CFI.co Summer 2018 by CFI.co

Capital Finance International

Summer 2018

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AS WORLD ECONOMIES CONVERGE

Emmanuel Macron, President of the French Republic:

JOBS FOR EVERYONE

ALSO IN THIS ISSUE // WORLD BANK: KNOWLEDGE & INNOVATION // DELOITTE: EMEA BANKS IBM: FOURTH INDUSTRIAL REVOLUTION // ASIAN DEVELOPMENT BANK: HIGH-TECH JOB CREATION OECD & UNCDF: BLENDED FINANCE FROM INFRASTRUCTURE TO BIODIVERSITY // NASDAQ: SUSTAINABLE BOND MARKET

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Editor’s Column Hear Him Out diplomats, historians, and assorted academics may argue, quite convincingly, that the US has profited handsomely from its pre-eminence. And that is also true, though rather beside the point. Mr Trump is not one for details. He notes that some Chinese companies steal the intellectual property of their US competitors and is quite upset about that. He sees that US steelmakers suffer unfair competition from subsidised overseas producers and gets angry. He points to tariff walls and regulatory obstacles erected by others to shield their markets and becomes annoyed.

These are interesting times. The liberal postwar world order is apparently no longer fit for purpose as geopolitical realities have shifted rather dramatically. Today, no single nation state can set the global agenda. Multiple superpowers have emerged and assert their influence over those near and far, vying for regional supremacy. This, of course, is how superpowers have always behaved. The difference is that the big boys club has swelled to four members with a few others trying to gain admittance.

Editor’s Column

Though he would undoubtedly shudder at the mere thought, US president Donald Trump is, at heart, a liberal globalist, arguing forcefully for the removal of trade barriers. Though he seems to abhor free trade agreements, Mr Trump is very much in favour of free trade as such and remains confident that his country’s enviable entrepreneurial pluck will carry the day – if only given a fair chance to do so. He may, in fact, be on the money. It is true – demonstrably so – that privileged access to the vast US market has allowed many a country to rebuild its ravaged or mismanaged economy and attain a degree of prosperity otherwise not available – at least not that easily. For decades on end, US consumers have effectively bankrolled the economic development of others. First Europe, then Japan, South Korea, and China. Of the world’s great economies, arguably only India succeeded in bypassing the US market. Before opening to global trade and investment, India suffered lacklustre growth rates – proving the point. The current US administration is determined to redefine the country’s role in global affairs. Mr Trump may throw his considerable weight around in a way that horrifies others, his policy is refreshingly simple: the US will no longer be the world’s benevolent paymaster. Of course, 8

Global trade is a highly complex topic. Though the best attempt yet to level the playing field, the World Trade Organisation (WTO) is far from perfect as it tries to strike a balance between a vast and bewildering range of national interests. President Trump profoundly dislikes the WTO and wonders why global trade cannot simply not be free. Good question. Mr Trump never laid any claim to sophistication; he just wants to make an artful deal. Before academics, policymakers, pundits, and others who take a more nuanced view of global affairs shake their collective heads in disbelief, it would perhaps be wise to find some simple answers to the questions raised by Mr Trump – they are valid and merit an answer. Sure, the EU and China are fully entitled to respond in kind to whatever punitive tariffs the Trump Administration imposes on their exports. However, it might be wiser to wait for the storm to pass and engage with Mr Trump, hear him out, and meet him midway: acknowledge that he has a point and try to address it. China indeed subsidises its industry in many ways and the European Union does maintain some significant barriers to trade. Whilst in this new multipolar world the US president can hardly expect to impose his will on others, he is entitled to call out those who harm his country’s interests. Mr Trump’s presentation may perhaps cause eyebrows to be raised but that does not necessarily invalidate his concerns. For the liberal world order to survive – an order that delivered an unprecedented degree of prosperity to nearly all – its improbable saviour needs to be heard. Like it or not, the US has been a free trade champion for as long as anyone care to remember. That has not changed under President Trump. Wim Romeijn Editor, CFI.co CFI.co | Capital Finance International

Editorâ&#x20AC;&#x2122;s Column

> Letters to the Editor

“ “ “

Whatever the writer’s opinion on free trade, Donald Trump was elected on a manifesto of protecting American jobs and that is what he’s doing with tariffs on steel and aluminium. As Peter Navarro stated on June 1st, “steel and aluminium made with American hands… will provide a solid tax base to communities ravaged by the forces of globalization.” Moreover, the latest figure for the EU trade-weighted applied tariffs was 3% whereas for the US it was 2.3%, so for the writer to claim that “Europe remains as an outpost of the liberal world order” is disingenuous, to say the least. MARVIN GLATTFELDER (Bethlehem, PA) The situation in Venezuela is one of near total despair. Well over a million people have fled to neighbouring Brazil and Colombia in pursuit of a regular meal. President Maduro speaks of an international conspiracy that ruins his country’s economy and reduced it to beggar status. Things are so bad that the government has simply stopped monitoring its performance. Inflation is now estimated to run at around 25,000% annually. Nobody knows the exact number because since 2015 no price index has been kept. The economy shrinks by about 15% per year. It could be more for solid numbers do not exist. Less than twenty years ago, Venezuela was one of South America’s most prosperous countries. It was also a democracy, albeit one suffering corruption. Though democracy is gone, corruption multiplied. PAULO CARDOSO (Manaus, Brazil) Every demographic suffers its fools and billionaires are no exception as is proved by the rather creepy Peter Thiel and the only slightly less weird prepper billionaires who have followed him to New Zealand in search of a sanctuary when things go horribly wrong in the world they helped shape. I cannot help but wonder: how many billions does it take to buy happiness. One or two should suffice to bankroll a life of leisure. Instead of prepping for the end times, why not follow in the footsteps of Bill Gates, Warren Buffett, and other exceptionally gifted entrepreneurs and give away the excess billions. Thiel et al are running away from the problem. Gates, Buffett, et al are trying to solve it. SANDRA PETERS (Key West, Florida, USA) I particularly enjoyed your piece on Andréa Maechler of the Swiss National Bank. It is no small feat for a country to undergo a thirty percent appreciation of its currency and still retain its position amongst the world’s most competitive places to conduct business. It just goes to show: a quality business environment is, literally, priceless. ELVIS FORRESTER (Hong Kong, China)

Summer 2018 Issue

“ “ “

I thoroughly enjoyed your portrayal of Porsche and its corporate history. The marque indeed stands for timeless quality and superior craftsmanship. A Porsche, especially perennial classics such as the 911, is a companion for life. Porsche is not just a car, but a celebration of German engineering. Let’s hope the company is able to keep its peerless reputation intact as we move away from the internal combustion engine towards electric drivetrains. Tesla doesn’t quite have the same ring to its name and that probably won’t change as that company struggles to deliver a dependable vehicle whilst its boss almost continually mistreats car buyers and stockholders as nuisances that stand in the way of progress. Pity the man. JEAN-PIERRE MECHELON (Lyon, France) US president Donald Trump gives the world a valuable lesson in how to alienate partners and lose friends. His diplomatic showmanship fools only gullible American voters eager to assign blame to distant countries for whatever bothers them. Dividing the world into an us and a them is a well-known and -studied trait of superpowers. It is also an approach that usually yields no results. The EU and other US trading partners now have a unique opportunity to bolster the strength of the World Trade Organization by adhering to its rules as they pursue their case against the US for introducing surcharges on imported steel. Unleashing a tit-for-tat trade war outside the multilateral framework just reinforces the notion that it is ok to act unilaterally. It is not. JAMES C MOOREHEAD (Liverpool, UK)

London: Trafalgar Square

Thanks for drawing attention to the Gibson guitar, one of America’s iconic brands just like Harley Davidson, Levi’s, Jeep, and – oh wait! – what else is left? Yes, we have Apple and Facebook and Google and Microsoft and Amazon; however, these newbie companies hardly form part of Americana – the undefinable yet easily identifiable quality that conveys everything the US stands for, or at least used to. I realise that one cannot run a major economy on nostalgia. I also understand that the US adapted to new technology faster and better than any other country – save, perhaps, tiny Estonia. Still, I do miss the time when blue collar workers earned a good living by building stuff, a time when Made in America represented the best quality available anywhere. FREDDY DESALVO (Flint, Michigan, US)

Editor Wim Romeijn

Assistant Editor Sarah Worthington

COVER STORIES

Executive Editor George Kingsley Production Editor Jackie Chapman

Otaviano Canuto, World Bank Making Returns on Knowledge

Editorial Tony Lennox Kate Stanton Steve Dyson John Marinus Ellen Langford Naomi Majid

Evan Harvey, Nasdaq The Sustainable Bond Market: New Developments

(14 – 15)

(25) Columnists Otaviano Canuto Evan Harvey Tor Svensson Lord Waverley Ian Fletcher

Distribution Manager Len Collingwood

Subscriptions Maggie Arts

Commercial Director William Adam

Director, Operations Marten Mark

Publisher Mark Harrison

Capital Finance International Meridien House 69 - 71 Clarendon Road Watford WD17 1DS United Kingdom T: +44 203 137 3679 F: +44 203 137 5872 E: info@cfi.co W: www.cfi.co Editorial on p16-21, 214 © Project Syndicate 2018

Printed in the UK by The Magazine Printing Company using only paper from FSC/PEFC suppliers www.magprint.co.uk

Ian Fletcher Fourth Industrial Revolution: Positioning for Change (32 – 36)

Cover Story President Emmanuel Macron: Getting France Back to Work (38 – 43)

Deloitte Change Will Never Be This Slow. Are EMEA Banks Ready? (80 – 82)

OECD & UNCDF From Infrastructure to Biodiversity: Expanding Blended Finance (208 – 210)

Asian Development Bank High-Tech Revolution Can Create Rather Than Destroy Jobs in Asia (212 – 213)

CFI.co | Capital Finance International

Summer 2018 Issue

FULL CONTENTS 14 – 43

As World Economies Converge

Otaviano Canuto

Nouriel Roubini

Brunello Rosa

Joseph E Stiglitz

Kenneth Rogoff

Tor Svensson

Evan Harvey

Dubai 10X

SWI

Ian Fletcher

44 – 51

Summer 2018 Special: Indian Business on the Move

52 – 85

Europe

Alleanza Assicurazioni

Masthaven Bank

Kaiserwetter

Montpensier Finance

Boxx Global Expat Solutions

Auka

Euro Exim Bank

AMAC Aerospace

Park Street Nordicom

Moldova Agroindbank

Istanbul Portfoy

Deloitte

Maserati

86 – 113

CFI.co Awards

Rewarding Global Excellence

114 – 137

Africa

Assupol

Ghana Investment Promotion Centre

InfraCredit

Catoca

Banque de Développement de Guinée

PwC

138 – 153

Middle East

Grant Thornton

Abu Dhabi Aviation

Image Nation

Al-Maidan Dental Clinic

Al Wifaq Finance Company

Oman India Fertiliser Company

Rabah Arezki

154 – 161

Editor’s Heroes

Men and Women Who are Making a Real Difference

162 – 175

Latin America

Fiduciaria de Occidente

176 – 185

North America

NESR

Provincia Fondos

Banco del Chubut EY

Obituary: Tom Wolfe

186 – 213

Asia Pacific

Indian Hotels Company Limited Asia Plantation Capital

Thailand's BCPG

Azizi Bank

Wing (Cambodia)

ValueLabs

IIFL Group

Michael Pettis

CCL Secure

OECD & UNCDF

Asian Development Bank

214

Final Thought

CFI.co | Capital Finance International

> Otaviano Canuto, World Bank:

Making Returns on Knowledge How Innovation Can Flow from Globalisation The April issue of the International Monetary Fund’s World Economic Outlook (WEO) included a chapter on how globalisation has helped technology leaders’ knowledge spread faster. Cross-border technological diffusion has not only contributed to rising domestic productivity levels in advanced and emerging economies, but also facilitated a partial reshaping of the innovation landscape. Some recipient countries have become significant new sources of research and development as well as patents. GLOBALISATION HAS DIFFUSED KNOWLEDGE AND TECHNOLOGY… More trade, foreign direct investment, and international use of patents have disseminated knowledge and technology across borders. This diffusion can lead to increases in average outputs at relatively low costs. Furthermore, its multiple use may generate positive network effects through cross-pollination.

CFI.co Columnist

Knowledge flows from abroad can have an impact both on productivity, through the adoption of foreign technologies in the production process, and on innovation, when combined with domestic R&D. The WEO estimates that in emerging market economies, “from 2004 to 2014, foreign knowledge accounted for about 0.7 percentage point of labour productivity growth a year, or 40% of observed sectoral productivity growth, compared with 0.4 percentage point annual growth during 1995–2003” (see chart 1). According to the report, these results remain robust even when China is excluded, indicating that productivity effects were broad-based among emerging market economies.

"International sources of technological innovation are changing, as R&D expenditures skyrocket in China and stocks of international patents pile up in South Korea." International sources of technological innovation are changing, as R&D expenditures skyrocket in China and stocks of international patents pile up in South Korea (see chart 2). These countries have joined traditional leaders in sectors such as electrical and optical equipment and, especially South Korea, machinery. This has happened even as, since the early 2000s, frontier economies have gone through a slowdown in the increase of labour and total factor productivity, a measure

Chart 3: The Capabilities Escalator. Source: Cirera, X. and Maloney, W.F. (2017). The Innovation Paradox, World Bank.

CFI.co | Capital Finance International

of how efficiently inputs are being used in the production process. These economies have also experienced slower growth in patenting and, to some extent, lower R&D investment. Competing explanations have been offered for the foregoing, either as a time gap in the transition between the third and fourth industrial revolutions or as a secular decline in opportunities to push productivity forward. In any case, prevailing technological convergence gaps and the possibility of simultaneous use of existing technologies have offered emerging market economies the opportunity to keep advancing even if the rhythm decelerated at the frontier. The WEO also brings to the fore the results of an empirical exercise showing positive effects of heightened international competition on innovation and technological diffusion. That could be considered an additional channel through which globalisation would be reinforcing incentives to innovate and adopt technologies from abroad.

Summer 2018 Issue

Annual percent growth, average across country sector (below two illustrations of Chart 1).

This knowledge cannot be made explicit, such as simply using blueprints, and thus cannot be perfectly diffused as either public information or private property. It must be developed locally. Production, technology adoption, and invention requires a relatively high level of such idiosyncratic knowledge and local capabilities. It is typical for latecomers to start from production and technological adoption and only then move on to invention (see chart 3). That has been the case in South Korea and China. These countries are developing their innovation capabilities after intense learning through using and adapting existing technologies. Success depends on the presence of a broad set of complementary factors: access to finance, infrastructure, skilled labour, and good managerial and organisational practices. In the absence of these factors, returns from investing in the development of capabilities are likely to be low. Solutions must be found to market failures that generate disincentives to the accumulation of knowledge. The transaction costs associated with doing business, such as trading across borders, hiring and enforcing contracts, also cannot be too high. This beneficial environment is not widespread, which is why there have not been larger changes in the international innovation landscape. It also explains what Xavier Cirera and William Maloney, economists at the World Bank, have called the “innovation paradox”: low levels of innovationrelated investment in developing economies do not correlate with the high returns thought to accompany technological adoption and catch-up. Globalisation may spread knowledge. Profiting fully from that knowledge requires a further effort. i

Chart 1: Contribution of Foreign Knowledge to Labour Productivity Growth.

Source: International Monetary Fund (2018). World Economic Outlook, April.

…BUT THERE ARE LOCAL REQUISITES TO ESCALATE THE LADDER OF INNOVATION CAPABILITIES Simple interconnectedness does not automatically spark productivity increases and

local innovation. Any application of technology needs locally specific content that cannot be acquired or transferred by means of textbooks or other codifiable forms of knowledge transmission.

ABOUT THE AUTHOR Otaviano Canuto is an Executive Director of the World Bank. The opinions expressed in this article are his own. Follow him on Twitter: @ocanuto

CFI.co Columnist

Chart 2: Patenting and Research & Development at the Frontier. Source: International Monetary Fund (2018). World Economic Outlook, April.

CFI.co | Capital Finance International

> Nouriel Roubini and Brunello Rosa:

Italy’s Slow-Motion Euro Train Wreck

inancial markets have finally woken up to the fact that Italy could soon be ruled by a populist government with designs to take the country out of the eurozone. And, given Italy's tepid economic performance since adopting the single currency a generation ago, there is little reason to think that the current crisis is a one-off event. The arrival in power of a populist, Eurosceptic government in Italy has focused investors’ minds like few other events this year. The yield 16

differential, or spread, between Italian and German bonds has widened sharply, indicating that investors view Italy as a riskier bet. And Italian equity prices have fallen – particularly in domestic bank shares, the best proxy of country risk – while insurance premia against a sovereign default have increased. There are even fears that Italy could trigger another global financial crisis, especially if a fresh election becomes a de facto referendum on the euro. Even before Italy’s March election, in which the CFI.co | Capital Finance International

populist Five Star Movement (M5S) and the right-wing League party captured a combined parliamentary majority, we warned that the market was being too complacent toward the country. Italy now finds itself in more than just a one-off political crisis. It must confront its core national dilemma: whether to remain shackled by the euro or try to reclaim economic, political, and institutional sovereignty. We suspect that Italy will compromise and remain in the eurozone in the short run, if only to avoid the

Summer 2018 Issue

Still, Italians have long been uncomfortable with the lack of an independent monetary policy, and that sense of lost control has gradually overshadowed the advantages of euro membership. The adoption of the euro has had massive implications for the millions of small and medium-size enterprises that once relied on periodic currency devaluation to offset the inefficiencies of Italy’s economic system and remain competitive.

damage a full-scale rupture would cause. In the long run, however, the country could increasingly be tempted to abandon the single currency. Since Italy returned to the European Exchange Rate Mechanism in 1996 – after withdrawing from it in 1992 – it has surrendered its monetary sovereignty to the European Central Bank. In exchange, it has enjoyed much lower inflation and borrowing costs, resulting in a dramatic reduction in interest payments – from 12% of GDP to 5% – on its massive public debt.

But the real explanation no longer matters. The prevailing narrative in Italy holds the euro responsible for the country’s economic malaise. And political parties that have either openly or implicitly called for leaving the eurozone currently hold a parliamentary majority, and would likely retain it in another election later this year or in early 2019.

The inefficiencies are well-known: labour-market rigidities, low public and private investment in research and development, high levels of corruption and of tax evasion and avoidance, and a dysfunctional and costly legal system and public bureaucracy. And yet several generations of Italian political leaders have cited “external constraint,” rather than domestic necessity, when pushing through the structural reforms required for euro membership – thereby reinforcing the sense that reforms have been imposed on Italy.

If Italians were confronted with the choice of retaining or abandoning the single currency, recent polls suggest that they would initially decide to stay, for fear of a run on Italian banks and public debt, as Greece experienced in 2012-2015. But the long-term costs of remaining in a club dominated by inherently deflationary, German-dictated rules might tempt Italians to leave. That decision could come in the midst of another global financial crisis, recession, or asymmetric shock that pushes several fragile countries out of the euro at the same time.

The loss of monetary sovereignty means there are effectively two chains of political command in Italy. One extends from the German government, through the European Commission and the ECB, down to the Italian presidency, treasury, and central bank. This “institutional” chain of command ensures that Italy meets its international commitments and maintains strict adherence to EU fiscal rules, regardless of domestic political developments.

Like the United Kingdom’s Brexiteers, Italians might convince themselves that they have what it takes to succeed on their own in the global economy. After all, Italy has a large industrial sector that is capable of exporting worldwide, and exporters would benefit from a weaker currency. Italians might be tempted to think: Why not escape the euro before those industries fold or end up in foreign hands, as is already happening?

The other chain of command starts with the Italian prime minister and extends through the government ministries that are responsible for domestic affairs. In most cases, the two chains of command are aligned. But when they are not, a conflict inevitably ensues. Hence the current crisis, which came to a head when the prime minister-designate tried to appoint the Eurosceptic economist Paolo Savona as Italy’s next economy and finance minister without first consulting the other chain of command. The appointment was duly rejected by the Italian president.

If Italians do eventually go down this path, the immediate costs will be borne by domestic savers, whose nest eggs will be redenominated in depreciated liras. And the costs would be still greater if an Italian exit precipitated another financial crisis with bank holidays and capital controls. Faced with these possibilities, Italians – like the Greeks in 2015 – might blink and stay. But they also might decide to close their eyes and take the plunge.

Let us return to the question of whether Italy will now choose to break free of its straitjacket. Despite the euro’s advantages, it has not delivered for Italy economically. Italy’s real (inflationadjusted) per capita GDP is currently lower than it was when the euro experiment began in 1998, whereas even Greece has managed to register growth, despite its depression from 2009 onward. Some would explain this poor performance by arguing that the eurozone is an incomplete monetary union, and that its “core” countries like Germany drain labour and capital from “periphery” countries like Italy. Others might counter that Italians failed to conform to the rules and standards, and to implement the reforms, upon which a successful monetary union is based. CFI.co | Capital Finance International

Though Italy would be better off staying in the eurozone and reforming accordingly, we fear that an exit could become more likely over time. Italy is like a train whose engine has derailed; it might be only a matter of time before the cars behind it start coming off the track. i

ABOUT THE AUTHORS Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, was senior economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. Brunello Rosa is co-founder, CEO, and head of research at Rosa & Roubini Associates, and a research associate at the Systemic Risk Centre at the London School of Economics. 17

> Joseph E Stiglitz:

Can the Euro Be Saved?

cross the eurozone, political leaders are entering a state of paralysis: citizens want to remain in the EU, but they also want an end to austerity and the return of prosperity. So long as Germany tells them they can’t have both, there can be only one outcome: more pain, more suffering, more unemployment, and even slower growth.

Eurosceptic government. This should surprise no one. The backlash in Italy is another predictable (and predicted) episode in the long saga of a poorly designed currency arrangement, in which the dominant power, Germany, impedes the necessary reforms and insists on policies that exacerbate the inherent problems, using rhetoric seemingly intended to inflame passions.

The euro may be approaching another crisis. Italy, the eurozone’s third largest economy, has chosen what can at best be described as a

Italy has been performing poorly since the euro’s launch. Its real (inflation-adjusted) GDP in 2016 was the same as it was in 2001. But the eurozone

CFI.co | Capital Finance International

as a whole has not been doing well, either. From 2008 to 2016, its real GDP increased by just 3% in total. In 2000, a year after the euro was introduced, the US economy was only 13% larger than the eurozone; by 2016 it was 26% larger. After real growth of around 2.4% in 2017 – not enough to reverse the damage of a decade of malaise – the eurozone economy is faltering again. If one country does poorly, blame the country; if many countries are doing poorly, blame the

Summer 2018 Issue

system. And as I put it in my book The Euro: How a Common Currency Threatens the Future of Europe, the euro was a system almost designed to fail. It took away governments’ main adjustment mechanisms (interest and exchange rates); and, rather than creating new institutions to help countries cope with the diverse situations in which they find themselves, it imposed new strictures – often based on discredited economic and political theories – on deficits, debt, and even structural policies. The euro was supposed to bring shared prosperity, which would enhance solidarity and advance the goal of European integration. In fact, it has done just the opposite, slowing growth and sowing discord. The problem is not a shortage of ideas about how to move forward. French President Emmanuel Macron, in two speeches, at the Sorbonne last September, and when he received the Charlemagne Prize for European Unity in May, has articulated a clear vision for Europe’s future. But German Chancellor Angela Merkel has effectively thrown cold water on his proposals, suggesting, for example, risibly small amounts of money for investment in areas that urgently need it. In my book, I emphasised the urgent need for a common deposit insurance scheme, to prevent runs against banking systems in weak countries. Germany seems to recognise the importance of a banking union for the functioning of a single currency, but, like St Augustine, its response has been, “O Lord, make me pure, but not yet.” The banking union apparently is a reform to be undertaken sometime in the future, never mind how much damage is done in the present.

"If one country does poorly, blame the country; if many countries are doing poorly, blame the system."

