businessannual2011

with

Offshore Guide

Special Feature

The Road to Recovery FDI * Markets * Emerging Economies * IT * Regeneration * Outsourcing * International Finance Centres Wealth Management * Tax * Leadership * Engineering * Pharmaceuticals * Insurance * Environment

2

with

Offshore Guide

Special Feature

The world is a little wiser and a little humbler as it sets out on the road to recovery and gets to grips with a new economic landscape where things long held as certain have proved to be anything but, where the East no longer beats to the West’s drum in quite the same way, and where environmental concerns and profits are no longer seen as incompatible.

The Business Annual 2011 puts under the spotlight those initiatives likely to be the brightest stars of this new-look arena in 2011, and by highlighting the trends, developments and ways of thinking most worthy of your time, energy and resources offers in the process the necessary analysis and evaluation to make informed operational, strategic and personal decisions, and so enable you to allocate precious resources in the most cost-effective manner possible.

It also includes within its pages an Offshore Guide Special Feature which looks at the changing face of international finance and how to stay tax-efficient against the backdrop of global legislative developments.

Editor: Richard Smith Business Development: Dominic Hale, James Wilson Production Manager: Claire Turner Designer: Wallace Wainhouse Editorial: Joanna Gray, Charlie Jacoby, Frances Law, Magnus Andersen, Ken Shaw All enquiries: info@businessannual.net W: www.businessannual.net Disclaimer: The information in this publication has been obtained from sources the proprietors believe to be correct.

However, the publishers cannot be held responsible for any errors or omissions. In no way does any of the content constitute legal advice and the publishers and staff accept no responsibility nor legal liability for any loss or damage caused by or arising from reliance on it. Persons are reminded that independent professional advice should be sought before any investment decisions are made.

Copyright: No part of this publication may be reproduced without the prior consent of the publisher. Š Business Annual 2011. Unless otherwise stated all photographic content is licensed under the Creative Commons (cc) attribution license.

To view a copy of the license visit http://creativecommons.org/ licenses/by/3.0/ Cover Photo credits clockwise from top left: Jacob Montrasio, Laszlo Ilyes, Zach Dischner, NASA Goddard, Nigel Morris, Jacob Montrasio, Joshua Nguyen, DVIDSHUB.

3

CONTENTS

Offshore Guide Special Feature 25 International Financial Centres Can Boost Growth in Developing Countries International financial centres can enhance economic growth and alleviate poverty among developing countries according to Professor Jason Sharman 26 Open for Business at the Crossroads of Asia Labuan: Islamic Finance powerhouse

6

8

Key Messages from the United Nations Conference on Trade and Development (UNCTAD)’s World Investment Report 2010 Strengthening Recovery, New Risks

by Pier Carlo Padoan, OECD Chief Economist

10 How to Regenerate Magnus Andersen asks to what extent should government and big business be responsible for urban regeneration?

14 Capitalise on the Green IT Market

by Terry Erdle, Senior VP, skills certification, CompTIA 15 Mighty Micros Microfinance is no longer a peripheral operation limited to Bangladeshi villages, rather its business model has become mainstream. Joanna Gray looks at a financial success story

31 Isle of Man Treasury Minister on ‘the Reinvention of Offshore Centres’ Anne Craine MHK rounds on critics who link smaller jurisdictions ‘with all of the world’s woes’ 32 To Serve and Protect The Cook Islands shows its maturity and mettle The Global Forum on Transparency and Exchange of Information for Tax Purposes – 10 Essential Elements 34 Chinese-Samoan Relations Flourish Samoa’s time on the world stage has finally come English Speaking Banking Hub in the Heart of Latin America The many merits of Belize 35 The Original IFC Embraces Change The Bahamas looks to have moved seamlessly into the new era

48 Exceeding Expectation: The Principles of Outstanding Leadership The Work Foundation’s study to reveal the essence of outstanding leadership 50 No Systemic Risk from Insurance Core Activities Findings of The Geneva Association Special Report on Systemic Risk in Insurance 52 Merrill Lynch Global Wealth Management and Capgemini Release 14th Annual World Wealth Report 54 The Eruption of Eyjafjallajökull was a Wakeup Call for Change

By Giovanni Bisignani, Director General and CEO, International Air Transport Association (IATA) 55 2011 – “Piracy: Orchestrating the Response” International Maritime Organization (IMO) participants confirm willingness to contribute to the promotion of the theme for World Maritime Day 2011

36 HK Banks Rise to New Challenges Extracts from Hong Kong Permanent Secretary for Financial Services & the Treasury (Financial Services) Au King-chi’s address at the Hong Kong Institute of Bankers’ second annual banking conference 16 Up in the Clouds Todd Thibodeaux, President and CEO, CompTIA discusses cloud computing 17 The Rise of Nearshoring and BPO Charlie Jacoby looks at nearshoring, FDI deals and Business Process Outsourcing (BPO), examining the current trends in these corporate policies among the world’s biggest companies 20

‘Flash Crash’ Shows Need for Price Discovery and Safeguards

by Duncan Niederauer, CEO, NYSE Euronext

21 The World Federation of Exchanges Publishes 2010 First Half Market Statistics AFME Outlines Ways to Rescue Failing Banks Without Taxpayer Financing from the Association for Financial Markets in Europe 22 BRICs March On With the developed nations still retrenching after the recession, BRICs nations emerged stronger. Joanna Gray celebrates the investment opportunities they offer

38 Jamaica Moves Closer to Becoming an IFC PM states intention to become an international finance centre Legislation that Works Inspired and innovative developments from the British Virgin Islands 39 ‘Business as Usual’ in the TCI Financial Services Sector Investors unaffected by political upheavals Bermuda Looks East Sub-tropical IFC enjoys increase in activity from Asia 40 Indian Ocean Gem is Hive of Activity Mauritius: a major hub for international investment flows

42 Extract from the G20 Toronto Summit Declaration On financial sector reform 43 Offshore Financial Centres A speech by Mr Mark Field, Conservative MP for Cities of London and Westminster at Westminster Hall, 21 July 2010 about the beneficial role IFCs play in the global economy 46 VAT Spreads Out Across the Caribbean St. Kitts and Nevis PM Douglas points out benefits of VAT

4

56 Green Goes Mainstream: Biodiversity is Climbing the Corporate Agenda Companies with ‘net positive impact’ on biological diversity are winners in resource-constrained world 58 UN Launches Decade-long Efforts to Tackle Desertification Desertification robs the world of productive land 60 Big Pharma 2011 may well see the launch of treatments as diverse as an anti-malaria vaccine and a cure for male baldness. Joanna Gray looks at six exciting launches 62 Building for the Future Engineering projects from railways to new cities offer economic hope and improved standards of living for millions. Frances Law looks at the most thrilling projects from six continents 64 Marco Polo: Business Pioneer Extracts from ‘Travels of Marco Polo’ 65 Simple Tips to Master Five of the Strangest Golf Rules

by Jack Moorehouse 66 The International Year of Chemistry 2011

Your Wealth. Our Protection.

We Navigate Your Options Wealth Management. Asset Protection.

Trusts. Companies. Banking.

Limited Liability Companies.

Insurance. Partnerships

Ideal Location. Strong Legislation. Outstanding People. www.cookislandsfinance.com 5

Key Messages from the United Nations Conference on Trade and Development (UNCTAD)’s World Investment Report 2010

FDI Trends and Prospects Global foreign direct investment (FDI) witnessed a modest, but uneven recovery in the first half of 2010. This sparks some cautious optimism for FDI prospects in the short run and for a full recovery further on.

UNCTAD expects global inflows to reach more than $1.2 trillion in 2010, rise further to $1.3–1.5 trillion in 2011, and head towards $1.6–2 trillion in 2012. However, these FDI prospects are fraught with risks and uncertainties, including the fragility of the global economic recovery.

Developing and transition economies attracted half of global FDI inflows, and invested one quarter of global FDI outflows.

They are leading the FDI recovery and will remain favourable destinations for FDI. Most regions are expected to see a rebound in FDI flows in 2010. The evolving nature and role of FDI varies among regions. Africa is witnessing the rise of new sources of FDI. Industrial upgrading through FDI in Asia is spreading to more industries and more countries. Latin American transnational corporations (TNCs) are going global.

Foreign banks play a stabilising role in South-East Europe, but their large scale presence also raises potential concerns.

High levels of unemployment in developed countries triggered concerns about the impact of outward investment on employment at home.

Overcoming barriers for attracting FDI remains a key challenge for small, vulnerable and weak economies. Overseas development assistance (ODA) can act as a catalyst for boosting the role of FDI in least developed countries (LDCs). For landlocked developing countries (LLDCs) to succeed in attracting FDI they need to shift their strategy to focus

6

on distance to markets rather than distance to ports. Focusing on key niche sectors is crucial if Small Island Developing States (SIDS) are to succeed in attracting FDI.

their IIA regimes, driven by the underlying need to ensure coherence and interaction with other policy domains (e.g. economic, social and environmental).

Investment Policy Developments

Global initiatives, such as investment in agriculture, global financial systems reform, and climate change mitigation are increasingly having a direct impact on investment policies.

A dichotomy in investment policy trends is emerging. It is characterised by simultaneous moves to further investment liberalisation and promotion on the one hand, and to increase investment regulation in pursuit of public policy objectives on the other.

A dichotomy in investment policy trends is emerging... characterised by simultaneous moves to further investment liberalisation and promotion on the one hand, and to increase investment regulation in pursuit of public policy objectives on the other.

Economic stimulus packages and State aid have impacted on foreign investment, with no significant investment protectionism observed so far.

The International Investment Agreement (IIA) universe is expanding rapidly, with over 5,900 treaties at present (on average four treaties signed per week in 2009). The IIA system is rapidly evolving as well, with countries actively reviewing and updating

Investing in a Low-Carbon Economy TNCs are both major carbon emitters and low-carbon investors. They are therefore part of both the problem and the solution to climate change.

TNCs can contribute to global efforts for combating climate change by improving production processes in their operations at home and abroad, by supplying cleaner goods and services and by providing much-needed capital and cutting-edge technology.

UNCTAD estimates that in 2009 lowcarbon FDI flows into three key low-carbon business areas (renewables, recycling and low-carbon technology manufacturing) alone amounted to $90 billion. In its totality such investment is much larger, taking into account embedded low-carbon investments in other industries and TNC participation through non-equity forms. Already large, the potential for cross-border low-carbon investment is enormous as the world transitions to a low-carbon economy.

For developing countries, low-carbon foreign investment by TNCs can facilitate the expansion and upgrading of their productive capacities and export competitiveness, while helping their transition to a low-carbon economy. However, this investment also carries economic and social risks.

Photo: NASA Goddard /CC by

“Carbon leakage” has implications for both global emission reduction efforts and economic development. However, the extent of this phenomenon and its implications are hard to assess. Instead of addressing the issue at the border (as discussed in the current debate), it could be addressed at its source, working through corporate governance mechanisms, such as improved environmental reporting and monitoring.

Policy needs to maximise benefits and minimise risks related to low-carbon investment, based on individual countries’ social, economic and regulatory conditions.

To support global efforts to combat climate change, UNCTAD suggests a global partnership to synergise investment promotion and climate change mitigation and to galvanise low-carbon investment for sustainable growth and development.

Elements of this partnership would be: • Establishing clean-investment promotion strategies. This encompasses developing conducive host-country policy frameworks (including market-creation mechanisms) and implementing effective promotion programmes (with key functions being investor targeting, fostering linkages and investment aftercare). International financial institutions and home countries need to support low-carbon investment promotion strategies, in particular through outward investment promotion, investment guarantees and credit risk guarantees.

• Enabling the dissemination of clean technology. This involves putting in place an enabling framework to facilitate cross-border technology flows, fostering linkages between TNCs and local firms to maximise spillover effects, enhancing local firms’ capacities to be part of global value chains, strengthening developing countries’ absorptive capacity

for clean technology, and encouraging partnership programmes for technology generation and dissemination between countries.

• Securing IIAs’ contribution to climate change mitigation. This includes introducing climate-friendly provisions (e.g. low-carbon investment promotion elements, environmental exceptions) into future IIAs, and a multilateral understanding to ensure the coherence of existing IIAs with global and national policy developments related to climate change.

TNCs are both major carbon emitters and lowcarbon investors. They are therefore part of both the problem and the solution to climate change • Harmonising corporate GHG emissions disclosure. This involves creating a single global standard for corporate greenhouse gas (GHG) emissions disclosure, improving the disclosure of foreign operations and activities within value chains, and mainstreaming best practices in emissions disclosure via existing corporate governance regulatory mechanisms (such as stock-listing requirements).

• Setting up an international low-carbon technical assistance centre (L-TAC).

L-TAC could support developing countries, especially LDCs, in formulating and implementing national climate change mitigation strategies and action plans, as well as engage in capacity and institution

building. The centre would help beneficiaries meet their development challenges and aspirations, including by benefiting from low-carbon foreign investment and associated technologies. Among others, L-TAC would leverage expertise via existing and novel channels, including multilateral agencies.

Investment for Development: Challenges Ahead The evolving TNC universe, along with the emerging investment policy setting, poses three sets of key challenges for investment for development: • to strike the right policy balance (liberalisation vs. regulation; rights and obligations of the State and investors); • to enhance the critical interfaces between investment and development, such as those between foreign investment and poverty, and national development objectives; • to ensure coherence between national and international investment policies, and between investment policies and other public policies.

All this calls for a new investmentdevelopment paradigm and a sound international investment regime that effectively promotes sustainable development for all.

June 2010 – reproduced with kind permission of UNCTAD Established in 1964, UNCTAD promotes the development-friendly integration of developing countries into the world economy.

7

Strengthening Recovery, New Risks

by Pier Carlo Padoan, OECD Chief Economist Growth is picking up in the OECD area–at different speeds across regions–and at a faster pace than expected in the previous Economic Outlook (November 2009). Strong growth in emerging-market economies is contributing significantly. However, risks to the global recovery could be higher now, given the speed and magnitude of capital inflows in emerging-market economies and instability in sovereign debt markets.

Keeping markets open has been a strong positive factor in the upturn. The rebound in trade, while incomplete, has been substantial and is proving to be a major force pulling the global economy out of recession. The ongoing recovery in activity could surprise on the upside, with a policy-driven expansion giving way to self-sustained growth. Fixed investment could bounce back more robustly and household consumption could recover more rapidly with household savings rates having risen more slowly than previously anticipated, especially in Europe. The spillover from growth in non-OECD Asia could be stronger than expected, especially in the United States and Japan. From this point of view, the overall economic environment is relatively auspicious.

As activity gathers momentum, global imbalances are beginning to widen again.

However, in some emerging-market economies, notably China, strong domestic, policy-driven demand is keeping a large external surplus from rising to the levels seen prior to the crisis. This does not obviate the need to tackle global imbalances through appropriate policies. As discussed in this Economic Outlook, strong, sustainable and more balanced growth can be achieved

8

through a combination of macroeconomic, exchange-rate and structural policies, while delivering fiscal consolidation. Identifying and implementing such a combination of policies is a major goal of international collaboration, most notably within the G20.

Progress in financial market reform will also require international collaboration.

Internationally agreed rules and regulations will need to be established to strengthen the stability of the global financial system.

Articulating more clearly the roles of monetary and prudential policies in dealing with future credit and asset-price developments is also a priority.

As activity gathers momentum, global imbalances are beginning to widen again This otherwise moderately encouraging outlook could be jeopardised by significant risks. A first substantive risk is related to developments in sovereign debt markets.

While originating in some euro-area economies, instability has spread to other euro-area members and sovereign debt markets in other parts of the world.

Overheating in emerging-market economies also poses a serious risk. A boom-bust scenario cannot be ruled out, requiring a much stronger tightening of monetary policy in some non-OECD countries, including China and India, to counter inflationary pressures and reduce the risk of asset-price bubbles. Growth would slow down as a consequence, with negative effects on other

regions. Exchange-rate flexibility could alleviate some of the pressure on Chinese monetary policy and allow more scope for addressing domestic inflation.

These risks indicate that policy challenges are substantial and more demanding than appeared to be the case a few months ago.

Bearing in mind these risks, monetary policy must be normalised. Support is already being removed in several countries. Exit strategies must take into account concomitant fiscal consolidation so as to facilitate it without putting undue pressure on interest rates.

The outlook for inflation remains benign in the OECD area due to considerable economic slack, but inflationary expectations may become unanchored. As mentioned earlier, emerging-market economies are having to deal with inflationary pressures and to absorb sizeable capital inflows. Strong growth in those economies is pushing up energy and commodity prices, which in turn will lead to further inflation.

Exit from exceptional fiscal support must start now, or by 2011 at the latest, at a pace that is contingent on specific country conditions and the state of public finances.

Many countries are facing very unfavourable government debt dynamics, as rising indebtedness raises risk premia, which adds to the debt burden while holding back growth, with further adverse consequences on debt sustainability. A related challenge is that several countries are having to embark on fiscal consolidation simultaneously. Given the magnitude and synchronicity of fiscal consolidation, international spillover effects could further bear down on the growth in demand in individual countries.

Photo: Daniel Lobo/CC by

Prompt and massive response by euro-area governments and the European Central Bank have calmed financial market turbulence.

But the region’s underlying weaknesses are far from settled. Fiscal consolidation has been stepped up and front-loaded in some countries. But fundamental structural adjustment programmes will have to be implemented, as announcements alone may not be enough to secure credibility in consolidation strategies.

The sovereign debt crisis has highlighted the need for the euro area to strengthen significantly its institutional and operational architecture to dissipate doubts about the long-term viability of the monetary union. At a minimum, surveillance of domestic policies needs to be strengthened, taking on board broader competitiveness considerations. But these efforts alone may not be enough. Bolder measures need to be taken to ensure fiscal discipline, along a continuum that ranges from stronger surveillance and more effective sanctions for non-compliance, to external auditing of national budgets, all the way to de facto fiscal union.

In all countries, there is a need for sustained and sustainable economic growth also in support of fiscal consolidation. This calls for an articulated strategy linking together – and exploiting synergies among – macroeconomic, financial and structural policies. Fiscal consolidation must be designed and implemented to support growth to the extent possible.

Spending cuts must be made to preserve, and indeed increase the cost-effectiveness of growth-friendly programmes, including innovation and education. Revenue-raising measures, where needed, must focus on

the instruments that are least harmful to growth, such as consumption and carbon taxes. Fiscal rules can help to enhance the credibility of fiscal consolidation. Growthenhancing structural reforms must be part of consolidation strategies.

This differentiated, yet synchronised, pattern of normalisation across policy domains and countries underscores the importance of domestic policies in one area taking due account of policy settings in other domains and countries. It also raises the possibility of exchange-rate movements and exposure of vulnerabilities in the financial sector.

Prompt and massive response by euro-area governments and the European Central Bank have calmed financial market turbulence Labour and product market reforms need to be implemented to raise potential output, support innovation and prevent high unemployment from becoming entrenched. These reforms can yield concomitant dividends in terms of facilitating fiscal consolidation and reducing global imbalances on a durable basis. The development of social security and services in China and other Asian economies with large current-account surpluses fulfils an important social goal in its own right and would reduce the need for precautionary saving, thereby further promoting domestic demand. In other surplus countries, different

types of structural reforms would unleash opportunities for investment, while pension reforms and the removal of tax incentives that encourage consumption would increase household saving in deficit countries.

In the autumn of 2008 the peak of the financial crisis led to unprecedented and coordinated policy responses that prevented the recession from becoming more severe and long lasting. Recent action taken by euro-area countries, also in coordination with other major economies, is of comparable dimension and momentum.

Both have been welcome and necessary, and have been taken under the pressure of rapidly evolving circumstances. The fact that the second set of actions has been taken eighteen months after the first is a reminder that the period of significant financial instability that began in August 2007 is not yet over.

The scale and scope of these two episodes has also highlighted the fact that short-term policy responses are not without long-term consequences. Above all, rising indebtedness and widespread moral hazard will reduce room for policy action, if needed in future to cope with new emergencies. Dealing with such consequences, while returning to strong, sustainable and balanced growth, will require coordinated, decisive and sustained efforts at the international and country levels.

Pier Carlo Padoan, Strengthening recovery, new risks, OECD Observer No. 280 July 2010, www.oecdobserver.org ©OECD Observer N° 280 July 2010

9

How to Regenerate?

Smog in Beijing, China Photo: Laurel Fan /CC by

To what extent should government and big business be responsible for urban regeneration asks Magnus Andersen? He compares what’s going on in Beijing, China right now with activity in three European cities widely acknowledged to be successful models of regeneration.

Beijing In China’s capital city planners have the unenviable task of balancing the competing pressures of rapid urbanisation with the emergence of new social and economic power groups with their varying demands. In a city with a history such as Beijing’s, these tasks are made all the more complex by the cultural and symbolic value of much of the urban environment.

This has been borne out recently with the controversial demolition of the Gulou and Caochangdi areas, the former being synonymous with imperial temples and official residences, but also with many hutong, one-story lanes of Old Beijing which have now been consigned to the past.

Caochangdi meanwhile had been seen as a centre for creative industries which had the misfortune to be located in close proximity to the airport and CBD. With local officials subject to centrally imposed growth targets, with no experience of urban planning and faced with many small businesses failing to meet the taxes levied upon them it is perhaps small wonder that they look to bigger, often foreign owned business to guarantee the necessary returns

10

on infrastructural investment, rather than wait indefinitely for the growth to occur organically.

It is clear then that in the rush to accommodate the demands of rapid economic transformation, measured longterm, strategic planning has been set aside.

Being subject to different market forces regeneration in old Europe is a markedly different affair with the most successful initiatives having much in common Yet not everyone’s complaining; compensation packages for hutong residents forcibly evicted are for some sufficient tonic to bid farewell to oft over-romanticised squalid conditions that have little room in a modern metropolis of global significance Being subject to different market forces regeneration in old Europe is a markedly different affair with the most successful initiatives having much in common;

There has been a long overdue realisation that here cities are in competition to attract sustainable, wealth-generating companies and entrepreneurs, and that as such setting and managing an ongoing strategy to make a city enticing, user-friendly and unique is of key importance, and that to achieve this real power and resources need to have been devolved to city authority level so that stakeholders make the decisions.

They share the view, and have been vindicated in doing so that this initial investment in highquality infrastructure and public realm to include cultural regeneration at its heart will change the image of the city and attract private investment and new residents.

They further share an acknowledgment that for maximum chance of success a holistic focus on the wider metropolitan area beyond strict municipal boundaries is necessary. This, to encompass all sectors and professions and to incorporate the dispossessed into attractive and balanced neighbourhoods.

Three cities where implementing these practices has been shown to have particularly worked in the European arena are Glasgow, Rotterdam and Bilbao. >>

Advertorial

CLYDE WATERFRONT – A RIVER OF OPPORTUNITY The scale, pace and diversity of the River Clyde’s regeneration has revitalised the area, creating numerous opportunities for businesses and the public to invest, locate and live!

Clyde Waterfront Strategic Partnership (www.clydewaterfront.com) facilitates and promotes the Clyde’s regeneration from Glasgow, via Renfrew to Dumbarton, with £3.5 billion already spent or committed by the public & private sectors across 250+ projects, creating 18,000 new jobs, 8,500 new homes and 300,000m2 of new commercial space to date.

Clyde Waterfront’s economy is now far more diverse than before, with several centres of excellence, for example:-

Financial services: Glasgow’s multi award winning International Financial Services District (IFSD) (www.ifsdglasgow.co.uk) has attracted +£1 billion of investment to date, with employers like AON, AXA, Barclays, beCogent, BNP Paribas, esure, First Data, HSBC, JP Morgan, Morgan Stanley, National Australia Group, Norwich Union, RBS and Santander, creating 16,000 new jobs since 2001. New tenants, new Grade A offices, the Tradeston “Squiggly” bridge and exciting plans for the riverside, all add fresh impetus.

