5.47
7
3
United States
5
5.43
4
-1
Germany
6
5.41
5
-1
Netherlands
7
5.41
8
1
Denmark
8
5.40
9
1
Japan
9
5.40
6
-3
United Kingdom
10
5.39
12
2
Former Rank
Change
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