The central problem in a currency area is how to correct exchange-rate misalignments like the one now affecting Italy. Germany’s answer is to put the burden on the weak countries already suffering from high unemployment and low growth rates. We know where this leads: more pain, more suffering, more unemployment, and even slower growth. Even if growth eventually recovers, GDP never reaches the level it would have attained had a more sensible strategy been pursued. The alternative is to shift more of the burden of adjustment on the strong countries, with higher wages and stronger demand supported by government investment programmes. We have seen the first and second acts of this play many times already. A new CFI.co | Capital Finance International

government is elected, promising to do a better job negotiating with the Germans to end austerity and design a more reasonable structural reform programme. If the Germans budge at all, it is not enough to change the economic course. Anti-German sentiment increases, and any government, whether centre-left or centre-right, that hints at necessary reforms is thrown out of office. Anti-establishment parties gain. Gridlock emerges. Across the eurozone, political leaders are moving into a state of paralysis: citizens want to remain in the EU, but also want an end to austerity and the return of prosperity. They are told they can’t have both. Ever hopeful of a change of heart in northern Europe, troubled governments stay the course, and the suffering of their people increases. Portuguese Prime Minister António Costa’s socialist-led government is the exception to this pattern. Costa managed to lead his country back to growth (2.7% in 2017) and achieve a high degree of popularity (44% of Portuguese thought the government was performing above expectations in April 2018). Italy may prove to be another exception – though in a very different sense. There, anti-euro sentiment is coming from both the left and the right. With his far-right League party now in power, Matteo Salvini, the party’s leader and an experienced politician, might actually carry out the kinds of threats that neophytes elsewhere were afraid to implement. Italy is large enough, with enough good and creative economists, to manage a de facto departure – establishing in effect a flexible dual currency that could help restore prosperity. This would violate euro rules, but the burden of a de jure departure, with all of its consequences, would be shifted to Brussels and Frankfurt, with Italy counting on EU paralysis to prevent the final break. Whatever the outcome, the eurozone will be left in tatters. It doesn’t have to come to this. Germany and other countries in northern Europe can save the euro by showing more humanity and more flexibility. But, having watched the first acts of this play so many times, I am not counting on them to change the plot. i ABOUT THE AUTHOR Joseph E Stiglitz, a Nobel laureate in economics, is a professor at Columbia University and chief economist at the Roosevelt Institute. His most recent book is Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump. 19

> Kenneth Rogoff:

Are Emerging Markets the Canary in the Financial Coal Mine?

re brewing exchange-rate and debt crises in Argentina and Turkey localised events without broader implications? Or are they early warning signs of deeper fragilities in bloated global debt markets that are being exposed as the US Federal Reserve continues to normalise interest rates? Rising interest rates could test stability in some advanced economies as well, especially in Italy, 20

where voters, particularly in the less developed south, have opted decisively for a disruptive populist government. With an economy ten times the size of Greece, a default in Italy would blow up the eurozone. Indeed, the populist coalition government that has now taken power has hinted that it wants write-offs for some of its under-thetable debts (not included in Italyâ&#x20AC;&#x2122;s official public debt of over 130% of GDP) to the euro system through the European Central Bank. CFI.co | Capital Finance International

The good news is that a full-blown global debt crisis is still relatively unlikely to erupt. Even with a recent softening of European performance, the overall global economic picture remains strong, with most regions of the world still growing briskly. Although it is true that several emergingmarket firms have piled up worrisome quantities of dollar-denominated external debt, many foreign central banks are brimming with dollar assets, especially in Asia.

Summer 2018 Issue

"Economists who assure us that advanced-economy debt is completely “safe” sound eerily like those who touted the “Great Moderation” – the supposedly permanent reduction in cyclical volatility – a generation ago. In many cases, they are the same people." way eurozone officials can allow high-debt Italy simply to destroy the common currency. The most important reason for optimism, notwithstanding all the surrounding political noise, is that global long-term real interest rates are still extremely low. Even with all the drama surrounding Fed tightening, 30-year inflationindexed Treasury bills are paying around 1% – far below long-term real returns, which have averaged closer to 3%. As long as the underlying global interest-rate picture is so benign, it is hard to see the big Kahuna of bond-default waves coming just yet. It is notable how much the IMF, the world’s debt and financial crisis watchdog, has been ratcheting up its warnings. After years of saying advanced countries no longer need to worry about their near-record public-debt levels – now averaging over 100% for general government debt – the IMF has started to warn that many countries may find themselves squeezed for fiscal space if faced with a new recession anytime soon. The challenges stem not only from debt that is on the books, but also from hidden liabilities, owing most notably to massively underfunded old-age pension and health-care programmes – implicit debts that in many cases are far larger than the official figures.

Christine Lagarde, Managing Director of the IMF

The International Monetary Fund, moreover, has sufficient resources to handle a first wave of crises, even if it includes, say, Brazil. The main concern is not that the IMF will fail to deliver funds, but that it will make the same mistake it did in Greece, by not imposing a realistic deal on debtors and creditors. As for Italy, chances are that Europe will find a way to grant temporarily some of the extra budget slack the new government seeks, even if there is no

The overwhelming evidence of recent research supports the IMF view. Countries with historically high debt levels have (on average) significantly poorer growth performance in the face of major shocks, and the long-term relation between high public debt and growth is distinctly negative. This, of course, says absolutely nothing about the economic consequences of actively reducing the burden of government debt, popularly known as “austerity.” Deep recessions are the time to use a country’s war chest, not the time to build it up. Admittedly, there are those on both the left and the right who think “this time is different” for advanced economies. With no realistic danger (in their view) of a major war or financial crisis CFI.co | Capital Finance International

anytime soon, it is folly to exercise too much restraint on public debt or pension promises. This is dangerous thinking even for the United States, despite the greater fiscal scope it enjoys as the issuer of the global reserve currency. Very bad shocks can happen to any economy, and their sources might not be the ones we normally consider. For example, risks stemming from cyberattacks (especially by state actors), pandemics, and certainly financial crises are probably far higher than anyone would like to admit. It is certainly not difficult to imagine a temporary slowdown in fast-growing China that could roil world markets. And if the completely unexpected does happen, one thing we can anticipate is that governments with strong access to global credit markets will have much better options for responding. Even if the best bet is that any emergingmarket bond meltdown would remain contained, today’s jitters ought to be a wake-up call, even for advanced economies. After all, no country, however rich, should bet its future on the prospect that today’s ultra-benign interest-rate environment will last forever. Economists who assure us that advancedeconomy debt is completely “safe” sound eerily like those who touted the “Great Moderation” – the supposedly permanent reduction in cyclical volatility – a generation ago. In many cases, they are the same people. But, as we saw a decade ago, and will inevitably see again, we are not at the “End of History” when it comes to global debt and financial crises. i ABOUT THE AUTHOR Kenneth Rogoff, professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. He co-authored This Time is Different: Eight Centuries of Financial Folly. His new book, The Curse of Cash, was released in August 2016. 21

> Tor Svensson:

RegTech to the Rescue The banking and other parts of the financial services industry are undergoing an all-encompassing digital transformation. Soon, disruptive technologies will revolutionise the sector globally.

ince the global crisis in 2008 there has been no shortage of new regulations. Banks have subsequently added a costly headcount by hiring large teams of professionals to fulfil compliance and manage risk. For instance, 80% of the budget for anti-money-laundering (AML) is for tasks done manually. Part of RegTech’s merit is to substitute human capital with robotics to cut cost. RegTech is short for ‘regulatory technology’, a catch-all phrase for the use of new technologies for compliance with regulation. For example, RegTechs are trying to tackle pain points such as onboarding whilst observing simultaneously know-your-client (KYC) requirements.

CFI.co Columnist

CORPORATE GOVERNANCE IN ACTION Much of RegTech is about the critical business of improving corporate governance. Some of RegTech’s key deliverables include: • Risk management, • Identity management, • Transaction monitoring, and • Reporting and transparency.

Both categories potential clients of RegTechs. However, some FinTechs compete with banks as disruptors, while RegTechs do not compete with banks, but supply solutions which comprise information technology systems that may add disruptive benefits to banks.

"RegTech has computer geeks trying to fix a dysfunctional global banking system unfit for purpose."

FinTech and RegTech are similar in that both rely on innovation and employ new technologies such as artificial intelligence, blockchain, big data, and cloud computing.

Blockchain was the buzzword of 2015; insurtech arrived in 2016, and last year, RegTech appeared on the scene. FinTech is a term from the last century which can now be applied to digital innovation in financial services. FinTech exists in two broad categories: (a) the ‘original’ B2B or institutional – such as technology for the back offices of banks and trading companies, and (b) the evolved ‘current’ retail B2C which includes personal finance apps, alternative investments (such as crypto), crowdfunding, and lending platforms.

COST-EFFECTIVE COMPLIANCE The comprehensive and ongoing regulatory reforms and tighter control mechanisms (see tag chart) drive the need for more RegTech. The need for efficiency and cost cutting push for more digitally automate compliance. And solutions must be able to do all better, cheaper, quicker, and safer than manual labour currently employed – minimising the human intervention in the daily course of cumbersome and time-consuming compliance. Also, growth in e-commerce, mobile payment systems, and fintech rouse RegTech as a must

Robust RegTech Ecosystem

Limited RegTech Concentration 0-9

10-19

20-29

30-39

40-49

50-59

Figure 1: RegTech Heat Map 2018. Source: CFI.co.

Figure 1. RegTech Heat Map 2018

60-69

70-79

80-89

90-100 Source: CFI.co

CFI.co | Capital Finance International

Summer 2018 Issue

Growing Demands

REGULATION, COMPLIANCE & REPORTING (MiFID, GDPR, KYC, AML)

SECURITY

CUSTOMER EXPERIENCE

(Against fraud, data protection)

(Real-time onboarding, world-class services)

HERITAGE SYSTEMS

FINANCIAL INSTITUTION

NEW TECHNOLOGY

(Software, data, technology)

(Bank, Investment co, FinTech)

(AI, Blockchain, Big Data, Cloud)

RegTech VALUE CREATION:

More Effective

Improved Efficiency

(Sales boost)

(Lower cost, time savings)

Reduced Risk

Better Customer Service

Figure 2: RegTech Value Creation. Source: CFI.co.

Source: CFI.co

Figure 2. RegTech Value Creation

have add-on. Strengthening security and fighting fraud are also strong motivators. Breach of compliance can lead to severe fines, such as 4% of a bank’s turnover. VALUE CREATION The drivers reside not only in risk and cost reduction, but also in improved decision-making processes and in future trends such as predictive and prescriptive analytics and intelligence. Agility and speed in execution, combined with strategic direction, creates value. The 3C conundrum is a balancing act between (a) investing in fulfilling the compliance requirements, (b) cost-effectiveness and efficiency, and (c) the client’s (often near or realtime) experience. LEGACY SYSTEMS New RegTech solutions must integrate into existing and often very complex and heterogenous internal IT legacy systems. Also, new solutions must serve entities across multiple jurisdictions and multidiscipline purposes such has treasury management, risk management, corporate governance, supervisory reporting, etc.

CFI.co | Capital Finance International

RegTech depends on the continuous integration of an evolving ecosystem which includes a financial services industry and skilled labour. The RegTech ecosystem also requires an engaged regulator as well as the collaboration of all stakeholders. REGULATORS JOIN IN Many regulators are updating their market monitoring systems and working with RegTechs to strengthen information gathering. For instance, the Austrian Central Bank is in the process of improving the regulatory report processes for banks and, in doing so, reduce both costs and systemic risk exposure.

CustomerService

Cost

RegTech

CFI.co Columnist

The RegTech industry is still pretty fragmented with without any players dominating. Around the globe there have appeared a number of promising start-ups. The top RegTech firms in both size and numbers are based out of the United States and United Kingdom. Also, many countries in Europe are working at becoming RegTech ecosystem hotspots, including in Ireland, Austria, Switzerland, and the countries of Scandinavia. Several emerging economies are also making strategic moves to boost their RegTech sector, including Brazil, South Africa, Cyprus, India, the United Arab Emirates, and Bahrain.

In Asia, Singapore is a natural RegTech ecosystem hub as the seat of regional headquarters of financial institutions for Asia Pacific. The city state’s government’s long-standing dedication to regulation and prudence is well known and documented.

Compliance

Figure 3: Banks 3C Conundrum Balance Act. Source: CFI.co.

Figure 3. Banks 3C Conundrum Balance Act Source: CFI.co

Capital Markets Auth

Countering terrorist financing (CTF)

Dodd-Frank

Anti-Money Laundering (AMLD IV)

multi-jurisdictional Anti-money laundering (AML)

Euro. Mkt. Infrastruc. Reg (EMIR)

identity management

Capital Req. Reg. (CRR)

costly headcount

Capital Req. Dir. (CRD)

regulatory regimes

AIFMD

UCITS

Solvency II transparency

Monetary Auth. Singapore (MAS)

AML GDPR

Know-your-customer (KYC)

Payment Service Dir. 2 (PSD2)

ever-changing reg

risk management

Gen Data Protection (GDPR)

Client lifecycle

IFRS 9

MiFIID II

Packag. Retail Inv Prod (PRIIPs)

KYC

Market Abuse Directive (MAD II)

central bank reporting

transaction monitoring

5th Collective Inv. Dir. (UCITS 5)

FATCA

accountability

corporate governance

regulatory reporting

Mkt in Fin Instr Dir (MiFID)

Basel III

Emir

FRTB

SMARTS surveillance

Common Reporting Standard (CRS)

Figure 4: Regulation and Compliance for RegTech Global Tag Cloud. Source: CFI.co.

CFI.co Columnist

Figure 4. Regulation and Compliance for RegTech Global Tag Cloud

The Monetary Authority of Singapore (MAS) has introduced a regulatory sandbox for exploring innovation, including to test blockchain technology.

Big data and data mining compute numbers to intelligence and can be used to improve visibility and transparency, including the mapping of potential systemic risks.

Blockchain is a record (or ledger) of digital events between different parties that collectively guarantee the integrity of the ledger – a true integrity record with no interference possible. Such blockchain (or distributed ledger technology - DLT) has the potential to fortify (near) real-time trade settlement, market surveillance, identity management, and smart contracts for post-trade lifecycle management.

RegTech forms part of the answer to how agile banks and other financials can plot their future by leverage innovation coherently and align it with their corporate strategy, across business lines and across jurisdictions, in the face of the ever-changing regulations.

RegTech solutions are often cloud-based, meaning the data is remotely maintained, managed, and backed-up. This increases the flexibility of access control and sharing of the data – as well as the potential for reducing costs. 24

ON A PERSONAL NOTE I just realised that I have been in the RegTech business for almost 35 years. In 1984, in much of Europe forex trading and international securities trading were legalised; until then mainly illegal and kept only for a few large institutions. Back then, in Denmark, I participated in developing a new trading system for banks and brokers, which could handle the trading of futures, including CFI.co | Capital Finance International

Source: CFI.co options (new product at the time), forex, and international securities. The RegTech system we developed had (just as today) compliance reporting to authorities, to the securities clearing system, KYC, and risk monitoring, etc. This time of history – for context – was before the internet as well as the proliferation of PCs and mobile phones. What really has changed since is the sheer scale and enormity in terms of (a) transactions (in part thanks to the division of lot size) and the compressed time scale (with near real timeliness of it all); (b) the complexity and magnitude of regulations, and (c) the number of individuals (inclusive now of also smaller players in emerging economies) as part of the globality. Technology has placed the power with the consumer on the move. i

ABOUT THE AUTHOR Tor Svensson is the Chairman of Capital Finance International.

Summer 2018 Issue

> Evan Harvey, Nasdaq:

The Sustainable Bond Market New Developments The transition from carbon-based energy to a more sustainable system requires innovations in instrumentation and technology. We have to find new ways to supply existing—and ever increasing—demand. A similar transition is underway in the global economy, as new markets and products emerge to satisfy investor demand for sustainable outcomes. This requires more than just a “scaling up” of traditional investments. Products that integrate some environmental, social, or governance (ESG) concerns are now common, but perhaps not sufficiently fit for purpose. Indeed, we are only now starting to understand the scope of the project.

hen the UN sustainable development goals (SDGs) were first revealed and analyzed, it was assumed that an extra US $4 trillion would have to be committed annually by governments, businesses, and investors to meet a 2030 deadline. More recently, the UN Conference on Trade and Development (UNCTAD) has revised its estimate to US $5 to $7 trillion, with a US $2.5 trillion gap in developing economies alone. Inconsistent (and escalating) cost projections do not obscure a key fact: This process will require a lot of money. BOND MARKETS, OLD AND NEW Investor appetite for ESG has already driven much change. At investor and regulator urging, companies are reporting more sustainability data than ever before, which in turn fueled an emphasis on longer-term ownership and value creation in equities. Indexes have been built on this burgeoning ESG data set, and with them an underlying exchange-traded fund (ETF) market. Now capital markets have seized on the power of bonds to drive more sustainable capital flow.

How big is the bond market? Though much lesser known, it’s larger than the global stock market. According to the Motley Fool, “the global bond market has more than tripled in size in the past 15 years and now exceeds $100 trillion. By contrast, S&P Dow Jones Indices put the value of the global stock market at around $64 trillion. In the U.S. alone, bond markets make up almost

$40 trillion in value, compared to less than $20 trillion for the domestic stock market.” Sustainable bonds make up a comparably small portion of that market—only $155 billion in total issuance—but with year-over-year growth rates north of 75%, the numbers are compelling. In the interest of full disclosure, we are not neutral observers: Nasdaq Stockholm launched the first sustainable bond market in the world. Begun in 2015 with a total volume of €740 million euros, it has grown at an impressive pace ever since. The market facilitates infrastructure development, provides oversight, and actively drives continued growth FINDING THE RIGHT DEFINITION How precisely are these bonds labeled, marketed, and controlled? Who decides if a bond qualifies for the “sustainable” distinction? Nasdaq uses three product categorizations (sustainable bonds, green, bonds, and social bonds), but relies on an emerging international standard to properly define and monitor these instruments for investors. “The Green Bond Principles (GBP) and Social Bond Principles (SBP), as well as the Sustainability Bond Guidelines (SBG), referred to as the “Principles” have become the leading framework globally for issuance of green, social and sustainability bonds,” according to the International Capital Markets Association CFI.co | Capital Finance International

(ICMA). The ICMA acts as the secretariat for these emerging standards. The Climate Bonds Initiative (CBI) is an “international, investor-focused not-for-profit” trying to mobilize the bond market to drive specific climate change deliverables. It, too, has become a standards-setter by designing a certification process for green bonds. Bonds certifying to their standard “have gone through a strict process to ensure that their assets and projects will contribute to a low carbon economy,” and are subject to “rigorous scientific criteria which are consistent with the 2 degrees Celsius warming limit as detailed in the 2015 Paris Agreement.” Issuers must also pay a fee for the certification. FUTURE PROOF? Bullish sentiment on the sustainable bond space seems unlikely to abate anytime soon. Nasdaq just launched a second sustainable bond market in Helsinki and others are likely forthcoming. Starbucks was the first U.S. company to offer a sustainability bond, a $500 million issuance designed to “fund programs that ensure coffee is grown and distributed in a way that can be maintained over the long run” (2016). Apple soon followed suit, on an even larger scale. But in some ways the U.S. market has been running behind. Only 20% of sustainable bond issuances currently originate in the U.S. One possible reason for the slower rate of progress here (certainly when compared with Europe, the Middle East, and Asia) could be an old one: legal anxiety. “Very few issuers are issuing in the U.S. because they are afraid of the potential for litigation, wrote Kate Allen in the Financial Times, quoting an investment banker. “Some bright hedge fund could come up with a way of arguing they have not met their use of proceeds requirements or something” (20 Feb 2018). i 25

CFI.co Columnist

Traditional bonds, market-based loans to large institutions, have been driving modest but steady investor returns for decades. The emergence of ESG-themed bonds, however, is a recent development. Rather than blindly funding some vague public or private project, these instruments are intended to remedy specific sustainability issues. They are regulated and categorized as fixed income securities, but serve different ends.

"At investor and regulator urging, companies are reporting more sustainability data than ever before, which in turn fueled an emphasis on longer-term ownership and value creation in equities."

> Dubai 10X:

Expanding an Already Commanding Edge Sheikh Ahmed bin Saeed Al Maktoum helped lay the foundations of Dubai’s remarkable success as a global business hub: a royal of substance and clear vision. The youngest son of the emirate’s former ruler, he is determined to expand his country’s lead as the world’s foremost disruptive power. To that end, Sheikh Al Maktoum put his considerable weight behind the Dubai 10X initiative which calls on all government entities to embrace “disruptive innovation” as their leitmotif and reinvent their roles in light of new and emerging technologies.

ssentially, Dubai 10X is a brave attempt to institutionalise out-of-thebox thinking. This is much more of a challenge than it may seem at first glance: a reluctance to accept, and deal with, change is hardwired into the organisational DNA of bureaucracies the world over. No matter where they are located within the hierarchy, civil servants are usually encouraged to revere the rule book which precisely delineates the boundaries of the permissible. Deviation is, at best, frowned upon whilst bold initiatives are mostly “verboten”.

Leadership & Innovation

Not so in Dubai where Sheikh Mohammed bin Rasheed al Maktoum, the country’s ruler and prime minister and vice-president of the wider UAE, has actually instructed his government – and all who work in it – to rewrite the rule book and change departmental procedures and operations in order to relentlessly push the envelope of innovation. The mission is to exploit advances in technology and rethink the way services are delivered to the customer – and never stop the process. Vying with Singapore for global leadership in e-government, Dubai early-on discovered the power of ICT to help diversify its economy. With a relatively small extractive industry Dubai’s leadership have invested in the physical and ICT infrastructure needed to attract business and tourists to create a global hub. Today, oil and natural gas represent less than 5% of its $109bn GDP (2016). Already in 2001 – eons ago when measured against the technological progress that has since taken place – the Dubai government introduced its first online services. In 2005, the

"With Dubai Blink, companies of all sizes – from big global corporates to SMEs – may easily establish a virtual presence in any of Dubai’s free zones without the need to set up a local office or facility." eGovernment Portal was launched which, over the years, was built out and now offers access to nearly all services from simple bill payments to tax returns, civil petitions, licenses of all sorts, and benefits – to name but a few. Sheikh Ahmed bin Saeed al Maktoum has now unveiled a new initiative that aims to radically alter the way business is conducted in Dubai’s free zones. Sheik Al Maktoum chairs the Dubai Free Zones Council. Using artificial intelligence, blockchain, and other nascent technologies Dubai Blink sets out a smart business-tobusiness (B2B) platform that aims, no less, to redraw, reinvigorate, and accelerate global supply chains. The initiative fits well with the emirate’s role as a logistics, financial, and light manufacturing hub located on the crossroads of three continents. With Dubai Blink, companies of all sizes – from big global corporates to small and medium-sized

enterprises (SMEs) – may easily establish a virtual presence in any of Dubai’s free zones without the need to set up a local office or facility. Dubai Blink replaces traditional business licenses and record-keeping with readily accessible online company information anchored in blockchain technology which, coupled to machine learning processes, will provide a complete, dynamic, and up-to-date business registry. According to Sheikh Al Maktoum, the novel approach levels the paying field for all companies seeking to do business in Dubai’s free zones: “The project offers one of the most innovative models for the future of global supply chains and e-commerce across free zones. It will help boost trade for companies operating in Dubai’s free zones, those which have chosen the emirate as a platform for growth and prosperity.” One of the most exciting and useful applications of Dubai Blink is the streamlining of supplier identification and validation within any given supply chain. Currently, that process involves much research and suffers from outcomes often distorted by murky or incomplete data. By deploying AI algorithms, Dubai Blink seeks to vastly improve the transparency of the process – and speed it up considerably. Sheikh Al Maktoum points out that by inviting companies located in distant fee zones to establish a virtual presence in Dubai, the B2B market not only gains depth – more choice for its participants – but also improves the quality of connections between businesses: “Dubai Blink wants to remove all unnecessary layers of complication that hinder B2B commerce such as tariffs, regulatory constrictions, and transaction fees.”