Creative Industries: The digital media sector is thriving in Glasgow at Pacific Quay (www.pacificquaydmq.com) with the relocation of STV and BBC Scotland into purpose built broadcasting centres and the development of Medius, The Hub and Film City, providing space for Creative SMEs – linked to the city centre by the Clyde Arc “Squinty” bridge. Opposite a new 12,500 seat SECC National Arena will open in

2013, reinforcing the area as a world class entertainment and conference venue.

Shipbuilding: BAE Systems Surface Fleet’s two yards in Govan and Scotstoun have recruited over 100 apprentices over the last two years to join the 3,500 strong workforce to build six £650m Type 45 Destroyers and two new 65,000 ton aircraft carriers for the Royal Navy, over the next 6-8 years.

Medical science: Is being boosted by the £842m re-development of the NHS Southern General, expanding its maternity hospital and building new acute and children’s hospitals, to create one of Europe’s largest medical campuses, employing thousands of local people and capable of treating 725,000 patients a year.

Leisure and tourism: Forthcoming attractions such as the iconic £74m Riverside Museum designed by Zaha Hadid will help grow tourism and leisure further when it opens Spring 2011, whilst the Glasgow Science Centre, Xscape, the Titan Crane and Loch Lomond Seaplanes have all become very popular since opening.

Retail: Clyde Waterfront boasts some excellent retail destinations, with Braehead’s +100 stores and cafes attracting 20m customers a year, Glasgow’s Buchanan Street often voted as the UK’s best shopping street and the St Enoch’s Centre recent £100m refurbishment now boasting the only Hamleys toy store outside of London.

Housing: New homes and environments are integral to plans, with prime examples being the award winning £1.2bn Glasgow Harbour development which is set to expand further with new shops, restaurants and hotels planned plus six developers at Ferry Village near Braehead are creating 2000 homes beside the new Clyde View public park.

Education: Our innovative on line resource (www.clydewaterfronteducation.com) offers teachers 200 free lesson plans linking 12 Clyde themes with 8 subjects as part of the Curriculum for Excellence and we continue to sponsor Clyde Cruises “Classroom on the Clyde” school trips between SECC and Clydebank, helping young people learn more about careers and their environment to become even more enterprising and successful Tourism: Thousands of locals and tourists visit the Clyde now to experience its regeneration and heritage prompted by our advertising and Heritage Guide booklet (www.clydewaterfrontheritage.com) New in 2010, Clyde Waterfront and Glasgow City

Council sponsored / promoted Clyde Cruises’ River Link waterbus 16 week trial between the Broomielaw, Pacific Quay and Braehead, to compliment Seaforce’s powerboat rides and The Waverley Paddle Steamer’s “Doon the Watter!” day trips.

Clyde Waterfront is making the most of its skilled workforce, cost competitive location, excellent communications and new infrastructure to develop a vibrant and thriving waterfront location that appeals to global companies and local communities alike!

Contact Details Clyde Waterfront 4th Floor, Atrium Court 50 Waterloo Street Glasgow G2 6HQ +44 (0) 141 229 5420 or www.clydewaterfront.com/ba

<< The regeneration of Glasgow’s River Clyde Waterfront has maintained momentum despite the recession through its publicprivate partnership structure so that private investment should naturally return come the upturn. In addition, the river itself is at the heart of the regeneration initiative unlike some other cities where the river has become a much under-utilised asset. Moreover, the mixed-use nature of the development should ensure sustainable communities are created and should safeguard longterm prosperity with a healthy balance of commercial, retail, residential, leisure and transport infrastructural development that has already attracted key international players to the area.

They are attracted by regeneration that has seen respectively; the development of the award-winning International Financial Services District (IFSD), a digital hub at Pacific Quay which has already brought in STV and BBC Scotland, the renaissance of Glasgow’s shipbuilding traditions through BVT Surface Fleet’s activities at Govan and Scotstoun, retail developments at Braehead and Buchanan Street, a new Riverside Museum and National Arena, an imminent 5 star hotel in the form of the £125m Jumeirah, as well as riverside residential developments at Glasgow harbour and Ferry Village near Braehead.

These facts speak for themselves while importantly the mammoth ongoing project receives strong backing from the communities affected and has so far created c.17,000 new jobs and delivered over 2.8m sq ft of commercial and business space.

Rotterdam, Netherlands Europe’s largest port received central government funding for the iconic Erasmus Bridge which along with a new metro station and the extension of the tram system has opened up the long declining Kop van Zuid area.

The process has been marked by the City Council having responsibility for development and delivery with an early injection of public investment in infrastructure signalling to prospective private sector investors that this project had legs and that it was safe to invest.

Consequently, Kop van Zuid can now boast a new mixed-use waterfront blending flagship commercial buildings and a highquality residential offering such that the area has become something of a creative mecca with its undoubted success acting as a catalyst for improvements in areas in close proximity assisted in this through the City’s Mutual Benefit programme designed

12

to engender support from and to bring a share of the benefits to more disenfranchised areas nearby, in the process bestowing on those residents stakeholder status with a vested interest in ensuring the new look environment continues to prosper.

Photo: huees /CC by

Glasgow, Scotland

Hadid Architects have been commissioned to deliver a bold new waterfront to match the strategic importance of this former port and industrial area set to become a landmark island just across from the city centre housing. In the process 15,000 new residents are set to benefit from a stunning mixed-use environment complete with workshops, labs, studios, and offices.

The transformation of these former industrial areas and the relocation of port activities to the outer bay have re-connected Bilbao with its Nervión River so that where once shipbuilders plied their trade, now a stunning commercial and cultural architectural landscape holds sway creating entirely new neighbourhoods in the process.

It’s not just urban areas that are experiencing a wave of regeneration. Predominantly rural regions are getting in on the act too. One such area is Lincolnshire on the East coast of England that has made an asset of its non-metropolitan quality.

Erasmus Bridge, Rotterdam, Netherlands

Bilbao, Spain Bilbao suffered something of an industrial crisis during the 1980s such that in 1989, the Strategic Plan for the Revitalisation of Bilbao was initiated This involved the regeneration of abandoned industrial sites and old deteriorated neighbourhoods, with associated investment in flagship projects; most notably the Guggenheim Museum and the Euskalduna Palace.

“

It’s not just urban areas that are experiencing a wave of regeneration The revitalisation of this former dock area was made possible through the transferring of responsibility to deliver the transformation to the Bilbao Ria 2000 Corporation in 1992 by the Bilbao and Barakaldo municipalities, the Greater Bilbao metropolitan area, and the Basque and Spanish Governments.

Now the restoration plan has moved on to the 60 Hectare Zorrozaurre area, where Zaha

Lincolnshire, England Lincolnshire constitutes a surprisingly unheralded and cost-effective rural oasis bordered to the West and North by the English industrial heartlands, marked by having a very high level of net inward migration combined with top scores on quality of life indicators, an abundance of skilled, educated labour and a high level of staff retention.

With its proximity to London and other urban centres in the Midlands and the North of England it offers a very real costeffective alternative for companies looking to relocate, expand or start up, especially given the ample availability of low-cost land earmarked for development as well as premises available for immediate occupation.

Moreover, the two principal urban centres it does have; Grantham and Lincoln possess national growth point status with associated transport infrastructural developments and the latter having experienced a raft of developments along its Brayford Waterfront including two hotels and Innovation Lincolnshire’s 37.2m ‘Think Tank’.

Responsibility for capitalising on all this activity by attracting investment is at ground level. In this case Invest Lincolnshire a public/private partnership are tasked with promoting investment opportunities and providing assistance to interested parties and in so doing are delivering an ongoing and sustainable renaissance in the region.

This is particularly manifested through their Investor Development facility which assists foreign owned businesses and large UK employers in such matters as sourcing premises, financial assistance, the required skills bases and local suppliers.

Think Location . . . Think Lincolnshire Searching for the perfect site or premises?

Want to relocate, expand or start up?

Looking for development opportunities?

Imagine a domain you can visit anywhere, anytime to view comprehensive and up to date information on industrial and commercial properties, land availability including a wide range of development opportunities. Go online and search Lincolnshireâ&#x20AC;&#x2122;s Property Directory - for all the information you need to make a wise investment decision.

www.investlincolnshire.com

Capitalise on the Green IT Market Terry Erdle, senior vice president, skills certification, CompTIA Though the meaning of “green IT” continues to evolve, one thing is clear: organisations are increasingly incorporating green factors into their technology decision making.

That bodes well for technology solution provider companies, who can capitalise on the green IT market by making a solid economic case to potential clients by bundling green options with other offerings.

With the current economic situation, the focus is largely on cost savings and energy efficiency. But as organisations increase the priority of green IT, efforts have become more coordinated. Ad hoc green IT practices driven by disparate individuals have given way to more organised, management-led efforts.

The top three reasons companies consider green IT solutions is to reduce energy-related operating expenses, reduce other IT operating expenses and improve the company’s brand image.

According to a 2009 study by CompTIA, the non-profit trade association for the information technology industry, only about 35 percent of executives consider their organisations green. However, these numbers should rise as about 67 percent of organisations indicate that green IT is a mid to high level priority for their organisation.

The recent influx of green initiatives by governments around the world has also fuelled growth in this segment. In the United States, for example, the 2009 American Recovery and Reinvestment Act included US$11 billion in funding for a smart power grid, US$2.3 billion for advanced battery technology and US$6.3 billion to states and local governments for greater energy efficiency.

Additionally, investments by private sector firms, venture capital firms and other investors point to a large and growing market. Forrester Research forecasts the market for green IT services to grow at 60 per cent annually (CAGR) over the next few years, reaching nearly US$5 billion in worldwide sales by 2013.

14

Green IT is at the heart of virtually every aspect of sustainability, from the power grid, smart buildings and environmental control systems to telepresence, telecommuting and virtualisation.

Not surprisingly, organisations with comprehensive green strategies are significantly more likely to factor green into their IT hardware purchase decisions than those without green IT strategies, according to the CompTIA study.

Medium and large organisations are also more likely to factor green into their consideration when purchasing printers (80 percent), monitors/ displays (77 percent), and desktop PCs (77 percent). When making such purchases organisations are largely concerned with power consumption (77 percent), green seals of approval such as Energy Star (61 percent) and ease of disposal (54 percent). The use of non-toxic, environmentally friendly materials and use of recycled materials are also important criteria.

Green IT is at the heart of virtually every aspect of sustainability In response to customer demand, technology companies are stepping up their activities in the green IT arena, according to the 2009 CompTIA study Green IT: Insights and Opportunities. For example, 40 percent of IT service providers provide energy audits to clients; 26 percent offer carbon footprint measuring and monitoring services; and 23 percent plan to offer these services within the next two years.

Other typical green services include data destruction (data wiping), asset recovery, end-of-life take back or trade-in and recycling.

While technology plays a major role in helping firms to achieve their green goals, it’s only part of

the equation. Organisations also must focus on behaviours and actively encourage employees to reduce paper, turn off their PCs and monitors each night, use energy saving PC settings and telecommute when appropriate.

IT departments will see increasing pressure to help organisations meet emissions targets and cut energy bills. IT professionals must understand greener energy solutions such as correct disposal of hazardous materials, preservation of power, and virtualisation. This is not a traditional area of IT training, but these are the skills that will be expected of IT departments of the future.

For an organisation to truly embrace green IT, it must become part of the corporate culture driven from the top on down. That means the same practices and policies that are put in place are adopted by the CEO in the corner office to the executive assistant that sits outside his or her door, and all the employees, divisions and offices in between.

Implementing a green IT policy is analogous to an organisation’s security policy. Compliance must be universal across the organisation.

If it isn’t the policy isn’t worth the paper it’s written on. Just as an organisation wouldn’t allow one set of password standards for the accounting department, and another for the marketing group, a green IT policy also has to be consistent.

There also must be some enforcement measures in the policy for failure to comply. Perhaps there are financial incentives for departments that exceed compliance standards, or financial penalties (i.e., reduced budgets) for those that fail to comply. An effective tool for gaining employee buy-in is to create a corporate culture committee or some similar employee group and task them with coming up with sound green practices for the office.

About the Author Terry Erdle is senior vice president, skills certification, for CompTIA, the leading non-profit trade association for the world’s information technology industry.

Photo: McKay Savage /CC by

Mighty Micros

Microfinance is no longer a peripheral operation limited to Bangladeshi villages, rather its business model has become mainstream, Joanna Gray looks at a financial success story It’s easy to picture the scene, a group of Bangladeshi women scratching out a living, barely growing enough food to feed their children. When they meet at the well they worry about the next harvest and lament the fact that no-one will loan them any money to pay for the next wedding or funeral that comes their way. Someone suggests a friend in another village whose husband will loan money so long as 90% interest is paid. They agree there’s no other option and contact is made with the shark. Their descent into poverty takes another steep dive. However since the 1970s another option has been made available to them, small loans at reasonable rates. It is now estimated that there are approximately 665 million client accounts at over 3,000 institutions offering banking services to people previously deemed to be unviable by mainstream banks.

The leading luminary in the field is Muhammad Yunus, who with the microfinancing bank he set up, won the 2006 Nobel Peace Prize for his efforts to aid social and economic development. His vision was simple: offer reasonable loans to groups of women to either maintain their standard of living or start up cottage industries.

Early pilot projects in 1976 led to the establishment in 1983 of The Grameen Bank

Project (Grameen means ‘rural’ or ‘village’ in Bangla language) which has the following objectives: extend banking facilities to poor men and women; eliminate the exploitation of the poor by money lenders; create opportunities for self-employment for the vast multitude of unemployed people in rural Bangladesh; bring the disadvantaged, mostly the women from the poorest households, within the fold of an organisational format which they can understand and manage by themselves; and reverse the age-old vicious circle of ‘low income, low saving and low investment’, into virtuous circle of ‘low income, injection of credit, investment, more income, more savings, more investment, more income’.

It is now estimated that there are...over 3,000 institutions offering banking services to people previously deemed to be unviable by mainstream banks.

Shown to succeed as a straight financial model the microfinance world has burgeoned and diversified. The Grameen model relies heavily on the loan of money to women who traditionally spend it to improve their family rather than on the local liquid poison.

This continues to drive new microfinance initiatives in India such as Swadhaar a bank

aimed at the urban Indian rather than rural Bangladeshi. Its aims are, ‘to assist the urban poor, especially women...to enable them to cross the poverty line and meet aspirations for a better future.’ With an urban setting Swadhaar relies on biometric cards and is doing away with repayments at a weekly village group meeting, instead preferring customers to repay loans monthly at a branch office. Swadhaar and other metrofinanciers such as Ujjivan in Bangalore and Arohan in Kolkata again confirm the vibrancy of microfinancing in India especially.

Indeed the fact that the microfinancing industry survived the recession on account of developing countries being less affected by global turmoil means that mainstream banks are now getting in on the act.

Software is often provided by larger banks to microfinancing operations such as Citibank’s provision of ATMs in India for microfinance customers, and their involvement is growing.

More excitingly microfinance is leaving its traditional shores of the sub continent, South America and Africa and heading west. In 2010 America’s largest bank, the Bank of America, announced it will provide US$10million in grants to non-profit lenders such as Community Development Financial Institutions for lending to small and rural businesses. It is hoped that the grants may unlock as much as US$100million in low cost, long-term capital for small business microloans nationwide.

15

Up in the Clouds Todd Thibodeaux, president and chief executive officer, CompTIA Everyone is doing it … cloud computing, that is. Visit any tech industry web site or open the business section of the daily newspaper and you’ll likely see a story about everything moving to “the cloud.” It’s better, faster, stronger, cheaper, and able to leap tall buildings in a single bound. It’s the best solution for every IT problem, regardless of industry, and why would you even think of using anything else? Oh, and did I mention everybody’s using it.

What does this all mean? Is it the end of the desktop PC as we know it? Can my company ditch our internal data centres because they’re no longer needed?

Yes, technology is moving toward cloud services (and has been for several years).

But it’s not a move that makes all traditional IT products immediately obsolete. Rather, it’s likely to be a hybrid melding of existing on-premise equipment on off-site cloud solutions that evolve over a number of years – perhaps a decade or more.

Cloud computing really isn’t even a technology in and of itself. It’s a business and delivery model that is enabled by existing technologies modified for remote, on-demand and fractional consumption.

computing is still an evolving paradigm.

Its definitions, use cases, underlying technologies, issues, risks, and benefits will be refined in a spirited debate by the public and private sectors. These definitions, attributes, and characteristics will evolve and change over time.”

But the shift to cloud computing is real and isn’t about to stop. A recent study by research firm IDC estimated public IT cloud services spending will grow at more than five times the rate of traditional IT offerings through 2014. Research firm Gartner estimates cloud computing will expand from $46.4 billion in sales in 2008 to more than $150 billion by 2013.

The 2010 CompTIA survey found that 72 percent of end-user customers surveyed plan to expand the type and number of cloud computing services they are consuming, and 64 percent plan to increase their investment in cloud solutions by more than 5 percent in the coming year.

Asked why they’re moving to the cloud, customers offered the following responses: • • • •

Some of the confusion and mystery about cloud computing may be allayed once the IT industry and its customers can reach consensus on a standard definition of cloud computing. A 2010 survey by CompTIA, the not-profit trade association for the IT industry, found that 59 percent of customers and 63 percent of IT companies believe clearer definition is needed to simplify the value proposition for buying and selling cloud services.

The National Institute of Standards and Technology, Information Technology Laboratory offers the following: “Cloud

16

• •

Reduce capital expenditures on hardware – 49 percent Cut costs – 44 percent Add new capabilities and features – 33 percent Simplicity or speed of implementation – 33 percent Reduce operational complexity – 30 percent Transition away from conventional software licensing – 30 percent

Cloud computing is changing the technology innovation and economic equation for the better. Users gain access to applications, resources and development resources previously unavailable due to cost constraints or other factors. Implementation of innovative technologies is now easier and faster. Cloud computing typically allows any authorised user to access their work from

Photo: Kables Kris /CC by

any place, anytime. All of their information isn’t locked into one computer or server, providing more options for getting work done.

For the technology industry, cloud computing is a simpler and more cost effective method to deliver applications, platforms and infrastructure to customers.

It also enables a faster and more efficient means for supporting and maintaining technologies through centralised management of hosted systems.

Security and privacy issues surrounding cloud computing remain, as do service delivery concerns, legal ramifications and regulatory directives. Many organisations are testing cloud offerings in a limited capacity so they can evaluate what each vendor offers and to make informed decisions.

Cloud computing allows even the smallest organisation to access enterprise-class technology with minimal up-front costs and easy scalability. By allowing a large number of networked computers to share an IT infrastructure, cloud computing eliminates the constraints of relying only on local or remote computers. By using Web-hosted services, companies pay only for what they use. It’s a financially attractive solution for many organisations, freeing up resources that can be used to focus on their core business.

About the Author Todd Thibodeaux is the president and chief executive officer of CompTIA, the leading non-profit trade association for the world’s information technology industry.

Photo: Till Krech /CC by

Photo : Jenn Calder /CC by

The Rise of Nearshoring and BPO Angus L. Macdonald Bridge, Halifax, Nova Scotia, Canada

Charlie Jacoby looks at nearshoring FDI deals and Business Process Outsourcing (BPO), examining the current trends in these corporate policies among the world’s biggest companies.

Take a pin, a map of the Northern hemisphere, start from the USA and work outwards, you bump first into Canada and Mexico. There you will find cities clamouring for nearshoring FDI. So far, the split between the two countries has been unsurprising. Mexico tends to attract manufacturing FDI, while Canada is more popular for office outsourcing.

Samsung LCD screens destined for the US market are made in Korea and assembled in Tijuana, Mexico, for example.

Attracting white-collar jobs is for most regions the holy grail – and Canadian cities are good at it. Take California-based IT company Keane, which employs 12,000 people in 12 countries. It opened in Halifax, Nova Scotia in 1997. Its employee numbers have doubled since 2002 and now stand at 440. According to John Gillis, director of service delivery for Keane Canada, far from being the first back office to cut when times are hard, nearshoring has been the key to weathering tough economic conditions. He says: “For many firms based in the United States, Canada is a great option; for those based in the Eastern seaboard, Halifax is just about perfect.”

Keane chose Halifax over India among other locations for sound geographical reasons – it was keen to keep the word “near” in its nearshoring policy. Most of the clients it

serves from its Halifax office are based in the Northeastern states. New York and Boston are only a short flight away, for example, and Halifax conveniently lies mid-way between Europe and California. Along with these geographic advantages, Halifax is also blessed with strong IT infrastructure: the city is an important hub for the transatlantic fibre-optic cable network that connects Europe and North America.

Keane chose Halifax (Nova Scotia)...for sound geographical reasons – it was keen to keep the word “near” in its nearshoring policy Like India, Keane takes advantage of a welleducated workforce in Halifax. The city has the largest proportion of post-secondary graduates of any city in Canada. And of course tax credits and government incentives influenced Keane Canada’s decision to keep the majority of its work in the Halifax operation. The Government of Canada offers a generous research and development credit, while the province of Nova Scotia helps fund training programs.

Inward investment agency Nova Scotia Business Inc has a positive approach to attracting foreign firms. It promotes a range of rebates and tax credits available to investing companies. These include a payroll rebate of usually between 5%-10% on your eligible gross payroll for the first five years

you are in Nova Scotia. It will also put you in touch with Canada’s generous R&D tax credit programmes, which take care of up to 35% of eligible expenditures. There is also a specific Digital Media Tax Credit in Nova Scotia where qualifying companies can claim back either 50% of the qualifying expenditures or 25% of total expenditures. And there is even a scheme whereby a US taxpayer may be able to use losses from its Canadian business as a deduction against its income for US income tax purposes.

When pulp and paper company Weavexx, a division of Xerium Technologies Inc, announced its investment in equipment upgrades at its Nova Scotia plant which employs 140, Nova Scotia Business Inc was able to announce a five-year payroll rebate up to a maximum of CA$500,000.

“Future provincial prosperity is built on a foundation of innovative businesses in communities across Nova Scotia,” said Percy Paris, Minister of Economic and Rural Development at the time. “We are pleased to support Weavexx as part of government’s commitment to help create good jobs and grow the economy.”

Traffic comes from the other direction, too.

European firms open offices in Halifax for its great way of life yet remarkable proximity to both European and East seaboard US market.

UK-based Simple Films opened a new office in Nova Scotia in 2008. The company has made the move to position itself closer to its target markets but the move makes it ideally placed for co-production deals between UK, US and Canadian companies. >>

17

<< One wag once said: “China will be the world’s factory, India the world’s office, South America the world’s bread basket.

We’re not sure about North America yet but we think it has something to do with arms and the entertainment industry.”

Capgemini Group has acquired on-demand purchasing solutions provider IBX and with it, the availability of the industry’s first global end-to-end, Procurement-as-aService offering

their sourcing strategy on a global basis, helping them manage their business better and derive compliance benefits,” says Hubert Giraud, global leader of Capgemini Global BPO. In early 2007, Coca-Cola Enterprises conducted a benchmarking exercise to see how the organisation’s effectiveness and efficiency stacked up against the competition. It identified that to become more efficient, CCE would need to conduct as much of its transaction processing as possible in a low cost country. The economic goals were to achieve cost savings of $20 million per annum in CCE’s transaction work.

CCE chose Capgemini to create an efficient process throughout its global business for: order-to-cash services; purchase-to-pay accounting; record-to-report activities; and document management. As part of the

implementation, CCE has used Capgemini’s branded ‘Rightshore’ delivery model to reposition support from its Tampa, Dallas, Toronto, Paris, Brussels and London offices to Capgemini’s India, Guatemala and Poland delivery centres. The contract with CCE runs until 2015 and total contract value amounts to approximately US$137 million – and it will save CCE 25% on its transaction costs.