“We reach almost 90% of the world's population with non-stop flights using the latest ultralong range aircraft. But geography is only part of the story. A clear vision was to put in place the right infrastructure, systems, and investments needed to build a global destination.” 26

CFI.co | Capital Finance International

Summer 2018 Issue

CEO of The Emirates Group and Chair of Dubali Blink, a 10X initiative: Sheikh Ahmed bin Saeed Al Maktoum

Dubai Blink is one of a series of daring initiatives developed under the aegis of Dubai 10X. “We squarely aim for Dubai to remain ten years ahead of its competitors. To that end, the government works closely together with all stakeholders to produce innovative solutions

that clear bottlenecks of business,” says Sheikh Al Maktoum who also leads the country’s Civil Aviation Authority and is CEO and chairman of the Emirates Group. Sheikh Al Maktoum is convinced that the smart commerce concept he helped develop is the way forward as it enables businesses to skirt around obstacles whilst speeding up transactions and facilitating new connections. The sheikh is particularly pleased with the technological platform that powers Dubai Blink and includes ample provisions for smart contracts: “Together, blockchain technology and machine learning can easily produce contracts that consider all aspects pertaining to a specific deal and adequately account for all eventualities. This saves considerably on both time and cost.” Sheikh Al Maktoum expects Dubai Blink to be fully deployed and operational within two years. The initiative wants to consolidate and expand CFI.co | Capital Finance International

the emirate’s, and the UAE’s, privileged position as a global trade hub: “We can maintain this edge because we are fortunate enough to have visionary leaders who understand that the right mix of geography, modern infrastructure, innovative products and services, and, most importantly, people, will help us stay well ahead of the competition.” The sheikh explains that Dubai’s enviable strategic location has been properly leveraged as the cornerstone of economic development. Speaking as the CEO of flag carrier Emirates, Sheikh Al Maktoum notes that Emirates serves about two billion people who reside within an eight-hour flying radius: “We reach almost 90% of the world's population with non-stop flights using the latest ultra-long range aircraft. But geography is only part of the story. A clear vision was to put in place the right infrastructure, systems, and investments needed to build a global destination.” i 27

Leadership & Innovation

Companies may now obtain a “cloud trading license” in Dubai and proceed to explore, sample, test, and exploit, any and all business opportunities available in the country. DirectorGeneral Mohammed al Zarooni of the Dubai Airport Freezone Authority (DAFZA) expects Dubai Blink to quickly grow into a business gateway: “It will allow participants to leverage free zone assets and networks, and connect with trusted providers of products or services to evolve their business. Dubai Blink will, in fact, be an integrated platform that allows businesses to manage supply chains and transactions, underwritten by the speed, truth, and reliability of blockchain smart contracts.”

Unique Production Plan for Company that Wears ‘Green’ Heart on its Sleeve Is it a solid? Is it a gas? New ‘supermaterial’ soars high for SWI.

reen initiatives, in 2018, are more than a tick in the column of environmental friendliness. Guided by best practice, bound by international guidelines and influenced by pressure from activists and conservationists, companies are striving harder than ever to minimise negative effects on the environment. Growing awareness of the fragile nature of ecospheres and wildlife habitats has opened hearts, minds and production lines to healthier, more sustainable development. Steel Wood Industries (SWI), headquartered in Dubai, United Arab Emirates, is one of the go-ahead international organisations that took on this challenge of its own volition, with the ambitious aim of entrenching green initiatives throughout all levels of its business.

"Steel Wood Industries alone, at its current capacity, can cut 650,000 tons of carbon dioxide in the next 10 years – 50% of the target which has been set by the UNDP."

A combination of strengths has driven SWI towards its laudable goal with a system that is environmentally friendly, sophisticated and advanced. It hinges on sustainable, renewable natural resources as raw materials.

Necessity, the mother of invention, prompted SWI to focus on using wood residuals as an alternative to forest depletion. Founder and managing partner Mr Ghassan Farouk Afiouni says Steel Wood Industries has always respected green financing and the reduction of its carbon footprint. He began by researching wood sources that can be harvested and used – without cutting a single tree. As so often, it was an indigenous and under-appreciated resource which triggered a breakthrough.

SWI is the first – and so far only – manufacturer of 100% recycled composite wooden panels in the GCC and Middle East. Its core strengths have propelled the business to pole position in the international race for sustainability with innovation.

A palm tree can generate up to 10kg of fibrous wood leaves per year, for instance. The UAE has more than 50,000,000 palms which produce 500,000 tons of leaves, an abundance of natural sustainable material which can be used and reused to cover the demand for wood.

The region’s construction boom generates around 10,000 tons of construction residuals per day per landfill in some cities. The reuse of such material removes 2.47 tons of the world’s carbon dioxide footprint per 1kg of recycled wood annually. This amounts to about 10 Million tons per year of carbon dioxide and generating a positive economic cycle. This, in turn, can generate an income of over $7 bn from one landfill and all palm trees in a 12 year span at 100% theoretical recycling capacity not accounting the value of end product sold. The SWI production site has the capacity to recycle 30,000 tons of wood waste. With this volume, it reduces the annual Carbon Footprint by about 75,000 tons annually (The production is producing 10,000 tons annually, making a negative carbon footprint of 65,000 tons each year.) These footprints are valued at over $15/ton as of March 2018 (CalCarbon.org) Projects such as this are expected to reduce carbon dioxide emissions by a total of 1.3 million tons over the course of the 10-year CDM crediting periods. Steel Wood Industries alone, at its current capacity, can cut 650,000 tons of carbon dioxide in the next 10 years – 50% of the target which has been set by the UNDP.

"A palm tree can generate up to 10kg of fibrous wood leaves per year, for instance. The UAE has more than 50,000,000 palms which produce 500,000 tons of leaves, an abundance of natural sustainable material which can be used and reused to cover the demand for wood."

CFI.co | Capital Finance International

Summer 2018 Issue

Steel Wood Industries: Staff

"Institutions that have high carbon footprints have a strong interest in strategic partnerships with negative carbon footprint recycling entities such as SWI. SWI is 'a true green and sustainable industry', says Mr Afiouni. 'Steel Wood Industries’ business is in-line with the vision of the UAE Leaders, who remain our true inspiration.'" Institutions that have high carbon footprints have a strong interest in strategic partnerships with negative carbon footprint recycling entities such as SWI. SWI is “a true green and sustainable industry”, says Mr Afiouni. “Steel Wood Industries’ business is in-line with the vision of the UAE Leaders, who remain our true inspiration.” The core of SWI is the UAE Government’s Green Economy Vision and Six-Track Strategy, which focuses on protecting environmental resources while strengthening the UAE’s competitive position in global markets. SWI hopes to make the UAE one of the key players in the composite-panel industry, serving the local and international markets without cutting a single tree. SWI has dubbed the links to a healthy society as the “SWIstainable cycle”. With its roots in research and development, Steel Wood Industries has been able to benefit from a windfall of revolution. Challenges were overcome with expertise, science and innovation. The company has taken a smallscale laboratory and transformed it into a stateof-th e-art production line.

Steel Wood Industries launched a gamechanging revolutionary product – Steel Wood Density Board (SDB) – a new type of composite wood panel that is set to change the wooden furniture and associated industries in the region. SDB is a highly engineered 100% recycled wooden board having premium quality features by using a constant density gradient, revolutionary internal bonds, elasticity and compressed core creation processes to ensure flawless uniformity. The result is a balanced panel with a premium face, an edge screw-holding capacity and very low associated emissions.

Gusolid-PCS (Precast i-SDB). With a weight of exactly one-third of ordinary concrete, and far greater strength, Gusolid-PCS is truly groundbreaking with its technical specifications. It is planned for use in building high-rise “woodscrapers” in the near future. GusolidPCS has elastic characteristics which act as a natural shock absorber during earthquakes or heavy winds, regaining its original form after the stress. Gusolid-PCS is a solid in a precast form which behaves like a gas under compression and expansion. It allows a cut in construction time as the progress of a project depends on how fast the pre-cast parts can be produced and assembled.

Due to its smooth surface, SDB is suitable for different coatings – veneer, laminates, paint and varnishing. SDB is available in a variety of thicknesses, sanded or un-sanded on one or both sides.

Gusolid-PCS opens the door to more creative designs which previously were out of the question. The value of the captured CO2 can also be sold delivering further income for investors.

SDB can substitute all wood types, including MDF, PB, OSB, plywood and lumber. It can also be used for structural purposes due to its advanced strength.

Steel Wood Industries, from its recent launch, has already won awards and recognition, with more than 70 employees working together for a single vision.

Steel Wood Industries is even able to replace concrete as a core building material using the 100% recycled SWIstainable wood named

Steel Wood Industries also has on-going in-house research projects for diverse industries. Watch this space… i

CFI.co | Capital Finance International

> CFI.co Meets Ghassan Farouk Afiouni:

Fighting Fire with Wood Waste in the Desert is a Game-Changer for Steel Wood Industries Ghassan Farouk Afiouni is the Founder, Managing Partner and Innovator of Lebanon’s Steel Wood Industries.

As resilient and assertive as its corporate logo, Steel Wood Industries – the sole manufacturing company of 100% recycled composite wood panels in the Middle East – has placed innovation, sustainability and the environment at the core of its business model.

teel Wood Industries (SWI) has been an innovator since its inception – which came after a tragic incident in 1997.

It started in 1997, when a fire hit the overcrowded tent city, Mina, where an estimated two million Muslim pilgrims were gathered on for the first day of the Hajj, or pilgrimage to Mecca. The fire was caused by exploding cooking gas canisters, according to witnesses. The fire was fanned by strong winds, killing 217 people, injuring 1,290 and destroying about 70,000 tents. (Those are official figures; witnesses and local newspapers reported at least 300 killed, many trampled in the resulting panic. Later reports gave a death toll of 343.) SWI managing partner Ghassan Farouk Afiouni was shaken, and moved to improve fire safety and prevention. He has always been inspired by the ability to invent, not to copy, to innovate and not to imitate, to think and not to gamble on luck. The Mecca incident pushed Mr Afiouni to establish a small-scale research laboratory in his home city of Tripoli, Lebanon (not to be confused with Tripoli, Libya). His research began with the desire to understand combustibility, studying household objects, as well as canvas and carpeting. Research showed that devastating fires most commonly start in homes where at least 50% of the household is made of wood. Mr Afiouni focused on raw materials, which prompted him to realise that wood-waste can be recycled into game-changing, flame-inhibiting composite panels which exceed market norms of fire resistance. There were numerous obstacles “which were nothing but an added step to the ladder of success”, says Mr Afiouni. He self-funded his research project and acquired further studies from the US after graduating from the American University of Beirut in 1993. 30

Founder & Managing Partner: Ghassan Farouk Afiouni

Hundreds of trials (and failures) were needed to understand the chemistry behind cellulosic combustion. Fire is a non-measurable, unit-less component – but any indication of a flame meant the failure of the process of fire-prevention. Then, one final, award-winning process – that of making flame-inhibiting composite wood panel – was developed. Mr Afiouni received a gold medal in the Safety/ Security category at America’s largest invention show, the 2000 INPEX XVI in Pittsburgh, Pennsylvania, for his invention: anti-fire composite panels. Taking this small research laboratory to a bigger scale, Steel Wood Industries was established in 2012 in the Gulf Co-operation Council (GCC). The challenge of creating a composite wood panel manufacturing company in the desert was taken on. Mr Afiouni noted the abundance of raw material, as the GCC region has a large amount of CFI.co | Capital Finance International

construction wood residuals as well as indigenous palm trees. Mr Afiouni aligned Steel Wood Industries with the vision of the UAE leaders. He remains determined to contribute to a sustainable environment, a greener planet and the Nations’ Green Vision. SWI’s aggressively “green” initiatives at the centre of corporate operations make sense for all its customers – and that includes investors. By spotting the trend first, SWI gained a competitive edge as the only company manufacturing 100% recycled composite wood panels. Inspiration and necessity renewed Mr Afiouni’s faith in the creativity of the human mind. What was once thought of as bizarre – opening a woodpanel industry in the desert dunes – proved to be a successful multi-sectoral business model. Mr Afiouni and Steel Wood Industries have inhouse disruptive technologies in various industries other than wood, and are planning to establish these in the near future. i

Summer 2018 Issue

> Book Review The Neighborhood by Mario Vargas Llosa

Missed Opportunity 256 pp, ISBN 978-0-5713-3307-3, £15.28

hese are not the best of times for Peruvian novelist and Nobel laureate Mario Vargas Llosa. A liberal on continent mostly ruled by demagogues who pay lip service to whatever ideology is in vogue, the writer has sought refuge in Madrid from where he frequently admonishes Latin American politicians for their lack of moral rectitude. In The Neighborhood, the 2016 novel that has now been translated into English, Mr Vargas Llosa dissects Peruvian society in order to display its many vices. The plot is set in 1990s Lima, a stage so anarchic it almost transcends the Latin American penchant for chaotic surrealism. As then-president Alberto Fujimori evolves into the caricature of a caudillo (strong man) and emits edicts increasingly detached from the grim reality of a disintegrating society – beset by Maoist rebels, an sputtering economy, and a restless population – Mr Vargas Llosa paints a sombre picture of protagonists caught up in strife and duplicity, betrayal and retribution. Though the story moves haltingly and at times seems to wander off into dead ends, the novel leaves little room for ambiguity or guesswork. Mr Vargas Llosa’s villains have no saving graces; they are all bad – and rather flat. Taking a cue from the satirical The Bonfire of Vanities (Tom Wolfe, 1987), a disconcerting number characters discover that wealth, even of the unfathomable kind, offers scant protection against political expediency. Down into the gutter or grave they go – one after the other in a sequence as predictable as inevitable. A work of fiction, The Neighborhood at times reads as a settling of scores. Mr Fujimori did Mr Vargas Llosa – and Latin American literature – a great favour by defeating the writer in the 1990 presidential election. Mr Fujimori duly became president only to proclaim himself dictator two years later in a novel self-coup (autogolpe). In 1995, he claimed a second term in office in a highly questionable election. Tinkering with the constitution as well as the ballot box enabled Mr Fujimori to run – and win – for a third time. The international community failed to show up for his inauguration in 2000. By now, the president’s many dark dealings had started to catch up with him. Whilst on a state visit to Brunei, Mr Fujimori refused to travel home, flying to Tokyo instead from where, after some prodding, he sent in his resignation by fax.

The Neighborhood tries to capture in words the string of absurdities that was the Peru of the 1990s. It fails rather miserably – and surprisingly. Mr Vargas Llosa seems to have lost his touch to describe incredible realities by proxy. As Gabriel García Márquez, in many ways Mr Vargas Llosa’s nemesis, has shown, Latin American reality can best be synthesised via surrealism. Any other approach invariably falls flat. The Neighborhood almost represents a tiresome I-told-you-so: the author seems to revel, perhaps unwittingly, in a certain glee that things went horribly wrong once he had left the political arena. But Mr Vargas Llosa must surely agree to let bygones be bygones: his erstwhile opponent CFI.co | Capital Finance International

Alberto Fujimori was only last year released from prison on humanitarian grounds after serving ten years of a 25-year sentence. Mr Fujimori, in a delusional state of mind, returned to Peru from his self-imposed exile in 2005, expecting a hero’s welcome. As it happened, he was arrested during a stopover in Chile and extradited in 2007 to face trial in Peru. As a statement of folly and deceit, The Neighborhood offers a disappointing read. However, should the reader attempt to apply a bit of colourful imagination to the plotline, a more realistic – and absurdly outrageous and entertaining – picture may emerge that approaches Peruvian realities a bit closer than the book does. i 31

> Ian Fletcher - Fourth Industrial Revolution:

Positioning for Change

We are living in one of the most transformational times in human history, creating a paradigm shift that will bring change at a speed, scale, and force unlike anything we’ve ever experienced before. This paradigm shift is widely recognised as the Fourth Industrial Revolution (4IR) and has the potential to change everything. What defines the 4IR as distinct from past cycles of industry revolutions is the convergence of the physical, digital, and biological worlds.

CFI.co Columnist

ach industrial revolution had a profound impact, allowing humanity as a whole to adapt and evolve. The first is commonly defined by physical mechanisation through water and steam – increasing power – where the second saw mass production, assembly lines, and electricity dominate our lives – increasing scalability. Around the 1960’s, and cresting now, is the third, defined by digitisation – increasing information integration. On the horizon, the 4IR wave will be far more transformative through physical, digital, and biological convergence. Unprecedented advancement in technology, the explosion of data, and our ability to consume and convert it into intelligence, is causing our physical and digital worlds to converge at rate like never before. Consider the convergence of medical data and wearable technologies or 3D printing. Genome sequencing and DNA technologies converging with artificial intelligence and 3D printing to someday “print” organs – organ donation could become obsolete. That same foundation of medical data and new knowledge applied to patient information, captured through mobile and IoT enabled wearable devices, used to monitor patient health in real-time, can lead to improvements in healthcare modalities such as personalised cancer, diabetes, and maybe even mental health treatment. There are a myriad of innovation examples possible across every industry that will drive these profound changes. Even current limits of computational capability are being addressed with the advent of quantum computing that is expected to provide the exponential increase is computational power necessary to enable this – science fiction is becoming science fact. DOUBLE-EDGED SWORD In the midst of all this opportunity, 4IR also brings to the forefront some important concerns. Every industry in every country is likely to experience a new cycle of disruption of a breadth and depth never seen before, through the transformation of systems of production, interaction, management, and governance. 32

“Without data, you’re just another person with an opinion.” W Edwards Deming American statistician, IBM IBV C-suite Study

These advancements also necessitate a level of transparency and information sharing about everything that can pose some ethical concerns that are just now starting to be addressed through regulation. A current topic high on the list is privacy – brought to light by the EUs GDPR regulations. Respecting individual privacy whilst being able to drive these innovations will become an important balancing act as we move forward. For those enterprises not already riding the crest of the current wave, the disruptive impacts of both disruptive new solutions and regulatory challenges aimed to protect citizens, may become foreboding obstacles for many organisations. THE 5 PILLARS OF THE FOURTH INDUSTRIAL REVOLUTION There are so many domains impacted by this new wave, and new conversations arising across all industries when considering the opportunities 4IR brings – trying to wrap one’s mind around it necessitates a framework to ground our thinking in how best to approach and prepare. To that end, we might consider five pillars, critical areas to be considered as part of a transformation journey into the Fourth Industrial Revolution. 1. Digital Dexterity – “A common vision for your agile data strategy with ownership, and accountability, underpinned by trust and compliance.” Very few organisations have a full understanding of what data they have, what more they can CFI.co | Capital Finance International

acquire and use, and how it can be harnessed to create measurable value. According to IBM MDI research – Chief Data Officer: Creating Value Through Data – data today represents up to 31% of the company’s revenues, and is expected to grow. It is vital that organisations put this high on their agenda. Management and governance is essential, hence the advent of the Chief Data Officer (CDO) role. The CDO’s role is to clearly articulate a data strategy and culture across the organisation and within the business ecosystem, aligning all under a common vision of how the convergence of data and emerging technologies will help enable new innovation and offerings to customers – whether consumers, patients, or citizens. Essential to this success is the creation of a cognitive journey map, driving a clear innovation strategy to maximise use and value.

"Cognitive Journey maps define how data will be entrenched in all parts of the organization and beyond, for actionable insights and optimized business processes, infused with Cognitive Capabilities for artificial or human like intelligence at scale." How is digital dexterity then enabled? One example is the concept of self-sovereign identity. The challenge to be dexterous rests in finding the correct balance in sourcing and using needed data, whilst being trusted and compliant. Today’s typical models are leveraging centralised and decentralised sources of data from a variety of sources, mined without full disclosure and transparency. A key concern of regulators is the enterprise assumption that customers are ceding their ownership of data about themselves (their privacy) through terms of service contracts. As regulatory scrutiny increases and new controls, such as GDPR, come into play (right to be forgotten, right to transfer, right to cancel, etc.) – a more efficient approach will be needed. Self-sovereign identity begins to address this by acknowledging a change in ownership of our personal data – from the domain of the enterprise to the domain of

Summer 2018 Issue

the individual. Then the individual can gain control over “what they can do”, as opposed to the enterprise determining “who they are” and offering things they may or may not want. Imagine air travel with all its current challenges to reduce queues, digitise border control, airline efficiency, and customer experience. Visualise walking through an airport scanner that recognises a traveller’s biometrics, retinal scans, because they exchanged them for loyalty points or an upgrade to business class. Take it one step further, their data packet is connected to their personal or a corporate blockchain, and their luggage has an RFID sensor with immersive security recognition built in. Finally, the traveller has given permission for this convergence of information because of what they want to do – travel with greater ease and benefit. The innovative use case here for selfsovereign identity is ease of travel; no passport, corporation interaction, government border confrontation, whilst better addressing current concerns about individual privacy. 2. Cultural Organisation – “Building talent communities, recognising the true value of the people, intelligent education, and ultimately driving brand advocacy.” With 66% of the jobs forecast for the next ten years not yet invented, this represents a real challenge for organisations to define their workforce talent needs, educators to evolve curricula to meet future demands, and individuals to explore new career opportunities which in turn influence their education journey. This is essential when considering how organisations are constantly evaluating the talent and skills needed from the human workforce in the face of evaluating opportunities for work that can be transitioned to cognitive solutions – for instance cognitive robotic processes enabled by emerging technologies such as artificial intelligence or blockchain. Controversy is created today when questions are focused on the socio-economic, ethical, or personal implications of the potential for machines to replace human in the workforce. Arguably, the conversation needs to change to what evolution is needed to influence how we prepare for this future and ensure widespread employment displacement does not occur leading to unintended adverse economic conditions.

CFI.co | Capital Finance International

CFI.co Columnist

Embedding technologies like artificial intelligence and cognition into workplace processes is becoming more prevalent. C-suite executives are realising the value these could bring, especially in areas of process automation, efficiency, data analysis, performance insights, and even new products and services – all integral to any company’s DNA. Traditional human job roles are changing, and emerging technologies are creating new ones at a rapid pace. There is a recognised global “skills gap” emerging, largely in the digital skills space, often referred to as “new collar” and “digital collar” jobs.

3. Cognitive Enterprise

1. Digital Dexterity appoint a Chief Data Officer, to build Trust & Ownership of the data, which is underpinned by a clear Company Data Strategy & governance to harness its value

2. Cultural Organisation recognise that people are the biggest assets, promoting Brand Advocacy & Talent Communities based on Intelligent Education and employee fluidity

Company Strategy

Trust & Ownership

4. Collaborative Ecosystems this is where Networks of Networks harness Transactional Ecosystems & Business Process Transformation, monetizing and connecting the dots.

Understand

Consumable Platforms

Chief Data Officer

5. Customer Value

where Consumable Platforms meet Artificial Intelligence, deep learning and augmented reality, driving Systems of Insights through connected business model platforms that have immersive security, agility and scalability

Reason

Interact

Systems of Insights

Artificial Intelligence Real-time Interaction Augmented Intelligence

Learn

Brand Advocacy

Talent Communities

Where data driven insights leverage Real-Time Interaction, Augmented Intelligence and Immersive Innovation, delivering measurable valued experiences.