You have to choose what’s right for you.

Keane chose Nova Scotia for its wealth of export markets: it is just four hours behind London and, historically and in the present, maintains strong links with the Commonwealth and the Caribbean as well as the US. “Halifax is a great place for Keane Canada,” Gillis says. “I fully expect we can capitalise on the ‘natural’ advantages here to sustain our current client base and continue the growth trend once the economy begins to recover.”

This puts Canada’s ‘Maritimes’ in a good position. Not only does Nova Scotia have an active film and TV industry and has been the setting or location for several recent blockbuster movies, it is also site of 44% of all of Canada ’s military assets, attracting defence and aerospace industries. In addition, Nova Scotia is the largest marketer of biodiesel and biofuels in Canada and has great tidal power potential with 16-metre (52ft) tides in the province’s Bay of Fundy.

Responding to demand from organisations which expect more today from BPO than traditional low-cost transaction processing, business consulting company Capgemini has developed ‘BPO with Business Insight’.

It claims that this new generation of BPO solutions applies unique Business Insight processes to extract a ‘hidden value’ in BPO workflow and help improve the top line.

Capgemini Group has acquired on-demand purchasing solutions provider IBX and with it, the availability of the industry’s first global end-to-end, Procurement-asa-Service offering. “While procurement platforms can provide immediate gains for companies looking to outsource processes, our capability enables clients to manage

18

Photo: Simply CVR /CC by

One of the problems facing executives looking at nearshoring opportunities is the wealth of choice of location. Nova Scotia cannot compete with South Korea for links to the Asian market, nor can it hope to top Hungary or Ukraine’s proximity to Western Europe. One way round this is Business Process Outsourcing (BPO), a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions or processes to a third-party service provider. Originally, this was associated with manufacturing firms that outsourced large segments of its supply chain, but it is now increasingly being sold as a back office solution.

Coca-Cola Enterprises has used Capgemini’s branded ‘Rightshore’ delivery model to reposition support to other global locations including Chennai in India

Are you looking to get the best out of your support functions?

The Solution lies just beyond the Challenge Let’s invent the future. Together.

Whether you are looking to bring your Finance & Accounting to the next level, resolve a supply chain challenge, assure cost-effective SOX compliance, enhance your procurement performance spanning the entire source to settlement process, achieve operational excellence in customer service… – Capgemini Business Process Outsourcing has the solution designed to deliver beyond your expectations.

Business Process Outsourcing (BPO) with business insight – adding real value with business analytics in F&A, Procurement, Customer Service, Management Assurance Services, Supply Chain Management, HRO, Knowledge Process Outsourcing.

www.capgemini.com/BPO TOGETHER. FREE YOUR ENERGIES Capgemini provides Business Process Outsourcing (BPO) services in 35 languages to a worldwide client base. Our solutions include: Finance & Accounting, Customer Care & Intelligence, Procurement & Supply Chain Management, Knowledge Process Outsourcing, Management Assurance Services, Human Resources Services and Vertical Services for the Finance Sector. Capgemini’s Rightshore® delivery network has more than 9,000 professionals operating 24/7 delivering tailored solutions from onshore, nearshore and offshore centers in Australia, Brazil, Canada, Chile, China, Guatemala, India, Morocco, Poland, Sweden and USA. For further information, please contact: Jean-Christophe Ravaux – email: jean-christophe.ravaux@capgemini.com

‘Flash Crash’ Shows Need for Price Discovery and Safeguards

by Duncan Niederauer, CEO, NYSE Euronext Around the world, financial markets are giving investors a bumpy ride. The sudden swoon of US stocks on May 6 - now referred to as the “flash crash” - was followed, 10 days later, by huge drops in Shanghai and Hong Kong. With continued nervousness about Europe’s fiscal situation, civil unrest in Thailand, fears of conflict in Korea, and the unprecedented oil spill in the Gulf of Mexico, global markets have been hit with a string of bad news recently.

In the US, however, it appears the sharp collapse of a handful of stock prices was due more to weaknesses in the structure and mechanics of our market system than

system, we must enhance transparency, price discovery and accountability across the marketplace. At the NYSE, we have long believed in the ability to slow our market during times of volatility - analogous to taking the plane off auto pilot during turbulence. However, until recently, no such rules or practices existed at the other trading venues and the other exchanges could legally ignore our established single-stock circuit breakers. The recently announced industry-wide, single-stock circuit breakers are a critical first step to protecting investors from another May 6. Next, we need to focus on transparency and broader market structure issues. Today, more than 30 per cent of all stock transactions in the US do not occur on regulated exchanges.

cornerstone of capital markets in one of the world’s most dynamic and fastest growing regions.

Asian exchanges are undergoing explosive growth to meet demand for capital from entrepreneurs seeking to launch or grow their companies. In China there is huge appetite to be part of the global market place, and the growing strength of exchanges in Asia can help spread the democratisation of capitalism. Pricing companies and exchanging shares in an open, secure, and legitimate fashion helps investors in emerging nations build trust in a market economy.

...in less than 20 minutes on May 6, confidence...was significantly damaged any particular piece of economic news. The Securities and Exchange Commission acted quickly to put in place mechanisms that slow trading down during periods of extreme volatility. These rules will not only apply to the New York Stock Exchange, where similar procedures have been in place for a long time, but to the broad array of electronic exchanges that make up the US market structure. This is an important first step, but restoring full confidence in US capital markets will take more.

Equity markets in the US remain the largest and most liquid in the world - and during the 2008 crisis seemed to be the only segment of the financial system that functioned unimpaired. Yet in less than 20 minutes on May 6, confidence in that market system was significantly damaged. Hours after the market’s wild ride, thousands of trades on electronic exchanges were cancelled on a somewhat arbitrary basis, leaving investors questioning the integrity of the marketplace. What is more, the search for a cause has not revealed specific triggers, but instead highlighted challenges with the fragmented nature of US markets.

In most developed markets, there is one “national” exchange on which public companies can list their stock. In the US, there is more than one listings platform and no fewer than 40 trading venues. Many are insufficiently transparent, and most investors have little knowledge or influence over where their trades are executed.

To build confidence in this fragmented

20

Dark pools, less regulated trading venues that match anonymous buyers and sellers without displaying prices publicly, and other alternative trading platforms can play an important role by enhancing liquidity for certain investors, but these benefits come at the cost of less overall transparency and price discovery across the marketplace.

Here, too, we are encouraged that the SEC is showing strong leadership. Last autumn, in fact, the Commission proposed several regulatory changes in order to “prevent the development of a two-tiered market in access to pricing information”.

Asian exchanges are undergoing explosive growth to meet demand for capital from entrepreneurs seeking to launch or grow their companies The lesson from May 6 is clear: price discovery and investor safeguards are absolutely critical elements of market structure, particularly in the face of severe volatility. This is true for traders and investors throughout the world. In Shanghai and Hong Kong, where I visited exchanges and met business leaders last week, thriving financial exchanges represent the

That is why the steps US exchanges have taken last week to install new stock-bystock circuit breakers are a critical step.

The next step is to continue pushing for more transparent price discovery in the US, and then bring those same safeguards and assurances to marketplaces around the world. By making transparency and investor protection key priorities, we will show how financial exchanges can continue to win investor confidence in all market conditions.

About Duncan Niederauer Duncan L. Niederauer is Chief Executive Officer of NYSE Euronext. He is a member of the company’s Management Committee and also serves on the Board of Directors. Prior to his current position, Mr. Niederauer was head of U.S. cash equities. Before joining NYSE Euronext in April 2007, he was Managing Director and co-Head of the Equities Division Execution Services for Goldman Sachs & Co. He joined Goldman in 1985 and moved to the Equities Division in 1987. In 2000, Mr. Niederauer relocated to the headquarters of Spear, Leeds & Kellogg, where he managed the firm’s global clearing and execution business.

He also ran the Equities E-Commerce effort, and was the global head of portfolio trading and spent time in Tokyo in Derivatives and Japanese products.He earned an MBA from Emory University and a BA from Colgate University where he currently serves on the Board of Trustees.

Originally printed in Financial Times, 27 May 2010

The World Federation of Exchanges Publishes 2010 First Half Market Statistics Exchanges across the globe saw the value of their indexes drop an average of 11.5% in USD terms in the first six months of the year, according to figures released today from the World Federation of Exchanges.

Among the markets showing gains in the first half of 2010, most were from emerging economies. In addition, several European exchanges in the NASDAQ OMX family, notably Copenhagen, Iceland, and Stockholm, rallied despite an 18% fall in the European/Middle East/African zone.

Emerging markets and exchanges for junior companies led fund raising activities.

Shenzhen Stock Exchange, the mainland market for smaller companies, led all WFE members with USD 22.6 billion raised for initial public offerings (IPOs). That was

Among the markets showing gains in the first half of 2010, most were from emerging economies more than the combined totals for BME Spanish Exchanges, Korea Exchange and London Stock Exchange Group which placed respectively 3rdthrough 5th. Shanghai Stock

Exchange, the second market for IPOs, raised USD 8.9 billion. TSX Group was second to Shenzhen Stock Exchange in the number of IPOs with 137 new companies listed between January - June 2010.

Compared with first half of 2009, the CBOE replaced the International Securities Exchange as the leader in trading stock options, while BM&FBOVESPA placed second thanks to an 80% increase in volume.

In stock index options, the National Stock Exchange of India took second place after Korea Exchange, with a 50% increase in volumes compared with the first half of 2009.

Photo: Jakob Montrasio /CC by

AFME Outlines Ways to Rescue Failing Banks Without Taxpayer Financing The Association for Financial Markets in Europe (AFME) has published the most comprehensive discussion paper yet to examine how a failing financial institution can be managed through crisis and recapitalised without requiring capital support from governments and taxpayers.

The paper, “The Systemic Safety Net: Pulling failing firms back from the edge”, focuses on two mechanisms - “bail-in”and “contingent capital”- that allow failing firms to continue in business rather than face liquidation.

• Bail-in: Implemented when a firm hits a pre-defined trigger, this would recapitalise a firm as a going concern by converting selected tranches of unsecured debt to common equity. No shareholder or creditor consultation would be needed so this could happen very quickly - over a weekend, for example.

• Contingent capital: Used historically by the insurance sector to provision against one-time losses, this is issued in the form of notes convertible into equity upon the issuer hitting a pre-defined trigger. The trigger itself would be activated well in advance of a firm falling below minimum regulatory

capital requirements. It requires no regulatory involvement, so increases transparency and may help prevent a localised problem spiralling into a systemic crisis.

“Taxpayers should never again be the first to be called upon for help when there is a banking crisis” -Mark Austen, Acting CEO of AFME Either option would be far better option than liquidation, protecting depositors and employees and reducing the likelihood of contagion. In each case, the bank’ shareholders would bear the loss through devaluation or dilution of their equity.

Critically, neither option requires capital support from taxpayers or a pre-capitalised fund for providing liquidity.

Mark Austen, acting CEO of AFME commented: “There will always be the risk of firms failing but we need to ensure that they

do not destabilise the wider economy or need taxpayers’ funds to refinance them.

Taxpayers should never again be the first to be called upon for help when there is a banking crisis. A well considered resolution and recovery scheme, using bail-in or contingent capital, could not only mitigate against contagion but also pull a firm back from the brink of insolvency so that liquidation can be avoided.

“If such a regime had been in place two years ago, Lehman Brothers might not have needed to be liquidated and the destructive consequences of that liquidation could have been avoided.” Details of how each mechanism would work and the challenges that implementing either would bring are set out in AFME’s paper, which has been distributed today to senior regulators and other interested parties across Europe.

The paper has been written by a group of senior experts from major banks and law firms and AFME’s in-house experts. It forms part of a wider piece of work considering the control of systemic risk in the financial system, due to be published in the autumn.

Photo - CC by Jakob Montrasio

21

Photo: Laszlo Ilyes /CC by

BRICs March On

Cristo Redentor (Christ the Redeemer) statue, Corcovado Mountain, Rio de Janeiro

With the developed nations still retrenching after the recession, BRICs nations emerged stronger. Joanna Gray celebrates the investment opportunities they offer As the US and the EU stutter out of recession, hoping to avoid sovereign debt crises and the ominous threat of rising inflation, Brazil, Russia, India and China have stood firm and continued to grow.

Recent forecasts have suggested that the world’s top four emerging markets will grow impressively next year, Brazil by 5.5%, Russia 5.5%, India 7% and China 10%. As these countries encompass over 25% of the world’s land coverage and 42% of the world’s population and a hold a combined GDP of US$15.435 trillion dollars they continue to provoke excitement and not a little trepidation from the west. That a delegation of BRICs heads of government effectively caused the weak resolution of the Copenhagen climate summit confirms that their presence as a group of four is beginning to hold geopolitical rather than simply economic sway.

Strong sovereign reserves To predict where these countries will take their incredible capacity for growth, it is key to understand how and why they withstood the recession. Economists are beginning to question whether their resilience offers a different economic model to the western

22

liberal democracy / free trade consensus.

Russia for example did a much better job of macro-management over the past 10 years than did the British government which ran up enormous debts. When economic conditions were good, the Kremlin put aside US$600 billion worth of foreign currency reserves which were later deployed to manage the faltering rouble. In fact between the four countries they own 40% of the

...it has brought into sharp focus the necessity to continue economic development with a sound financial bottom line. world’s foreign exchange reserves. Some put this down to good old fashioned banking practices and fiscal rectitude seemingly abandoned by the west but others see this as a subtle way to exert control over stronger nations saddled with debt. Either way it has brought into sharp focus the necessity to continue economic development with a sound financial bottom line. Spain and Greece sadly have learnt the hard way.

Opportunities within a relatively closed economy Interestingly, India’s rather more closed economy helped to shield it from the global storms but confirm perceived problems about western economies breaking into the country. Western countries may well benefit from the extraordinary range of out-sourcing opportunities India offers but if inward investments are blocked both sides lose out.

However, the French supermarket giant Carrefour has recently followed the American Wal-Mart into the country proving that foreign countries can seize multi-outlet retail, rather than the traditional IT related opportunities in India. However, while India’s rapid industrialisation has been staggering there are genuine fears that its infrastructure is not up to the task and will hamper future growth. China, spurred on in no small part by the Olympics has invested thoroughly in its own infrastructure but India’s is crumbling. Engineering expertise will be increasingly demanded and here western economies can help and profit. The British Prime Minister David Cameron’s recent overtures to India should be seen as a green signal for further inward investment from British and other western companies.

The value of state control?

China and Brazil’s forging ahead on the global economic stage initially baffled economists unable to marry economic success and left wing ideology. Thanks to Francis Fukuyama, everyone thought 1991 proved the two to be incompatible.

However, though an authoritarian state, China learned much from Russia’s painful move into capitalism in the early 1990s and has been careful to retain certain levels of state control without hindering its economic growth. Its biggest banks, ICBC, China Construction Bank and Bank of China are still state controlled but gently and successfully the Chinese economy has been opening up to private money. HSBC for example now holds a 19% share of the Shanghai-based Bank of Communications.

So far the success from Brazil and China in balancing private and state ownership is flourishing but BRICs economies have to ensure that they don’t fall back into the trap of overly subsidising businesses. From the classic British Leyland disaster to the recent Spanish government’s massive subsidy of the solar industry, in the long term the state cannot effectively subsidise business. At the moment China and America seem to be in a sort of race to find the elusive green power,

which in its own terms offers interesting prospects for inward investment. But, while admirable in principle the subsidised race must not, for both teams, cause a slowing down of economic growth which so often happens when shackled by the tentacles of government.

BRICs economies have to ensure that they don’t fall back into the trap of overly subsidising businesses.

BRICs place on the world stage With such breathtaking economic delivery comes global responsibility and this is where Brazil is leading the way on the world stage.

Brazil development aid currently stands at US$4billion a year, notably in Africa. As opposed to Chinese aid there that has been alleged to simply embed already deep rooted corruption, Brazil’s aid really is aid, and by matching its economic ambitions with social ones Brazil will continue to be taken seriously as a global power, rather than as a global threat.

With Russia and China however international relations are a little more strained, with the ever constant pressure regarding NATO being just one point of debate. Needless to say carbon emissions and the fact that for example Chinese emissions now account for 22% of the world’s total means that friction will always emerge between the still industrialising BRICs nations and the efforts to de-carbonise on the part of the west.

Economically speaking one of the biggest challenges for the west will be to ensure that the BRICs economies don’t simply offer goods and services to each other: Chinese labour to Brazil, Russian arms to China, India IT skills to Russia and so on.

For advanced economies to realistically penetrate these markets, goods and services are going to have to be designed accordingly.

For example Japan, which in the past decade has seen its exports to America and Europe fall by a half and a third respectively, is now aggressively and specifically tailoring products for the BRICs markets. This does rather emphasise that they are now in the position of power with the advanced economies touting for business.

Photo:BriYYZ Brian /CC by

Photos clockwise from top left: The Metro, Moscow, Russia, Shanghai World Financial Center, China, and Gandhi Setu Bridge, Patna, India

Photo: Rob Sinclair /CC by

Photo: Aksveer /CC by

23

OG

Offshore Guide

International Finance Centres (IFCs) continue to play an invaluable role in the global economy that goes way beyond simply tax mitigation, offering opportunities for both corporations and individuals, and allowing for legitimate risk management and financial planning with the result that more than half of the world’s assets and investments are still held in such jurisdictions.

Most IFCs’ are responding admirably to the changing landscape resulting from the global downturn which has brought with it a new set of international requirements,

such that legislation has been amended accordingly, and the world at large has been witness to a statement of intent.

Special Feature

increasing support from some influential and in some cases unlikely places.

The IFC sector... continues to be very much open for business.

The IFC sector is one which offers a wealth of innovative tailored products and vehicles, and unparalleled management expertise uniquely tailored to clients’ requirements, and continues to be very much open for business.

As the dust settles many are coming to realise the essential role these jurisdictions play in international finance and trade, and with this IFCs have been garnering

Key developments and those proactive jurisdictions with the most pertinent recent activity and tangible, engaging agenda are covered in the following pages.

Advertorial

Stability. Innovation. Service For nearly thirty years the Cook Islands has been a leading international finance center.

Located in the South Pacific northeast of New Zealand, east of Tahiti, and south of Hawaii, the country comprised of fifteen islands and 13,000 people boasts an ideal location and a global client reach for its legal and financial services. Part of the

For nearly thirty years the Cook Islands has been a leading international finance center.

British Commonwealth, the Cook Islands has a stable Parliamentary system of democratic government. Popular with clients of countries with a Common Law legal system, the jurisdiction also attracts an increasing number of clients from Civil Law jurisdictions due to the country’s strong legislation related to international financial services. Close ties with New Zealand allow the Cook Islands access to the New Zealand judiciary from which it draws its judges in the High Court. This ensures a sophisticated and fair justice system providing confidence to the corporate entities and individuals who use the international financial services.

24

The first country to create legislation allowing for modern asset protection trusts, the Cook Islands is known for its innovative services and ability to respond quickly to changes in and demands from the global market. With the recent changes in the global banking environment, the Cook Islands finds itself ranked very highly for its regulations and oversight of the financial industry. With a supportive government and proactive industry, the jurisdiction has been able to maintain its sophisticated legal and financial services at competitive prices and, most importantly, with an outstanding level of service.

The Cook Islands provides a full range of corporate, trust, and financial planning services. Whether you represent large corporations, closely held businesses, family offices, or individuals, you will find everything you need in the Cook Islands.

Stability. Innovation. Service.

For more information please contact Jennifer Davis, CEO of the Cook Islands Financial Services Development Authority, at jdavis@fsda.gov.ck or visit: www. cookislandsfinance.com.

Photo: Virginia McMillan /CC by

OG

Photo: Jakob Montrasio /CC by

International Financial Centres can Boost Growth in Developing Countries

Joint press release from IFC Forum and the Commonwealth Secretariat 2nd July 2010 International financial centres can enhance economic growth and alleviate poverty among developing countries according to Professor Jason Sharman.

important contributor to the livelihoods of people in a number of Commonwealth countries, especially small states with limited economic opportunities.

In a new paper International Financial Centres and Developing Countries: Providing Institutions for Growth and Poverty Alleviation, which uses the experiences of China and India, Sharman shows how the services and products provided by IFCs can boost domestic and foreign investment in developing countries.

The Commonwealth Secretariat has worked over a number of years to support the implementation of regulation in these countries and ensure a level playing field between all countries.

China is a highly successful example of poverty reduction; China’s openness to foreign investment is widely regarded as a key driver of Chinese growth from 1978 to the present. Flows of foreign investment into China have been mainly routed through tax-neutral IFCs and in particular Hong Kong and several Caribbean centres including the Cayman Islands.

By routing investment through IFCs, investors can use institutions that lower transaction costs, resulting in larger capital flows and more efficient use of this capital.

Small- and medium-sized businesses from developing countries can often access capital much more efficiently through the stable and well regulated platforms in IFCs than they could do domestically. For foreign investors, IFCs ease the path of entry into developing countries.

Sharman finds that IFCs are rarely final destinations for capital from the developing world and these funds are usually invested back into the larger countries. Such flows allow investors to unite their desire for access to financial services platforms with the need to contribute to national development.

Sharman also finds that there is insufficient evidence to support the two common misconceptions surrounding IFCs; that they drain wealth from developing countries or that they are used for tax avoidance. In fact, the report finds that small IFCs are crucial intermediaries for trade with and investment into developing countries.

Cyrus Rustomjee, Director of the Economic Affairs Division from the Commonwealth Secretariat says: “The international financial services industry is an

In this we have worked to ensure that policy is based on full international consensus and supported by evidence.

We welcome this study as an important contribution in enhancing the understanding of the role which these centres play in the global financial system and supporting economic development in developing countries.”

Jonathan Rigby, from the IFC Forum, which supported the Commonwealth Secretariat with the production of Professor Sharman’s paper, says: “In this current period when the global financial architecture is under review it is important that any prospective changes are fully understood. There is a distinct danger that if IFCs are discriminated against or marginalised this could not only damage the flow of capital around the world, but significantly hamper the economic development of developing nations.” *

The International Financial Centres (IFC) Forum is a non-profit organisation established to provide authoritative and balanced information about the role of IFCs in the global economy.

*

The Commonwealth Secretariat carries out programmes of work based on mandates set by Commonwealth Heads of Government at their biennial summit (CHOGM).

Its mission is to work as a trusted partner for all Commonwealth people as a force for peace, democracy, equality and good governance, a catalyst for global consensus-building and a source of assistance for sustainable development and poverty eradication.

*

For further information on the paper’s findings please contact Mark Twigg at Cicero Consulting: mark.twigg@ cicero-group.com. Cicero Consulting provides government relations and regulatory affairs counsel to the financial sector in the UK, the US and across Europe.

25

OG

Open for Business at the Crossroads of Asia Malaysia’s dedicated IFC, Labuan off the north-west Sabah coast was established in 1990, since which time it has gone from strength to strength, successfully carving out for itself a status as the pre-eminent global Islamic Finance hub in the process.

…new legislation brought in in February 2010 has…enhanced the jurisdiction’s reputation as a cost-effective, flexible and compliant location.

Yet in recognising that even Islamic Finance with its lack of speculation is not immune to corporate defaults such that occurred in Dubai in 2009, it has focused on maintaining a high level of transparency and a highly developed regulatory framework, while new legislation brought in in February 2010 has also further enhanced the jurisdiction’s reputation as a cost-effective, flexible and compliant location in a whole range of areas including foundations, limited liability partnerships, captive insurance and mutual funds, shipping operations and trusts.

One of the most noteworthy legislative amendments has been that to the Labuan Business Activity Tax Act 1990 (LBATA) which means that trading companies now have the option to pay 3% of audited profits or alternatively a flat rate of MYR20,000 p.a. while non-trading companies pay no tax at all.

Labuan further recommends itself through its sound geographic location in the heart of SE Asia particularly useful as a conduit for FDI into China, India, South Korea and Malaysia itself, and so cementing its status as one of the leading international financial hubs in the Asia Pacific region.

It is perhaps in the Islamic Finance sector, however where Labuan has made its presence most strongly felt, and the dedicated Labuan International Business and Financial Centre (IBFC) outlines the reasons for this as follows; As the financial world churns with turbulence, Islamic

financial services are increasingly being regarded as a viable alternative to conventional finance. Indeed, these products are gaining popularity among both Muslims and non-Muslims.

Islamic finance advocates real asset financing and investment, which departs from money lending and highly speculative financial activities. Importantly, Islamic finance detaches itself from the conventional interest-based pricing mechanism.

The specific benefits of conducting Islamic finance activities in Labuan are many, among them being Malaysia’s recognised leadership and reputation as a global hub for Islamic finance. Access to Labuan IBFC’s own Shariah Advisory Council for endorsement and advice on new products and structures is another advantage. Since Labuan Financial Services Authority (Labuan FSA) is a founder member, it contributed significantly to the establishment of the Malaysia International Islamic Financial Centre (MIFC), which, together with Labuan IBFC play active and complementary roles in attracting Islamic finance heavyweights to our shores.

Labuan is unique in that it is probably the only jurisdiction with specific legislation relating to Islamic finance. The allnew Labuan Islamic Financial Services and Securities Act 2009 (LIFSSA) effective from February 11th. 2010 is a comprehensive set of regulations, covering the full spectrum of Islamic finance activities permitted in Labuan.

“Labuan is unique in that it is probably the only jurisdiction with specific legislation relating to Islamic finance.”

On the world stage, Labuan FSA continues to strengthen its ties with the International Islamic Financial Market (IIFM), of which it is a founding member, leveraging this relationship on behalf of Labuan financial institutions.

Add to this a wide range of tax incentives and access to Malaysia’s Double Tax Agreements with 69 countries, and we believe we’re justified in claiming leadership in this arena.

Content in italics supplied by Labuan IBFC: www.labuanibfc.my

Photo: William Warby /CC by

26

Our streamlined laws are bound to

ZXkZ_ pfli \p\

WHITE BELLIED SEA EAGLE N_\e k_\j\ ljlXccp j`c\ek iXgkfij ZXcc flk j_i`ccp# k_XkËj n_\e j_\cc]`j_ j\ej\ `k `j jX]\ kf Zfd\ flk f] _`[`e^% ?\eZ\# k_\`i DXcXp eXd\# 9lile^ ?XdgX J`glk fi ÊJcXm\ kf j_\cc]`j_Ë%

Aljk c`b\ k_\ j_Xig$\p\[ j\X \X^c\j k_Xk jfXi `e fli jb`\j# pfl gifYXYcp jZXe ]fi fggfikle`k`\j ]Xi Xe[ n`[\% KXb\ X Zcfj\i cffb Xk CXYlXe @9=: n_\i\# n`k_ k_\ `ekif[lZk`fe f] ]fli e\n cXnj Xe[ k_\ Xd\e[d\ekj kf ]fli \o`jk`e^ fe\j# pflËcc Ôe[ Xe \m\e jX]\i# Ylj`e\jj$]i`\e[cp p\k n\cc$i\^lcXk\[ ÔeXeZ`Xc [\jk`eXk`fe1

<Xjp Xe[ Zfem\e`\ek Xcc$`e$fe\ cXn fe YXeb`e^# `ejliXeZ\# ]le[j Xe[ fk_\i ÔeXeZ`Xc j\im`Z\j% N\Xck_p `e[`m`[lXcj Xe[ ]Xd`cp f]ÔZ\j `e Z`m`c cXn Zfleki`\j ZXk\i\[ ]fi k_ifl^_ k_\ e\n CXYlXe =fle[Xk`fej 8Zk% JZfg\ f] C`d`k\[ GXike\ij_`gj Xe[ C`d`k\[ C`XY`c`kp GXike\ij_`gj \ogXe[\[% @jcXd`Z ÔeXeZ`Xc j\im`Z\j Xe[ j\Zli`k`\j jki\Xdc`e\[ Xe[ ZcXi`Ô\[ `e fe\ fde`Ylj 8Zk% <e_XeZ\[ ]leZk`fej f] k_\ i\$eXd\[ i\^lcXkfi# CXYlXe =J8% E\n gif[lZkj `ekif[lZ\[ `eZcl[`e^ j_`gg`e^ fg\iXk`fej Xj X CXYlXe Ylj`e\jj XZk`m`kp%

:FEE<:K<; :FEM<E@<EK :FJK$<==@:@<EK

>i\Xk\i Õ\o`Y`c`kp le[\i k_\ Xd\e[\[ CXYlXe :fdgXe`\j 8Zk# `eZcl[`e^ Xccfn`e^ X CXYlXe ZfdgXep kf fne X Zfekifcc`e^ jkXb\ `e X [fd\jk`Z ZfdgXep% Efe$i\j`[\ekj n`k_ DXcXpj`Xe Xjj\kj ZXe `ea\Zk k_\`i `em\jkd\ekj `e X CXYlXe kiljk n_`c\ i\j`[\ekj ZXe j\k lg X kiljk ]fi k_\`i `ek\ieXk`feXc fi DXcXpj`Xe Xjj\kj fe k_\ XggifmXc f] k_\ i\^lcXkfi# CXYlXe =J8%

Fli kiXZb i\Zfi[ jg\Xbj ]fi `kj\c]# k_\ gi\]\ii\[ _fd\ ]fi X dlck`kl[\ f] ZfdgXe`\j# `ejliXeZ\ \ek`k`\j Xe[ YXebj k_Xk Zfd\ kf \eafp fli ^\e\iflj kXo `eZ\ek`m\j# ZfdgXiXk`m\cp cfn fg\iXk`feXc Zfjkj Xe[ fe\ f] k_\ cXi^\jk [flYc\ kXoXk`fe ki\Xkp e\knfibj `e k_\ i\^`fe%

@] pfl ZXe j\\ ]Xi X_\X[# pfl befn pfl j_flc[ Y\ _\i\ `e CXYlXe% M`j`k fli n\Yj`k\ ]fi dfi\ [\kX`cj f] fli cXnj%

?FC;@E> :FDG8E@<J% @JC8D@: =@E8E:<% @EJLI8E:< 8E; :8GK@M< @EJLI8E:<% =LE; D8E8><D<EK% GI@M8K< N<8CK? D8E8><D<EK% D8IB<K@E> F==@:< CXYlXe @ek\ieXk`feXc 9lj`e\jj =`eXeZ`Xc :\eki\ @eZfigfiXk\[ J[e 9_[ /(.,0*; Jl`k\ )9$(($'* GcXqX J\ekiXc# AXcXe Jk\j\e J\ekiXc# BC J\ekiXc# ,'+.' BlXcX Cldgli# DXcXpj`X% K\c1 "-'* )..* /0.. =Xo1 "-'* )./' )'..

27

Advertorial

New Laws Make Heads Turn

by Labuan International Business and Financial Centre There was a time when “Westward Ho!” heralded a new frontier and the epitome of endless opportunities in none other than North America. These days, the path to fame and fortune is more likely to be an eastward journey towards India, Asia Pacific and China.

In the midst of the hurly-burly can be found Labuan island, off the north west coast of Borneo, which has been quietly but steadily growing in appeal. Here, in Labuan International Business and Financial Centre, the living is good, business even better, and the tax benefits more than generous.

Labuan IBFC was designated Malaysia’s international business and financial centre in 1990 and to date, it is home to multiple thousands of companies, 59 banks, and 149 insurance entities with 23 Trust companies providing professional services.

Its latest milestone is likely to be the most far-reaching, expected to transform business in Labuan IBFC in the years ahead and steer the jurisdiction to meet its objective of being the premier IBFC in Asia Pacific. That momentous event was the enactment of four new laws and the radical amendment of four others on 11 February 2010.

Head turning new Acts The cornerstone of the new legislation is two Acts that make it easier for those in the financial services and securities industry to understand Labuan IBFC’s regulations and processes. The first ‘omnibus’ legislation the Labuan Financial Services and Securities Act 2010 (LFSSA) – is an amalgamation of the individual laws and guidelines governing financial entities operating in Labuan under the conventional system.

Labuan IBFC was designated Malaysia’s international business and financial centre in 1990…

The LFSSA provides for the regulation and administration of mutual funds, market intermediaries, Labuan trust companies, Labuan banks, Labuan insurance and reinsurance entities, company management, exchanges and rules on self-regulatory organisations.

The Act also introduces new entities such as Labuan Private Trust Company, Labuan Managed Trust Company, Limited Liability Partnerships and Protected Cell Companies.

28

Mutual and private funds have been deregulated and re-defined. In the insurance sector, those previously licensed as life brokers can act as fully fledged International Financial Advisers. There is also no longer a need for a Labuan insurer to have a Labuan resident director.

The second ‘omnibus’ legislation - the Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA) - is possibly the first of its kind in the world and its central concern is to ensure the sound Shariahcompliance of Islamic based financial organsiations.

To this end the Shariah Advisory Council was elevated to the level of a full Shariah Supervisory Council (SSC) and this body now determines the proper Islamic law and procedure relating to any business regulated in Labuan IBFC. Furthermore, any of the Council’s rulings may be taken as a valid reference by any court of Competent Jurisdiction in making its decision.

This Act, which broadly runs parallel to the legislation covering conventional financial

products, contains provisions for the licensing and regulation of Islamic finance activities, the role of the regulator, and the range of Islamic financial services and products which may be offered through the jurisdiction.

New business products including takaful captives (the first in the world), Islamic style Protected Cell Companies, Private Trust Companies, Labuan Islamic Trusts and Labuan Islamic Foundations, Limited Partnerships and Limited Liability Partnerships have been introduced.

The third new law is the Labuan Foundations Act 2010, which makes Labuan one of a very few jurisdictions in the region to offer both common law Trusts as well as civil law Foundations for wealth management.

All the key issues such as the formalities, administration and judicial nature of foundations are addressed. So are others such as preserving confidentiality, and the unenforceability of foreign claims or judgements pertaining to divorce, succession rights or creditors claims. A Foundation can

related businesses, as well as to gather information from Labuan institutions and to share it with other enforcement agencies where there is an adequate prima facie case to do so. These powers ensure the business practices in Labuan IBFC are in compliance with international standards. There are, however, sufficient safeguards to ensure confidentiality and ‘no fishing’ expeditions are entertained.

Other advantages of the Labuan Special Trust include: settlors having wide reserved powers, protection of a Trust against a foreign law claim and a wide variety of Trust purposes including, uniquely, “the advancement of human rights and fundamental freedom”. Trusts can also now be ‘in perpetuity’, and there are clear guidelines relating to beneficiaries and their right to information.

The second amended law is the Labuan Companies Act 1990 which regulates Labuan companies. This Act introduced no par value shares, no authorised capital, amalgamation of companies, companies limited by guarantee; flexibility in the shareholding and capital structures, and the registration of Labuan companies in any language or character, so long as an English version is provided too.

Malaysian residents can now establish trusts for their non-Malaysian assets. With the approval of Labuan FSA (which approval will not be unreasonably withheld) Malaysians may inject domestic assets in the Trust.

Foreigners may be a settlor or beneficiary of Malaysian assets.

Various restrictions have been lifted, including shipping operations in Labuan and outside of Malaysia, permission to deal with Malaysian residents, owning controlling interests in Malaysian domestic companies, Labuan investment holding companies being allowed to co-locate in Kuala Lumpur and Labuan banks permitted to co-locate anywhere in Malaysia. New corporate structures, especially Protected Cell Companies for captive insurance and fund activities are also now allowed.

be deemed Islamic if it subscribes to Shariah principles and appoints a Shariah adviser.

The Limited Partnerships and Limited Liability Partnerships Act 2010 repeals and replaces the earlier Limited Partnerships legislation. Under the new Act, three types of partnerships are allowed in Labuan: Limited Partnerships, Limited Liability Partnerships and Recognized Limited Liability Partnerships.

The Act also provides for an LP or a Labuan company to convert to an LLP and for a foreign LLP to be registered in Labuan.

The Labuan Trusts Act 1996 has been redrafted to meet modern needs. One of the most attractive features is the Labuan Special Trust which allows the Trust to hold shares in a Labuan Holding Company, which in turn may own assets such as cash, real estate, art securities, businesses, insurance policies etc.

These shares, which are ‘on trust to retain’, may be held indefinitely. As the management of the company is the responsibility of the directors only, there is a distinct separation between the custodian role of trustees and the fiduciary role in investing which is handled by the company directors. This feature is one of the most sought after in Trust Law for, by separating the roles, the founders of wealth (the older generation) can still keep the original legacy intact.

…the Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA) is possibly the first of its kind in the world A natural follow-up on the other laws is the Labuan Business Activity Tax Act 1990 (LBATA). Amendments include extending the Labuan tax treatment to new entities such as Foundations, Limited Liability Partnerships, Protected Cell Companies, companies undertaking shipping operations and their corresponding Islamic versions. Under LBATA, trading companies pay 3% of audited profits or flat MYR20,000 (approximately USD6,000) while non-trading companies pay no tax.

For potential investors who seek certainty and clarity in their tax obligations, the Act provides for advance tax rulings from the Inland Revenue Board.

Those in search of new opportunities or concerned about wealth preservation should consider Labuan IBFC with its connectivity, convenience and cost efficiency.

For more information on Labuan IBFC, please visit www.LabuanIBFC.my

Four Acts improved In line with international best practice, the Labuan Financial Services Authority Act 1996 was amended to streamline the supervisory and regulatory functions of Labuan Financial Services Authority (or Labuan FSA) which is responsible for ensuring the stability of the IBFC. The re-named regulator is empowered to issue licenses for banks and other finance-

29

Small is Beautiful

Samoa; a remote Polynesian island in the middle of the Pacific Ocean, population of 170,000; 2,944 square kilometres of tropical paradise; economic backbone – her people.

The Samoan people’s pioneering spirit and tenacity brought them across vast oceans and acquired independent sovereignty from foreign rule. Versatility and foresight harnessed the scant resources to forge a state of rapid economic growth and political stability. Such ingenuity has won Samoa the praise of international organizations like the Asian Development Bank hailing Samoa as the model state of the Pacific. The Samoa International Finance Authority’s approach to business since its inception is no different.

The current product range that SIFA offers has been carefully engineered over the years through a natural process of selection to thrive in the ever changing global financial environment. The scope of business and product lines are naturally limited; however this has enabled SIFA to focus, rendering the development of greater product depth to serve the sophisticated interests of the international investor. It’s a case of offering a carefully selected suite of products and concentrate on delivering the highest standard of quality on par with international standards. And better still, at less cost than other highly marketed jurisdictions.

Great focus has been on the IBCs. Smaller and simpler company structures can be established using Samoa’s facilities in a more cost effective way without sacrificing quality. A Samoa IBC can be set up within 24 hours at a cost of US$300 regardless of share capital in Samoa compared to two days at a rate of US$350 in BVI. Being the last OFC in the world to close business for the day, clients in Asia can take advantage of Samoa’s location just east of the international dateline

30

which means companies effectively can be incorporated yesterday. Furthermore, Samoa can register a company with its name or constitution in Chinese characters in addition to English letters.

Samoa has enhanced further its services to the Asian market with the establishment of embassies in Japan in 2009 and the People’s Republic of China earlier in 2010. Diplomatic relationships with the PRC dates back over 30 years. With diplomatic offices on both sides (Apia and Beijing), the investors have a short trip to Samoa’s Chinese embassy where they can get documents notarized, making the registration process safer and easier.

To assure the investor that their investment is in a credible jurisdiction, Samoa has been at the forefront of some of the OECD initiatives to improve the effectiveness of offshore structures and to meet international standards.

To assure the investor that their investment is in a credible jurisdiction, Samoa has been at the forefront of some of the OECD initiatives to improve the effectiveness of offshore structures and to meet international standards. Signing up twelve TIEAs in a matter of 8 months and securing itself a place on the OECD’s White List is a testimony to Samoa’s tenacity and credibility. Furthermore, other

Photo: Tabitha Roder /CC by

Advertorial

legislations are in place including Money Laundering Prevention Act 2007 and Mutual Assistance in Criminal Matters Act 2007.

These measures – and the recognition won from the OECD – are an indication of how Samoa has strived to develop itself as a clear cut, reputable OFC in order to attract more business.

Samoa remains confident that it will continue to meet the demands of the international finance community and the discerning investor despite the changing times. It draws strength from its ability to make quick decisions from the top government officials to the implementation by the stakeholders.

Why? Because it is a tight-knit community. It is a nation of navigators, adept in negotiating the changing tides of time. Small is indeed beautiful. And being the last jurisdiction to close, we take care of business long after many have gone home, and for others, we took care of business for them, yesterday!

Photo: Sarah Keleman /CC by

OG

Isle of Man Treasury Minister on ‘The Reinvention of Offshore Centres’

Photo: Jim Linwood /CC by Bradda Head, Isle of Man, British Isles

TREASURY Minister Anne Craine MHK highlighted the Isle of Man’s position as an innovative and successful business centre during an international finance conference in Dublin in April 2010.

Delivering a keynote speech on ‘The Re-invention of Offshore Centres’, she said the Island should be viewed as a positive contributor to the global economy, rather than a threat.

The Minister rounded on critics who linked smaller jurisdictions ‘with all of the world’s woes’, and focused on the many benefits derived from the Isle of Man’s continued growth.

Delegates at the 2010 Global Financial Services Centres Conference heard how the Island continued to facilitate good business, while remaining a responsible and cooperative neighbour internationally.

The Minister rounded on critics who linked smaller jurisdictions ‘with all of the world’s woes’ Minister Craine said that although the Island had come under increasing scrutiny in recent times, it had consistently emerged with a clean bill of health.

Indeed, she added that its status as a well-regulated country had been reinforced by the findings of some of the world’s major standard setters, such as the 2009 International Monetary Fund (IMF) Report, and Michael Foot’s Review of the Crown Dependencies and Overseas Territories.

‘I am not saying that we don’t still have work to do, that is to be expected, but the essence of the reports is quite clear; the Isle of Man is an expert international financial services centre with high grade regulation, the rule of

law and a seriously embraced policy of international cooperation,’ the Minister said.

The Dublin Castle conference – attended by leading financiers, regulators, tax experts and decision makers from around the world – was told that much of the Island’s recent success could be attributed to its policy of pursuing a diversified economy.

The development of niche markets and its role in providing a gateway to route funds to other financial centres such as the City of London were cited as further benefits, rather than threats, to world markets.

‘My aim is to maintain and enhance our performance,’ the Minister said, adding that she would also continue to uphold the Isle of Man’s ‘firm position against tax evasion and illicit financial flows.’

Minister Craine, who joined other prominent speakers at the ‘Table of Honour’ during the conference lunch, called on countries to assist each other in tackling all forms of financial crime.

‘The Isle of Man has been at the forefront of efforts to put in place tax co-operation agreements. This policy has increased our international standing while at the same time having no discernable impact on our volume of business,’ she said.

‘We are proud of what we have achieved and even though pressure is being applied by powerful groupings and bodies such as the G20 and European Union, I feel that we can offer an immediate defence to much of it by citing our track record.

‘Financial services are changing constantly, and I want the Isle of Man to be known for innovation, professionalism and excellence in execution.

‘With those features in place, we will be well positioned to prosper as the recession unwinds.’

31

OG

To Serve and Protect The Cook Islands has matured as an IFC over some thirty years and continues to offer tax mitigation opportunities and low fee structures, yet manages at the same time to be soundly regulated and expertly administered, such that it has gained a potent position in the Asia-Pacific region for everything from trusts, company formation, wealth management, LLCs, insurance

The Global Forum on Transparency and Exchange of Information for Tax Purposes – 10 Essential Elements A: Availability of Information A.1. Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.

A.2. Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.

A.3. Banking information should be available for all account-holders.

B: Access to Information

Photo: Robert Young /CC by

and partnerships whilst also enjoying global preeminence in the field of asset protection trusts which originated here.

These provide a very high level of security for personal assets, and epitomise the Cook Islands’ subscription to a school of thought that puts investors’ needs first in that they allow for significant protection from creditors claims, the settler of a trust permitted to be named as a spendthrift beneficiary, and a statute of limitations on any fraudulent transfer claims.

(Asset protection trusts) epitomise the Cook Islands’ subscription to a school of thought that puts investors’ needs first The jurisdiction is also noteworthy in receiving strong support from the government and trust companies based on the islands, while in addition it has strong links with New Zealand with which it is in free association, such that it uses its New Zealand Dollar as currency and has access to its judicial infrastructure. Moreover, further reassurance for prospective corporate, family office and individual interested parties from across the globe comes in the form of its connections to the Commonwealth, manifested through its English speaking status and in the form of its stable democracy and Common Law legal system.

32

B.1. Competent authorities should have the power to obtain and provide information that is the subject of a request under an EOI agreement from any person within their territorial jurisdiction who is in possession or control of such information.

B.2. The rights and safeguards that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.

C: Exchanging of Information C.1. EOI mechanisms should provide for effective exchange of information.

C.2. The jurisdictions’ network of information exchange mechanisms should cover all relevant partners.

C.3. The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.

C.4. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.

C.5. The jurisdiction should provide information under its network of agreements in a timely manner.

OG

Photo: Neil Spicy /CC by

Chinese-Samoan Relations Flourish

English Speaking Banking Hub in the Heart of Latin America Belize is a politically stable, well regulated IFC oasis located on Central America’s Caribbean coast and possesses a banking sector known for its high levels of liquidity which has continued to flourish despite economic woes elsewhere. The key qualities are epitomised by the likes of Caye International Bank which offers services to non-resident individuals and corporations and which has recently published a stellar set of results that buck the prevailing global economic trend.

The insurance, mutual funds, trusts and ship registry sectors constitute other pillars of strength and these are backed by a sound legislative framework e.g the amended Trust Act of 2007 which affords investors opportunities to limit exposure and protect assets, while at the same time requiring for the compulsory registration of all international trusts.

Samoa, in the Western Pacific exhibits strengths in banking, insurance and trust management and offers compliant tax mitigation opportunities at low cost, while at the same time it has successfully created a state of affairs where it is synonymous with sound regulation and competent administration. Moreover it enjoys membership of a number of peer regulatory groups and is well respected in the region.

Samoa’s time on the world stage has finally come With inclusion in late 2009 on the OECD’s White List of jurisdictions that have ‘substantially implemented the international standards of transparency and exchange of tax information’ having rapidly signed the requisite 12 TIEAS, Samoa enjoys a sound reputation and in particular a growing popularity amongst Chinese investors who are well catered for through Samoa’s unique time zone status (being able to incorporate yesterday), through being able to incorporate in Chinese and through the establishment of a Samoan embassy in Beijing in 2010 which allows for straightforward registration and notarisation.

It could be said that Samoa’s time on the world stage has finally come, its maturity as an IFC built up over more than 20 years, this thanks to strong support from the government and its dedicated Samoa International Finance Authority (SIFA), as well as from professional service providers based in the jurisdiction that make the most of its location betwixt East and West which ensures Samoa constitutes an excellent conduit for investment into the wider region.

34

…the high volume of both English and Spanish speakers under one roof means it remains the jurisdiction of choice for many US, Latin American and Commonwealth qualifying candidates.

Belize is now taking its compliance responsibilities seriously with almost the required volume of TIEAS signed sufficient to be removed from the OECD grey list at time of going to press after a raft of agreements with Scandinavian countries were signed on 15th September 2010. This inexorable development of good relations with such international regulatory bodies is complemented

by Belize’s continued ability to ably cater to top-end private banking, asset management and investment requirements while the high volume of both English and Spanish speakers under one roof means it remains the jurisdiction of choice for many US, Latin American and Commonwealth qualifying candidates.