Immersive Innovation

Networks of Networks

Artificial Intelligence

Transactional Ecosystems

Business Process Transformation

"Man and machine always get a better answer than man alone or machine alone." Chairman, President and Chief Executive Officer IBM - Ginni Rometty. Think 2018

CFI.co Columnist

The answers lie in new ways to source talent and the recognition that it’s about “man and machine convergence”, but not the controversial man or machine conversation dominating media today. Artificial intelligence and cognitive automation are inevitable and will become integrated into every day society and cultures as “pervasive artificial intelligence”. We are already seeing examples of this with Dubai Government by announcing the world’s first state minister for AI in October 2017, whose goal it is to make the UAE a leader when it comes to Artificial Intelligence research, development, and innovation to better serve humanity and its citizens. For executives, reshaping and engaging their businesses to cope with the impending employee fluidity will be a key measurable ingredient in organisational success to build brand advocacy (this is a great place to work), in order to attract and retain new and needed talent. This will necessitate rethinking how talent is sourced as well. Some experts are starting to refer to the old term “crowd sourcing”, as the “human cloud”. This necessitates reinventing the traditional organisation model by addressing culture, recognising the value of human insights as uniquely human, adopting new talent sourcing channels, continuing to evolve the employeremployee “contract” and encouraging perpetual learning, if companies are to survive and thrive. At its core, it necessitates the recognition that workforce displacement and continued erosion of the middle class is an unacceptable outcome for this new world – humans are essential. 34

To help with the impending skills shortage 4IR will bring and the changing landscape of the future workforce, governments and the educational system also have a huge responsibility in nurturing the talent of the future. Schools and universities must align themselves with business and industries early in the lifecycle, recognising they have an essential role in both building the foundation for new learning ecosystems and creating new learning paths. By aligning closely with business leaders, enablers, and by monitoring thought leadership trends, educators should be better placed to support future generations with the right skills and help build or contribute to the organisational or human cloud ecosystem. Despite all the technological advances, it is still the human-only characteristics such as emotion, intellect, wisdom, and ethics that set us apart. These values need to be nurtured because everything that can’t be digitised or automated in the future will become valuable commodity. The truth is, people remain the most important asset a company has, so it must ensure they provide a culture in which to excel in the new Cultural Organisation. 3. Cognitive Enterprises – “Where Consumable Platforms meet Artificial Intelligence, deep learning and augmented reality, driving Systems of Insights through connected business model platforms that have immersive security, agility, and scalability.” CFI.co | Capital Finance International

The Cognitive Enterprise is the rise of a new business paradigm that leverages exponential technologies to use data in a way which gives rise new opportunities and experiences for the world. The first such businesses are well known today – Apple, Google, Über, Airbnb, and many others. A platform is a business model that creates value by facilitating exchanges between two or more interdependent groups, usually consumers and producers, but as we progress, this will expand to become a fully immersive, collaborative ecosystem, all interrelated and supporting the platform economy. In 2009 we witnessed examples of digital disruption appear or Überisation. This was a great example of disintermediation, described as “the removal of intermediaries in economics from a supply chain, or cutting out the middlemen in connection with a transaction or a series of transactions”. Today we are starting to see even more radical industry convergence through re-intermediation, where the disrupted are fighting back to become disruptors, breaking down the process workflow even further in order to take back market share. The value of these new business models derives from the exponential scalability associated with low marginal costs, relative to traditional asset, service, or technology-based businesses. to capitalise on the cognitive enterprise. Organisational CXO’s should consider four primary aspects – consumable platforms, business insights, cognition/AI, and immersive security:

Summer 2018 Issue

In the fourth industrial revolution, the IT landscape will look fundamentally different to the one we see today, and won’t be a collection

"These disruptive behaviours are forcing organisations to reassess the attributes of effective platform business model strategies and the execution required for monetising them." of systems but an array of interconnected ecosystems based on platform business models. Future reallocation could approach an estimated $1.2 trillion in the next few years, up $730 billion, an increase of 72%. This is what experts refer to as “making the platform play” and requires a strong belief in their own market position, core capabilities, technologies, and business models. If they get it right, it will not only provide ways for organisations to capitalise on their own transformational strategies, but encourage their ecosystems, partners, or even competitors to leverage their platforms. This opens the door for entirely new business model platforms at industry, country, or government level, supporting economic platforms, smarted cities, and improving GDP. These disruptive behaviours are forcing organisations to reassess the attributes of effective platform business model strategies and the execution required for monetising them. A growing number of organisations are embracing radically new models and instead of going it alone, they’re innovating with partners. These new partnerships are building shared platform ecosystems – harnessing and creating large scalable networks of users and resources – that can be accessed on demand through data sharing. This is referred to as: coopetition. 4. Collaborative Ecosystems – “This is where Networks of Networks harness transactional, ecosystems & business process transformation, monetising and connecting the dots, leveraging the cognitive enterprise.” If cognitive enterprise platforms represent the technological foundation for the successful transformation into the fourth industrial revolution, then collaborative ecosystems represent the ability to monetise and scale. Successful organisations will need to engage with multiple ecosystem of platforms to support their business. The competitive advantage will depend on how well and how fast a core platform is able to learn exponentially and continually adapt to the shifting marketplace. CFI.co | Capital Finance International

Equally important and vital to data monetisation are the transactional ecosystems, supported by game changing “smart” technology platforms like AI, weather, mobility, blockchain, IoT, and eventually quantum. These platforms will help facilitate radical decentralisation, creating new business models, business redesigns, integrate supply chains, and provide platform innovation that can be both transformative and disruptive. Many large organisations are radically digitising the world’s trade through the supply chain. The result is an integrated ecosystem platform that provides more efficient and secure methods for conducting global trade using blockchain technology. For example, we are seeing evidence of first of a kind blockchain solutions to transform the diamond marketplace, to ultimately reduce fraud and black market trade. The technology is used to track the provenance of the diamond, thus providing an immutable, distributed ledger audit trail for the traded stones by digitizing the current paper based diamond certification system, the Kimberly Process. Food organisations are improving traceability and transparency of the food supply chain using blockchains and IoT, to build the ultimate digitized food system that can be tracked within minutes from an ecosystem of suppliers to retailers and ultimately to consumers. Banks are establishing a digital identity verification network that shares identity attributes and will reduce costs for banks and improve customer experience. Future business models build trust as they interact with the correct individual helping to enable Self-Sovereign identity, leveraging a blockchain network, to access a range of services across organizations and share only the minimum required identity attributes. A different perspective of new collaborative ecosystems that leverage the sharing economy is DreamLab (vodafone.com.au/foundation/ dreamlab). This represents an attempt at helping solve societal problems such as cancer, by encouraging communities to download an application that uses the processing power of your idle phone while your sleep. The more people that use the app, the faster it works, and the faster we can help develop more personalised treatments. This innovative application was created by the Garvan Institute of Medical Research, and Vodafone Foundation Australia, which funds health and well-being projects that use mobile technology. When a phone with the DreamLab app installed is fully charged and plugged in, the app will automatically download data and analyse it using an algorithm, before uploading it back to the researchers via the cloud. The app uses “distributed computing” to harness the combined power of thousands of small computers, effectively turning them into a supercomputer. What both these examples represent is the ability to leverage the platform ecosystems, connecting the dots for mutual value, and proving innovation from different ends of collaborative spectrum. 35

CFI.co Columnist

I. Consumable Platforms – Cloud – (public, private and hybrid): Build platform business architectures that can scale through shared services, encouraging trust and collaboration to facilitate a sharing economy. Integrate legacy environments with the digital platform technology such as IoT, blockchain, applications, and business process automation, and foster partnerships ecosystems in their value chains. Look to agility and even be open to sharing assets and people skills. Senior executives should encourage rapid prototyping, fail fast and encourage innovation, and ensure you transform quickly for competitive advantage. Create value from reciprocity and adopt a deeply collaborative approach that spans your ecosystem to create win-win propositions and commit to innovation, reallocating capital and resources from defending markets to innovating in new ones. II. Business Insights – Data: Maximise the cognitive power of your data fabric, from the data lakes of structured and unstructured data, to the data science capabilities of deep learning, data mining and predictive, prescriptive, and cognitive analytics. Harness your systems of record (SoR), systems of engagement (SoE), and systems of insights (SoI) through real-time dash boards and selfservice reporting for measurable value. III. Cognition/AI: Capitalise, cultivate, and orchestrate data assets to hone performance and the capacity for continuous change. Build the cognitive platform, encompassing self-learning systems, natural language processing, robotic process automation, enhanced data intelligence, augmented reality, and predictive patterns – all accessible through an open API economy (application program interface). These elements should be supported by cognitive journey map, cognitive enabled workflow, business process automation, empowering the business to make faster, more informed decisions. IV. Immersive Security: Recent forecasts predict that two-thirds of crime in the next ten years will be cybercrime, which raises the question: what will our law enforcement look like, will they need to be data scientists and will Tom Cruise’s film, Minority Report, about predictive crime become a reality? A clear reality is that as the world becomes more reliant interchangeable data, it will be vitally important to consider a security approach from a data centric model. Understanding our data, where it is, and its taxonomy is a prerequisite to enable us to understand how to apply security controls and related technology. To succeed in the new world, executives need to ensure with have the governance and policies in place to combat change. In short embed trust and security into everything.

CFI.co Columnist

5. Customer value – “Data driven insights leveraging real-time interaction, augmented intelligence, and immersive innovation, delivering measurable valued experiences”. Customer value represents shift from the simplistic digital models characterised in the third industrial revolution, to much more complex innovations based on products and services being enhanced by data and with an openness to collaborate. We are moving forward from a path to personalisation to an experience that is all about individualisation. No one size will fit all and 4IR will help tailor an experience to meet the lifestyle of one. As corporations compete for our time and, more importantly, our cash, they need to understanding consumers at a micro level, using cognitive real-time analytics, artificial and augmented intelligence, and deep learning. These elements will have a profound effect, helping understand our lifestyle behaviours, preferences, and buying patterns, recognised as 'the attention economy'. Transformative business models that support brand advocacy will also play and essential role in the support of a contiguous customer’s journey, with consumers, citizens, and employees playing a far more interactive role through perpetual real-time feedback. One of the profiles that embodies customer value – and looks at who will shape and live these new paradigms of experience – is Generation Z or GenZ. This group will engage whenever and wherever they want. So be responsive by experimenting and reconfiguring capabilities to meet their needs. Leverage voice and facial recognition and AR and VR to knit together digitally integrated experiences. They embrace robotics and cognitive/AI to remove friction, offer autonomous services, fix issues, and implement speedy resolutions. Enable your physical spaces to be more intelligent, using sensory devices to collect and learn from data about shoppers, and broaden the mobile and digital experiences to 36

add convenience, education, and games to keep them coming back. But it’s not just restricted to the consumer end of the scale, corporations and governments also need to embed all of the above and include traits like provenance, ethics, sustainability, and corporate responsibility into everything they do, understanding their influence, ultimately measuring the experiences they provide. CONCLUSION In order to make the transitional journey from the later stages of the third to the fourth industrial revolution, corporations should look to embrace and leverage many of the key characteristics of digital dexterity, cultural organisation, cognitive enterprise, and collaborative ecosystems to deliver actionable insights that support customer value. In order to thrive, they should harness these combinatorial elements and infuse them into every aspect of business decisions and processes to drive efficiency and agility, ensuring they measure success and maturity in this new data-led and on-demand” economy.

Services and Global Markets. With over thirty years’ experience in technology and business consulting services, Mr Fletcher leads the IBM IBV C-Suite study for the Gulf & Levant Region. Mr Fletcher also runs IBM’s thought leadership programme locally, advising clients on business transformation and strategy. More recently, Mr Fletcher has competed his substantial research on the impact of the Fourth Industrial Revolution and, in turn, its impact on the C-Suite. ABOUT IBM The right partner for a changing world. IBM is a leading cloud platform and AI solutions company. Today, it is the largest technology and consulting employer in the world, with more than 380,000 employees serving clients in 170 countries. ABOUT IBM INSTITUTE FOR BUSINESS VALUE The IBM Institute for Business Value, part of IBM Services, develops fact-based strategic insights for senior business executives around critical public and private sector issues.

The world is changing at an exponential rate where data, AI and immersive security, if not already, will become part of our everyday DNA fabric, embedded into everything we do. Everything that can be connected, will be connected and the fusion between the physical, digital, biological, and neural networks have an air of inevitability. For humans to succeed in this ever changing world, we all must embrace the change and transcend the technology, not let it overpower us, harnessing its transformative power for greater good and to improve our world. i ABOUT THE AUTHOR Ian Fletcher was educated in the UK, graduating from Birmingham University, and built a successful career in IBM Global Technology CFI.co | Capital Finance International

Author: Ian Fletcher, IBM Institute for Business Value Director MEA

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President Emmanuel Macron:

GETTING FRANCE BACK TO WORK By Wim Romeijn

The irony must have been lost on François Pinault, one of France’s richest men, as he accused President Emmanuel Macron of ‘not understanding little people’. A luxury goods retail magnate with a reported fortune in excess of $33bn, Mr Pinault worries that the Macron Administration is leading France towards a system that excludes the ‘most modest’. Government spokesperson Benjamin Grivaux immediately hit back, reminding Mr Pinault of his well-documented reluctance to pay taxes. The self-made billionaire long disputed a €450m tax bill which resulted from the 2002 transfer to his children of the business empire he built, and which includes iconic luxury brands such as Gucci and Yves Saint Laurent. Mr Pinault ended up paying his tax bill.

Cover Story

ther billionaires have also been critical of President Macron’s drive to modernise the French state. Investment banker Matthieu Pigasse, CEO of Lazard Bank and co-owner (and saviour) of the left-wing Le monde newspaper, believes that the president lacks a ‘social dimension’ and fails to understand the plight of the poor. Mr Pigasse has called on the government to prioritise the fight against poverty and social inequality. Mr Pigasse’s comments followed President Macron’s unfortunate off-the-cuff remark that the country spends ‘a crazy amount of dough’ on social security programmes. For all its political inconvenience, the observation was not without merit. According to OECD (Organisation for Economic Cooperation and Development) data from 2016, France’s social spend equals 31.5% 38

of GDP – the highest amongst the organisation’s member states. The OECD average spend on social security hovers around 21% of GDP with South Korea (10.4%) claiming the opposite side of the scale.

and bridge the divide between the combatant left and the conservative right by addressing social inequities and holding the centre ground. President Macron has vowed to introduce a new growth model that promotes social mobility, cares for the environment, and improves fiscal discipline. His idea is to shave €60bn off the budget over the course of his presidency and bring France back in line with the EU-mandated deficit spending limit (3% of GDP). A significant part of the expenditure cuts would be obtained by trimming the number of public servants by some 120,000 through ‘natural wastage’ as opposed to dismissals. Overly generous state pension schemes will also be pruned though the minimum retirement age stays at 62.

An entire coterie of champagne socialists has sprung up to remind the French president of his campaign promise to deliver ‘work for everyone’

DIFFICULT TO PIGEONHOLE Whereas most of his predecessors were easily classified as either to the right or the left of the

"An entire coterie of champagne socialists has sprung up to remind the French president of his campaign promise to deliver ‘work for everyone’ and bridge the divide between the combatant left and the conservative right."

CFI.co | Capital Finance International

Summer 2018 Issue

President Emmanuel Macron

political centre, President Macron defies such stereotyping. Whilst he is unable to claim working class roots – his mother was a physician and his father a professor of Neurology at the University of Picardie – Emmanuel Macron convinced most of France that he wants to put common people back in charge. His La République En Marche! party made waves, and broke with tradition, by inviting candidates from civil society people to stand for parliament on its ticket – shunning politicians and administrators with solid track records and friends in high places. At least half of the 310 deputies En Marche! sent to the National Assembly after the 2017 legislative elections have no prior political experience.

In its annual assessment of the French economy, published in early June, the International Monetary Fund (IMF) heaped praise on France, calling it the ‘fastest-reforming’ country in Europe. The IMF did, however, wonder how exactly public spending will be cut and notes that, so far, few details have been provided. The IMF congratulated France on its overhaul of the country’s labour laws which reduces the power of the unions and makes the hiring and firing of workers a less cumbersome and costly process. CFI.co | Capital Finance International

TURNING THE PAGE Unveiling the five decrees he issued to streamline the weighty and notoriously inflexible Labour Code (Code du Travail) – a roughly 3,000-page red book that regulates everything from workplace safety to executive bonusses – President Macron in August 2017 joyfully announced that his country was ‘turning the page on three decades of inefficiency’. The 36 reforms seek to help small businesses with up to 250 employees, introducing caps on severance and damage payments and simplified collective bargaining procedures. Larger companies benefit from changes to the Labour Code that facilitate mass dismissals and limit the influence of workers’ committees. The reforms also allow employees to negotiate directly with management instead of having to wait for unions to reach sectorial agreements with employers. Mobilising the En Marche! majority in the National Assembly, President Macron easily managed to secure the backing of parliament for his reform package. The senate went along as well, granting the president the authority to fast-track changes to the labour code without the need to seek prior approval from the legislature. Predictably, most unions oppose the changes, though not all; the moderate Democratic Federation of Labour (CFDT), France’s largest union, was initially found willing to grant President Macron the benefit of tdoubt. The hard-line General Confederation of Labour (CGT), usually the first to rally whenever reforms are considered, immediately called for 39

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Mr Macron’s political vehicle grew out of La Gauche Libre (The Free Left), a think tank founded in 2015 to forge a cohesive platform out of disparate ideas and thoughts about the future course of France. The name indicates a measure of ambiguity: an investment banker with a degree in philosophy, and a senior civil servant with an eye on politics, Mr Macron joined the government of socialist president François Hollande in which he represented its less dogmatic wing. As minister of Economy and Finance in the second iteration of the cabinet of Prime Minister Manuel Valls (2014-2016), Mr Macron was charged with solidifying the drift to the political centre and creating a more businessfriendly climate. His 2015 Law on Growth and Purchasing Power introduced a slew of modest labour law and public service reforms which are credited – by the OECD – for France’s, likewise modest, economic revival.

Elected president in the run-off election against National front contender Marine Le Pen in May last year, Emmanuel Macron assumed office as the youngest head of state to govern France since Napoleon. He did so at a most propitious moment in time with the economy of the country showing signs of life and shaking off its dusty image. Though national statistics agency INSEE expects GDP growth to slow from 2.3% in 2017 to 1.7% this year, Finance Minister Bruno Le Maire remains optimistic that fiscal targets can be met – and kept under the 3% limit. Earlier this year, the European Council closed its excessive deficit procedure for France, in force since 2009, confirming that the country’s accounts complied with the EU’s fiscal rule book. The national debt, now standing at 97% of GDP, offers less cause for concern as long as the economy keeps growing. Minister Le Maire’s bright outlook is probably not far off the mark. Private sector activity showed a sharp and unexpected increase in June, suggesting the economy may yet prove the bearish INSEE forecast wrong.

demonstrations to be followed by strike action. In Paris, the CGT – supported by the radical leftist former presidential candidate Jean-Luc Mélenchon of the France Unbowed party – managed to get an estimated 220,000 to march from the Place de la Bastille to de Place de la République. The protests, however, quickly subsided, allowing President Macron to claim victory and cash in the spoils by going after the most iconic bastion of trade union power, the French National Railways SNCF which allows its almost 150,000 employees to retire at 52 and also offers rail workers iron-clad employment guarantees, subsidised housing, and free travel over its network, amongst many other perks – redefining, as it were, the gravy train concept. Many presidents have tried – and failed – to rein in the SNCF. President Macron seems to have learned from their mistakes and first held out a most appetising carrot: the state would take over a large chunk of the company’s debt – €37bn out of €57bn – in return for a set of reforms aimed at establishing a degree of normalcy in the labour practices of the company. Whilst the CGT refused to even contemplate the offer, vowing to fight on to the bitter end, most other unions welcomed the deal which ends all special privileges for newlyhired rail workers but preserves the benefits of current staff.

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After three weeks of labour unrest and interrupted train services, strike turnout by late April had fallen to barely 14% of the workforce, enabling the company to resume all services. Whilst Mr Mélechon and the more bellicose unions and student organisations keep organising protests and calling for strikes in a ‘convergence of struggles’ – dubbed the ‘human tide against Macron’ – adherence has dwindled. The promised explosion of anger on the fiftieth anniversary of the massive protests, occupations, and general strikes of May 1968 never materialised. Five decades on, France’s hard left has been reduced to a shadow of its former self. Union membership has shrunk from 22% of workers fifty years ago, to not even 8% today. FRENCH CORPORATE HERITAGE This turn of events – or rather non-events – is all the more remarkable because the French railways, fully state-owned and a monopoly in all but name, is widely considered an untouchable national treasure. “This is a public service, so we simply say ‘no’ to competition,” assures CGT boss Edouard Phillipe. The European Commission has urged France and other countries to open their rail networks to competition as a first step towards the creation of a truly pan-European rail market and system. SNCF suspects it may be made ripe for privatisation further down the line, though President Macron denies this: “The company is part of France’s heritage and will continue to enjoy that status.” Other European countries are also loath to privatise 40

their train operators. A few years ago, Germany quickly shelved plans to sell the Deutsche Bahn for fear of a popular backlash whilst the Dutch government also stopped toying with the idea after examining the British experience which resulted in a marked deterioration of service levels, price increases, and rail chaos. Network Rail, the owner and manager of the mainline network in Great Britain, remains in state hands and is saddled with a €51bn debt. Knowing precisely how far he can push French society may, in fact, constitute one of President Macron’s best and most useful qualities. Though the left has tarred Macron as the ‘president of the rich’, most French, perhaps grudgingly, admire his energy and drive whilst also agreeing, deep down, that the country needs to change at least a little in order to keep up with its peers – read: Germany and the Benelux. The rail strikes are proof of that: the unions of ‘les cheminots’ expected to crush Macron as they did Jacques Chirac in 1995 but failed to account for the societal shift that has since taken place. French sympathy for the strikers has worn thin, and most people – 65% according to some polls – agree that the outsized benefits package enjoyed by the rail workers is no longer justifiable. The leader of the reformist CFDT union, Laurent Berger, has shown signs of doubt when it comes to industrial action: “Given the nation’s mood, calling for strikes only plays into the government’s hands. At the same time, President Macron keeps pushing us towards a more radical stance. We need to talk.” This is a relatively new sound coming from a French union boss. The change of tune partly originates from the admission that the country’s unemployment rate refuses to come down noticeably even as the economy is growing at a fairly robust clip. In the recent past, the IMF had repeatedly warned that unemployment levels would probably not dip lower than 8.5% absent a more flexible labour law. Now that both the national assembly and the senate have enabled President Macron to consolidate and even expand his reforms, that impediment has been removed. Still, French unemployment remains stubbornly high at 9.2%, almost triple the German rate (3.4%) and more than double that of Great Britain (4.2%). HELPING SMES TAKE OFF In order to boost growth, the Macron Administration is determined to transform France into a nation of high-tech start-ups. Legislation has already been amended to improve the country’s business climate by raising the threshold above which small and medium-sized enterprises (SMEs) are taxed at a higher corporate rate and need to comply with more onerous employment rules. Auditing requirements have also been relaxed and bankruptcy procedures eased, as have the strict rules that govern trading hours. Starting a business no longer necessitates interaction with possibly uncooperative civil servants as the entire registration process may be completed online.

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According to Finance Minister Bruno Le Maire, the key to France’s economic success is helping SMEs seize opportunities: “We have a potential for growth that is not being exploited and need a profound and coherent transformation to address that.” At present, only about 125,000 French SMEs export their goods and services versus 310,000 in Germany. Macron’s deregulation drive is a perhaps belated attempt to reinvigorate the gallic economy which boasts high worker productivity but has performed sluggishly over the past five years and only recovered very slowly from the 2008/9 global banking crisis. Already during the election campaign Macron promised to launch a government-backed fund to provide seed and venture capital to innovative start-ups. The president proposes to fill this fund with the proceeds of his privatisation programme which includes the sale of stakes in airport operator ADP (Aéroports de Paris), energy company Engie, and the state gaming monopoly Française des Jeux. The privatisations are expected to raise at least €15bn which has already been earmarked for the as of yet unnamed innovation fund. In order to avoid raising popular alarm, and the ire of the unions, the government has vowed not to touch the national railways and the defence and nuclear industries. Also, after the privatisation of Engie, the world’s second-largest utility company, the French state has promised to hold on to a golden share which enables it the block the future sale of assets deemed strategic. In 2017, the state already sold a 4% stake in the company for €1.5bn. It still owns around 32% of Engie’s share capital. In total, France has equity worth about €100bn locked away in 81 companies, including telecoms operator Orange, car manufacturer Renault, and aerospace and defence contractor Thales.

Macron is particularly enamoured of the Californian version of the United States; a melange of economic libertarianism, a leftist approach to social issues, and entrepreneurial daring. The French president – beneficiary of an electoral system instituted by General de Gaulle in 1958 and designed for stability – operates outside the realm of established political parties which he accuses of failing to find answers for the deindustrialisation of the country, a corrosive process that has been going on for forty-odd years and has pushed almost six million people onto the dole. Macron takes great pains in portraying his presidency as one of an outsider – not quite revolutionary but also not tainted by an uncomfortably close association with the establishment. Taking a cue from the US West Coast where the debate on immigration is much less acerbic than elsewhere in the US, President Macron has downplayed concerns about the perceived loss of French identity and during the election campaign mostly refused to engage with Marine Le Pen of the National Front, insisting that fixing the economy and modernising society are much more important issues than identity, culture, and civilisation. Instead, Macron talked almost incessantly about creating opportunities for all in a nation that welcomes, encourages, and supports individual initiative – and diversity. At times, it seemed as if the candidate described a place other than France. Turned president, Macron barely changed the discourse: the future belongs to those who rise to the top, or stay afloat, by adapting to the fast-changing world, globalisation, and technological disruption. According to Macron, the old values cherished by the French – job security, social hierarchy, and an omnipresent welfare state, amongst others – stand in the way of diversity and prosperity. In order for France to succeed in a globalised world, the country must embrace its values – something it had refused to do until Macron came along. Though the youthful may not yet have changed the country’s perception of itself, the French seem willing to give it a try, albeit reluctantly and with some reservations. Much like British Prime Minister Margaret Thatcher argued in the 1980s, Macron assures his country that there is no alternative but to embrace change. i 41

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CALIFORNIE-sur-SEINE A true latter-day Tocqueville, the French president does not hide his fascination with, if not admiration for, all things American – a highly unusual trait in a French politician. Though he may have misread US President Donald Trump who rebuffed his overtures at the annual G7 summit in Ottawa, Canada, Macron still considers the United States a political and economic model with elements worth emulating. The new president caused eyebrows to raise when, barely ten days after the inauguration, he went to the National Assembly to deliver the

first-ever State of the Union à la française speech which is now set to become an annual event. The investiture of his wife Brigitte as a highly visible first lady likewise caused surprise.