Photo: Alana Ralph /CC by

The Original IFC Embraces Change Photo: /CC by

The Bahamas with its ideal location that links the USA to the wider Caribbean and a pedigree stretching back to the 1930s would appear to have moved seamlessly into the new era of international finance thanks to the successful execution of its public-private driven vision for the financial services sector.

The Bahamas...would appear to have moved seamlessly into the new era of international finance

representativeâ&#x20AC;&#x2122; whilst retaining full autonomy to appoint the board of directors.

The funds sector meanwhile has seen the introduction of the SMART Fund which in some of its forms has seen predefining specific criteria for investment fund projects such as the number of investors or minimum value of investment done away with to be replaced as a determining factor by applicants only needing to demonstrate to the regulator that the structure is an appropriate use of an investment fund, and although administrators must have a physical presence in the Bahamas, certain tasks can be outsourced by mutual agreement.

Legislative developments such as the recent Bahamas Insurance Act and Investment Funds (Amendments) Act, and a good standing with the OECD attributable to the jurisdiction having positively embraced change look set to ensure that it will continue to be a force to be reckoned with.

Another noteworthy vehicle is the Bahamian Foundation.

This allows for redomiciliation and can be used for private, commercial and charitable purposes and can be suitable for cross border transactions and international estate and inheritance planning.

In the private wealth management sector vehicles such as the Bahamas Private Trust Company afford the opportunity for HNW families to establish a bespoke structure with a Bahamas based â&#x20AC;&#x2DC;registered

The Bahamas also exhibits prowess in the insurance, e-commerce and maritime sectors. The ship registry for example holds the status as global number one for cruise ship registration.

35

OG

HK Banks Rise to New Challenges

Extracts from Hong Kong Permanent Secretary for Financial Services & the Treasury (Financial Services) Au King-chi’s address at the Hong Kong Institute of Bankers’ second annual banking conference.

September 21st 2010 (news.gov.hk)

Of course, this snapshot would not be complete without mentioning the repercussions of the global financial tsunami.

Banking in Hong Kong Hong Kong is the world’s 15th and Asia’s 3rd largest banking centre. We are also the world’s 6th largest foreign exchange trading hub. Our banking industry is characterised by the strong presence of international banks: there are 195 authorised institutions in Hong Kong, from 30 economies.

International financial organisations such as the G20 and Financial Stability Board have come up with a long list of reform proposals following the financial crisis. A few key themes have emerged consistently on the global financial agenda, including disclosure, investor protection and financial stability.

Of these, 71 of the world’s largest 100 banks operate in Hong Kong. The sector contributes to over 10% of our GDP and employs 2.7% of our workforce. These figures speak volumes of the socio-economic significance of our banking industry.

The financial crisis highlighted the importance to market confidence of reliable valuations and disclosure of market risks. In this regard, the Financial Stability Board has launched a peer review concerning risk disclosures by market participants to enhance market resilience.

Hong Kong (is) an effective testing ground for the internationalisation of the renminbi, as well as a preferred asset-management hub, and the premier listing platform for Mainland companies wishing to go global The development of our banking industry has been shaped by a number of underlying trends in the past decade. Increasing financial integration with the Mainland has brought growing presence of Mainland banks in Hong Kong and vice versa.

36

of investment products in addition to handling deposits for customers. These call for unique solutions to meet the regulatory challenges.

Investor protection in spotlight Investor protection has come to the forefront as regulatory gaps were exposed during the financial crisis. Governments in the West are stepping up efforts to protect the investing public. For instance, the UK has proposed establishing a Consumer Protection & Markets Authority and, in the US, there is the new Consumer Financial Protection Bureau.

The international community has paid increasing attention to previously unregulated or under-regulated areas for strengthening macro-prudential oversight and promoting financial stability. Measures on the agenda seek to monitor emerging systemic risks; regulate “too big to fail” financial institutions and credit rating agencies; enhance the transparency of hedge funds and over-the-counter derivatives, and so on.

Another trend is our advancement as China’s global financial centre. Hong Kong has been ranked number three in the City of London’s Global Financial Centres Index, trailing London and New York. Our high degree of economic freedom and business friendly environment are recognised around the world.

A key cross-border reform initiative close to the heart of the banking industry now being actively pursued in Basel is capital and liquidity reforms. Indeed, the financial tsunami reveals that the risk coverage of the Basel II framework needs to be strengthened in a number of aspects.

Blurring of boundaries There has also been a blurring of boundaries among different financial sectors. Banks in Hong Kong provide a full range of financial services to their customers, including securities and insurance services. Some banking staff sell a variety

Risk coverage enhanced The Hong Kong Monetary Authority will continue to participate in the Basel process and work together with the local banking industry for implementing the relevant enhancement measures.

Photo: Benson Kua /CC by

OG

These global reform proposals would affect our financial industry to varying degrees. For instance, additional capital requirements may exert pressure on the profitability of banks, especially the smaller ones. Also, the EU proposal to regulate alternative investment managers may inadvertently limit the operation of the fund managers.

a bridge to the world. These attributes set us aside from other Mainland financial centres.

We are mindful of any potential protectionist repercussions of these overseas regulatory measures, which may lead to market fragmentation and regulatory arbitrage. Through our active participation in the international financial fora, we endeavour to ensure that our concerns are factored into the policy review and formulation processes of these overseas jurisdictions.

We have been leveraging this unique strength by actively taking part in such platforms as the Closer Economic Partnership Arrangement and Hong Kong-Guangdong Cooperation Framework, and putting forth our contributions in the formative process of our country’s 12th five-year plan.

‘China advantages’ Our compatibility with international standards and best practices will help to attract overseas financial institutions wishing to harness the business potential in the region. At the same time, they will be able to service their clients worldwide.

We must bring together our unique “China advantages” and “global advantages” to reinforce Hong Kong’s status as the preferred springboard to carry out not only Chinarelated activities in the global financial arena, but also global operations in the Greater China market.

As China’s global financial centre, Hong Kong is leveraging its advantages in conducting activities in asset management, offshore Renminbi business and capital formation, attracting and anchoring capital and talent from within and outside the country. In the process, Hong Kong should seek to better serve the needs of our country in its ongoing economic transformation.

Mainland-HK cooperation Hong Kong’s strategic positioning as China’s global financial centre under ‘One country, two systems’ gives our financial market unparalleled strengths in serving China’s development needs, while safeguarding its financial security.

In effect, it is ‘One country, two financial systems’ with Hong Kong enjoying our own legal and financial systems. We have a simple and low tax regime, a free flow of information and capital, a stable and fully convertible currency, the rule of law, an independent judiciary, as well as a highly internationalised financial market best placed to serve as a gateway to China and

In a nutshell, Hong Kong enjoys an “offshore” financial status, while remaining organically domestic in serving the giant economic powerhouse of China.

All these help make Hong Kong an effective testing ground for the internationalisation of the renminbi, as well as a preferred asset-management hub, and the premier listing platform for Mainland companies wishing to go global.

With our collective and concerted efforts, we shall be able to... capture the shift in financial gravity from the West to the East.

Shaping policies The banking profession is at the core of Hong Kong as China’s global financial centre. We rely on your expertise and dedication to help maintain and enhance this status.

The continued and sustainable development of our banking industry requires shared vision and joint efforts among the industry, the Government and the regulators.

We attach great importance to developing policies and strategies with the banking community for the best interest of depositors, investors and other users of banking services, and for enhancing our competitiveness in the financial arena.

With our collective and concerted efforts, we shall be able to optimise our regulatory regime, turn crises into opportunities, and capture the shift in financial gravity from the West to the East.

37

OG

Jamaica Moves Closer to Becoming an IFC Jamaica’s intention to establish itself as an international finance centre was restated by PM Bruce Golding in late September 2010 to a gathering of potential investors in New York.

The jurisdiction plans to become synonymous with specific sub-sectors in the financial services industry such as captive insurance, mutual funds and trusts, while it also harbours ambitions to become a one-stop-shop marine hub and international ship registry, making the most of its prime location.

Photo: Trisha /CC by

It has identified its historical entertainment and sporting pedigree as something to be capitalised upon in targeting specific niche HNW investors and so stand out from the crowd, whilst making the most of its proximity to key markets and links to the Commonwealth, Caribbean and US. Its status as the new kid on the block at a time when existing IFCs are constantly under the microscope could well be to its advantage since it will allow it to be distanced from any ‘black lists’ and attract business that has fallen off from other jurisdictions that have had to amend existing preferential legislation to comply with new international rulings.

Legislation that Works The British Virgin Islands (BVI) boast one of the highest incomes per capita in the Caribbean and the status as the world’s biggest incorporator of offshore companies.

This can be traced back to the enactment of the much aped International Business companies (IBC) Act of 1984 that set the wheels in motion for the economic and financial development of the BVI, and held sway until it was superceded by the BVI Business Companies Act of 2004.

...the most noteworthy recent developments have taken place in the form of the Securities & Investment Business Act (SIBA) and Mutual Funds Regulations...

This latter piece of legislation spelt out the permitted scope of a company’s activities and members’ and directors’ responsibilities, but also broke new ground in abolishing the concept of authorised capital, while there became a wider selection of corporate vehicles to choose from.

Along with The Virgin Islands Special Trusts Act (VISTA) of 2003 which enhanced the attractiveness of the BVI as a location for international trust settlements and operations and the bringing into law of Anti-Money Laundering Regulations in 2008 and the Anti-Money Laundering and Terrorist Financing Code of Practice, 2009, the BVI has consistently made efforts to reflect the ever changing face of international finance, as evidenced in recognition from international bodies such as the OECD, and membership of the Peer Review Group on the Global Forum on Transparency and Exchange of Information.

Its status as the new kid on the block at a time when existing IFCs are constantly under the microscope could well be to its advantage.

In going down the IFC route the country stands to benefit through the creation of skilled jobs, a construction boom, an increase in government revenue, as well as economic diversification, while it has a robust preexisting professional sector, strong regulatory framework, sound infrastructure and stable democratic credentials with which to recommend itself.

38

Yet it is in the mutual fund industry where the BVI plays host to some 3000 active funds that the most noteworthy recent developments have taken place in the form of the Securities & Investment Business Act (SIBA) and Mutual Funds Regulations which came into force in May 2010 with a compliance deadline of the end of 2010 and afford funds increased legal and regulatory support.

OG

‘Business as Usual’ in the TCI Financial Services Sector It is testament to the Turks and Caicos Islands (TCI’s) financial services sector’s solid foundations and appealing offering that it has remained immune from any recent political upheavals. Yet with a commitment to transparency and sound, fair regulation with a view to preventing fraud and money laundering that is evidenced most clearly in the OECD moving TCI to their white list in late 2009, it is easy to see why the sector remains in good health.

Bermuda Looks East The sub-tropical UK Overseas Territory of Bermuda in the North Atlantic has long been known for its stability and strong tradition of compliance which is perhaps why it continues to be held in such high esteem as an international finance centre with noteworthy strengths in the banking, fund administration, reinsurance, e-commerce and ship registration sectors.

Moreover, it has a well-respected regulatory system controlled by the Bermuda Monetary Authority, stringent anti-money laundering measures and ‘know your client’ due diligence as standard Bermuda has a skilled and specialised labour pool and associated financial services infrastructure few other jurisdictions can match, and so it isn’t surprising it is a hub for the likes of some 1500 hedge funds, pooled fund vehicles, captives, excess liability and catastrophe reinsurance.

Perhaps the most significant business entity however is the exempted partnership structure, a collective investment vehicle that for tax purposes is considered transparent by the likes of the UK and US since tax is levied at partner level.

Photo: Nigel Morris /CC by

The jurisdiction enjoys global pre-eminence in the specialised Producer Owned Reinsurance Companies (PORCs) sector which are third-party reinsurance companies owned by insurance agents and brokers.

Although PORCs are not technically considered to be captives since the company they provide reinsurance for is not the owner, in the captives sector TCI is synonymous with flexibility offering the potential to cover against industrial action and losses related to conflict.

The jurisdiction enjoys global pre-eminence in the specialised PORCs sector The keystone piece of legislation is the 1981 Companies Ordinance which allowed for the formation of a number of business entities and led to the huge popularity of the Turks and Caicos exempted company which does away with the need to obtain a business license, has minimal filing requirements, and offers scope for exemption from potential future TCI taxes for 20 years. They are used for everything from financing to investment holding so long as the lion’s share of business isn’t conducted in TCI itself, and afford significant flexibility in relation to defining capital structure and members rights and liabilities.

Yet, the jurisdiction has also built a reputation in other fields; most noticeably in the mutual funds and trust management sectors. TCI mutual funds for example can be structured as a company, partnership or unit trust while recent legislation permits individuals to be licensed as a fund manager, investment adviser or investment dealer.

Bermuda is a global leader when it comes to e-commerce with an enviable technical infrastructure that has attracted many payment solutions providers, while it has recently cemented its status at the helm of the global captives and reinsurance scene through its driving forward of the fledgling catastrophe reinsurance sector.

Bermuda has a skilled and specialised labour pool and associated financial services infrastructure few other jurisdictions can match.

In June 2010 Business Bermuda, the body charged with attracting investment into the country published the results of an economic impact study which revealed that despite challenging global conditions Bermuda has preserved its strong economic relationship with the US and Europe, and is enjoying a big increase in activity in Asia, an area it has been proactively courting with roadshows.

Photo: Alain Feulvarch /CC by

This has been driven by support from the Ministry of Finance that has targeted China as a source of great capital through the likes of provincial pension funds which they aim to attract to Bermuda thanks to legal changes in China. These allow for foreign investment, and with no income, profits, capital gains, interest, dividends, withholding or inheritance tax currently levied, along with no estate duty or stamp duty to be paid by a fund on the issue, redemption or transfer of units or shares in Bermuda investors could well come to find the jurisdiction is hard to beat.

39

Photo: Alain Feulvarch /CC by

OG

Indian Ocean Gem is Hive of Activity With its prime location in the Indian Ocean bridging not only Asia and Africa, but also East and West, as well as its strong European ties Mauritius is proving to be an increasingly popular financial centre for investors from the emerging Asian mega-economies of China and India as well as those investors from more developed economies.

That said, the jurisdiction is at pains to point out it is not and never has been a tax haven nor a ‘round-tripping’ destination, rather somewhere that offers tax mitigation opportunities through its range of sophisticated business entities, and with proven pedigree in the trust management, funds, shipping registration and captive insurance sectors.

Mauritius has been particularly successful at not only cementing its status as a major hub for international investment flows, but has also done very well recently in attracting foreign direct investment of its own too.

Chinese developers for example have been keen to take advantage of this stable, cost-effective springboard into Africa with its preferential market access to many international trading blocs, and are currently busy creating the USD750m, 521 acre Jinfei Economic Trade and Cooperation Zone.

Such bilateral ties have been further consolidated recently following a Mauritian trade mission to China headed by President Anerood Jugnauth in September 2010.

Other credentials that reassure investors are Mauritius’ status as the African leader in the World Bank’s 2010 Doing Business Report, its financial sector having met with IMF approval thanks to a solid regulatory and legal framework, and a state of play where the country has the thumbs up from international bodies such as the OECD and FATF. In addition, the economy is considered 12th freest in the world according to the 2010 Index of Economic Freedom.

Its status in this respect has been enhanced by revitalised legislation which has seen Acts updated to ensure they are flexible and fit for purpose, and thus will attract the discerning modern investor. These include the Securities Act, Insurance Act and Financial Services Act 2007, the

40

last of which liberalised international ‘Global Business Companies’ (GBCs) which are those business entities most commonly used by international investors.

Being considered resident, GBC 1s enjoy exemption from stamp duty, land transfer tax, and capital gains taxes, as well as being able to benefit from foreign tax credits and the network of DTAs which ensure they pay no more than a 15% corporate tax rate and as little as 3% on overseas profits such that it soon becomes apparent why it is such a popular conduit for investment into the likes of India.

They also benefit from an absence of withholding taxes on dividends or other payments issued to non-resident shareholders.

...revitalised legislation...has seen Acts updated to ensure they are flexible and fit for purpose, and thus will attract the discerning modern investor.

GBC 2s meanwhile can be 100% foreign owned, have no minimum capital requirements and are not subject to tax on income derived from outside Mauritius. However, as such they are unable to benefit from the many DTAs in place, and after new guidelines issued in February 2010 they are now considered fully transparent in being required to furnish the Mauritius FSC with details of the beneficial owner and an annual financial summary in addition to the pre-existing requirement to state the business objective, thereby allowing Mauritius to fully comply with its international obligations.

Photo: Alain Feulvarch /CC by

OG

Extract from the G20 Toronto Summit Declaration

June 27, 2010

Financial Sector Reform 15. We are building a more resilient financial system that serves the needs of our economies, reduces moral hazard, limits the build up of systemic risk, and supports strong and stable economic growth. We have strengthened the global financial system by fortifying prudential oversight, improving risk management, promoting transparency, and reinforcing international cooperation. A great deal has been accomplished. We welcome the full implementation of the European Stabilization Mechanism and Facility, the EU decision to publicly release the results of ongoing tests on European banks, and the recent US financial reform bill.

16. But more work is required. Accordingly, we pledge to act together to achieve the commitments to reform the financial sector made at the Washington, London and Pittsburgh Summits by the agreed or accelerated time frames. The transition to new standards will take into account the cumulative macroeconomic impact of the reforms in advanced and emerging economies. We are committed to international assessment and peer review to ensure that all our decisions are fully implemented.

to improve transparency and regulatory oversight of hedge funds, credit rating agencies and over-the-counter derivatives in an internationally consistent and nondiscriminatory way. We re-emphasized the importance of achieving a single set of high quality improved global accounting standards and the implementation of the FSBâ&#x20AC;&#x2122;s standards for sound compensation.

20. The second pillar is effective supervision. We agreed that new, stronger rules must be complemented with more effective oversight and supervision. We tasked the FSB, in consultation with the International Monetary Fund (IMF), to report to our Finance Ministers and Central Bank Governors in October 2010 on recommendations to strengthen oversight and supervision, specifically relating to the mandate, capacity and resourcing of supervisors and specific powers which should be adopted to proactively identify and address risks, including early intervention.

21. The third pillar is resolution and addressing systemic institutions. We are committed to design and implement a system where we have the powers and tools to restructure or resolve all types of financial institutions in crisis, Photo: Benson Kua /CC by

17. Our reform agenda rests on four pillars.

18. The first pillar is a strong regulatory framework. We took stock of the progress of the Basel Committee on Banking Supervision (BCBS) towards a new global regime for bank capital and liquidity and we welcome and support its work. Substantial progress has been made on reforms that will materially raise levels of resilience of our banking systems. The amount of capital will be significantly higher and the quality of capital will be significantly improved when the new reforms are fully implemented. This will enable banks to withstand - without extraordinary government support - stresses of a magnitude associated with the recent financial crisis. We support reaching agreement at the time of the Seoul Summit on the new capital framework. We agreed that all members will adopt the new standards and these will be phased in over a time frame that is consistent with sustained recovery and limits market disruption, with the aim of implementation by end-2012, and a transition horizon informed by the macroeconomic impact assessment of the Financial Stability Board (FSB) and BCBS. Phase-in arrangements will reflect different national starting points and circumstances, with initial variance around the new standards narrowing over time as countries converge to the new global standard.

19. We agreed to strengthen financial market infrastructure by accelerating the implementation of strong measures

42

without taxpayers ultimately bearing the burden, and adopted principles that will guide implementation. We called upon the FSB to consider and develop concrete policy recommendations to effectively address problems associated with, and resolve, systemically important financial institutions by the Seoul Summit. To reduce moral hazard risks, there is a need to have a policy framework including effective resolution tools, strengthened prudential and supervisory requirements, and core financial market infrastructures. We agreed the financial sector should make a fair and substantial contribution towards paying for any burdens associated with government interventions, where they occur, to repair the financial system or fund resolution, and reduce risks from the financial system. We recognized that there are a range of policy approaches to this end. Some countries are pursuing a financial levy. Other countries are pursuing different approaches.

22. The fourth pillar is transparent international assessment and peer review. We have strengthened our commitment to the IMF/World Bank Financial Sector Assessment Program (FSAP) and pledge to support robust and transparent peer review through the FSB. We are addressing non-cooperative jurisdictions based on comprehensive, consistent, and transparent assessment with respect to tax havens, the fight against money laundering and terrorist financing and the adherence to prudential standards.

OG

Offshore Financial Centres A speech by Mr Mark Field, UK Conservative MP for Cities of London and Westminster at Westminster Hall, 21 July 2010 about the beneficial role IFCs play in the global economy “As international organisations and major governments seek to understand the cause of the global financial crisis, small international financial centres (IFCs) have repeatedly endured political attacks and misguided criticism. From pejorative sniping about their being tax havens for avaricious bankers to allegations that they provide secrecy jurisdictions for shady figures in the international business community and are in part to blame for shortcomings in the financial markets, the debate over the role of small IFCs has been, to date, remarkably one-sided. This is unfortunate as it demonstrates a fundamental lack of understanding of their function and the benefits they provide to the wider global economy.

Before the UK and our international partners look to develop further international standards on financial regulation, it is critical that politicians and policymakers formulate and implement policy in an informed, consistent and balanced manner. As such, it is vital that we now take a dispassionate view of IFCs that looks sensibly at the benefits they can offer our nation as well as the broader global financial system.

that enables investors from multiple jurisdictions to ensure they do not meet multiple layers of taxation as funds pass through the global financial system; and legal neutrality that ensures no one nationality is given special treatment.

It is for this reason that there has been a mutually beneficial relationship between the City of London and many Crown Dependencies and Overseas Territories, demonstrated not only by the massive capital flows between the two which aid market liquidity and investment in the UK, but also legal and constitutional similarities and the transfer of skilled professionals. To give some idea of the scale of those capital flows, UK banks had net financing from Guernsey alone of $74.1 billion at the end of June 2009.

Unfortunately, because the public debate is largely myopic when it comes to IFCs, these benefits are often overlooked or conveniently ignored. This is in part as a result of small IFCs’ relatively low profile, Mark Field MP for Cities of London from, for instance, a lack of seats at and Westminster, UK the intergovernmental bodies which design global financial regulation.

The UK has an almost unique position in this debate. We have a constitutional relationship – through our Crown Dependences and Overseas Territories – with half of the top thirty offshore financial centres. With the Chinese government successfully lobbying the G20 to have both Macao and Hong Kong excluded from any OECD grey list on matters of tax transparency, it looks increasingly likely that the standards and regulations currently being formulated may well be imposed in some jurisdictions yet overlooked in others. Not only is this incompatible with the need to find a global response to the formation of new financial regulation but it risks undermining the UK’s financial sector and the wider British economy which is a major recipient of investment capital raised through small IFCs.

There now needs to be a much greater understanding of the role and proven benefits provided by small international financial centres as part of the City of London’s transaction chain. I therefore seek to dispel some of the popular myths surrounding such centres.

Firstly, that IFCs have a negative impact on growth in the global economy. In reality, many small IFCs are able to offer a stable, well-regulated and neutral jurisdiction through which to facilitate international and cross-border business. Investment channelled into small IFCs will in turn provide much needed liquidity, further investment opportunities, competitiveness and access to capital markets for businesses and investors in both the major developed economies and emerging market countries.

“...it is vital that we now take a dispassionate view of IFCs that looks sensibly at the benefits they can offer...”

Small international financial centres, such as Jersey and Guernsey, are used by the global financial community for a variety of reasons. They include political stability and a favourable economic outlook; familiar legal systems often based on English common law; a very high quality of service providers; the ability to meet important investor requirements such as the legal infrastructure to sell shares; a lack of foreign exchange controls that remove restrictions on the payment of interest of dividends; tax neutrality (not to be confused with tax evasion)

Indeed the recent Treasury Review of this area undertaken by Michael Foot concluded that ‘The Crown Dependencies make a significant contribution to the liquidity of the UK market. Together they provided net financing to UK banks of $332.5bn in the second quarter of 2009.’ These funds are largely accounted for by the “up streaming” to the UK head office of deposits collected

by UK banks including Lloyds Banking Group and Royal Bank of Scotland as well as Barclays, HSBC, Santander and a number of building societies. >>

43

OG

<< In addition to aiding capital flows, a report by University of Michigan economics professor, James Hines, on the relation between IFCs and the world economy reveals that expanding investment opportunities through offshore centres leads to increased domestic investment and employment, creating jobs both at the financial centre and in the domestic economy.

Small IFCs play an important role in helping to allocate capital efficiently. To this end they act as important financial intermediaries which match the capital provided by savers in one country with the investment needs of borrowers in another. While this has led to concerns over ‘round tripping’ in which capital is recycled through an offshore centre in order to give it the appearance of foreign investment and attracting a more favourable tax treatment, the experience of China and India throws this into doubt – both countries have removed tax breaks for foreign investment during the past decade and both have seen inward investment continue to soar.

unfair competition have been overstated. It is clear that the debate around tax competition needs to be redefined and any further policy initiatives need to protect the important principle of tax sovereignty as well as adequately recognise the impact of tax regimes on the productive sector. The OECD has clearly warned on the detrimental effects of high corporate tax on productivity.

The recent attacks on the zero-ten tax regimes reveal a worrying trend which not only undermines the sovereignty of independent states to set their own tax rates, but which also sees high tax countries seeking to export their high tax rates around the world.

Economic models vary country by country, and the adoption of a tax regime premised on the principles of lower tax burdens, efficient government and dynamic private sector activity is legitimate and some degree of tax competition should therefore be recognised as positive. Regardless of this, small IFCs have shown

“...because the public debate is largely myopic when it comes to IFCs...benefits are often overlooked or conveniently ignored” As a major net recipient of capital flows from small IFCs, it is possible that our firms may suffer if they were to find it more difficult to access capital via the international markets.

willingness to engage with the concerns raised over their tax regime and Guernsey, for example, is currently voluntarily undertaking a Corporate Tax Review to act within the spirit of the EU Tax Code of Conduct Group.

A second myth is that small IFCs played a part in causing the global financial crisis. While it is convenient to blame far off countries for causing the crisis, even those who work in the financial markets do not accept that small IFCs were a major cause. Last year, for instance, the Treasury Select Committee found that Guernsey did not contribute at all to global financial contagion. Indeed it could be argued that the liquidity provided by the small IFCs was significantly positive to the UK during the crisis.

A fourth myth suggests that small IFCs have a negative impact on transparency, regulation and information exchange. With the G20 placing tax transparency at the top of its agenda, small IFCs are actively participating in the expansion of the Global Forum on Transparency and Exchange of Information. Indeed an IMF review of Jersey’s regulatory standards in September last year concluded that Jersey was in the “top division” of financial centres and gave it the highest ranking ever achieved by a financial centre in terms of its compliance with FATF recommendations.

Thirdly, that IFCs engage in harmful tax practices. The Foot Review suggested that the potential for tax leakage from so-called full tax jurisdictions such as the UK towards low-tax or zero-tax regimes is relatively limited.

While the TUC has argued that the tax gap created in UK government tax receipts as a result of offshore centres is £25bn, the Deloitte Report, commissioned by the Treasury at the time of the Foot Report, showed that only £2bn is potentially lost in tax leakage per annum, with Foot concluding that the real figure could be even less than that.

Concerns about the UK’s tax base being stripped by

44

Fifthly, it is often thought that small IFCs do not benefit developing countries. Small IFCs have been accused of supporting capital flight out of developing countries. Yet the Commonwealth Secretariat is publishing a new report this month illustrating how small IFCs often play an important role in aiding developing countries by enabling such nations effectively to ‘rent’ financial expertise from other countries while they develop financial centres of their own. Crucially, they also offer investors greater protection of their property rights against domestic political uncertainty. It is no exaggeration to say that without smaller offshore financial centres many

Photo: Maurice de Beijer /CC by

OG

The Houses of Parliament, London, UK

developing countries would not secure key funding for project finance which makes a substantial contribution to the improved lives of the most vulnerable global citizens.

Furthermore, the Financial Action Taskforce gives many small IFCs a positive assessment in meeting its 49 recommendations on anti-money laundering and terrorism finance. In fact centres like the Channel Islands perform better in fighting financial crime when compared with major countries such as France, Italy, the US or even the UK. Finally, that the UK’s Crown Dependencies are fiscally unsustainable. The debate within the UK government has naturally been framed by events surrounding the collapse of Iceland’s banking system. When the Icelandic banks imploded in September 2008, it quickly became apparent that the contagion would spread to British savers and ultimately to the British taxpayer. Furthermore, the role of the Isle of Man as a core financial intermediary between British savers and Icelandic borrowers illustrated the UK’s exposure to offshore centres.

most of these funds pass through the City of London.

Much of this liquidity simply would not reach the UK but for the relationship between professionals in the City and in Jersey.

Jersey is a significant provider of administrative and legal services to international businesses active in the City helping to make the City of London a more attractive place to do business. For example Vallar plc, which successfully raised more than £700 million in a London IPO earlier this month, used a Jersey structure indicating the respect with which investors, professional advisors and companies have for Jersey as a jurisdiction. Jersey also provides banking services to a large number of UK expatriates who are unable to access the UK banking system as they do not have UK addresses.

Small IFCs desire fair recognition to their high regulatory and supervisory standards and therefore wish to make policymakers from all G20 member countries aware of their true operation as well as allow them an effective voice at the table. In this regard, it would be helpful if the

“...too few people who now seek to impose regulation on offshore jurisdictions truly understand how those jurisdictions actually operate...”

However, the subsequent Treasury Review undertaken

by Michael Foot went some way to allaying the two main concerns. In particular, the worries over the fiscal sustainability of UK Crown Dependencies proved to be overstated. Throughout the past years IFCs like Gibraltar, the Isle of Man, Guernsey and Jersey have amassed large budget surpluses while diversifying their tax base as Foot recommended. Indeed the Foot Report commented on the fact that none of the Crown Dependencies have taken on significant levels of borrowing.

It is important that at the G20 summit in Korea later this year, the beneficial role that small IFCs play in the global economy is given adequate recognition and that discussions avoid being dominated by the interests of large financial centres and those who are misinformed or hold a narrow view about the valuable contributions small IFCs offer to the world economy in terms of liquidity, efficiency, investment, economic growth and job creation.

Make no mistake; ensuring the voices of small IFCs are heard in Korea is in our national interest. If we look at the example of Jersey, and its positive effect on the wider UK economy, we can see that the island provides a conduit through which mobile capital from around the world can be aggregated and invested, primarily in London. Although approximately two thirds of the more than $250billion of bank deposits in Jersey originates from outside the UK

Minister could give an indication of what measures the UK government can take to ensure the G20 process is more inclusive and that policy prescriptions which aim to restore financial stability strike the right balance between the onshore and offshore financial community and recognise the mutual interests which exist between the two. It would also be helpful to have an update on the progress being made to meet the Foot recommendation and information on the progress being made through EU and OECD efforts to assist the Overseas Territories in meeting their international requirements.

To conclude, too few people who now seek to impose regulation on offshore jurisdictions truly understand how those jurisdictions actually operate, their positive rankings of compliance with major international regulatory standards or their beneficial role in promoting investment and growth in the wider global economy. While it is inevitable that governments attempt to prevent further financial crises occurring, and that this will result in the development of global standards which should have an impact on all jurisdictions, it is critical that politicians and policymakers do not depart from the need to formulate and implement policy in an informed, consistent and balanced manner. When it comes to our naked self-interest, it would be foolish of the UK to ignore the proven benefits provided by small international financial centres as part of the City of London’s world class operation.” © Parliamentary copyright

45

OG

VAT Spreads Out Across the Caribbean St. Kitts and Nevis PM Douglas points out benefits of VAT In August 2010 St. Kitts and Nevis Prime Minister Hon. Dr. Denzil L. Douglas said the Value Added Tax (VAT) being debated in the National Assembly will result in a wider tax base.

“This would greatly enhance equity in the system since instead of depending on a few entities to carry the tax burden it would now be spread over a larger number of entities therefore eventually lessening the liability of taxpayers,” Prime Minister and Minister of Finance, Hon. Dr. Denzil L. Douglas told the lawmaking body and the nation.

...more than 150 countries have travelled this road before... which made it easier for St. Kitts and Nevis to devise a system to suit particular circumstances.

“There is clear evidence that the VAT in many countries is generating buoyant revenues and therefore this is a very desirable feature of the Tax. Indeed we are hoping that eventually the VAT will help to finance a gradual lowering of other tax rates throughout the system. However this is dependent upon successful implementation and sustainability of the Tax which would be a function of the compliance rate of businesses which will collect this Tax on behalf of the Government. The self-policing feature of the invoice credit method can potentially mitigate tax avoidance and evasion and improve revenue stability,” Dr. Douglas said.

For example the cost of goods which were charged Consumption Tax at around 22.5 percent should decrease as this will be replaced with a VAT at 17 percent. The cost of some services may however increase where suppliers of these services do not make any changes to their cost structures.

The VAT will also provide a substantial benefit to businesses in the form of additional cash flow as they will be able to have access to the equivalent of the input VAT which they will be able to collect even prior to the goods being sold. Under the Consumption Tax regime businesses would have to wait until their goods are sold to recover the Consumption Tax. Under VAT they can claim the input VAT which they have paid at the end of the month in which it was incurred.

The Minister of Finance said that the implementation of the VAT gives St. Kitts and Nevis a head start in preparation for the erosion of border taxes which has already started and which is expected to intensify as the Federation begins to fulfill its international commitments with respect to CARICOM, the WTO and the EPA. Supplied by the Office of the Prime Minister of St. Kitts and Nevis

The Minister of Finance said that the VAT will also consolidate and modernise the tax system, pointing out that a multiplicity of taxes at different rates is inefficient to administer and that the move to VAT would eliminate 12 separate taxes as outlined in the VAT White Paper.

He said another advantage of going along the VAT path at this time is that more than 150 countries have travelled this road before with several alternative VAT laws and experiences to start from which made it easier for St. Kitts and Nevis to devise a system to suit particular circumstances.

“Unlike the personal income tax, the VAT only taxes consumption, not savings and therefore can have a stimulating effect on savings. It is expected that with the introduction of VAT the cost of living will not increase as the net increases and the net decreases in the cost of various goods and services will balance out,” said Dr. Douglas.

46

Photo: simonsimages /CC by

www.oystermarine.com

THE WORLDâ&#x20AC;&#x2122;S YOUR OYSTER From the Oyster 46 to our new Oyster 125 superyacht, every yacht in our range is recognised for its striking deck saloon profile, proven performance, build quality and numerous, practical seamanlike and live aboard details that make an Oyster an Oyster.

Whether you are considering a yacht for long distance cruising or a charter holiday afloat, let us show you how we can, almost literally, make the world your Oyster.

46

54

56

575

625

655

72

82

super yachts

motor yachts

4"*- ] 108&3 ] $)"35&3

Head Office: Oyster Marine Ltd Foxâ&#x20AC;&#x2122;s Marina Ipswich Suffolk IP2 8SA England T: +44 1473 695005 F: +44 (0) 1473 686861 E: yachts@oystermarine.com Oyster Marine Germany Saseler Str. 192a 22159 Hamburg Germany T: +49 40 64400880 F: +49 40 64400882 E: yachten@oystermarine.com Oyster Marine USA Newport Shipyard One Washington Street Newport RI 02840 USA T: +401 846 7400 F: +401 846 7483 E: info@oysteryachts.com

Exceeding Expectation: The Principles of Outstanding Leadership The Work Foundation’s major study to reveal the essence of outstanding leadership has crushed the commonplace assumption that powerful leaders with a controlling and target-driven approach are essential in tough economic times. Based on over 250 in-depth qualitative interviews, the two-year study, ‘Exceeding Expectation: the principles of outstanding leadership’, provides proof that a highly people-centred approach to leadership results in outstanding performance.

Six high-profile organisations took part in the study including EDF Energy, Guardian Media Group, Tesco and Unilever. As data in the report demonstrates, one of the most striking elements to emerge from the research was the stark contrast between how outstanding and good leaders behaved.

Until all the interviews were completed and analysed, researchers did not know if leaders taking part in the project were deemed to be ‘outstanding’ or ‘good’ in terms of their achievements and how they were perceived by their direct reports and managers.

Lead author Penny Tamkin said, “The evidence from our research indicates there needs to be a paradigm shift for all leaders who remain fixated on numbers and targets. Outstanding leaders focus on people, attitudes and engagement, co-creating vision and strategy. Instead of one-to-one meetings centred on tasks, they seek to understand people and their motives. Instead of developing others through training and advice, they do this through challenge and support. They manage performance holistically, attending to the mood and behaviour of their people as well as organisational objectives. And instead of seeing people as one of many priorities, they put the emphasis on people issues first.”

Author Gemma Pearson added, “Outstanding leaders are focussed on performance but they see people as the means of achieving great performance and themselves as enablers. They don’t seek out the limelight for themselves but challenge, stretch and champion others, giving them the space and support to excel.”

As Penny Tamkin explains, “Our findings strongly suggest that an approach which connects leaders to people and people to purpose defines outstanding leadership.

Leadership that focuses on mutuality and respect is not only good for people but good for organisations too.”

48

Nine Themes Which Characterise Outstanding Leaders 1. Think systemically and act long-term Outstanding leaders achieve through a combination of systemic thinking and acting for the long-term benefit of their organisation. They recognise the interconnected nature of the organisation and therefore act carefully.

2. Bring meaning to life Outstanding leadership enables a strong and shared sense of purpose across the organisation. They emphasise emotional connection for people with a focus on passion and on ethical purpose.

“Outstanding leaders are focussed on performance but they see people as the means of achieving great performance and themselves as enablers.”

3. Apply the spirit not the letter of the law Outstanding leadership focuses on the few key systems and processes which help provide clarity, give structure, enable feedback, allow time for discussion and enable the development of vision. They use them to achieve outcomes rather than focus on the process, and put flexibility and humanity first.

6. Give time and space to others Outstanding leaders both give significantly more time to people than non-outstanding leaders and allow their people considerably more freedom and influence over the work they do and how they do it.

7. Grow people through performance Outstanding leaders passionately and constantly invest in their people and use the challenges presented every single day to encourage growth, learning and engagement.

8. Put ‘we’ before ‘me’ Outstanding leaders work hard on issues such as team spirit, shared decision making, collaborative working and a strong bond within and between teams. Sustainable performance comes from collective wisdom and intent, encouraging people to get involved, and giving them voice and autonomy.

9. Take deeper breaths and hold them longer Outstanding leaders actively build trust by delivering on promises and acting with consistency, which in turn, leads to a sense of security and greater freedom of expression. They understand the power of trust to speed up interactions, enable people to take risks, diminish arguments or disputes and underpin innovation.

The Work Foundation is a leading independent not-for-profit organisation aiming to improve the quality of working life and the effectiveness of organisations by equipping leaders, policymakers and opinion-formers with evidence, advice, new thinking and networks.

4. Self-aware and authentic to leadership first, their own needs second Outstanding leaders unite a deep understanding of others, high levels of selfawareness and a systemic appreciation of their symbolic position to become a role model for others.

5. Understand that talk is work Outstanding leadership depends on trusting and positive relationships that are built over time for the long-term benefit of the people and their organisation. They spend a significant amount of time talking with people to understand what motivates and how they can support and boost enthusiasm in others.

www.lumaxart.com

49

No Systemic Risk from Insurance Core Activities—Findings of The Geneva Association Special Report on Systemic Risk in Insurance Leading international insurance think tank, The Geneva Association, have published a special report analysing the role of insurance in financial stability and its systemic relevance. The report has been provided to inform and support supervisors and policymakers in their discussions on the development of measures to address the complex problem of systemic risk underlined during the financial crisis.

In the report, the differing roles of insurers and banks in the global financial system and their impact on the crisis are examined. A key conclusion of the analysis is that the core activities of insurers and reinsurers do not pose systemic risks due to the specific features of the industry: • Insurance is funded by up-front premia, giving insurers strong operating cashflow without the requirement for wholesale funding.

...the core activities of insurers and reinsurers do not pose systemic risks due to the specific features of the industry • Derivatives trading on non-insurance balance sheets.

• Mis-management of short-term funding from commercial paper or securities lending.

• Insurance policies are generally long-term, with controlled outflows, enabling insurers to act as stabilisers to the financial system.

The industry has put forward five recommendations to address these particular activities and strengthen financial stability:

• During the hard test of the financial crisis, insurers maintained relatively steady capacity, business volumes and prices.

• The implementation of a comprehensive, integrated and principle-based supervision framework for insurance groups, in order to capture, among other things, any non-insurance activities such as excessive derivative activities.

Applying the most commonly cited definition of systemic risk, that of the Financial Stability Board (FSB), to the core activities of insurers and reinsurers, the report concludes that none are systemically relevant for at least one of the following reasons: • Their limited size means that there would not be disruptive effects on financial markets.

• An insurance insolvency develops slowly and can often be absorbed by, for example, capital raising, or, in a worst case, an orderly wind down.

• The features of the interrelationships of insurance activities mean that contagion risk would be limited.

The report underlines that supervisors and policymakers should focus on activities rather than financial institutions when introducing new regulation and that upcoming insurance regulatory regimes, such as Solvency II in the European Union, already adequately address insurance activities.

50

However, during the financial crisis, a small number of quasi-banking activities conducted by insurers either caused failure or triggered significant difficulties. The report therefore identifies two activities which, when conducted on a widespread scale without proper risk control frameworks, have the potential for systemic relevance.

• Strengthening liquidity risk management, particularly to address potential mismanagement issues related to short-term funding.

• Enhancement of the regulation of financial guarantee insurance, which has a very different business model than traditional insurance.

• The establishment of macro-prudential monitoring with appropriate insurance

representation.

• The strengthening of industry risk management practices to build on the lessons learned by the industry and the sharing experiences with supervisors on a global scale.

Dr Nikolaus von Bomhard, Chairman of The Geneva Association and CEO of Munich Re said, “In the public debate, the business model of insurance is unfortunately not always sufficiently demarcated from the business models of other financial services providers, such as banks. The way systemic risks are addressed must, however, take account of precisely the specific differences and characteristics of the business models and particular activities carried out by institutions. Just looking at the obvious differences, the conclusion can only be that the insurance industry in its core activities does not pose systemic risks for the economy.”

Patrick M. Liedtke, Secretary General and Managing Director of The Geneva Association said, “The analysis carried out in this Geneva Association report, using the FSB’s criteria for systemic risk, is a positive contribution to the global debate on insurance and financial stability. It demonstrates that the insurance industry is taking an active and co-operative approach to engagement with regulators and policymakers in this matter.”

Dr Stefan Lippe, Board Member of The Geneva Association and CEO of Swiss Re commented, “Global and large insurers and reinsurers play an important role in supporting the global economy, they are shock-absorbers as they have long-term investment strategies.

In this respect they contribute significantly to financial stability.”

Andrew Moss, hosting the conference as a Board Member of The Geneva Association and CEO of Aviva said, “The insurance industry with its strong cash flows and well funded customer contracts is a source of stability in the financial system. These

recommendations will enhance the regulatory framework, strengthen consumer protection and support the industry’s capacity to provide investment to the real economy.”

systemic risk accrues, not to firms, but to specific activities of those firms. Applying the FSB criteria to the main activities of insurers and reinsurers, the report concludes that neither poses a systemic risk.

management remains an area requiring improved coordination among supervisors.

Report Summary

Principle-Based Group Supervision Mitigates Potential Systemic Risk

In seeking to close remaining gaps in the supervisory framework, regulators should avoid the temptation to place special burdens on specific institutions. This approach could distort the insurance market by skewing pricing, reducing aggregate market riskbearing capacity, drawing supervisors’ attention away from risky activities going on elsewhere, and creating moral hazard in these “too big to fail” institutions. The consequences of getting systemic risk reforms wrong would not only be severely damaging to the insurance industry but to the economy as well.

Significant Differences Between Banks and Insurers The insurance business model encompassing both insurers and reinsurers - has specific features that make it a source of stability in the financial system. Insurance is funded by up-front premia, giving insurers strong operating cash-flow without requiring wholesale funding. Insurance policies are generally long-term, with controlled outflows, enabling insurers to act as stabilisers to the financial system. During the crisis, insurers maintained relatively steady capacity, business volumes and prices.

Those few insurers who experienced serious difficulties, most notably AIG, were affected, not by their insurance business, but by their quasi-banking activities.

Similarly, the troubled “monoliners” (FSA, AMBAC, MBIA et al.) concentrated exclusively on financial guarantees and Credit Default Swaps and trading. More than 90 per cent of State support to insurers went to those with significant, failing noninsurance businesses.

Core Insurance Activity Poses No Systemic Risk The FSB uses three criteria to assess the systemic risk presented by an institution: size, interconnectedness and substitutability.

The International Association of Insurance Supervisors (IAIS) has added time—that is, the speed of loss transmission to third parties—as a fourth criterion. This is of particular relevance to insurance, as insurance claims, unlike banking obligations, do not immediately generate cash outflows.

The report does not dispute these criteria for systemic risk. Even more importantly for the regulatory purposes, they show how

Current and already approved insurance regulatory regimes adequately address core insurance activities. The remaining question is whether existing regulation adequately mitigates potential systemic risk from the aforementioned non-core activities or whether it needs supplementing or replacing with new measures.

...supervisors and policymakers should focus on activities rather than financial institutions when introducing new regulation

Regulatory Focus to be Based on Risk Activities and not on Institutions

supplied by The Geneva Association

The report concludes that principle-based group supervision applied to all entities within an insurance group (regulated and non-regulated), supported by sound industry risk-management practices, will mitigate potential systemic risk related to these activities.

In the European Union, Solvency II represents a comprehensive risk and economic-based regulatory framework but should not be confused with the banking regulation Basel II. Insurer Insolvencies Currently Handled in Orderly Manner The report shows that insolvencies need not be avoided at any price. Faced with a very large event, an insurer can fail; but, in contrast to what has been witnessed in the banking sector, winding-up an insurer is an orderly process that does not generate systemic risk. However, cross-border crisis

The Geneva Association is the leading international insurance “think tank” for strategically important insurance and risk management issues identifying fundamental trends and strategic issues where insurance plays a substantial role or which influence the insurance sector.

Membership comprises a statutory maximum of 80 Chief Executive Officers (CEOs) from the world’s top (re)insurance companies.

Established in 1973, The Geneva Association, officially the “International Association for the Study of Insurance Economics”, is based in Geneva, Switzerland and is a non-profit organisation funded by its members.

For more information please visit: www.genevaassociation.org.

51

Merrill Lynch Global Wealth Management and Capgemini Release 14th Annual World Wealth Report Wealth Recovery Nearly Compensates for 2008 Losses – HNWI Population Growing at 17.1 percent While HNWI Wealth Reaches $39 trillion Asia-Pacific Leads Emerging Wealth Recovery – BRIC Countries Continue to Drive Regional Growth The world’s high net worth individuals (HNWIs) regained ground despite weakness in the world economy, according to the 14th annual World Wealth Report, released June 2010 by Merrill Lynch Global Wealth Management and Capgemini. The world’s population of HNWIs returned to 10 million in 2009 and HNWI financial wealth increased, posting a gain of 18.9 percent to $39 trillion. Ultra-HNWIs increased their wealth by 21.5 percent in 2009. These figures indicate that emerging wealth recovery has nearly recouped 2008 losses, returning to levels last seen in 2007.