Delicate Engine: Franco-German Eurozone Pact Faces Opposition

Though a committed Europhile, French president Emmanuel Macron at times seems to forget that in the European Union, it takes 28 to tango. He has found a reluctant partner in German Chancellor Angela Merkel for his grand plans to strengthen the EU post-Brexit via, amongst others, the introduction of a common budget for the eurozone with which to fund investment programmes that provide temporary financial support to countries facing a cash crunch.

n a highly unusual move, President Macron’s finance minister Bruno Le Maire lashed out at a group of twelve EU member states, led by The Netherlands, who dare stand in France’s way. In Late June, the Frenchman bluntly stated that his country’s proposal was “non-negotiable”, accusing all those who oppose the setting up of a eurozone budget of ‘bad faith’ for defending a status quo that feeds populism. Earlier in June, President Macron and Chancellor Merkel met in Meseberg, Germany, to agree on a eurozone reform agenda that tentatively includes a mechanism to support and stabilise financially troubled member states. Mr Le Maire insists that the Meseberg Accord does not involve fiscal transfers – a big nono for northern EU member states – but only involves short to medium term loans intended for investments in technological innovation and research. Those loans take the form of discounts on future eurozone budgetary contributions with the European Stability Mechanism covering the shortfall and recovering the funds post-crisis.

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The governments of The Netherlands, Finland, Austria and nine other EU member states doubt the need to add any ‘fiscal capacity’ to the eurozone. In a letter to Mário Centeno, the current president of the Eurogroup, Dutch finance minister Wopke Hoekstra expressed concern over ‘moral hazard risks’ and the ‘wide divergence’ emerging within the eurozone. He also questioned the fiscal neutrality of the Franco-German plan. During a meeting of finance ministers in Luxembourg, the eurozone effectively split into two clearly defined camps with a Hanseatic League emerging of countries strongly opposed to rewarding the fiscal imprudence of southern member states. Already last year, and with Brexit looming, the Benelux took the initiative to set up an informal group of fiscally conservative EU member states as a counterweight to any machinations taking 42

"Already last year, and with Brexit looming, the Benelux took the initiative to set up an informal group of fiscally conservative EU member states as a counterweight to any machinations taking place along the Paris-Berlin Axis." place along the Paris-Berlin Axis. Finance ministers from the Baltic states (Lithuania, Latvia, and Estonia), the Nordics (Finland, Sweden, and Denmark) were invited to Brussels where, over an extended dinner, they agreed to align their position within both the EU and the eurozone in a revival of the Hanseatic League which for over three centuries (ca. 1100-1450) dominated trade along the northern edges of the continent. The Netherlands, after the departure of the United Kingdom the fifth-largest economic power in the EU, has taken the lead of the informal coalition which later welcomed Ireland and Austria as well. This Hanseatic League 2.0 also enjoys the covert approval of Berlin which feels it must, at least for now, humour the French but would, in fact, much rather stick to its longstanding advocacy of fiscal prudence. Off the record, German diplomats indicated that Berlin is ‘quietly pleased’ with the initiative of the budget hawks. The Hague, meanwhile, is having none of it: set to lose its most dependable and closest EU ally with the imminent departure of the British, the Dutch are in no mood to accept a power shift that favours the French. The Hanseatic League 2.0 is their answer to President Macron’s European ambitions – an attempt to preserve the liberal economic philosophy in Europe and maintain a level single market based on fair and dynamic

competition between financially responsible member states. The Hague has indicated that anything and everything that smacks of a transfer union will be instantly vetoed. The undiplomatic anger, more akin to a venting of frustration, of Monsieur Le Maire may in part be explained by the fact that France, with a reluctant Germany in tow, stands absolutely no chance of seeing its proposal for a eurozone budget approved. The Benelux, now greatly reinvigorated thanks to Brexit and with three votes in the European concert, can easily torpedo any French initiative on its own. With the support of nine other like-minded member states, it becomes a duck shoot for the bloc-within-abloc, even if Germany should let its judgment be clouded by its sympathy for France. Rather than shoot from the hip in a gunfight he cannot win, Mr Le Maire could water down his plan to something a bit more palatable which might offer a foundation upon which a future eurozone fiscal edifice can be slowly erected. Chancellor Merkel already reined in President Macron during their four-hour get together in Meseberg – a baroque 18th century palace to the north of Berlin that is used as the chancellor’s retreat. Though Chancellor Merkel agreed to overhaul the European Stability Mechanism and allow it to grant emergency loans to troubled countries, the details of this advance – celebrated as a ‘new page’ in the history of Europe’s single currency – were left open. Thus, Mrs Merkel went along with a symbolic first step which remained, however, without substance. Mr Macron admitted that providing details at this point in time would prove ‘counterproductive’ and stand in the way of consensus. The Elysée was happy all the same for seeing the notion of a eurozone budget ‘anchored’ with discussions over its size and governance to follow. Sources in Paris did say that France would push for a budget equal to at least 1% of the eurozone’s GDP – some €100bn, give or take.

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President Macron repeatedly stated that his policy merely aims to correct the design flaws of the euro by promoting greater cooperation between eurozone member states. To that end, France want to perfect the banking union as well – again running into opposition from northern member states who want prioritise risk reduction rather than build grand structures to deal with any fallout. According to Valdis Dombrovskis, the European Commission’s vice-president in charge of the common currency, the EU has already ‘come a long way’ on risk mitigation: “All the riskreduction measures are already either delivered or included in legislative proposals submitted by the commission.” Klaus Regling, who oversees the European Stability Mechanism, agrees but wants to unblock the political discussion surrounding the founding of a permanent support mechanism. Mr Regling fears that progress has been too slow to have everything in place before the next crisis hits. Macron’s France does, however, have a few cards to play after Germany got trapped in its own words. Berlin’s previous attitude towards French calls for deeper EU integration had been to remind Paris of its own failings in pushing through a much-needed economic and social reform agenda. Nobody had expected President Macron to succeed in passing his labour reform. He also wasn’t expected to tighten public expenditure to meet the 3% deficit rule. By accomplishing the seemingly impossible, President Macron has gathered considerable political clout which he monetised at Schloss Meseberg. Though suspicious of his plans for the eurozone, Germany also craves for French co-leadership in Europe and beyond. Berlin is – for a host of self-explanatory historic reasons – unwilling to carry that burden alone. The country is already troubled enough by its recent elevation to leader of the free world after both the US (Trump) and the UK (Brexit) seem no longer able or willing to fully assume that role – or accepted in that role by others. Germany needs a strong France and – because of that – cannot ignore or dismiss the country’s proposals. This helps explain why in Meseberg, Germany went along with a set of French policy initiatives that a few years back would have been rejected out of hand. Complicating the conundrum, German voters are none too keen on following their chancellor down this path. As a nation, Germany remains addicted to fiscal conservatism which even has been written into law: the German government must at all times run a primary budget surplus.

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Heading a fragile coalition and aiming to please her arch-conservative Bavarian partners, Mrs Merkel must perform a delicate balancing act between political expediency and diplomatic necessity. Irate comments such as those made by French finance minister Le Maire are – to say the least – quite unhelpful and may well upset the EU applecart. i

> Summer 2018 Special

Propelled by Pluck and Business Savvy: Indian Business on the Move

n India, major newspapers regularly complain about the country’s economic performance, invariably described as lacklustre, moribund, or just plain slow. A few sentences along, financial writers mention the GDP growth forecast for 2018 which hovers around 7% - a rate unheard of in Europe, North America, and pretty much anywhere else outside Asia. Even when measured against other economies in what, arguably, constitutes the world’s most dynamic region, India’s economy is doing exceptionally well. India’s rate of growth is at par with China’s and expected to accelerate significantly over the coming years as the reform agenda of the Modi Administration takes shape. In Q1 2018, annualised growth registered a peak at 7.7% - almost a full percentage point over China (6.8%). Even more impressively, the construction sector expanded by well over 11%, pushed in part by infrastructure development. During the first quarter of last year, builders experienced a -3.5% slump. Investors and traders are a bit less bullyish on India. In the forex markets, the Indian rupee remain surprisingly weak, retreating by 5.3% over the last year. Amongst major emerging economies, only Brazil, Argentina, Turkey, and Russia saw their currencies depreciate more. The rising price of crude oil introduces another variable that may well restrain India’s economic performance. The government aims to minimise the impact of costly oil imports by reducing excise taxes and encouraging oil companies to offer discounts to their customers. India has repeatedly blamed the recently reintroduced US sanctions on Iran for the jump in oil prices. The country depends on imports for about 80% of its demand. Formerly an entity onto its own, and one of the world’s most protected markets,

India has opened its borders to trade and investment. The results have been nothing short of amazing with large Indian corporates venturing outside their (captive) home market and onto the global stage. Mahindra, Tata, and scores of others snapped up assets throughout Europe and North America. Different from, say, many Chinese and Middle East companies, India’s corporates moved cautiously yet with a strong determination to buy into promising sectors only. Now open to the world, India is – yet again? – caught in a countercyclical exercise, this time through not fault of its own. With protectionism on the rise in the United States and a North Atlantic trade war looming, the country fears for its exports. The current administration is looking to cement India’s position as a major trading power by cosying up to the European Union. Talks about a comprehensive free trade deal have resumed and seem to move along quite nicely. An earlier attempt at forging a free trade agreement between India and the EU was derailed by the UK government which, at the time, strenuously objected to a looser visa regime for Indian professionals. Brussels, anticipating the UK’s imminent departure from the EU, has indicated that the EU does not in principle object to a more relaxed approach to Indians wishing to travel, study, or seek work in the union. Indian professionals enjoy a reputation for hard work and their almost peerless ability to think and act outside the proverbial box and seek innovative solutions to everyday problems. These traits are cultivated in a domestic business environment that remains one of the most complex in the world. To succeed in India, entrepreneurs and managers need both pluck, perseverance, and creativity. That is what makes the country’s prime movers and shakers, six of whom are portrayed on the pages that follow. i

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> ABIDALI NEEMUCHWALA When the Tough Get Moving As the saying goes: when the going gets tough, the tough get going. Such it is with Wipro, the Indian IT services company headed by Abidali Neemuchwala (50) which suffered this year a series of major setbacks such as the bankruptcies of two major clients and disappointing results at the US-based healthcare business it acquired in 2016 for $460 million. The sudden demise of Aircel, a domestic mobile telecom operator, and UK facilities management and construction services company Carillion hit Wipro particularly hard, depriving the company of some $200m in revenue. “These bankruptcies of large clients, occurring in the same quarter, have most certainly elongated our corporate journey,” says Mr Neemuchwala. However, the CEO fully expects the company to return to healthy growth by Q3 2018: “We have a nearly full order book and are doing particularly well in BFSI [banking, financial services, and insurance], manufacturing, and energy which is the exception of the generally weak utilities sector.” In the US, Wipro has to take a $150 million hit at its HealthPlan Services (HPS) unit which helps insurers manage their claims pay-out processes to people enrolled in Obamacare. Due to the political uncertainties surrounding public healthcare in the US, a growing number of insurance companies are withdrawing their Obamacare products. As a result, HPS has seen its business dry up. Mr Neemuchwala remains convinced that HPS has a great future: “At Wipro, we focus on long-term business development. There is a clearly articulated internal strategy to which we adhere. Wipro prioritises investor value creation and the company has reported its six strategic levers which it intents to use for future growth.” Joining Wipro in 2015 as chief operations officer – becoming the company’s CEO just one year later – from Tata Consultancy Services (TCS), Mr Neemuchwala was brought in to help expand the business. At TCS, where he worked for 23 years and received training from Tata Sons current chairman Natarajan Chandrasekaran, Mr Neemuchwala was responsible for a large corporate turnaround exercise which significantly improved the performance of the business. TCS is a direct competitor of Wipro with a slightly higher revenue. At Wipro, Mr Neemuchwala considerably strengthened the company’s service palette for banks and other financial entities. “Historically, Wipro was underrepresented in the BFSI segment. That was actually an advantage of sorts as the company did not have to deal 46

with legacy issues and could devise, and offer to clients, an entirely new and state-of-theart platform. This now helps Wipro capture additional market share.” The company headed by Mr Neemuchwala is currently India’s third-largest software services exporter. In order to shore up its cash reserves, Wipro has announced the divestiture of its hosted data centre services business to smaller rival Esono for a reported $405 million. The deal is expected to be concluded by the end of June. CFI.co | Capital Finance International

Mr Neemuchwala assured investors that Wipro now aims to tap into the lucrative client mining sector which already now shows promising early signs of success. The CEO is slightly disappointed that his efforts at revamping Wipro have been disturbed by developments outside the company’s control. Even so, the chief exec believes the job of pushing up Wipro’s profitability to meet industry benchmarks is nearly completed: “We suffered a mere delay, an annoyance, but nothing more than that. At Wipro we have now laid a strong foundation upon which to build sustained growth. “

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> SHIKHA SHARMA A Legacy of Strong and Balanced Growth

Photographer: Dhiraj Singh/Bloomberg

India’s leading banker Shikha Sharma (59) is no stranger to controversy. Earlier this year, she cut short her tenure as managing director and CEO at Axis Bank after, in a highly unusual move, the Reserve Bank of India (RBI) suggested the bank’s board reconsider its decision to reappoint Mrs Sharma for a full three-year term. She will now step down in seven months. The intervention merely signalled the RBI’s newfound willingness to act decisively when the situation demands. Market watchers are, however, not fully convinced that the reserve bank targeted the right person – or properly identified the causes of its concern. Mrs Sharma boasts a highly impressive track record. After a career with ICICI Bank and JP Morgan, she took the reins of Axis Bank in 2009 determined to shake up her charge and get things moving double-quick. True to her word, Mrs Sharma needed only a few years to transform Axis Bank into India’s third-largest privately-held commercial bank (by assets). Mrs Sharma is widely recognised, and praised, for her ability to manage and channel corporate growth and change. At Axis Bank, she expanded the retail lending side of the business and carved out a considerable niche in the investment banking segment. Mrs Sharma also shortened

internal lines of communication – i.e. streamlined procedures – and unveiled, and implemented, a strategic plan to make the bank future-proof. Though, at the time, Axis Bank had strong and well-performing retail, corporate, and SME franchises, the synergies between these business lines were modest – at best. The challenge was to deepen and broaden the product portfolio in a cohesive yet comprehensive manner whilst creating mutually reinforcing pillars on which to erect a nimble, customer-focused, and thoroughly modern bank. Mrs Sharma’s first order of business was to rebalance Axis Bank’s loan portfolio, seeking to cash in on the strong consumer demand generated by India’s buoyant economy. Today, the banks loan portfolio comprises 40% retail, 44% corporate, and 16% SME. Mrs Sharma was careful to include all stakeholders in her plans. She paid particular attention to staff training and skills development as a way to preserve Axis Bank unique qualities and avoid the need for bringing outside talent aboard. This ensured Mrs Sharma the loyalty of the bank’s over 55,000-strong workforce. Axis Bank maintains a nationwide network of over 3,300 branch offices and more than 14,000 ATMs. The bank also has nine overseas offices in, CFI.co | Capital Finance International

amongst others, London, Hong Kong, Shanghai, and Dubai. During her eight years at the helm of Axis Bank, Mrs Sharma managed to triple, almost quadruple, the balance sheet, driving up its share prices by almost 150%. However, more recently, the bank has been plagued by a number of affairs in the wake of the government’s rather haphazardly executed demonetisation of large denomination bank notes. The bank has so far been obliged to suspend nineteen officials for illegal activities that took place during the highly confusing days following the demonetisation in late 2016. Another worrying trend has been the increase in non-performing loans (NPLs) which, according to some pundits, is the result of Axis Bank’s sustained push to broaden its client base. As Mrs Sharma’s time at Axis Bank draws to a close, the balance of her tenure is, however, positive. In just a few short years, she managed to reposition Axis Bank as a great institution, a systemic bank that is ready to face the future: “In India, attaining highgrowth rates is not really a problem. However, managing all that growth without upsetting an organisation is a much more important challenge. That, we managed to do at Axis Bank: updating the product mix, establishing synergies, and delivering a superior product that customers may access in the most convenient of ways.” 47

> AMITABH BACHCHAN India’s Time Has Come is to be welcomed by the global community. The country has much to offer in the way of experience, heritage, and – why not? – attitude.” Though he doesn’t like to look back on his brief career in politics, Mr Bachchan still is one of only a select few candidates for parliament who received more than two thirds of the votes in their district. In the 1984 general election, Mr Bachchan ran against the former chief minister of Uttar Pradesh – one of the state’s political heavyweights – to obtain a crushing victory, obtaining the backing of 68.2% of the electorate. However, three years later, the actor vacated his seat, claiming politics to be a cesspool. Not a stranger to controversy, Mr Bachchan’s name had turned up in the Bofors Scandal which uncovered kickbacks paid by the Swedish arms manufacturer to numerous members of parliament and implicating then-Prime Minister Rajiv Gandhi as well. Mr Bachchan was eventually cleared of any wrongdoing both in India and Sweden. Returning to acting, Mr Bachchan suffered a career dip in the early 1990s but clawed his way back to the top starring in cult movies – now classics – such as Agneepath in which he portrayed a mobster. The performance netted Mr Bachchan his first National Film Award for Best Actor. Moving into film production, the actor-turned-producer scored a few modest box office hits but saw his company founder and go into liquidation after one of its big budget films flopped miserably. Experiencing both success and failure – though thankfully not in equal measure – Mr Bachchan has recently reclaimed his spot at the top, starring in Indian and US movies opposite younger peers such as Leonardo DiCaprio (The Great Gatsby, 2013). In Bollywood, Mr Bachchan cemented his already formidable reputation with faultless performances in the courtroom drama Pink and the highly-praised comedy Piku. A star in Hollywood and Bollywood, Amitabh Bachchan (75) is without doubt one of India’s best-known ambassadors. He knows the time has come for India to shine on the world stage and claim its position as a great power. Mr Bachchan is much more than just a personality on the silver screen: India’s former angry boy has matured and so has his country. He marvels at the confidence, clarity, and dare displayed by the present generation: “We were never like this. We never knew what and where we were to go. We do now.” A once-upon-a-time politician, Mr Bachchan has lost none of his savvy to age. He regularly points out that India’s demographic dividend 48

represents the country’s greatest opportunity: “Some of the most progressive and wealthiest nations face an old age syndrome and struggle to find the human resources needed to keep their edge. India faces no such challenges. Moreover, young people here have little patience with underdevelopment. They want to catch up – and fast.” Praising the Modi Administration for its willingness to implement a long-overdue reform agenda, Mr Bachchan also welcomes his country’s more assertive foreign policy, especially as it seeks to engage with Western nations: “India is now ready, and eager, to assume a prominent role in world affairs. This CFI.co | Capital Finance International

When not in front of the cameras, Mr Bachchan lends his instantly-recognisable persona to a myriad of good causes such as saving India’s emblematic tigers, the prevention of HIV/ AIDS, and the plight of young girl labouring in sweatshops. Mr Bachchan also fronts public awareness campaigns against malnutrition and promoting railway safety – a brave attempt to end the practice of coach surfing and track crossing which cost hundreds of lives annually. From rebel rouser to gentleman with a few bumps in between, Mr Bachchan perhaps embodies the resilience and determination of a nation whose time has come.

Summer 2018 Issue

> NATARAJAN CHANDRASEKARAN Ensuring Tata Group’s Future India’s largest business by revenue, Tata Group comprises no less than 289 businesses that together have just breached the $100bn annual turnover mark. Though Tata Group shows no signs of slowing down, chairman Natarajan Chandrasekaran of the holding company Tata Sons is determined to streamline the organisational structure of the corporate behemoth in order to vastly increase operational efficiency, explore synergies, and push up profits. Tata Group has a stake in industries covering nearly the entire spectrum of entrepreneurial activities from growing food to building military hardware and exploring artificial intelligence – and pretty much everything in between. Mr Chandrasekaran wants to weed out marginal businesses: “If we cannot scale and we cannot consolidate them, then we have to look if maybe there is a better place where that business can flourish.” The current chairman was parachuted into his job after his predecessor was summarily dismissed early last year at the conclusion of a public and rather embarrassing dispute regarding the group’s lagging performance. Excluding the highly profitable IT services provider Tata Consultancy Services, the conglomerate saw its after-tax profits shrink by staggering 72% over a five-year period. Natarajan Chandrasekaran was brought in to revert the downward trend and repower India’s flagship company. Though the chairman declines to specify the business he considers ripe for divestment, he has already begun offloading some of the group’s minor members such as a business consultancy and a pharmaceutical research company. Late last year, he also sold Tata Group’s consumer-facing telecoms business to its rival Bharti Airtel for an undisclosed sum. Described in The Economist as a corporation like no other due to its vast scale, palace politics, and historic sense of moral purpose, Tata Group defies categorisation. Now that some of the more pressing issues facing the conglomerate have been addressed, Natarajan Chandrasekaran – Chandra for short – must find a new corporate framework for his still rather unwieldy charge. As corporate vessels go, Tata Group is huge and made up of superlatives: the group employs slightly under 700,000 people and represents an estimated market value of $155bn. Tata is synonymous with India. The company, founded in 1868 and already a considerable force in the market by the turn of the century, was an early supporter of ndia’s independence and its hero Mahatma Ghandi. Already long before the British let go of the jewel in their colonial crown, Tata companies were instrumental in the country’s industrialisation effort. Later, in the 1990s,

Tata helped shape the IT outsourcing revolution which transformed the country into a software development powerhouse. Even though in the 1990s Tata Group embarked on an ambitious and ultimately successful global expansion drive, the company failed to mind and nurture its bottom line. Under Mr Chandrasekaran’s predecessor, the company was accused of navel gazing – paralysed by analysis. That has now all changed. The new chairman earned his spurs at Tata consultancy Services (TCS) which under his guidance grew into a $60bn business. Chandra is also one of the only a handful of Tata executives able to use his stellar track record to face down former chairman Ratan Tata who relinquished his control of the group in CFI.co | Capital Finance International

2012 but remains a larger-than-life behind the scenes presence. Mr Chandrasekaran is now busy to bring the holding company back to its roots as a source of knowledge and funding for its operational businesses – streamlining internal processes and lines of communication whilst extracting synergies from the group’s constituent parts. He also aims to lessen the burden of history which has made Tata, in the eyes of many, as a vehicle of national development rather than a corporation owing a fiduciary duty to its shareholders. The resulting picture may indeed be less romantic but just might ensure the company’s longevity and help write another 150+ years of Indian corporate history. 49

> ANAND MAHINDRA Disruptor-in-Chief Celebrated and admired for his can-do approach to life and business, India’s disruptor-in-chief Anand Mahindra is starting to wonder out loud if the time is ripe for a new social network – one owned by its users, tightly regulated, and professionally run. Mr Mahindra, chairman of the eponymous multinational corporate group, in early May sent out a call via Twitter to Indian tech entrepreneurs to come up with some original ideas: “I’d like to see if we can assist with seed capital.” Mark Zuckerberg need not worry just yet but should take note: Anand Mahindra is not known for merely toying with ideas or tweeting random thoughts. Presiding over one of India’s top ten industrial conglomerates and known for breaking convention, Mr Mahindra thoroughly enjoys upsetting markets and proving naysayers wrong. Mahindra & Mahindra (M&M), one of India’s largest automotive industries and the jewel in the group’s crown, was the first in the country to manufacture a range of all-electric cars, using technology developed at its secretive Blue Lab. Here, Indian and foreign innovators meet regularly to discuss ways of turning out-of-the-box thinking into actual mass market products. Amongst others, the lab has produced a car that senses its driver’s mood, and adjusts its systems accordingly, and is reportedly working on a transformer-like vehicle that can run on two, three, or four wheels depending on the user’s requirements. M&M is now set to launch an electric luxury sedan with a 600V powertrain designed by Italy’s legendary Pininfarina studio and touted as India’s answer to Tesla. Last year, the company’s racing team caused a sensation when it claimed the third spot in the Formula E competition ahead of Jaguar and just seconds behind Renault and Audi. Former head of Renault’s Cooperative Innovation Laboratory Alain Giraud has since accepted an invitation to team up with Blue Lab where he joins Swiss serial innovator Jean-Luc Thuliez, founder of Domteknika – home of the electric horse. Anand Mahindra (63) thrives on innovation and, just as importantly, is willing to help fund disruptive businesses. Mr Mahindra believes that due to its history and people, India is exceptionally well-placed to drive the Fourth Industrial Revolution. However, Mr Mahindra is not just about fast cars and big business; he has a keen eye for detail as well. After seeing a picture of an industrious cobbler precariously plying his trade from an improvised curb side stall – but cleverly and proudly advertising his business as a “hospital for shoes” – Mr Mahindra tracked the man down via an appeal on Twitter. A few Mahindra business professionals were promptly dispatched to find out what the 50

shoe doctor needed in order to see his start-up flourish. The man did not ask for money, but suggested a better workspace instead. In short order, the Mahindra design studio in Mumbai was ordered to Haryana, query the cobbler, and come up with a functional and aesthetically pleasing design. And so, quite by fortunate accident, Mahindra Group got into the business of roadside stalls. The Haryana cobbler has moved upmarket and now manufacturers custom shoes in a brand new kiosk. Called the face of Indian capitalism, Anand Mahindra insists that all the group’s companies, CFI.co | Capital Finance International

regardless of size, maintain a profoundly human touch by remembering that their existence is derived from customer satisfaction and goodwill. In fact, Mr Mahindra at times seems slightly less interested in the business aspects of his many pursuits than in their ability to cause a beneficial impact on people’s lives. Mr Mahindra’s charitable activities are well-documented and many; yet the Indian billionaire is by no means a starry-eyed idealist and keeps as far away from guru status as it is possible to get. Mahindra Group and its chairman are dedicated to the practicalities of national, business, and personal development – producing the means rather than the fish.

Summer 2018 Issue

> NARENDRA MODI Giving India Its Due of approval rating of 88%. Small wonder: though it experienced a rocky start, the Modi Administration has now shown to be exceptionally capable of managing the country’s accelerated development whilst rebalancing public finances. As a result, India now ranks alongside China in the top ten of AT Kearney’s Foreign Direct Investment Confidence Index. India is, in fact, the only country with a per capita GDP of $5,000 or less to be included in the ranking. Though foreign investors find the country “chaotic”, they also perceive India as highly competitive and dynamic. Last year, India received almost $45bn in direct foreign investment (FDI) and is on track for a repeat performance in 2018 – all the more remarkable as the era of cheap money nears its end and the clamour for yield dissipates. Challenges, however, remain. The growth of the country’s manufacturing sector, currently representing 18% of GDP, trails that of the overall economy, possibly derailing the government’s plan to boost its participation to 25% of national income. All the administrative reforms notwithstanding, India’s long-standing love affair with bureaucracy has so far not abated noticeably. Though introduction of a unified general sales tax was meant to streamline procedures, most businesses report that the complexity of the country’s fiscal system seems to have actually increased since 2014. According to global business consultancy Deloitte, India has the third-most complex fiscal regime in the Asia-Pacific Region, only slightly less bewildering than Vietnam’s and China’s.

He definitely is the man of the moment. The establishment may disagree, but Prime Minister Narendra Modi of India sprang a surprise on his political opponents who had earlier dismissed him as a knee-jerk populist, peddling simplistic solutions to complex problems. Instead, Mr Modi proved a man of his word and managed to dramatically raise his country’s formerly modest profile on the global stage. During the 2014 election campaign, Mr Modi promised an Indian revival. He is well on his way to delivering just that. The prime minister not only outsmarted the opposition; he also put the world’s sixthlargest economy on a sound footing, slashing the budget deficit to just 0.2% of GDP and consistently delivering strong growth. India’s economy now outpaces China’s, registering a 7.2% expansion of GDP in Q3 2017. Both

the World Bank and the International Monetary Fund (IMF) expect India to remain the world’s fastest-growing major economy for the foreseeable future, displacing France (No5) as early as next year and Germany (No4) by the mid-2020s. Narendra Modi is, arguably, the first Indian prime minister to have an excellent grasp of global power politics: he successfully deployed his country’s size to get a seat at the top table. The son of a humble green grocer, Mr Modi knows what it takes to forge ahead and burst through social and political barriers. He is not at all intimidated by power and will not play second fiddle to anyone’s tune. The Indians, most of them anyway, absolutely love his every move. Three years into his mandate, Mr Modi boasts an almost unheardCFI.co | Capital Finance International

Aware of the issue and undoubtedly working towards a solution, Prime Minister Modi is well aware of India’s unequalled potential as an economic powerhouse – held back for decades on end by policies that discouraged outside investment and cross border trade. A political innovator, if not a disruptor, par excellence, Narendra Modi aims to put paid to the notion that his country is merely a gentle, but not particularly efficient or attractive, giant. He may need a second term in office to finish the job and is highly likely to obtain the voters’ consent to do so. Meanwhile, the Modi Administration continues its efforts to transform India into one of the anchors of the global economy. Talks have just resumed on a far-reaching free trade agreement with the European Union. Earlier attempts foundered on British objections to Indian demands for a more relaxed visa policy. Now that the UK has decided to leave the EU, negotiators in Brussels and New Delhi are optimistic that a free trade agreement is well within reach. 51

> Europe

Eastern Europe: Linking Three Seas Poland has dusted off and revived one of its grand national projects. Moribund, if not completely forgotten, since the 1939 invasion of the country by the Soviet Union and Nazi Germany, the Intermarium Federation â&#x20AC;&#x201C; now renamed the Three Seas Initiative (TSI) â&#x20AC;&#x201C; again takes pride of place in Polish foreign policy.

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Summer 2018 Issue

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The initiative aims to strengthen cooperation between the former communist nations of Eastern Europe along a geopolitical fault line that runs from Estonia in the north to Romania, and possibly Greece, and the south – linking the Baltic, Adriatic, and Black Seas and forming a bulwark against both Russian expansionism and EU meddling. As such, the Three Seas Initiative complements and expands the reasonably successful Visegrád Group set up by Poland, the Czech Republic, Slovakia, and Hungary in 1991 as a political and cultural alliance with a view to furthering the participating countries’ interests in Brussels. Whilst one of the Visegrád Group’s initial aims was to facilitate and coordinate the accession and integration of East European nations into the EU by establishing solid links with the centres of power in Western Europe, the Three Seas Initiative seeks to intensify regional cooperation in light of the strained relations between some of its members – particularly Poland and Hungary – and Brussels. The twelve TSI member states celebrated their first regional summit in Dubrovnik only two years ago. Whilst Polish president Andrzej Duda repeatedly assures that the regional grouping is merely an attempt to promote cohesion within the European Union, his national security adviser Andrzej Zybertowicz is much more candid: “The Three Seas Initiative is designed as a buffer against threats from the east and new enemies that may possibly appear in the west. Should the West European project implode at some point in the future, we need to have a security chain in place between like-minded countries to meet that challenge and ensure our independence.” The first tangible result of the grand initiative is to be the Via Carpathia – a north-south highway running through Eastern Europe from the Lithuanian port city Klaipėda on the misty shores of the Baltic straight down to sunny Thessaloniki on the Greek shore of the Aegean Sea – unlocking along the way vast regions lost in time and mired in poverty. Though by no means a new idea – plans for a north-south transport corridor in Eastern Europe have been circulating in Brussels since at least 2006 – Via Carpathia was pushed to the top of the national agenda in Poland after the Law and Justice Party returned to power in 2015. Whilst sympathetic in principle, the European Commission has so far refused to declare the project a regional priority or even consider the Via Carpathia for inclusion in its Trans-European road network which would release credit facilities equal to 85% of total construction costs. Given the abrasive relations between Warsaw and Brussels, the commission is unlikely to change its position anytime soon. “That road will be built, no matter what,” says Minister of Infrastructure Andrzej Adamczyk: 54

"The underdeveloped eastern provinces of my country have been ignored for far too long. If we cannot convince Europe to help finance this highway, we will press ahead regardless and build it ourselves." Andrzej Adamczyk, Minister of Infrastructure

“The underdeveloped eastern provinces of my country have been ignored for far too long. If we cannot convince Europe to help finance this highway, we will press ahead regardless and build it ourselves.” Mr Adamczyk’s government has already earmarked €7bn for the project and construction crews have been put to work on key loops and sections totalling some 200 kilometres. National Security Adviser, Andrzej Zybertowicz, emphasises that the highway is not only an economic necessity, but a symbolic one as well: “The project will cement the friendship between the countries of Eastern Europe. In time, this will enable the region to counteract the present French-German dominance in the EU. The Berlin-Paris axis not only endangers the Judeo-Christian values upon which European society rests, but also undermines the future of the union. Why should Poland not consider a scenario that sees the European Union implode? Brexit represents an irrational decision. What if the French also lose their marbles and suddenly vote for a Frexit?” Mr Zybertowicz belongs to the inner circle that coalesces around Jaroslaw Kaczynski, the powerful president of the ruling party which he helped found in 2001 with his identical twin brother, late president Lech Kaczynski who died in 2010 aboard a Polish air force transport plane that crashed near Smolensk in Russia killing all 96 passengers. Mr Zybertowicz keeps in close touch with diplomats across the region and – in a remarkable coup – has managed to secure the support of the new government of Austria for both the Three Seas Initiative and the Via Carpathia. He now applies his considerable diplomatic skills to convince the governments of Romania and Bulgaria to join the group of countries that no longer automatically obeys the instructions emanating from Brussels. However, both depend on the EU’s largesse to keep financially afloat CFI.co | Capital Finance International

and are, understandably, reluctant to offend their paymaster. Former Hungarian Foreign Minister Géza Jeszenszky, who in 1991 helped disband the Warsaw Pact and later that same year cofounded the Visegrád Group, points out that the countries of Eastern Europe are not yet accustomed to acting jointly within Europe: “The Eastern Bloc never existed as such. It was a fictitious construct of the Soviets. In fact, the Soviet Union broke up or closed off road and rail connections between our countries to discourage contact. The Visegrád Group was formed for a single purpose: to speed up the EU accession procedure. It was never our intention to create a counterweight to Brussels or a nationalistic platform.” Mr Jeszenszky does not at all see the need for the Three Seas Initiative and considers the entire project the work of former White House Chief Strategist Steve Bannon who was the main act during the last meeting of the group, late May, in Budapest. Mr Bannon and US President Donald Trump are hugely popular in Poland and Hungary, mainly because of their defence of Western civilisation against “the onslaught of terrorism, bureaucracy, and the erosion of traditions.” During his July 2017 visit to Poland, the US president reminded the Polish that their own experience shows the need for continued vigilance: “The defence of the west ultimately rests not only on means but also on the will of its people to prevail.” President Trump implied that the European Union lacks that will. According to Mr Jeszenszky, all this talk of nationalism, values, and tradition will ultimately undermine, rather than strengthen, the position of Eastern European countries in Europe: “The region may well become isolated and a plaything of big powers such as Russia, China, and the United States; the stage on which they vie for supremacy.” Mr Jeszenszky does not think the Three Seas Initiative will move beyond economic cooperation and integration: “Deep down we all know that the EU, for all its shortcomings, is our best bet.” That said, it would be unwise to dismiss Polish ambitions, says political scientist Aleks Sczcerbiak of the University of Sussex: “Its plans are indeed ambitious but the government in Warsaw is also realistic and recognises the many differences that exist between the countries of Eastern Europe. Moreover, Polish policymakers understand that forging a united front is tough work and will take many years, if not decades, to complete. That is why the Three Seas Initiative is being erected from the ground up by connecting national grids and establishing highway links. The ruling parties in Poland and Hungary continue to enjoy the solid support of voters and have plenty of time to complete the groundwork of their initiative. Once the foundation has been put in place, successor governments have little choice but to continue building.” i

Summer 2018 Issue

> Book Review On Governing Europe: A Federal Experiment by Adrew Duff

EU History Dissected

294 pp, ISBN 978-1-9818-7699-0, £13.46

conomic Community, predecessor to the EU, British Prime Minister Harold Wilson had already managed to establish his country as a major irritant in Brussels, requesting a “fundamental renegotiation” of the membership terms just agreed. At the time, the British government demanded, amongst others, a steep discount on its contributions to the EEC budget and still more money from the community’s structural development funds which, by then, had been almost depleted – to the supreme annoyance of Italy and Ireland – as disadvantaged regions in the UK, such as Wales and the North England rustbelt, claimed most of the available resources. Not quite done yet with his litany of complaints, Prime Minister Wilson also opposed direct elections for the European Parliament – which the British managed to delay until 1979 – and demanded an opt-out clause to formally distance Great Britain from common diplomatic initiatives and allow London to prioritise its much-cherished relationship with Washington over the ties with Brussels and Europe. Finally, the British rejected any and all moves towards a monetary union because such an initiative was deemed “too ambitious and dangerous.” Perceived as exceptionally unreasonable, especially given his status as newcomer, Mr Wilson only succeeded in causing consternation and indignation amongst the other eight EEC members. However, he did set the tone for the British attitude towards Europe for next 45 years.

In On Governing Europe: A Federal Experiment, former member of the European Parliament Andrew Duff details the history of the European Union from its post-war beginnings to the present. Mr Duff, a Liberal-Democrat, lays bare the pesky dichotomy between broad federalism and narrow nationalism that has plagued the union since its foundation as the European Coal and Steel Community in 1952 – both commodities deemed essential for the waging of war and thus most in need of a common policy to create the interdependencies that limit the freedom of action of individual nation states (read: Germany and France). Mr Duff is a member of the Spinelli Group, a civic network that strives for a Federal Europe. In his book, Mr Duff explains why the EU, due to its intergovernmental nature, consistently underperforms even though its plans are always grandiose. He also shows how the United Kingdom assumed it would captain the ship and grew

increasingly frustrated as other member states undermined, or even ignored, its aspiration. After Prime Minister Wilson’s false start, the UK collaborated constructively towards the shaping of the single market. Indeed, British Euro Commissioner Lord Cockfield is widely recognised as the Father of the Single Market. Lord Cockfield painstakingly tabulated over 300 barriers to trade and set up a precise timetable for their elimination. With the single market in place and fully functional, the EU edifice was complete as far as the British government was concerned. After other member state signalled their wish to push integration further with a large undertakings such as Schengen and the euro, they inadvertently set in motion the Great British Retreat which culminated in the 2016 Brexit vote and the triggering, one year later, of the Article 50 exit procedure. In hindsight, the departure of Great Britain from the union seems to have been an inevitability. Since the early 1990s, the UK has consistently tried to delay or derail any and all attempts at closer integration. Whenever it failed to do so, the country managed to secure opt-outs. However, in 2015 Prime Minister Cameron overplayed his hand when he demanded the unthinkable: an optout from the single market. CFI.co | Capital Finance International

Although he knew better, Mr Cameron requested the UK be exempted from freedom of labour (movement) – one of the market’s four foundational pillars alongside the freedom of movement of capital, goods, and services. This was the straw that righted the camel’s back. Prime Minister Cameron was sent home empty handed whilst the 27 continental member states – upset at the UK’s apparent arrogance for asking the impossible – signalled Brussels to stiffen its resolve in dealing with London: no more catering to British exceptionalism. Mr Duff makes no excuses. Whilst he points out the weaknesses of the EU, in particular the union’s cumbersome decision-making processes, he also emphasises the challenges Brussels faces and meets as it carefully plots a course that is acceptable to 28 – soon to be 27 – member states, each with its own national agenda. Even those sceptical of the EU would be well advised to study its origins and the thoughts that gave rise to what has been called history’s most ambitious nation-building project. The United States of Europe, first suggested by Winston Churchill, may not be everybody’s preferred outcome; it still remains the unspoken long-term objective of creating an ever closer union of the peoples of Europe. i 55

> Alleanza Assicurazioni:

Celebrating 120 Years of History with a Record Year

avide Passero, CEO of Alleanza Assicurazioni, has announced record figures for 2017, as well as new growth initiatives for the future. These very encouraging results come three years after the launch of Alleanza’s sustainable growth strategy. 56

In 2017, while the overall market slowed down, new production at Alleanza grew by 9% to €2.2bn, and Gross Written Premiums increased by 7% to €4.9bn, marking a new record for the company. Over the last three years new production has grown by a cumulative 34.2% and Net Written Premiums have more than doubled, going from €740m in CFI.co | Capital Finance International

2014 up to €1.6bn at the end of 2017. As a result, Alleanza has gained four positions in the ranking of life insurance companies in Italy, climbing from the ninth to the fifth place in just three years. Furthermore, the company's financial stability shows a very healthy picture. Although the

Summer 2018 Issue

Italian insurance sector has achieved a robust level of capitalization, Alleanza's Solvency Ratio was over 292% at the end of 2017 and made it one of the most capitalized businesses on the market. This remarkable growth is the direct result of four main initiatives: digital evolution, an increasingly hybrid offer, a change management program, and a sustainable strategy. DIGITAL EVOLUTION Alleanza has taken very significant steps forward in the field of digitalization, where its projects are among the most ambitious ones in the European insurance sector. Alleanza was the first Italian company to digitize the entire distribution network. For instance, the company has developed a proprietary relationship management tool to deliver a valuable customer experience. Moreover, it has created a workforce management platform to increase consultants’ efficacy: 4,000 consultants are now digitalized and equipped with tablets and mobile applications. They can now assist some two million customers and collaborate with 10,500 accounts, who will have access to digitalization in 2018 under the BYOD mode (Bring Your Own Device). Alleanza has also digitalized cycle management for customers "on the move", ranging from customer profiling to purchases with digital signature or POS payments. Today, most customer service interactions can take place directly at home or anywhere else. At present, two out of three policies are fully digital, and the company’s goal is to reach three out of three by 2019. As a result of these efforts, Alleanza has recently won the Global Agent Excellence Contest, an international tender promoted by the Generali Group involving around 82,000 agencies from fourteen countries worldwide, which compete on innovation and digitalization and have an impact on business development. AN INCREASINGLY HYBRID OFFER Alleanza is moving towards an increasingly hybrid offer, with 75% of new products being hybrid. Alleanza Assicurazioni: Management

"This remarkable growth is the direct result of four main initiatives: digital evolution, an increasingly hybrid offer, a change management program, and a sustainable strategy." CFI.co | Capital Finance International

For instance, EXTRA (a hybrid savings plan launched in March 2016) has already been chosen by over 180,000 people, gathering more than €230m in 2017. Valore Alleanza is a hybrid product launched in April 2017 which has already attracted over 15,000 people, with a total of €360m raised in just eight months. Both products are the latest Alleanza solutions 57

CEO: Davide Passero

for clients with a low risk appetite who invest over a medium-term horizon, look for a stable return, and like the option of early withdrawals without penalties. Finally, Smart Capital completes Alleanza's range of hybrid products and offers a new smart saving plan: it has been developed for customers requiring a mediumterm saving plan with investment flexibility - a separate account combined with a UCITS fund chosen out of three options - and a sound health and life insurance for their families and themselves. A NEW PROFESSIONAL IDENTITY The strategy for sustainable growth encompasses an ongoing change management program, with specific reference to the corporate culture. That requires the adoption of a new mindset, whereby employees can understand that their job rests on two pillars: proximity and professionalism. As far as professionalism is concerned, extensive training programmes are implemented to promote a new way of providing consulting services and a reviewed corporate identity. Alleanza has strongly focused on its consultantsâ&#x20AC;&#x2122; professional training: 1 million hours of education provided in 2017. The company has also created an e-learning platform, available 24/7 from all devices, which allows users to easily access multimedia and interactive training materials. Proximity is equally crucial. Alleanza can rely on an extensive distribution network, featuring 58

1,200 operating points available to consultants, who can easily deliver home advisory services supported by digital tools, through a smooth and comfortable customer experience. In particular, the network has been further strengthened by targeting young generations: Alleanza has recently launched a project called Generazione Alleanza targeting millennials entering the labour market for the first time. Young and talented job-seekers have an opportunity to build a career in their area of interest throughout Italy, starting as junior account assistants and being trained to become insurance consultants. Finally, proximity is also achieved through the development of social and digital media channels, which have enabled the company to bolster its ability to build long-term relations with customers. In particular, the social media play a key role in further developing professional relations, through initiatives such as SMILE (Social Media Link Education). A SUSTAINABLY STRATEGY STARTS FROM CUSTOMER SATISFACTION Greater customer satisfaction requires strengthening customer service standards on which corporate activities are based. Alleanza has designed a new service platform to reshape and simplify processes in terms of customer centricity, and has created a services card showing the insurer's commitment to customer service, be it by improving the management of after-sales requests (to be delivered within binding timeframes) or generally improving the overall customer service quality. CFI.co | Capital Finance International

Once again, numbers speak volumes: the completion of network digitization and the increase in service standards have greatly improved customer satisfaction. The Net Promoter Score (a customer service metric) has reached 17.3% and has more than doubled since 2016 (7.3%). ALLEANZA ASSICURAZIONI Alleanza SocietĂ di Assicurazioni was founded in Genoa by Evan Mackenzie, Giacomo Castelbolognesi, Enrico Rava, and Giuseppe Corradi in 1898. Since the very beginning, the Life Insurance Division has represented the most relevant business area for the Company; in just two years since its foundation, it had already grown to be one of the largest at that time. DAVIDE PASSERO Davide Passero is CEO of Alleanza Assicurazioni, which is part of the Generali Group. He was formerly CEO at Genertel and Genertellife, a direct insurance company. Mr. Passero joined the Generali Group in 2001 as General Manager at Banca Generali. Before that, he was Head of CFN/CNBC and Radio Classica at Class Editori. He was CEO of RaiNet in 1999 as well as CEO of Finanza & Futuro Consulting - the financial services distribution network of Deutsche Bank in Italy - from 1996 to 1999. Previously he was Marketing Director and CEO of the franchising stores network Omnitel (now Vodafone Italy). Born in 1960, Mr. Passero graduated from Bocconi University in Milan. i

Summer 2018 Issue

> Big

Tech, Diversity, and Net Neutrality

It wasn’t meant to be this way. The domain of a mere handful of tech giants, today’s internet is a far cry from the almost anarchic virtual space – a chaotic online universe that encouraged diversity, innovation, and – yes – revolution, or at the very least, the good-humoured subversion of any and all attempts to impose order, oversight, and structure. Today’s worldwide web is to surprisingly large degree dominated by the FAANG Group – Facebook, Amazon, Apple, Netflix, and Google.

t peak times in the United States, almost half of the available downstream bandwidth is taken up by just two services: Netflix (approx. 25%) and YouTube (approx. 20%). According to Cisco, the world’s largest network hardware manufacturer, by 2021 video streaming will represent 82% of all internet traffic – up from 73% in 2016. In just three years, video services – including live streams and on-demand programming – will generate in excess of 187 exabytes (187 billion gigabytes) of traffic. By contrast, traditional web surfing and data traffic – the latter including the demands of the Internet-of-Things – requires less than a sixth of the bandwidth dedicated to video streaming. As Amazon Video and Hulu gain market share, and Facebook begins streaming video, the consolidation of internet traffic into the hands of just a few large players has put net neutrality under pressure. The concept, now transposed to the digital world, is rooted in the provisions of ‘common carrier’ law as it applies, amongst others, to telephone networks. Net neutrality laws force internet service providers (ISPs) to treat all traffic equally. A network operator may not cap, block, slow down, exploit, or otherwise discriminate between traffic streams. ISPs have long argued that the bandwidth they provide is not unlike a highway system with the only difference that heavy users are charged at the same rate as occasional ones. Without net neutrality rules, ISPs could charge bandwidthhogging services such as Netflix for the use of their infrastructure and, on a more positive note, establish digital fast lanes that improve the video streaming experience. The flipside of the argument is that charges for premium network access may snuff out competition by erecting barriers to the entrance of possibly disruptive newcomers, leading to a further consolidation of business interests on the internet. Also, net neutrality is probably not to blame for the natural inclination of ISPs and