“The last few years have been significant for wealthy investors. While in 2008 global HNWI wealth showed an unprecedented decline, a year later we are already seeing distinct signs of recovery, and in some areas a complete return to 2007 levels of wealth and growth”, said Nick Tucker, UK and Ireland Market Leader, Merrill Lynch Wealth Management.

“The rebound has been, and will continue to be, driven by emerging markets – especially India and China, as well as Brazil,” said Ed Merchant, Global Head, Capital Markets, Capgemini Financial Services. “In fact, Asia-Pacific was the only region in which both macroeconomic and market drivers of wealth expanded significantly in 2009.”

Asia-Pacific HNWI growth is likely to be the fastest in the world While the global HNWI recovery was generally stronger in developing nations, most of the world’s HNWI population and wealth remained highly concentrated in the U.S., Japan and Germany, which together accounted for 53.5 percent of the world’s HNWI population in 2009, down slightly from 54 percent in 2008. North America remains the single largest home to HNWIs, with its 3.1 million HNWIs accounting for 31 percent of the global HNWI population.

Asia-Pacific HNWIs, Hit Especially Hard in 2008, Led Recovery in 2009 After falling 14.2 percent in 2008 to 2.4 million, Asia-Pacific’s HNWI population rebounded in 2009 to reach 3 million, matching that of Europe’s HNWI population for the very first time. Asia-Pacific wealth also surged 30.9 percent to $9.7 trillion, more than erasing 2008 losses and surpassing the $9.5 trillion in wealth held by Europe’s HNWIs. This shift in rankings occurred because HNWI gains in Europe, while sizeable, were far less than those in Asia-Pacific, which saw continued robust growth in both economic and market drivers of wealth. Hong Kong and India led growth in Asia-Pacific, after experiencing massive declines in their HNWI bases and wealth in 2008.

Moving Forward, Asia-Pacific and BRIC will Likely be the Powerhouses of HNWI Growth BRIC nations (Brazil, Russia, India and China) are expected to again be the drivers of HNWI growth for their respective regions in the coming years. In Asia-Pacific, China and India will continue to lead the way, with economic expansion and HNWI growth likely to keep outpacing more developed economies. Asia-Pacific HNWI growth is likely to be the fastest in the world as a result. In Latin America, Brazil is similarly expected to remain an engine of growth. Russia is expected to display strength due to its commodity-rich resource base.

Photo : And rew M agill /C C by

HNWIs Warily Returned to Markets in 2009 in Cautious Pursuit of Returns HNWI investors favoured predictable returns and cash flow, as evidenced by the rise in HNWI allocations to fixed-income instruments, to 31 percent from 29 percent. Equity holdings also rose, to 29 percent from 25 percent, as the world’s stock markets recovered. Cash holdings declined slightly. HNWIs from Latin America and Japan remained the most conservative, with HWNIs in each region holding 52 percent of their aggregate portfolios in either cash/deposits or fixed-income, despite surging equities prices.

52

Investments in residential real estate regained some of its appeal in 2009 as HNWIs showed a preference for tangible assets and sought to capture some bargains as real estate prices slumped. Of all real estate assets, the share dedicated to residential real estate rose to 48 percent from 45 percent as prices recovered across much of the globe. Commercial real estate holdings, however, dipped slightly to 27 percent from 28 percent as the sector experienced falling rental incomes, weak demand and increased supply.

Geographical Diversification was Evident in HNWI Asset Shifts in 2009 The geographic distribution of HNWI assets also shifted in 2009 as HNWIs generally sought higher returns and greater geographic diversification in their portfolios. Overall, HNWIs in all regions except Latin America increased the relative share of holdings in markets outside their home regions in 2009. This could be reflected by an increase in HNWI allocations to emerging markets as investments flowed to regions and markets expected to have the most growth in the coming years. This shift countered a widespread trend toward asset repatriation to home regions during the crisis.

By 2011, HNWIs are expected to further reduce investments in their home regions and look to those regions in which growth is expected to be more robust. While HNWIs from the mature economic regions of North America and Europe are expected to continue increasing their allocations to Asia-Pacific in search of higher returns, HNWIs in Europe are also likely to increase their North American holdings to inject stability into their portfolios.

“These asset allocation findings tell us that despite signs of recovery and growth, HNWIs’ confidence was shaken by the financial crisis and they are taking a more balanced approach to investing and risk-taking, preferring more reliable and consistent returns,” said Nick Tucker, UK and Ireland Market Leader, Merrill Lynch Wealth Management. “To best serve the more cautious investor, wealth management firms need to clearly identify and factor in behavioural traits when providing specialised and independent advice, and for effective portfolio and risk management over the long-term.”

By 2011, HNWIs are expected to further reduce investments in their home regions and look to those regions in which growth is expected to be more robust HNWIs are defined as those having investable assets of $1 million or more, excluding primary residence, collectibles, consumables, and consumer durables Ultra-HNWIs are defined as those having investable assets of $30 million or more, excluding primary residence, collectibles, consumables, and consumer durables About Merrill Lynch Global Wealth Management Merrill Lynch Global Wealth Management (GWM) is a leading provider of comprehensive wealth management and investment services for individuals and businesses globally. With more than 15,000 Financial Advisors and approximately $1.4 trillion in client assets as of March 31, 2010, it is among the largest businesses of its kind in the world. More than two-thirds of GWM relationships are with clients who have a net worth of $1 million or more. Within GWM, the Private Banking & Investment Group provides tailored solutions to ultra high net worth clients, offering both the intimacy of a boutique and the resources of a premier global financial services company. These clients are served by more than 160 Private Wealth Advisor teams, along with experts in areas such as investment management, concentrated stock management and intergenerational wealth transfer strategies. Merrill Lynch Global Wealth Management is part of Bank of America Corporation.

About Capgemini Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, enables its clients to transform and perform through technologies. Capgemini provides its clients with insights and capabilities that boost their freedom to achieve superior results through a unique way of working, the Collaborative Business ExperienceTM. The Group relies on its global delivery model called Rightshore®, which aims to get the right balance of the best talent from multiple locations, working as one team to create and deliver the optimum solution for clients. Present in more than 30 countries, Capgemini reported 2009 global revenues of EUR 8.4 billion and employs 90,000 people worldwide.

More information is available at: www.capgemini.com.

53

The Eruption of Eyjafjallajökull was a Wake-up Call for Change

Photo: William Warby /CC by Giovanni Bisignani, Director General and CEO, the International Air Transport Association (IATA)

By Giovanni Bisignani Director General and CEO, International Air Transport Association (IATA) At the operational and technical level, we quickly discovered that we are ill equipped to deal with such situations. In April, the International Air Transport Association (IATA) joined with the International Civil Aviation Organization (ICAO) in a task force that is fast-tracking research to agree on specific technical standards for engine tolerance to volcanic ash. We are urging Europe to invest in enough test aircraft to efficiently monitor ash concentrations across the continent.

Policy gaps will be harder to fill. Europe’s rules for compensation and care for flight irregularities placed an unfair burden on airlines. In this extraordinary event, insurance companies claimed force majeure.

Trains or buses would not face such a liability but the European Commission was adamant that its badly drafted regulations for airlines should be applied. An urgent rethink is needed.

We also saw a clear demonstration of the inefficiency of Europe’s divided skies.

The uncoordinated response of Europe’s governments to the ash crisis highlighted what the industry has been saying for decades—Europe’s governments must make the Single European Sky (SES) a reality.

The ash crisis spurred some long-awaited action. Within days, Europe’s transport ministers committed to an accelerated

54

program for some components of the SES. For example, we expect a network manager to be in place by the end of the year, and a fast-track for the implementation of functional airspace blocks.

The commitment is welcome but what we need is a date for the complete SES, not incremental progress on the stages of a process that started years ago.

Aviation drives economies ... When it was disrupted for six days in Europe, 100,000 flights were cancelled and $1.7 billion in industry revenue was lost.

We must follow developments closely to ensure that we achieve a true and efficient SES. It must improve Europe’s competitiveness by cutting at least $6 billion in costs with reduced delays and more efficient routings. It must improve environmental performance with a 16 million metric ton reduction in carbon emissions.

Even with the advantage of a few weeks’ perspective, fundamental questions remain about the relationship between governments and the industry.

Aviation drives economies. It supports $3.5 trillion in economic activity annually and 32 million jobs. When it was disrupted

for six days in Europe, 100,000 flights were cancelled and $1.7 billion in industry revenue was lost.

More than that, 10 million people were unable to travel. Family gatherings were cancelled, heads of state stranded, conferences postponed and meetings foregone. Flowers from Kenya did not reach their markets. Australian oysters did not reach European kitchens. German factories did not have the parts to assemble their products. The cost to the economy of our industry not operating is still being calculated.

Never before has the importance of the aviation industry been so vividly demonstrated. The shutdown was on the front page of every newspaper and at the top of every newscast.

For aviation, the ash crisis was a lobbying moment par excellence. We must not let governments forget. Decisions made in crisis and policy rethinks in the aftermath of disasters are not the leadership that we need.

Aviation should not be policy afterthought.

It should be on the agenda of every head of state.

As we look to the future, beyond the recent recession, we face the enormous challenge of rebuilding the industry on a new and more resilient foundation. Eyjafjallajökull is a reminder to governments everywhere that we need proactive policy aligned with a vision for a global industry that is even safer, more environmentally responsible and sustainably profitable.

2011 – “Piracy: Orchestrating the Response”

photo: DVIDSHUB / CC by

USS Chosin patrols the Gulf of Aden in support of counter-piracy operations in the Gulf of Aden.

At a meeting held at International Maritime Organization (IMO) headquarters on 14 July 2011 participants confirmed their willingness to contribute to the promotion of the theme for World Maritime Day 2011, “Piracy: orchestrating the response”, as approved by the IMO Council in June 2010.

- strengthen the protection of persons and ships sailing though piracy-infested areas by constantly improving guidance to the industry; promoting even greater levels of support from navies; and providing care for those attacked or hijacked by pirates and support to their families;

maritime law enforcement and the safety of life at sea. And, while so doing, help tackle the root causes of piracy through the provision of assistance to States for the development of their maritime capacities and the protection of their maritime resources.

The theme links to the Year of the Seafarer (2010), in that it will directly address the impact of piracy and armed robbery against ships on seafarers and their families. There is expected to be an increased focus on programmes, such as those outlined by Mr. Marianito Roque, until recently Secretary of the Department of Labor and Employment in the Philippines e.g. his country has set up a programme to assist national seafarers (who have been held hostage by pirates in Somalia) and their families, during the postrelease period, to cope with the traumas the captivity has caused them.

- ensure that ships are aware of how to access the available naval protection, and that they are implementing the recommended preventative, evasive and defensive measures effectively;

The participants expressed strong support for the actions the IMO Secretariat had included in a provisional action plan for 2011 and undertook to provide inputs to enable finalisation of the plan before the year-end so that it may start being implemented as early as possible. In particular, industry representatives agreed on the importance of the need to ensure ship operators and ship personnel were fully aware of the existing guidance on preventing piracy attacks and how to deal with an attack once it occurred.

The meeting discussed possible activities aimed at addressing a number of objectives being included in an action plan for the year, such as: - increase pressure at the political level (including at the UN Security Council) to bring about a solution to the Somali problem and facilitate and expedite the release of hostages. Calling the world’s attention to the unacceptable plight of all those being held by pirates – seafarers, in the main – and, by so doing, creating a worldwide demand for action to set them free would be part of the objective and, to that end, participants agreed to make a joint IMO/industry approach to the United Nations;

In Somalia itself, building maritime capacity would focus on assisting the country to potentially develop its own coastal monitoring force or coast guard capability...

- promote co-operation between and among States, regions and organisations in reducing the risk of attacks on ships through information-sharing; coordination of military and civil efforts; and regional initiatives, such as the Djibouti Code of Conduct; and - build up the capacity of affected States to deter, interdict and bring to justice those who commit acts of piracy and armed robbery against ships, thereby enhancing

The meeting agreed that the implementation of the Djibouti Code of Conduct throughout 2011 (with the establishment of the Djibouti Regional Training Centre and national Information Sharing Centres in Kenya, the United Republic of Tanzania and Yemen) would be critical in assisting the region to combat piracy.

In Somalia itself, building maritime capacity would focus on assisting the country to potentially develop its own coastal monitoring force or coast guard capability, while IMO would continue to work with other organisations involved at the United Nations level, including the Security Council, the United Nations Political Office for Somalia (UNPOS), the United Nations Office on Drugs and Crime (UNODC) and others.

55

Green Goes Mainstream: Biodiversity Is Climbing the Corporate Agenda

impacts or 'environmental externalities' total around US$ 2.2 trillion annually.

Photo: Geoff Gallice / CC by

Companies with 'Net Positive Impact' on Biological Diversity are Winners in Resource-Constrained World One in four global CEOs sees biodiversity loss as a strategic issue for business growth: Latin American and African CEOs are most concerned about impacts of biodiversity loss on business growth prospects-European CEOs are least concerned The Economics of Ecosystems and Biodiversity (TEEB) for Business Report 13 July, 2010 - Business leaders in biodiversity-rich developing economies are concerned about losses of 'natural capital', a new report highlights.

Over 50 per cent of Chief Executive Officers (CEOs) surveyed in Latin America and 45 per cent in Africa see declines in biodiversity as a challenge to business growth. In contrast, less than 20 per cent of their counterparts in Western Europe share such concerns.

The findings, compiled by a study of The Economics of Ecosystems and Biodiversity (TEEB), indicate that those corporate chiefs who fail to make sustainable management of biodiversity part of their business plans may find themselves increasingly out of step with the market place.

Another recent survey, also spotlighted in the TEEB report for business, shows rising

56

interest among consumers with 60 per cent of those surveyed in America and Europe and over 90 per cent in Brazil aware of biodiversity loss.

Over 80 per cent of those consumers surveyed said they would stop buying products from companies that disregard ethical considerations in their sourcing practices.

The findings...indicate that those corporate chiefs who fail to make sustainable management of biodiversity part of their business plans may find themselves increasingly out of step with the market place The "TEEB for Business" report indicates that scrutiny of big business and its impacts on the world's natural capital is likely to intensify as better evaluations and assessments come to the fore.

The UK-based consultancy TruCost, on behalf of the UN's Principles for Responsible Investment, is set to publish a study on the activities of the world's top 3,000 listed companies, estimating that their negative

Pavan Sukhdev, the TEEB Study Leader and also head of UNEP's Green Economy Initiative said: "Through the work of TEEB and others, the economic importance of biodiversity and ecosystems is emerging from the invisible into the visible spectrum.

It is clear that some companies in some sectors and on some continents are hearing and acting on that message in order to build more sustainable, 21st century businesses".

The report, entitled "TEEB for Business" and part of a suite of reports being launched in the UN's International Year of Biodiversity, calls for companies to embrace concepts such as 'No Net Loss'; 'Ecological Neutrality' and ultimately 'Net Positive Impact' on the environment.

Achim Steiner, UN Under-Secretary General and Executive Director of UNEP which hosts TEEB, said: "We are entering an era where the multi-trillion dollar losses of natural and nature-based resources are starting to shape markets and consumer concerns. How companies respond to these risks, realities and opportunities will increasingly define their profitability; corporate profile in the market-place and the overall development paradigm of the coming decades on a planet of six billion, going to over nine billion people by 2050".

Julia Marton-Lefevre, TEEB advisory board member and Director General of IUCN, which coordinated the TEEB for Business report, urged companies to back new and transformational policies such as those outlined in the report.

"Together governments and business, in both developed and developing economies, can show leadership by establishing networks of committed corporations across all sectors dedicated to achieving a 'Net Positive Impact' on biodiversity and ecosystem services".

The TEEB report cites the case of the multinational mining giant Rio Tinto as

Photo: Eddy Van 3000 /CC by

Photo: Joshua Nguyen /CC by

one company that has committed itself to achieving Net Positive Impact on biodiversity. In association with leading conservation experts the company has developed new ways of assessing the biodiversity values of its land holdings, and has begun to apply biodiversity compensation or 'offset' methodologies in Madagascar, Australia and North America.

Other companies with similar commitments on biodiversity include Walmart (Acres for America initiative), Coca Cola (water neutral by 2020) and BC Hydro (no net incremental ecological impact). In addition to minimising and mitigating adverse impacts, business can also generate revenue from conserving biodiversity and delivering ecosystem services. Agriculture, forestry and fisheries all depend on healthy ecosystems to ensure healthy profits.

The tourism sector has a major stake and role to play in conserving biodiversity.

Realising its reliance on the biodiversity rich but fragile coral reefs, Chumbe Island Coral Park Ltd in Tanzania has invested over US$ 1.2million to establish a marine park to protect the corals surrounding Chumbe Island. The company actively supports park management as well as its own resort facilities.

The "TEEB for Business" report, which will form part of a final TEEB synthesis report calls on professional associations to develop new accounting and reporting tools for business.

"Better accounting of business impacts on biodiversity - both positive and negative - is essential to spur change in business investment and operations. Smart business leaders realise that integrating biodiversity and ecosystem services in their value chains can generate substantial cost savings and new revenues, as well as improved business reputation and license to operate."

In another recent report by the World Business Council for Sustainable Development, business leaders expressed their vision of a sustainable future, which include "prices that reflect all externalities: costs and benefits" (WBCSD Vision 2050).

In addition to minimising and mitigating adverse impacts, business can also generate revenue from conserving biodiversity and delivering ecosystem services Steps in this direction are already being taken, as evidenced by the growth of markets for biodiversity and ecosystem services.

Market data compiled by Forest Trends and the Ecosystem Marketplace showed: â&#x20AC;˘ The certified agricultural products market was valued at over US$ 40bn in 2008 and may reach up to US$ 210bn by 2020.

The measurement and valuation of biodiversity and ecosystem services in business is improving. The report recommends that accounting professions, financial reporting bodies and others should accelerate efforts to develop common standards and metrics to enable business to assess and disclose their biodiversity impacts and responses in annual reports.

â&#x20AC;˘ Biodiversity offsets, such as wetland mitigation banking in the United States or 'bio-banking' in Australia, are predicted to rise from US$3 billion in 2008 to US$ 10 billion in 2020.

Joshua Bishop, the TEEB for Business report coordinator and Chief Economist of IUCN, said:

As of now, businesses can show leadership on biodiversity and ecosystem services by:

â&#x20AC;˘ Bio carbon/forest offsets including REDD are expected to rise from just US$21m in 2006 to over $10bn in 2020.

1. Identifying their impacts and dependencies on biodiversity and ecosystem services.

2. Assessing the business risks and opportunities associated with these impacts and dependencies.

3. Developing BES information systems, set targets and report results.

4. Taking action to avoid, minimise and mitigate BES risks.

5. Integrating BES actions with wider Corporate Social Responsibility initiatives 6. Engaging with business peers and stakeholders to improve guidance and policy .

7. Grasping emerging BES business opportunities.

The TEEB for Business report is available at www.teebweb.org The lead authors and editors of the TEEB for Business report include staff from Business for Social Responsibility (BSR), Earthmind, the Global Reporting Initiative (GRI), PricewaterhouseCoopers (PwC), the International Union for Conservation of Nature (IUCN), the United Nations Environment Programme (UNEP), and the World Business Council for Sustainable Development (WBCSD).

The survey of CEOs and their attitudes to biodiversity loss was carried out by Price Waterhouse Coopers.

The survey of consumer attitudes to biodiversity and business was carried out by global market survey company IPSOS. The TEEB project is hosted by the United Nations Environment Programme and supported by the European Commission; the German Federal Environment Ministry; the UK Government's Department for Environment, Food and Rural Affairs; UK Department for International Development; Norway's Ministry for Foreign Affairs; The Netherlands' Interministerial Program Biodiversity; and the Swedish International Development Cooperation Agency.

57

UN Launches Decade-long Efforts to Tackle Desertification Fortaleza (Brazil) / Nairobi, 16 August 2010 - The United Nations is launching the Decade for Deserts and the Fight against Desertification (2010-2020), an 11-year long effort to raise awareness and action to improve the protection and management of the world’s drylands, home to a third of the world’s population and which face serious economic and environmental threats.

“Continued land degradation - whether from climate change, unsustainable agriculture or poor management of water resources - is a threat to food security, leading to starvation among the most acutely affected communities and robbing the world of productive land,” said UN Secretary General Ban Ki-moon in a statement announcing the launch.

“As we begin the Decade on Deserts and the Fight against Desertification, let us pledge to intensify our efforts to nurture the land we need for achieving the Millennium Development Goals and guaranteeing human well-being,” he added.

On a global scale, desertification - land degradation in drylands - affects 3.6 billion hectares, which accounts for 25 percent of the Earth’s terrestrial land mass. It threatens the livelihoods of more than 1 billion people in some 100 countries.

Against this backdrop, member states of

58

the United Nations addressed growing desertification and land degradation by adopting a resolution to dedicate the next decade to combating desertification and improving the protection and management of the world’s drylands in 2007.

The global launch took place in Fortaleza, Brazil, in the State of Ceara, Brazil’s semiarid region, during the Second International Conference: Climate, Sustainability and Development in Semi-arid Regions.

(Desertification) threatens the livelihoods of more than 1 billion people in some 100 countries Also today, the regional launch for Africa was held in Nairobi, Kenya, at the headquarters of the United Nations Environment Programme (UNEP) and in partnership with the United Nations Development Programme (UNDP). Other regional launches are scheduled to take place in New York, in September, for the North American Region, in the Republic of Korea in October, for the Asian Region, and in November for the European region.

While concerns about desertification are growing, it is not all doom and gloom.

Efforts have been made to address land degradation and while there have been positive outcomes, more action is needed to arrest and reverse land degradation and creeping desertification worldwide.

Luc Gnacadja, Executive Secretary of the UN Convention to Combat Desertification warned that the international community is at a crossroads, and must decide between a business-as-usual approach that will be characterised by severe and prolonged droughts, flooding and water shortages or an alternative path, that “channels our collective action towards sustainability”.

He added that the Decade’s message stresses that land is life, “so, we must ensure the drylands, remain productive and working” and that the vision for the Decade is to “forge a global partnership to reverse and prevent desertification and land degradation and to mitigate the effects of drought in affected areas in order to support poverty reduction and environmental sustainability”.

Decade’s History and Purpose In 2007, the United Nations General Assembly declared 2010-2020 the UN Decade for Deserts and the Fight against Desertification and in December 2009, it mandated five UN agencies to spearhead

•

2.1 billion people, about 40% of the world’s population, live in the world’s deserts and drylands

•

90% of this population is in developing countries

•

50% of the world’s livestock is supported by rangelands

•

46% of global carbon is stored in drylands

•

44% of all cultivated land is in drylands

•

30% of all cultivated plants come from drylands

•

8 of the 25 global hotspots are in the drylands. These are areas where 0.5% of the plant species are endemic to the region but habitat loss exceeds 70%

activities related to the Decade. These are the United Nations Environment Programme, the United Nations Development Programme, the International Fund for Agricultural Development and other relevant bodies of the United Nations, including the Department of Public Information of the United Nations Secretariat.

The Decade is designed to heighten public

Desertification Threats •

Desertification affects 3.6 billion hectares of land worldwide - or 25% of the Earth’s terrestrial land mass

•

110 countries at risk of land degradation

•

12 million hectares of land, an area the size of Benin, are lost every year

•

Annual land lost could produce 20 million tons of grain

•

US$42 billion in income is lost every year from desertification and land degradation

awareness about the threat desertification, land degradation and drought pose to sustainable development and ways leading to their alleviation.

United Nations Convention to Combat Desertification (UNCCD) Established in 1994, the United Nations Convention to Combat Desertification

Photo: Zach Dischner /CC by

Value of Deserts and Drylands

(UNCCD) is the sole legally binding international agreement linking environment, development and the promotion of healthy soils. The Convention’s 193 signatory countries, or Parties, work to alleviate poverty in the drylands, maintain and restore the land’s productivity and mitigate the effects of drought.