"Though today’s internet is unrecognisable from what it was just a single decade ago, the perceived loss of diversity to the emergence of the FAANG behemoths is perhaps less than it seems." telecoms to concentrate their efforts in more lucrative urban markets, leaving an estimated ten million US consumers stranded in the dialup era and many millions more stuck on slow ‘broadband’ connections. Even with net neutrality, ISPs and telecoms are hugely profitable both in the US and elsewhere. There is scant empirical evidence that the rules stop these providers from investing billions in network upgrades. Even so, the US Federal Communications Commission (FCC) allowed most of its net neutrality rules to lapse in early June. Users barely noticed the change as all major network operators promised not to restrict or throttle traffic in any way. The country’s largest ISP, Comcast, is actually forbidden to do so under the terms of its 2011 acquisition of NBC Universal which requires the company to observe net neutrality until September, whilst Charter – the second-largest US network operator – must do so until 2023 as a condition of its takeover of Time Warner Cable in 2016. Meanwhile, the US Senate late last year passed legislation to force the FCC to keep, or reinstate, net neutrality. That Congressional Review Act is now set to face a vote in the House of Representatives where it stands a good chance of benefiting from a consensus that crosses the aisles as pollsters found that almost 83% of voters, including 63% of declared Republicans, favour the reinstatement of net neutrality rules. President Donald Trump may, however, refuse to

sign the act since his opposition to the initiative is well-documented. State governments are mulling legislation of their own, in many cases considerably stricter than the provisions just scrapped by the FCC. In California and New York bills have been tabled that would force nondiscriminatory practices on ISPs. New York has taken the indirect route with Governor Andrew Cuomo signing an executive order that bans state agencies from doing business with providers who do not observe net neutrality. Though this may seem a discussion about semantics; it is, in fact, an important battle. Big Tech companies – the FAANG Group – represent a sizeable slice of the US economy. Without their buoyancy, the US stock market would have retreated this year. To put thing into a sobering perspective: according to The Economist, the FAANG Group’s market cap is now worth more than that of all FTSE 100 companies combined. These five supersized corporates also represent the US economy’s successful face. Though the federal administration puts in considerable effort into narrowing the overall trade deficit, it fails to account for the absence of detailed rules of origin. In value-added terms – the bits added during final assembly in China to manufactures that contain components sourced from elsewhere – the US trade deficit with China is about 36% smaller than the $375bn often quoted. The wider US current account deficit would also be a lot less worrisome when the global profits of Big Tech are included. Though today’s internet is unrecognisable from what it was just a single decade ago, the perceived loss of diversity to the emergence of the FAANG behemoths is perhaps less than it seems. Whilst traditional web surfing amounts to just 14% of all internet traffic, that share is part of a pie many times larger than it was ten years ago. In absolute terms, diversity has actually improved: the world now boasts about 1.5 billion websites (of which only some 200 million are active) – a sevenfold increase over 2008. i

"Even with net neutrality, ISPs and telecoms are hugely profitable both in the US and elsewhere." CFI.co | Capital Finance International

> CFI.co Meets the Management of Masthaven Bank:

Andrew Bloom & Jon Hall A poster in the kitchen of Masthaven Bank’s busy head office off London’s Oxford Street reads: ‘Happiness lies in the joy of achievement and the thrill of creative effort’.

he phrase, uttered by US president Franklin D Roosevelt, provides a dose of daily inspiration to the two men responsible for the running of the specialist bank: managing director Jon Hall and chief executive officer Andrew Bloom. “This quote captures perfectly the way Andrew and I feel about all of us sharing in the creation of Masthaven Bank,” Mr Hall says, looking out over the bank’s busy office where, today, more than 150 colleagues – underwriters, savings specialists, servicing team, and more – mix together seamlessly. While President Roosevelt helped the American people restore faith in themselves as the US grappled with the depths of the Great Depression, Messrs Hall and Bloom are on a mission to restore the British public’s faith in the banking industry. “It would have been pointless to bring a new bank to market that's just like everyone else out there,” explains Mr Hall: “We're about something very simple yet rarely done: find out what customers actually need and deliver that to them – not just with words but with actions.” For Mr Bloom, the key to the bank’s success is to always keep thinking about the future: “We mustn’t rest on our laurels,” he says. “It’s easy to say: ‘great, what an achievement’, then take your foot off the pedal and relax. We mustn't think like that.” The comment is typical of Mr Bloom, who built Masthaven Finance from scratch in the early noughties, working initially in a serviced office with a small start-up team of four, funded entirely from his own resources. In late 2014, Mr Bloom reached out to Jon Hall, asking him to join. Together they would grow Masthaven into a new retail bank. Their story is one of two determined individuals establishing themselves before coming together. Mr Hall has a strong financial background, starting his career with PricewaterhouseCoopers before joining Aviva, then becoming CEO of Saffron Building Society. It’s while at Saffron that Mr Hall’s entrepreneurial, digital edge, and focus on fast growth really showed, Saffron 60

CEO: Andrew Bloom

MD: Jon Hall

being named the second-most digitally mature building society as well as being nominated for a clutch of other awards.

launched as a retail bank, becoming the first ‘challenger’ bank to be regulated that year. In 2017, Masthaven was in the Financial Times’ Fast Track 1,000, listed as the 240th fastestgrowing private company in Europe.

The desire to push boundaries is similar to Mr Bloom’s trajectory. After leaving university, Mr Bloom joined KPMG where he qualified as a chartered accountant, moving to transaction services, before working in the investment division of what is now called Strand Hanson. Following time as managing director of property investment firm Montague Knight, Mr Bloom launched Masthaven Finance in 2004, the lender initially specialising in bridging loans and development finance before expanding into mortgages. The CEO’s expertise in running and growing lenders who specialise in risk made him the perfect fit to start-up a new entrant like Masthaven Finance. “I’d long been fascinated by the opportunities for innovation within the financial services industry, particularly bridging, so Masthaven Finance was the perfect launching post,” explains Mr Bloom. Success soon followed, with the lender listed in 2015’s The Sunday Times’ Virgin Fast Track 100 with Masthaven the 81st fastest-growing private company in the UK. In 2016, Masthaven CFI.co | Capital Finance International

Today Mr Bloom, as CEO, takes a strategic role, with Mr Hall leading the bank’s day-to-day running. Different people, definitely, but who gel, push each other, and share a common aim. “We are definitely a challenger bank,” explains Mr Bloom, “but that’s not all we are.” “Whilst we don’t shy away from technology, one of the founding tenets of our philosophy is people,” Mr Hall says. “We are all about people. We like to treat people as individuals – both our staff and our customers – choosing to see the human being behind applications.” Messrs Hall and Bloom are proud to lead a bank that’s reflective of society, offering lending solutions to people with diverse requirements and allowing savers – not their bank – to choose when their account matures. “Today, ‘different’ most definitely doesn’t mean ‘risky’,” Mr Bloom adds: “Different just means human.” That ethos is clear in the Masthaven of today and one of the reasons the bank has secured the Best Digital Bank – UK Award. i

Summer 2018 Issue

> Masthaven Bank:

Challenging the Conventions of Traditional Banking Winner of CFI.co’s Most Innovative Digital Retail Bank in the UK for 2018, Masthaven is a bank that does things differently. Blending digital services with the vital human touch, the bank challenges high-street monoliths with simple, useful savings products and clever, innovative features that meet people’s needs.

Masthaven Bank: The Team

asthaven launched as a retail bank in 2016. It offers award-winning saving and lending products and is unique in allowing savers to choose when they would like their account to mature.

The bank applies its specialist lending knowledge to the needs of underserved borrowers and their intermediaries, enabling it to give excellent and responsive customer service combined with technology for speed and simplicity. Masthaven’s focus for its customers is to build trust by offering a first-class service, ease of access, and consistently good rates. The bank’s knowledgeable and experienced specialists are committed to providing customers with flexible and fixed term savings accounts, first and second charge mortgages, bridging loans, and development finance. Masthaven eschews the one-size-fits-all approach, adopting a human-digital philosophy

to give customers a banking service they value. Behind this is the recognition that technology is great at streamlining things, but not so good at making lending decisions. Technology cannot be warmly human and empathetic – real people are needed for that. So Masthaven use technology to make things simpler, quicker and easier, and employs friendly, clever people to do everything else. This ethos is borne out by the CFI.co judging panel, who praised Masthaven for “redefining online-only banking” by “rescuing and celebrating the human dimension”. “Online retail banks realise full well that advances in technology may wow customers, but it is the human touch that begets business. Masthaven Bank, on the leading edge of a second wave of disruptor banks seeking to challenge established convention, has put its customers in charge.” The bank is authorised by the Prudential CFI.co | Capital Finance International

Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Register no. 719354). Deposits are protected up to £85,000 by the Financial Services Compensation Scheme. Masthaven was named Best Bridging Lender in the Coreco Awards (2017); Most Innovative Savings Provider in the Moneynet Personal Finance Awards (2017 and 2018); and Best Specialist Lender in the Moneynet Personal Finance Awards (2018). Masthaven Finance featured in 2015’s The Sunday Times’ Virgin Fast Track 100, the annual awards designed to recognise Britain’s top 100 private companies with the fastest growing sales over their latest three years. Masthaven Finance, the bridging division of Masthaven Finance Group, was listed as number 81 in the list of 100 companies. Masthaven Bank was ranked 240 in Financial Times’ FT1000 list (2017). i 61

> Kaiserwetter:

The Digitisation Revolution Leading Investors to Renewable Power Today, millions of people are suffering from extreme weather events and the wider effects of global warming caused by climate change. For the first time in history, we are aware of the consequences of the changes in climate conditions, and how certain human activities are the cause of this. This reality has finally led mankind to take action and embrace our responsibility to protect the planet for future generations. All relevant players from the international community (governments, businesses, civil society) have united under the commitments of the Paris Agreement, grouping together almost 98% of the planetâ&#x20AC;&#x2122;s population to take action.

ollowing this, the various parties involved in the energy industry are developing new ways to increase production and efficiency, limiting the use of fossil fuels. A true paradigm shift is taking place in the industry: moving from being a part of the problem to becoming a part of the solution. Large international institutions are no longer the driving force of the energy transition which will slow the effects of climate change. The world is suffering from a lack of capital in this regard, as $1.5 trillion should be invested by 2030, and this would require private investment. Private actors are to become (and are already becoming) the main contributor to this new vision of our planet. The only way to attract these essential investors is by maximising benefits and minimising risks, which can only be achieved through digitisation. High tech digitisation is already becoming the axis upon which the revolution in renewable power sector, already attractive for private investors, revolves. The potential of digitisation has been anticipated by Kaiserwetter, leading multinational DaaS Enertec company, and the first to champion digitisation in the renewable energy sector with its digital platform ARISTOTELES. Kaiserwetter is dedicated to the management of renewable power plants and finance portfolios by offering a Data as a Service (DaaS) approach for investors, based on its cutting-edge IoT platform.

"A true paradigm shift is taking place in the industry: moving from being a part of the problem to becoming a part of the solution." and to maximise the performance of portfolios. Kaiserwetterâ&#x20AC;&#x2122;s innovation has enabled new private investors to enter the renewable market, especially funds and banking institutions where the financial might is located. Attracted by the potential value of a sector with an inevitable potential for growth, investors now possess a friendly tool to use in a sector in which they were previously outsiders.

Kaiserwetter has therefore revolutionised the future of the energy sector with new technology harnessing the possibility of the Internet-ofThings (IoT), big data and smart data analytics. Along with a solid digital infrastructure, the IoT allows access to data almost anywhere in the world, and has the ability to analyse data to mitigate the risk of investments in energy assets 62

CFI.co | Capital Finance International

It is becoming increasingly important for asset managers to be able to integrate and transparently manage the financial performance of their energy portfolios, working to minimise the risk for their investors and maximising returns. The pressure of competition lowering capital and operational expenditures creates larger portfolios and higher investment volumes, which sparks innovative ideas to improve processes and efficiency. ARISTOTELES: THE LATEST REVOLUTION IN RENEWABLE ENERGY INVESTMENT Kaiserwetter showed the potential of digitisation with the launch of IoT platform ARISTOTELES during the 22nd UN Climate Conference (COP22) in November 2016. To date, it is the first and only digital solution on the market that integrates the possibilities of Internet-ofThings (loT), smart data analytics, and digital infrastructure in the cloud. ARISTOTELES has

Summer 2018 Issue

"Kaiserwetter showed the potential of digitisation with the launch of IoT platform ARISTOTELES during the UN Climate Conference. To date, it is the first and only digital solution on the market that integrates the possibilities of Internet-ofThings (loT), smart data analytics, and digital infrastructure in the cloud." been awarded the SAP Innovation Award 2018, as one of the high tech main ‘driving forces to helping to stop climate change’. The digital platform is aggregating large streams of meteorological, technical, and financial data in the cloud, to maximise returns and minimise risks whilst implementing the highest transparency to renewable energy portfolios. Via its capability in performing smart data analytics and predictive analytics, allowing it to identify under-performing assets in different parts of the world, and assess potential defects via predictive scenarios. All this should catalyse investments in renewable energies, helping to stop climate change. The platform is designed to support the executive level of investment companies by supporting their decision making process. It is the only end-to-end solution currently on the market to include all energy production and financial data from energy parks within one frontend, allowing investors and financing institutions to take advantage of the added value of digitisation. It

is the platform they need in order to mitigate risk and maximise transparency and return on investment, both now and in the long run without any regional restriction. Furthermore, ARISTOTELES allows companies to simplify their business structures, replacing almost all functions of the controlling departments and implement lean organisational set-ups. In addition, the system also includes the possibility to integrate a cloud based enterpriseresource-planning (ERP) system. In summary, the digitisation of power production and energy asset management, the use of IoT and smart analytics, has the potential to drive the future of the renewable energy sector and force capital investments. For Kaiserwetter it is clear that, in the words of Aristoteles, "We cannot change the wind, but we can adjust our sails.” KAISERWETTER: AN EVER-EXPANDING YOUNG AND PIONEERING COMPANY Kaiserwetter was founded in 2012 as the only DaaS Enertec independent German company CFI.co | Capital Finance International

dedicated to the management of renewable energy assets by focusing on digitisation. ‘Innovation’ is one of the principal characteristics of the company, specialised in offering its digital services to investment funds, private equity investors, and banking institutions on a global level. With these services, Kaiserwetter has become a pioneering business in the emerging Enertec sector, maximising the intrinsic value of the facilities, lowering operation costs and risks, and optimising sustainable benefits in accordance with regulations. Headquartered in Hamburg, the company has a team of thirty experts with a vast experience in managing a total output of approximately 500MW on behalf of third parties and has offices established in Hamburg, Madrid, and New York. It manages parks across Germany, Spain, France, and Poland. Kaiserwetter is currently expanding internationally in the Americas and Asia, with a strategic development for the future of the company, and the energy sector itself, currently setting its eyes on the US investor market. i 63

> CFI.co Meets the CEO and Founder of Kaiserwetter Energy Asset Management:

Hanno Schoklitsch

enewable energy investors need service providers who are familiar with the investment landscape at a local level, can adapt to the latest technologies, and have a clear vision of market evolution and regulations. Hanno Schoklitsch, CEO and founder of Kaiserwetter Energy Asset Management, reached this conclusion in 2012 when he founded Kaiserwetter, the world’s first Enertec company. This new sector includes organisations which use stateof-the-art technology developing innovations to increase asset efficiency and achieve the maximum performance of energy portfolios by implementing the capabilities of digitalisation. Hanno Schoklitsch is a civil engineer and holds a Master’s degree from the University of Graz (Austria) in Business Administration. As a civil engineer, he specialised in the construction of hydropower stations, which provided him with an in-depth understanding of energy assets. Prior to starting Kaiserwetter he gained fifteen years of experience in real estate investment firms, operating under German banks such as WestLB, Landesbank Berlin, and DekaBank, where he was heading Germany’s second largest real estate fund (with an investment fund of €8.5 billion). Throughout his career, his professional experience and achievements, particularly with regard to managing large real estate portfolios, brought Mr Schoklitsch to understand the potential of the digitalisation within asset management. The use of big data and the Internet-of-Things (IoT) is key to capitalising upon the digitisation of the renewable energy sector. The launch of ARISTOTELES, the innovative digital platform for the management of renewable energy portfolios, was the next step in transforming Kaiserwetter into a leading business. The cloud based IoT platform uses the possibilities of smart data analytics and predictive data simulation by aggregating and correlating all technical, meteorological and, crucially, financial data with the goals of: (1) maximising the returns, (2) minimising investment risks, (3) achieving the highest transparency in real-time. ARISTOTELES allows business investors to manage their investments and assets from a global perspective via an independent, standardised, and tamper-proof digital database. Headquartered in Hamburg, the company has a team of thirty experts with vast collective experience, who manage a total output of approximately 500 MW on behalf of third parties. Kaiserwetter has offices in Hamburg, Madrid, and New York. It is currently focused on its international expansion, by starting up its business in North America, Latin America, and Asia. i 64

CEO and Founder: Hanno Schoklitsch

CFI.co | Capital Finance International

Summer 2018 Issue

> CFI.co Meets the CEO of Montpensier Finance:

Guillaume Dard of a company, to understand its lifecycle, and to analyse its valuation, aiming to select the most attractive investment vehicles. To understand the success of Montpensier Finance, we need to go back thirty years. In 1988, with the backing of the Taittinger champagne family, Guillaume Dard created and developed Banque du Louvre, a pioneer in multi-management. At the time, no bank was practicing that, as they were all focused exclusively on selling in-house products. “We have implemented several partnerships with reputable companies such as Pimco, Goldman Sachs, and Legg Mason. Thus, we have been able to build an array of products of very good quality and Banque du Louvre acquired, as a result, a great reputation and enjoyed strong commercial success.” “When HSBC became a major shareholder, and decided to merge Banque du Louvre with other entities, I felt the need to take on a new challenge. I therefore took control over Montpensier Finance. My experience of partnership with American asset managers convinced me of a principle: success = process + talent. We have therefore been very attentive to select very talented men and women and to be consistent on the development of our methods.” One of the proprietary model used for the topdown approach is the MMS (Montpensier Market Scan). “Twenty-five years ago, a manager's challenge was to collect all the information needed to make the right decision. Today, the challenge is to know how to sort and analyse relevant information within a deluge of daily data” says Mr Dard.

CEO: Guillaume Dard

erformance arises from the union of talent and method. This is the conviction of Montpensier Finance, based on a long experience of investment and a resolutely entrepreneurial culture. With over € 2 billion in assets under management, this independent management company based in Paris developed itself around three core competencies: multi-asset, European equities, and convertible bonds. “We are proud that our three-pronged approach in asset management has helped us realise continuous growth in the past years,” says CEO Guillaume Dard who acquired the company in

2004. “To compete in a complex world, our managers work as a team and use our methods as well as our analytical tools, developed over many years and enriched permanently. Our collegial, qualitative, and quantitative approach allows our managers to have a solid foundation in a rapidly changing financial environment.” The belief of Montpensier Finance is that companies are facing three major trends: contested globalisation, irresistible digitisation, and growing regulation. Therefore, they unite their bottom-up and top-down visions in their investment processes. This differentiating angle helps managers to identify the growth potential CFI.co | Capital Finance International

The MMS method relies on a four-pillar analysis to determine allocation. First, the economic momentum, examines the acceleration or deceleration of growth. This indicator is composed of ‘lead and lag’ data over a twoyear horizon. It gives an indication of potential trend reversals. The second pillar is looking at monetary dynamics, i.e. central bank policies and the behaviour of interest and exchange rates. The third pillar, market valuation includes data on earnings growth, geographical and sectoral data, as well as return on equity, according to different scenarios. Finally, the fourth pillar of the method concerns market dynamics, in which the flows and technical behaviour of these markets are analysed. “That’s the way we have achieved the first successes of Montpensier Finance,” concludes Mr Dard. i 65

> Boxx Global Expat Solutions:

Shaking Up the Global Mobility Sector Since twelve years Boxx global expat solutions has delivered and coordinated integrated mobility services on a global scale for multinational companies. The services include, amongst others, coordination of (relocation) vendor support, immigration advice and compliance, HR advice and development of global mobility policies, and tax and payroll advice and compliance. In this short period the company has been able to conquer a significant part of the global mobility market which was mainly dominated by traditional Big Four accounting firms and relocation companies.

ince twelve years Boxx global expat solutions has delivered and coordinated integrated mobility services on a global scale for multinational companies. The services include, amongst others, coordination of (relocation) vendor support, immigration advice and compliance, HR advice and development of global mobility policies, and tax and payroll advice and compliance. In this short period the company has been able to conquer a significant part of the global mobility market which was mainly dominated by traditional Big Four accounting firms and relocation companies. When a company has employees working outside its home country, these ‘expats’ can add significantly to HR workloads and may additionally bring (compliance) risks for the company. Some corporates have their own dedicated global mobility teams dealing with these matters, but most do not. Even when an inhouse global mobility team is available, external expert support is often required, for instance with house searches, relocation practicalities, or complex (private) affairs matters of the employee such as dealing with his/her personal income tax returns or visa applications. When a company is looking for support on these and other elements, it normally needs to engage multiple providers and hope that these can work together whilst aligning their services. Coordinating all this brings additional challenges to HR or global mobility teams: they need to keep the employees (and their families) happy by dealing with the various providers and at the same time make sure that their costs are kept under control. In theory something that may seem easy, turns out to be difficult and time consum-ing. Within the global mobility sector, the following challenges are often experienced: • An insufficient match between the actions of external vendors and everyday (HR) practices of multinational companies; • Insufficient alignment between the various 66

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Summer 2018 Issue

enough as an organisation to meet not only the needs and expectations of the corporate client, but also the needs and expectations of the client’s employees. This will generate the highest return on investment as a happy employee (and family members) creates loyalty to the employer and that loyalty will lead to a successful completion of an assignment – and a valuable and experienced employee upon return. Consistently meeting and exceeding all expectations is one of the most important future developments within the global mobility market and Boxx is already ahead of this with its development of the Expat Customer Journey.