THE SECRETARY-GENERAL MESSAGE TO SECOND INTERNATIONAL CONFERENCE ON CLIMATE, SUSTAINABILITY AND DEVELOPMENT IN SEMI-ARID REGIONS ON THE LAUNCH OF THE UNITED NATIONS DECADE FOR DESERTS AND THE FIGHT AGAINST DESERTIFICATION Fortaleza, 16 August 2010 More than 2 billion people live in the world’s drylands. The vast majority live on less than one dollar a day and without adequate access to freshwater. Almost three-quarters of rangelands show various symptoms of desertification. Continued land degradation, whether from climate change, unsustainable agriculture or poor management of water resources is a threat to food security, leading to starvation among the most acutely affected communities and robbing the world of productive land.

Land degradation also poses growing social costs. Increased competition for depleted dryland resources can generate localized conflict and broader tensions. The forced migration of millions of people creates the risk of social breakdown in the traditional lands they leave behind and instability in the increasingly crowded urban areas to which they go in search of jobs, shelter and services.

These are formidable challenges. But they are not intractable. Across the globe, efforts to rehabilitate drylands are showing results.

By providing sustained assistance to local communities, we can preserve or recover millions of hectares of land, reduce vulnerability to climate change and alleviate hunger and poverty for one-third of humanity.

Desertification and land degradation are global problems that require a global response. As we begin the Decade for Deserts and the Fight against Desertification, let us pledge to intensify our efforts to nurture the land we need for achieving the Millennium Development Goals and guaranteeing human well-being.

59

Photo: Andrea Rueda /CC by

Big

Pharma 2011 may well see the launch of treatments as diverse as an anti-malaria vaccine and a cure for male baldness. Joanna Gray looks at six exciting launches

Fight the fat With the Wealth Health Organisation admitting that there are now more obese people in the world than starving, reducing weight is a number one priority for governmental and pharmaceutical concerns. Over 75,000,000 Americans are reported as being obese so it’s no wonder that the Food and Drug Administration is currently trialling 2574 ‘treatments’ for obesity. One of the most promising drugs is Contrave produced by US company, Orexigen Therapeutics, Inc, a biopharmaceutical company focussed on the treatment of obesity. Comprising naltrexone sustainedrelease (an opioid blocker used to treat alcoholism and opiate addiction) and bupropion (an antidepressant) the drug ‘targets behaviour and reward pathways to the brain.’ Trials conducted so far reveal that patients who took Contrave as opposed to a placebo experienced significantly greater

60

weight loss. Food cravings were also calmed.

The FDA is currently examining the drug with a hoped for release early in 2011.

Mosquirix is the first ever malaria to reach the Phase III trial stage, and as 80% of vaccines that reach Phase III end up on the market, things are looking good for a launch in 2011.

Targeting malaria Every year there are 250 million cases of malaria and approximately one million deaths according to the World Health Organisation. The Bill & Melinda Gates

Foundation has no less a goal than, ‘to eradicate this deadly disease.’ Top of their planned solutions for the blitzing of malaria is the development of a vaccine, hence its plus US$100million investment in the British firm GlaxoSmithKline (GSK) and its Mosquirix medicine. Advance trials have taken place whereby 16,000 patients in seven African countries including Mozambique, Kenya and Malawi were immunised.

Mosquirix is the first ever malaria to reach the Phase III trial stage, and as 80% of vaccines that reach Phase III end up on the market, things are looking good for a launch in 2011. The vaccine will be made available to people living in areas where malaria is endemic – not tourists.

Regrowing hair Male pattern baldness is not just an issue of vanity because for some men affected it can have detrimental effects on their mental

health. You only have to look at the British MP Mark Oaten who blamed going bald for his affair with a male prostitute. Currently sufferers are advised to adopt a healthy life style in a bid to reduce further hair loss or consider a hair transplant. However, cloning is now being utilised by Aderans Research Institute (ARI), a Japanese owned company in the USA, to multiply follicular hair cells.

The company terms the process, ‘cellular hair regeneration’ which sees a small piece of tissue from the neckline removed and then manipulated via a method called the Ji Gami process and finally transplanted on to the affected area. ARI, ‘envisions a time when crowns can be covered with full natural hair regardless of the degree of hair loss.’ Trials are currently taking place and hopes are high amongst the 25% of men who have started balding by the time they are 30, that the technique will become mainstream soon.

are turned into another type of cell which helps nerve fibres replace myelin which often gets removed when spines are injured. Its regeneration should open pathways for the body to transmit sensory signals. With 15 years and US$150 million already spent on the treatment it is hoped that the trial will replicate earlier studies on paralysed rats that had since learned to walk. If successful the treatment would have far reaching effects

If successful the treatment would have far reaching effects for those not only suffering paralysis but also a whole host of neurological conditions, including Parkinson’s

Outfoxing Parkinson’s Michael J Fox is now just as well known and respected for his work for Parkinson’s Disease as his starring role in Back to the Future. The Michael J Fox Foundation for Parkinson’s Research aims to close the gap between research and practical therapies. It greeted the news that Geron, a Californian biotech firm, has received clearance from federal regulators for the world’s first human test of a treatment made from embryonic stem cells, with optimism. The much anticipated study will inject the formula into patients with spinal injuries to restore their motor function. Embryonic stem cells

for those not only suffering paralysis but also a whole host of neurological conditions, including Parkinson’s. What is also exciting is the very fact that Geron was given the goahead for human trials of embryonic stem cell treatments, it should open up the way for other pharmaceutical companies to come forward. Early results are expected in 2011.

One pill for HIV While the cure for HIV is still far off, pharmaceutical companies are still involved in a race to reduce the cocktail of drugs that HIV sufferers have to take. Tibotec

Pharmaceuticals is based in Ireland and is dedicated to the, ‘discovery and development of innovative HIV/AIDS drugs and antiinfectives for diseases of high unmet medical need.’ In mid 2010 it announced very promising Phase III, randomised trials of TMC278 for use in the treatment of naive adult patients. It is currently submitting its findings to the European equivalent of the FDA, the European Medicines Agency (EMEA) with a plan to commercialise the once-daily drug in the European Union by 2011.

Rainforest cancer cure It’s the stuff of Hollywood films but if Australian firm QBiotics Ltd is to be believed they may have located a tumour-busting drug extracted from the native Australian plant blushwood. 2011 will see the company begin its first trials on healthy humans after the drug has been used effectively on over 150 animals with a variety of hard tumours. The drug EBC-46, derived from the blushwood tree is injected into the tumour and works by stimulating the patient’s immune system into producing white blood cells called neutrophilis to combat tumours.

When a tumour is forming these white blood cells are inactivated by the tumour, the drug is a signalling molecule which reactivates the neutrophils to destroy the surrounding tumour cells. QBiotics represents a growing number of pharmaceutical companies that are working with pets and then progressing to humans in what is becoming known as One Life, One Medicine.

Photo: oxymoron /CC by

61

Photo: Premshree Pillai /CC by

Building for the Future

The dense population of Mumbai requires the monorail engineers to work within existing transport structures

Engineering projects from railways to new cities offer economic hope and improved standards of living for millions. Frances Law looks at the most thrilling projects from six continents Desalination plant, Adelaide, Australia

sensitive marine habitats, no road widening is necessary and that the processed seawater will be within normal salinity levels.

Also pertinent to Australia is the projects’ endeavour to continue working with the native Kaurna people to recognise and respect their heritage and connection with the land and waters.

King Abdullah Economic City (KAEC), It is no surprise that ‘environment’ is, after Jeddah, Saudi Arabia clean water, the second biggest priority for the South Australian Government and SA Just as the West is attempting to rely less Water who have commissioned AdelaideAqua heavily on Middle Eastern oil, so too are and Abigroup Contractors to design, build, maintain and operate a desalination plant.

The development of King A project that has been running since 2009 and is due to be fully operational Abdullah Economic City in 2012, the Adelaide desalination plant between the holy cities aims to address Australia’s most pressing of Mecca and Medina is a need: water shortage. Current costs are US$1.83 billion. The desalination plant continuation of the region’s is due to deliver 100bn litres of water drive to encourage private each year – which equates to about half Adelaide’s water supply. For every 40-45 sector investment away litres of drinking water produced, 100 litres from oil. of seawater are processed. This massive operation naturally requires acute thinking Arabian states. As the multi-trillion dollar from the contractors about how to ensure development of Dubai is testament to, oil is that marine habitats are not damaged, or at not the only profitable product the region least created elsewhere. has to offer. The development of King Abdullah Economic City between the holy AdelaideAqua, a consortium comprising cities of Mecca and Medina is a continuation Acciona Ague, United Utilities, McConnell of the region’s drive to encourage private Dowell and Abigroup Contractors have sector investment away from oil. agreed to stringent environmental demands made of it by the South Building by a consortium led by Emaar Australian Government and SA Water. The Properties began in 2006 and is set to ‘Environmental Impact Statement’ promises take 20 years to complete the city that will that construction works will be avoided in eventually be the size of Washington DC and

62

house two million people. Comprising port, industrial valley, educational zone, central business district, resorts and residential area the growing city relies on the expertise of international companies such as Parsons, WATG, SOM and RSP to ensure the city functions on an international basis. The master planners also aim for the city to be completely self-supporting.

The Belo Monte Dam, Xingu River, Brazil Think big engineering projects and dams spring, or perhaps gush, to mind. The Belo Monte Dam is a proposed hydroelectric dam complex on the Brazilian Xingu River. It has a planned capacity at 11,223MW making it the third largest dam in the world after the Three Gorges and Itaipu. Twenty-three million Brazilian homes are set to receive its electricity. However this project has not had the easiest of launches owing to the relocation of 12,000 people and serious concerns about devastation to the Brazilian rainforest; the first project was abandoned in the 1990s.

However, in April 2010 the Norte Energia consortium (including Electrobras, Queiroz Galvao, Galvao Engenharia, Medes Junior, Seveng, JMalucelli Constructora, Contern Construcoes, Cetenco Engenharia and Gaia Engergia e Participacoes) won the renewed US$10.9billion contract. Construction is expected to start in 2015. The success of this project rests on the ability of Norte Engergia to convince international environmental interests that it will benefit rather than deprive the region. Recently the chairman of the Energy Research Company (EPE),

Photo: Juliette Gilbert /CC by

It is hoped the MOSE project will protect Venice from tidal flooding and rising sea water levels

Maurício Tolmasquim has made great strides in conveying its economic benefits to the native population stating that 18,000 direct jobs will be created and 4,500 people currently living in houses on stilts will see their living standards rise.

Mumbai Monorail, Mumbai, India The 19km long stretch of monorail in Mumbai is the first to be built in India since the Patiala State Monorail and comes at the right moment for India’s most economically vibrant of cities. From Jacob Circle to Wadala and then onto Chembur, the monorail, with an average speed of 65km per hour is expected to carry 125,000 passengers per day. Speed really is of the essence in this project owing to its start in 2010 and aimed completion in 2012 at a cost of US$0.5billion.

Rather than dealing with concerns regarding ecology that so often befall largescale engineering projects, the consortium behind the monorail (Scomi Engineering and Larson & Toubro Ltd) have had to contend with the ever-increasing demands of a growing population – 13,000,000 and growing; hence the speed of the project.

The dense population of the city also requires the engineers to work within existing transport structures – monorail only requires a width of one metre for the foundation pillars. It is also remarkably quiet and thus ideal for urban settings.

Relizane-Tiaret-Tissemsilt Railway line, Algeria, Africa Large-scale engineering projects are always

welcomed in Africa as beacons of a more prosperous and connected future. Adam Smith, the great economist blamed Africa’s lack of easily navigable rivers as the chief cause of its slow economic growth, hence elation when another rail link is planned, albeit in the more prosperous north. The Relizane-Tiaret-Tissemsilt railway line will stretch 185km from Algiers to the three named towns. The US$1.3bn project has been running since 2009 and is due to be completed in 2014. Financed by the Algerian Government the line will include seven passenger stations, five junctions and the

...this Algerian rail project...represents great economic retrenchment by the Algerian Government and the trickle-down effect of good infrastructure bodes well for the rest of the Continent. high performance track should allow for a speed of 160km per hour. The stretch between Relizane-Tiaret is very rugged and the constructors will employ the New Austrian Tunnelling Method (NATM) to build five tunnels. Spanish contractors FCC and an Algerian firm ETRHB Haddad were awarded the contract in May 2010.

What makes this Algerian rail project interesting is that it represents great economic retrenchment by the Algerian

Government and the trickle-down effect of good infrastructure bodes well for the rest of the Continent. FCC states, ‘the contract, awarded by the Transport Ministry via ANESRIF (National Agency of Studies and of Follow-up of the Realization of the Railway Investment), is part of the 20092014 economic development programme promoted by Algeria’s President, Abdelaziz Bouteflika. The programme has a budget of 114 billion euro, a large part of which is aimed at infrastructure construction.’

The Modulo Sperimentale Elettromeccanico (MOSE), Venice, Europe If ever old Europe’s heritage collides with modern Europe’s engineering prowess it is in Venice’s extraordinary flood defence system. In a scheme reminiscent of a James Bond villain, MOSE uses panels and gates attached to the sea floor in an effort to protect Venice from tidal flooding and rising sea water levels. When the tide reaches above an established level the barriers are mobilised to temporarily isolate the Venetian lagoon from the Adriatic Sea and stop the tidal flow with the aim of ensuring that the likes of St Mark’s Square, the Doge’s Palace and the fleets of gondoliers are protected for posterity. Begun in 2003 it is due to be completed by 2012 using a budget of US$3bn. However the project has had to fend off an inordinate number of complaints including a 12,000 strong petition and concerns about the natural habitat of the lagoon. The consortium, Consorzio Venezia Nuova has done much to allay environmental concerns by recreating mudflats and saltmarshes for example.

63

Marco Polo Business Pioneer Extracts from ‘Travels of Marco Polo’ On Energy: All over the country of Cathay there is a kind of black stone existing in beds in the mountains, which they dig out and burn like firewood. If you supply the fire with them at night, and see that they are well kindled, you will find them still alight in the morning, and they make such fine fuel that no other is used throughout the country. It is true that they have plenty of wood also, but they do not burn it, because those stones burn better and cost less.

On Governance: The Great Khan chose 12 barons to whom he entrusted all the necessary affairs of 34 provinces... These 12 barons reside all together in a very rich and handsome palace. To every province is assigned a judge and several clerks; and all reside in this palace, where each has his separate quarters.

These judges and clerks administer all the affairs of the provinces to which they are attached, under the direction of the 12 barons. Howbeit, when an affair is of very great importance, the 12 barons lay in before the emperor, and he decides as he thinks best. But the power of those 12 barons is so great that they choose the governors for all those 34 great provinces that I have mentioned. Only after they have chosen do they inform the emperor of their choice.

Those 12 barons also have such authority that they can send the armed forces wherever and in whatever strength they please. This is done of course with the emperor’s awareness, but still the orders are issued on their authority. They are called “The Supreme Court,” as is the palace where they abide. This body forms the highest authority at the court of the Great Khan; and indeed they can favour and promote whomever they wish.

On Infrastructure: From this city...proceed many roads and highways leading to a variety of provinces, one to one province, another to another; and each road receives the name of the province to which it leads. The travelling messengers of the emperor find at every 25 miles of the journey a station called a “Horse Post-House.” At each of those stations used by the messengers, there is a large and handsome building for them to stay at, in which they find all the rooms furnished with fine beds and all other necessary articles in silk, and where they are provided with everything they can want...At some of these stations, there are some 400 horses standing ready for the use of the messengers; at others there are 200. Even when the messengers have to pass through a roadless expanse where there are neither houses nor hostels, the station houses have been established there just the same.

On Tax: First there is the salt, which brings in a great revenue. For it produces every year, in round numbers, a vast sum of money!

64

In this city and its dependencies they make great quantities of sugar, as indeed they do in the other eight divisions of the country; so that I believe the whole of the rest of the world together does not produce such a quantity, at least, if that be true which many people have told me; and the sugar alone again produces an enormous revenue. All spices pay three and a third percent on the value; and all merchandise likewise pays three and a third percent. (But sea-borne goods from India and other distant countries pay 10 percent.) The rice-wine also makes a great return, as does coal, of which there is a great quantity; and so do the twelve guilds of craftsmen that I told you of, with their 12,000 stations apiece, for they must pay tax on every article they make. The silk which is produced in such abundance brings an immense return since they must pay 10 per cent on it or more as on many other articles.

On Money: With these pieces of paper... (the Emperor) makes them to pass current universally... whithersoever his power and sovereignty extends. And nobody, however important he may think himself, dares to refuse them on pain of death. And indeed everybody takes them readily, for wheresoever a person may go throughout the Great Kaan’s dominions he shall find these pieces of paper current, and shall be able to transact all sales and purchases of goods by means of them just as well as if they were coins of pure gold. And all the while they are so light that ten bezants’ worth does not weigh one golden bezant.

Photo: Jenny Douglas /CC by

Simple Tips to Master Five of the Strangest Golf Rules St. Andrews Old Course, Scotland

by Jack Moorehouse Golf can be maddening at times. Take its rules. The game is supposed to be played by gentlemen, so there are no judges, referees, or umpires watching our every move to make sure we follow the rules. You’re supposed to know the rules, even though few teachers, if any, give golf lessons on them. And when players play in a group, they’re responsible for penalising themselves and their playing partners. In other words, you’re supposed to be honest when you play, no matter what your golf handicap. Most golfers are honest and follow the rules.

But some rules leave even the most astute golfers shaking their heads. Put simply, the game has some of the strangest rules of any sport. Even if we spent several golf instruction sessions going over the rules with you, we probably couldn’t help you with all the strange things that are covered in the golf course. Nor could we help you understand the rationale behind the rules covering these incidents. In other words, golf’s rules don’t always make sense. Below are five of those rules.

Power Line Interference If your drive strikes a power line that’s within the course’s boundaries, you must retee the ball and hit another shot (Rule 20-5 applies). But if your ball comes off any other man-made obstruction, you must play the ball as it lies. You can get relief if your ball is in an obstruction or the obstruction impedes your swing. But otherwise, you have to play the ball where it lies. Aren’t power lines manmade objects?

Carrying a Non-conforming Club You can be disqualified if you’re found carrying a damaged or non-conforming club—even if you don’t use it. (Rule 4-1/1 applies). In fact, one PGA professional was disqualified for just this reason. Dudley Hart, a PGA Tour Professional, was disqualified from the 2004 Buick Championship for carrying a bent club during the tournament’s second round. That rule doesn’t apply, of course, if your club is bent or damaged during the round you’re playing. This rule seems harsh, doesn’t it? How big an advantage can you gain by playing a ball with a broken or damaged club?

...some rules leave even the most astute golfers shaking their heads Fairway Divots You blast a drive straight down the middle only to have your ball land in a divot. It’s unfair, but you still have to play the ball from the divot, even though someone else created it. Think about it. Aren’t you being penalised for something someone else failed to do?

Wasn’t the other player supposed to replace his or her divot, if possible?

Provisional Announcements Rule 27-2a/1 states that you must say you’re playing a provisional ball, even if it’s clear that was what you meant when you said something else. For example, if you say, “I think I may have lost that ball” or “I’m going to hit a second ball, just to be safe,” you could be penalised. The penalty: a stroke

and distance. So when it comes to playing in tournaments, make sure you say “provisional ball.”

Practical Joker We’ve never covered this rule in any golf lessons we’ve given, but maybe we should.

What would happen if someone decided to move the pin somewhere other than the correct hole on the green and some players played to it? It’s not something that happens daily. In fact, we can’t recall this ever happening in all our years of golf. But if it does happen, the rules have it covered. They say you can’t replay the hole. You have to finish the hole and take the strokes. This rule goes under the heading “strange but true.”

Golf is a great game. The quest to hone your skills and lower your golf handicap can fill up the time, absorb your interest, and provide plenty of entertainment. But some of its rules should come with golf tips designed to explain the rationale behind them.

Sometimes, the rules just don’t make sense.

Jack Moorehouse is the author of the bestselling book “How to Break 80 and Shoot Like The Pros.”

Photo: Fevi Yu /CC by

65

The International Year of Chemistry 2011 The International Year of Chemistry 2011 (IYC 2011) is a worldwide celebration of the achievements of chemistry and its contributions to the well-being of humankind. Under the unifying theme “Chemistry—our life, our future,” IYC 2011 will offer a range of interactive, entertaining, and educational activities for all ages. The Year of Chemistry is intended to reach across the globe, with opportunities for public participation at the local, regional, and national level.

The goals of IYC2011 are to increase the public appreciation of chemistry in meeting world needs, to encourage interest in chemistry among young people, and to generate enthusiasm for the creative future of chemistry. The year 2011 will coincide with the 100th anniversary of the Nobel Prize awarded to Madame Marie Curie—an opportunity to celebrate the contributions of women to science. The year will also be the 100th anniversary of the founding of

The IYC 2011 is an initiative of IUPAC, the International Union of Pure and Applied Chemistry, and of UNESCO, the United Nations Educational, Scientific, and Cultural Organisation. It involves chemical societies, academies, and institutions worldwide, and relies on individual initiatives to organise local and regional activities.

During the International Year of Chemistry, planned activities will: Increase the public appreciation of chemistry in meeting world needs Chemistry, appropriately called the Central Science, is both a deeply philosophical inquiry and an applied scientific endeavour.

The science of chemistry is fundamental to humanity’s understanding of the world and the cosmos. Molecular transformations are central to the production of foodstuffs, medicines, fuels, metals, i.e., virtually all manufactured and extracted products.

Through IYC the chemical community

Generate enthusiasm for the creative future of chemistry Humanity’s understanding of the world is grounded in our developing knowledge of chemistry. Creative opportunities to discover exciting new principles and applications continually appear as our understanding of molecular properties grows. Chemists will inevitably play a key role in overcoming the challenges facing today’s world, for example in helping to address the United Nations Millennium goals. A deep understanding of the science is essential for developing molecular medicine, for creating new materials and sustainable sources of food and energy.

Photo: Jennifer Dickert /CC by

the International Association of Chemical Societies, providing a chance to highlight the benefits of international scientific collaboration.

IYC 2011 events will emphasise that chemistry is a creative science essential for sustainability and improvements to our way of life. Activities, such as lectures, exhibits, and hands-on experiments, will explore how chemical research is critical for solving our most vexing global problems involving food, water, health, energy, transportation, and more.

In addition, the Year of Chemistry will help enhance international cooperation by serving as a focal point or information source for activities by national chemical societies, educational institutions, industry, governmental, and non-governmental organisations.

66

will publicly celebrate the art and science of chemistry, its key contributions to developing human knowledge, advancing economic progress and fostering a wholesome environment.

Increase interest of young people in chemistry In order to ensure that first-rate minds continue to be attracted to and challenged by the central science, IYC will underscore the role of chemistry in managing natural resources sustainably. In partnership with the United Nations, the International Year of Chemistry will make a strong educational contribution toward the goals of the UN Decade of Education for Sustainable Development, particularly in the key action areas of health and environment. National and international activities carried out during the International Year will emphasise the importance of chemistry in helping to sustain the natural resource base for life.

Celebrate the 100th anniversary of the Mme. Curie Nobel Prize and the 100th anniversary of the founding of the International Association of Chemical Societies The year 2011 marks the one-hundredth anniversary of the Nobel Prize in Chemistry awarded to Marie Sklodowska Curie, recognising her discovery of the elements radium and polonium. Dr. Curie’s achievements continue to inspire students, especially women, to pursue careers in chemistry. The year 2011 also marks the one-hundredth anniversary of the founding in Paris of the International Association of Chemical Societies to address the need for international cooperation among chemists and international standardisation of nomenclature, atomic weights, physical constants, and scientific communication.

67

68