"The only thing that should not be forgotten is that global mobility concerns people; real humans that need attention and prefer a personal approach and contact." external vendors in the total process; • Focus of the employer on things other than the expectations of the expats. With Boxx, a true one-stop solution came to life and was quickly implemented after the company was established twelve years ago. This was possible by attracting former in-house specialists of HR and global mobility departments of multinational companies and the hiring of experienced consultants. As a result, at Boxx not only consultants are providing the services, but also people who have seen the mobility challenges from within. Boxx’ specialists know the expat business inside out and know how to manage the interests of the different stakeholders across multiple jurisdictions. Having these kind of specialists on board is the starting point of Boxx’ unique way of managing expat relocations by focussing on the client much more than is usual with traditional global mobility providers. To keep abreast of current and future developments, Boxx has also chosen to do interim in-house projects at multinationals on a structural basis. This gives the Boxx professionals an opportunity to keep their knowledge and inside perspective up to date and further improve service levels via a better understanding of the client’s challenges. With its one-stop solution, Boxx controls every step of the assignment process, whilst providing a full overview which is subsequently linked to the specialists dealing

with each of the relocation steps. Boxx thus smoothens the entire process. With a global reach covering more than a hundred countries, and the support of more than 300 hand-picked network partners in all facets and regions of mobility, Boxx has really become a global player that can challenge the traditional mobility providers. Having built a strong client portfolio and reputation in the Benelux, Boxx is now ready to further expand its European operations and client portfolio. With a unique business model – and global mobility being the core business, the company wants to give Europe and the rest of the world the opportunity to experience how it is to partner up with a firm that not only provides high quality services, but also value for money and return on investment. Boxx already enjoys high client appreciation and advocacy scores. Boxx maintains a clear strategy on how it wants to position the company in the market. The people at Boxx know very well how they can be of most value to clients. The concept excels when the full range of services is offered, including advice and compliance services – from idea to execution. That isn’t to say that the company’s experience will not be of value when providing just a part, or parts, of the service offering. Boxx feels that global mobility is all about personal approach, being pro-active and flexible CFI.co | Capital Finance International

In essence this is not unlike the customer journey that retail companies map. Every customer has different motivations, needs, expectations, sentiments, and prior experiences. A retail company knows that studying the way all these different customers experience their journeys, can provide insights in their expectations which ultimately has an impact on satisfaction scores. Upfront knowledge about expectations of expats and their spouses (regarding the role of the employer, that of the external advisor, and/ or their own), is key in order to reach maximum satisfaction. Furthermore, this helps Boxx improve its service delivery. Boxx helps clients by taking away any burdens and worries expats may have. Needless to say that it also depends on the level of support the company decides to give its expats. When the company asks to take over the full process, Boxx will act as the out-sourced global mobility team. Apart from assisting expats, the company can also assist the employer on other issues such as expat talent management or assessing the relevant expat stress factors in specific situations and countries. Boxx always strives for real partnerships with clients. With the further globalisation of the world, the mobility market is rapidly changing and attention points of employers will change with it. The only thing that should not be forgotten is that global mobility concerns people; real humans that need attention and prefer a personal approach and contact. Global mobility should not only be about cost challenges with digital systems and self-help programmes as standard answers. In order to attract the best talent, having a sound global mobility policy in place that is supported by a service provider who understands the needs and expectations of employees can give a company a decisive edge when attracting and retaining talent, especially for the generations that will start their careers now and see working internationally as part of their career path. This is where the unique service delivery model of Boxx Global Expat Solutions fits in perfectly. i

If you want to learn more about Boxx, please visit their website at boxx-expat.com, email them at info@boxx-exat.com, or call Rens van Oers, business development leader, at +32 11 55 99 10. 67

> Troubled Billionaires:

The Embarrassment of Riches - Again Billionaires, too, lay awake at night worrying about money. The world’s 1,500 or so billionaires are mainly concerned over the preservation of their fortunes in the face of restless natives. According to Joe Stadler, head of the UBS ultra-high-net-worth (UHNW) global business unit, his clients are fully aware of the dangers inherent in the widening gap between rich and poor.

illionaires fear that, at some point, people may rise up and take direct action to strip them of their money and, quite possibly, lifes. “We’re at an inflection point. The concentration of wealth is as high as in the early twentieth century. This may not be sustainable. The question now is, at what point will society intervene and strike back.” In a UBS-sponsored research report on the über-rich, Mr Stadler points out that the world’s 500 richest billionaires last year increased their wealth by 23% on average to a total volume of assets worth $5.4tn – well over twice the UK’s GDP. As development agency Oxfam likes to remind us periodically, the world’s 42 wealthiest people own as much as the poorest 3.7 billion combined. Oxfam calculated that 82% of the wealth created in 2017 disappeared into the pockets of the richest 1% of the world’s inhabitants. Interestingly, Oxfam also concluded that the approximately $760bn earned by the world’s billionaires last year would be enough to end extreme poverty seven times over. Over at UBS, Mr Stadler wonders if a new generation of political leaders is ready to draw lessons from history and emulate Theodore Roosevelt, the 26th US president, who in the early 1900s broke up monopolies, faced down robber barons, busted trusts, and put the US government – for the first time – firmly in charge of running the country’s economy. “Once again, the world is going through a ‘Gilded Age’ during which wealth percolates upwards into the hands of fewer and fewer people. The billion-dollar question is, will society react in the same way?” Mr Stadler argues that billionaires, and their role in society, are often

"Interestingly, Oxfam also concluded that the approximately $760bn earned by the world’s billionaires last year would be enough to end extreme poverty seven times over." misunderstood: “Some 98% of their wealth finds its way back into the wider society. Also, billionaires provide employment to an estimated 27.7 million people.” Mr Stadler sees a silver lining to the growing inequality: “More than before, billionaires realise that they need to mind their public image. It is why you see many of the world’s richest people donating vast sums to charities and initiatives that curry favour with the public such as museums and sports teams.” The Gilded Age (approx. 1870-1900) made way for the Progressive Era which lasted almost six decades. Successive New Deal policies and two world wars saw inequality reduced as social democracy took root and curtailed excesses. However, since the early 1970s wealth and income gaps have increased – first steadily, then almost explosively as the ‘me decade’ gave way to Generation X and its insatiable thirst for instant gratification and opulence. John Mathews, head of UBS’ Private Wealth Management in the US, found that 140 of the world’s top sports teams are owned by 109 billionaires: “It is a way for them to do something for the community. Of late, we’re seeing billionaires from China moving into this market as well.” According to Mr Mathews, it is

not about big egos sitting in skyboxes and lording over games. Instead, a growing number of very rich people see sports as a way to bridge the divide between the seriously wealthy and those less well-heeled: “When a game is on, that’s the only topic of conversation between stars, sheikhs, businessmen, and regular guys.” Oxfam UK director Mark Goldring considers these moves merely window dressing and pleads for a rethink of economic priorities and models: “Rather than a sign of a thriving economy, the concentration of wealth keeps millions of hardworking people in poverty. Work needs to offer a way out of that poverty and if this requires less for the already wealthy, then that is a price we should be willing to pay.” US billionaire hedge fund manager Ray Dalio agrees and has called for a ‘national emergency’ to be declared to fight and reverse inequality. Mr Dalio fears that the advent of artificial intelligence, machine learning, and robotics will only widen the wealth gap. “Capitalism is no longer working for the majority of people and, because of that, is in jeopardy. Yet, no one knows what to do about it.” Universal basic income (UBI) is an idea to which a number of high-profile billionaires are now warming up. Richard Branson, Warren Buffett, Elon Musk, and Mark Zuckerberg, amongst others, argue that, as productivity increases and people spend less time working, governments should step in to ensure that all get a fair share of the bigger economic cake. “Productivity is good for everyone, though not available to everyone. That has to change,” concludes Mr Dalio, one of the billionaires – he is worth about $17bn – who lies awake at night wondering when the pitchforks come out and how to stop that from happening. i

"Productivity is good for everyone, though not available to everyone. That has to change." 68

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> CFI.co Meets the CEO and Founder of Auka:

Daniel Döderlein

orwegian native, fintech pioneer and Top 200 European fintech influencer, Daniel Döderlein is the CEO and founder of Auka. He has more than twenty years of entrepreneurial experience in the fields of IT, product development, advertising, and financial services. He was awarded Entrepreneur of the Year in 2014 by the Norwegian Venture Capital Association. Sitting on the Google cloud advisory board, Mr Döderlein has a string of firsts to his name. He was the first to develop mobile payments technology in Scandinavia, the first to launch a mobile payment service in Norway (mCASH), and the first to create and run a regulated financial services platform on public cloud. After Norway’s second largest bank, Sparebank 1, acquired mCash for exclusive use in the country, Mr Döderlein started his current company, Auka. Auka helps banks anywhere in the world to create, launch, and monetise their own mobile payments offering, following the same successful formula of banks in Scandinavia. Auka has been awarded Deloitte Fastest Growing Fintech in EMEA and best mobile payments platform by CFI.co magazine. Mr Döderlein explains the origins of the business: “I started my first business when I was fourteen, and my first formal company at age seventeen. So besides working in a local telecom store during school, I have never worked for anyone. I have worked alongside my fellow colleagues in companies I have built. I made a lot of mistakes, and still do. But I don't think you could learn in school, or working for others, what I have learned from my journey and would never trade my scars from this with anything.” “My job as a leader is to get trouble out of the way for the people I serve. And I serve my colleagues. I strive to be transparent and honest in everything I do, and I expect that from everyone I work with. If we can't deal with the truth, whatever plans we make will be a longer route to a solution if we ever get there. At Auka, your title means virtually nothing. We have open doors, and believe that good ideas, strategies, and solutions come from talented and dedicated people, wherever you are formally placed in an organisational chart.” “Fintech is the most funded industry from an investor perspective at the moment. Financial services is listed as the Number 1 industry for total transformation, and we have never seen more innovation and regulatory changes in any

CEO and Founder: Daniel Döderlein

industry at any time as far as I see it. What a ride it has been, and it has just started!” On corporate leadership, Mr Döderlein emphasises competence: “I’m surprised all the time that the decision makers in the financial CFI.co | Capital Finance International

services industry do not know how their business actually works, except looking at business cases from a spreadsheet perspective. I could live with that if the person is a prolific leader who inspires and motivates. But I don't see many of those in financial services, sadly.” i 69

> Euro Exim Bank:

Facilitating Global Trade For further information, please visit: euroeximbank.com

uro Exim Bank is an international financial institution serving import and export businesses around the globe, facilitating trade finance instructions.

In today's rapidly growing international markets – such as the new Silk Road and expanding commercial hubs – trade finance continues to play a strategic role in the flow and movement of goods and services. Euro Exim Bank specialises in connecting corporate buyers and sellers, enabling businesses to economically and efficiently export and import goods and services. The bank assists companies to fulfil their trade aspirations through financial instruments issuance (SWIFT MT700, MT710, MT760) and relay via correspondent institutions. 70

The bank’s international teams of experts have years of trade finance and SWIFT experience of sophisticated instruments and transacting via an extensive network of contacts and counterparties covering Europe, Asia, the Middle East, Australasia, and South America with operations in St Lucia and London.

INNOVATIVE TRADE FINANCE PLATFORM Trade finance covers many aspects of the financial market with complex documents, payments, and tracking. As such, comprehensive systems are essential to successful trade finance operations, and capturing data as close to the source is vital.

With expanding international offices supporting trade finance, bank guarantees and advisory services, Euro Exim Bank is extending its capabilities to provide credit and pre-paid card issuance, foreign exchange, and third-party SWIFT services, for a full-service offering to corporations, financial institutions, and limited companies. Plans include a presence in Abu Dhabi, India, and West Africa.

To meet this need, Euro Exim Bank has developed a sophisticated trade finance workflow system named SimpleX – available to agents, partners, and key customers – which captures pro-forma invoices, creates first drafts, tracks the flow of information for each trade, and creates SWIFT format messages.

CFI.co | Capital Finance International

In addition to invoices for the applicants, it tracks the due diligence, KYC, and compliance

Summer 2018 Issue

your customer, their type of business, the source of funds, and proofs of business relationships, financial institutions are more risk-averse than ever. As a matter of course, Euro Exim Bank pays strict attention to UN, US, EU, and individual country sanction lists regarding prohibited and dual-use goods. We also track PEPS, adverse press, and use AI technology throughout our due diligence process.

channels experience in international financial markets.

CONFERENCES AND EXHIBITIONS The bank participates in financial conferences globally and provides of thought leadership articles. Euro Exim Bank will be a key participant at the GTR Conference in Singapore.

Georgette Adonis-Roberts – International Legal Counsel georgette.a@euroeximbank.com Georgette Adonis-Roberts oversees the legal aspects for Euro Exim Bank. She is responsible for leading legal strategy and structure in the EMEA and Caribbean regions and providing oversight for the bank’s regulatory, compliance, and cross-border functions.

MANAGEMENT Kaushik Punjani - Director kaushik.punjani@euroeximbank.com Kaushik Punjani is a business owner, trusted executive, board member, and team leader with a unique understanding of both technical and business requirements. He holds BSc (Chemistry) and D. Pharmacy qualifications. Mr Punjani has an extensive financial background and his roles have covered management and delivery of financial solutions at UK businesses at all levels. As director, he manages the board, overseeing preparation of financial reports and marketing and representing the bank at international events. In his role as head of Accounts, he oversees audit functions and liaison with external auditors and regulatory agencies. Sanjay Thakrar - Trade Finance Specialist sanjay.thakrar@euroeximbank.com Sanjay Thakrar is a Trade Finance Specialist at Euro Exim Bank. With experience of running his own businesses, he has a unique perspective of both technical and business requirements. Mr Thakrar is keen to promote business growth and supports strong CSR programmes. He holds BSc and a masters’ degree.

submissions through the life cycle of the transaction. The system also produces diarised entries so that events are alerted to operators for manual follow up where required. TYPICAL CLIENTS The bank’s corporate clients are mainly based in the active export markets of China, India, UAE, Africa, Malaysia, Indonesia, Thailand, and Vietnam, sending goods all over the globe, transacting such diverse products as ethically sourced frozen foods, used cars, scrap metal, fruit, rice, grain, nuts, garments, sewing machines, plastic piping, plumbing accessories, and ceramics, amongst others. DUE DILIGENCE By heightened compliance requirements to know

Mr Thakrar has an extensive financial background, working in invoice discounting. He is immersed in the entire life cycle of imports and exports from inception and pro-forma invoices, through freight forwarding, insurance, importers, transporters, shipping, and all associated financial aspects. Graham Bright JP – Head of Compliance and Operations graham.bright@euroeximbank.com Graham Bright JP is an experienced and technically proficient industry professional from a financial services and system vendors background. His extensive career spans 35 years and includes twenty years at SWIFT. His expertise covers sales and marketing through software applications, infrastructure projects (CHAPS and Enquiry link), enterprise and managed services, marketing (re-branding and launching new SAAS products), and partner/ CFI.co | Capital Finance International

Mr Bright is a regular contributor to trade journals (GTR, TFR) with published articles in financial technology press and the Financial Times. He is a regular speaker at international trade industry conferences and will be a speaker at GTR in Singapore.

Mrs Adonis-Roberts is dual qualified barrister with a demonstrated history of working in in-house and in private practice in the legal services industry, banking, and trade finance sectors. Keen, dynamic, and career-driven she has extensive knowledge and experience in drafting legal documents, negotiating terms and conditions, assisting in the progression of commercial transactions, and corporate governance. Prior to joining Euro Exim Bank, Mrs AdonisRoberts worked in private practice in St Lucia with a cohesive team at Du Boulay Anthony & Co, dealing with many complex legal matters and civil litigation for high-net-worth clients, international organisations, hotel chains, and banks. She has also worked as a property law specialist for Premier Property Lawyers on behalf of clients buying or selling residential properties in the UK and is an accredited mediator in civil and commercial training. Mathisha Wahikala - Marketing Manager mathisha.w@euroeximbank.com Mathisha has over 18 years of experience and expertise in strategic marketing and business development across a wide variety of industries in the UK, Dubai and Sri Lanka. As Marketing Manager at Euro Exim Bank, she is responsible for the overall strategic marketing management that expedites the drive of the company, including planning and implementing promotional campaigns, overall responsibility for brand management and corporate identity and developing CSR initiatives. Holding an MBA from the University of Southern Queensland and the professional qualification from the Chartered Institute of Marketing (CIM), she holds an instrumental role with insight into business management and added exposure to a range of markets and cultures. Mathisha is a professional member of CIM and Australian Marketing Institute. She has worked as the Marketing & Administration Manager for Syngco Ltd and as the Senior Administration & Marketing Officer at Drydocks World Dubai. i 71

> AMAC Aerospace:

VIP / VVIP Aircraft Completion and Maintenance

MAC Aerospace is offering narrow and wide-body VIP completion and maintenance for the corporate/private aviation market. The company was founded in 2007 in Basel, Switzerland. Today, the company is the largest privatelyowned facility in the world and led by Kadri Muhiddin, executive chairman and group CEO, Bernd Schramm, group COO, and Mauro Grossi, group CFO. The successful progress attests to the commitment to excellence. With long72

term industry engagement, deep industry roots, extensive experience, and a strong international network, the AMAC team collaborates to exceed the expectations of clients, airworthiness authorities, and original equipment manufacturers. The founders created AMAC Aerospace in 2007 to serve the corporate and VIP/VVIP demand. Today, AMAC Aerospace is represented as a group of companies that spans the width of Europe and maintains a presence in Turkey and Lebanon. CFI.co | Capital Finance International

AMAC Aerospace operates a network of seven hangars for mid-size jets, narrow, and wide-body jets and is dedicated to maintenance complex design, modifications, and completion work that covers a footprint of over 100,000m2. AMAC Aerospace has over one thousand employees in specialised domains of aviation to offer a one-stop shop for all clientâ&#x20AC;&#x2122;s inquiries. The core service is certainly the unique VIP completion business. AMAC Aerospace is

Summer 2018 Issue

Turkey: Bodrum

Switzerland: Basel

users, or install them in the aircraft as part of the completion or refurbishment project. AMAC Aerospace has three affiliated sister companies which make up the group of companies:

Turkey: Istanbul

able to provide multiple completion and refurbishment requests simultaneously – no request is too ambitious. The aim is to exceed client expectations and consistently deliver ontime and within budget. The state-of-the-art workshops are manned by the best craftsmen in the industry and outfitted with modern cabinet, upholstery, sheet metal, composite, and electro/avionic workshops. AMAC Aerospace is authorised to upholster, inspect, install TSO tags and ship completed seats directly to end

AMAC Corporate Jet – Located in Kloten, Zurich, the Aircraft Management and Charter Division host approximately fifteen aircraft on portfolio with regard to direct aircraft management. The company helps facilitate charter requests, fuel arrangements, insurance coverage, crew selection and training, to name but a few services. AMAC Aerospace Turkey – Located at Atatürk International Airport, Turkey and at MilasBodrum airport, these facilities provide MRO services on Pilatus PC-12, PC-24, and Dassault, Airbus, and Boeing products. Equipped with all necessary tooling, this hangar in Istanbul was created by AMAC Aerospace to service the Pilatus aircraft products on an exclusive basis in CFI.co | Capital Finance International

the Middle East Region and then was developed to cover Dassault aircraft maintenance support in the region as well. The new hangar in Bodrum was completed in September 2017 for narrow and wide body aircraft maintenance up to and including the B777 series. To date, AMAC Aerospace are the first to use a mixed business model for this hangar in Bodrum where during the winter months, the facility carries out commercial line and base maintenance. During the summer months, the MRO services flips over to VIP business maintenance. JCB Aero was acquired in May, 2016. JCB is one of the world leaders in composite and carbon fibre production techniques and methods, and can carry out completion works using their DOA & POA approval status. JCB is also a qualified completion specialist in the VIP helicopter world and is in the process of acquiring its 145 approval for maintenance too. AMAC Aerospace Lebanon - A regional sales base for the Middle East, is located in Solidere, Beirut. 73

THE AMAC AEROSPACE TEAM: OVER A CENTURY OF EXPERIENCE With long-term industry engagement, deep industry roots, extensive experience, and a strong international network, the AMAC team collaborates to exceed the expectations of clients, airworthiness authorities, and original equipment manufacturers. Between them, the three shareholders have over a century of accumulated experience in the aviation industry and each one of them comes from a successful background within this particular sector. Kadri Muhiddin, Group Executive Chairman & CEO Kadri Muhiddin is an accomplished aviation expert with more than forty yearsâ&#x20AC;&#x2122; experience in aircraft and engine maintenance, overhaul, and modification. An aeronautical engineer and aircraft maintenance licensed engineer holding EASA and FAA PPL, Mr Muhiddin is a fellow member of the Royal Aeronautical Society in the UK. As a chairman of the board for other aviation ventures, Mr Muhiddin provides industry insights, profound knowledge, and a vast commercial network of associations alongside financial, commercial, and legal knowledge to AMAC Aerospace Switzerland AG.

Bernd Schramm, Kadri Muhiddin, Mauro Grossi

Bernd Schramm, Group COO Bernd Schramm has acquired strong operational and procedural expertise in MRO and VIP completions in almost ten years as general manager, senior vice-president, and vicepresident of completions in previous business aviation endeavours. As an aeronautical engineer with more than twenty years of industry experience, he has key client relationships throughout Europe, the Middle East, Africa and the Far East. Mauro Grossi, Group CFO Mauro Grossi is a recognised expert in optimisation and organisational restructuring as well as operational and financial project management. He brought to AMAC Aerospace more than twenty years of previous experience as chief financial officer in other companies. His key client relationships establish a secure and dependable financial footing for AMAC Aerospace throughout Europe and the rest of the world. At AMAC Aerospace, the philosophy is to get the aircraft in and out on time and on budget. The management team is not interested in creating a parking lot outside the four hangars: they are only interested that the aircraft remain up in the sky to serve their purpose. To date, AMAC delivered over twenty completion and refurbishment projects, covering all sizes from narrow to wide body aircraft. As for the maintenance business area, AMAC has tabulated over 3,400 modification projects in its ten years of existence. Those projects range from belly camera installations, self defence systems, and satcom installations to specific single and multiple STC (supplemental type certificate) developments. i 74

Satcom installations

AMAC Aerospace Basel: Completion - BBJ demonstrator

CFI.co | Capital Finance International

Maintenance

Summer 2018 Issue

> Park Street Nordicom:

Pushing the Digitisation of the Real Estate Industry

ark Street Nordicom owns sixty assets with a total floorspace of about 250,000m2 across Denmark valued at DKK2.5 billion and generating approximately DKK150 million in annual rent. The portfolio is split between 40% each of retail and office and 10% each of residential and other (mainly hotel) segments. During its first twenty years in business, Park Street Nordicom has laid deep roots as a real estate development company, which is reflected in the potential of its portfolio. Financial challenges over the last decade shifted the strategy towards a conservative management of the portfolio, with a high priority on generating cash flow to support a reduction in leverage.

Park Street Nordicom team in Copenhagen offices.

Over the past 18 months, the new shareholders and management of Park Street Nordicom have been able to solidify the financial backbone of the company with a significant reduction of debt, the enhancement of equity, and a refinancing of loans to term. This financial restructuring has been complemented by a streamlining of operations and the merger of multiple subsidiaries into a single Danish operating company. Moreover Park Street Nordicom has also outsourced property administration and facilities management contracts, added significantly to the team leadership, and developed cutting edge management information systems – all supporting a dynamic approach to property and portfolio management. The above restructuring effort has delivered a stabilised and simplified platform, as highlighted by Pradeep Pattem, the CEO of Park Street Nordicom. Commenting on the impact of the corporate merger undertaken in 2017, Mr Pattem said: “The new corporate structure of Park Street Nordicom has simplified internal and external reporting and financial management processes, and represented an important step towards creating a sustainable real estate company.” The firm’s continued investment in technology is a key aspect of its ongoing corporate strategy which prioritises transparent and real-time management reporting. The focus is on empowering management with real-time insights, to facilitate the analysis of the key portfolio performance metrics, and enhance the execution of asset management. As part of this strategy, technology enhancements and partnerships have been put into place in order to simplify the work flows across property administration and facilities management. Real estate as a sector is undergoing a profound change which is driven by advancements in technology

and digitisation. The trend helps improve the asset management decision-making process. Digitisation in real estate can deliver substantial efficiencies, expand productivity, and knowledge sharing. The firm is determined to capture such benefits. The intention is for operational efficiency to enhance the time and energy available CFI.co | Capital Finance International

for management to focus primarily on the management of the portfolio through vacancy reduction, rent optimisation, asset optimisation, tenant optimisation, and (where appropriate) re-development and/or property and portfolio acquisitions. The ambition of the company is to be the best-in-class for managing and developing properties, capital, and talent in the real estate industry. i 75

> Moldova Agroindbank:

A Reliable Banking Partner results desired. This year’s numbers attest to that,” Mr Cebotari notes. For Moldova’s banking sector, 2018 brought a U-turn in the settlement of the crisis the country’s financial system was facing. The willingness of foreign financial institutions to invest in the local banking sector put an end to a long period of uncertainty. Due to the consistency of its performance and operational excellence, delivered by a professional team using a finely-tuned strategy, MAIB emerged from the crisis as a stronger and consolidated institution. With assets topping €1bn and a market share hovering around 30% in deposits, loans, assets, and profit, the bank knows how to combine its long experience with a modern development vision. MAIB is known as a customer-centric bank that values its employees, promotes high corporate governance standards and financial transparency, and implements the most innovative banking technologies. "The development of the banking sector needs to focus on quality, but it is also important to grow the automatic business processes, and to review the banking business model. MAIB has already shifted to this process," the CEO adds. In 2017, MAB maintained its leading position and focused on improving the quality of loans portfolio, but also worked on implication with the clients, helping them understand that there are new requirements, including legal ones, in terms of loan issuing, which are more rigorous, and that they need to adjust.

Chairman of the Management Board: Serghei Cebotari

ver the past years, the banking sector of Moldova – an Eastern European country sandwiched between Romania and Ukraine - has undergone an extensive reform process which was set in motion with a view to stabilise the financial system and bolster customer confidence. Besides numerous regulatory reforms to which all financial services providers were subjected, Moldova Agroindbank (MAIB) – the country’s largest bank – has implemented a series of structural and operational reforms aimed at strengthening the image of the institution as a reliable bank, stepping up and extending its market position, and aligning the bank to the highest European standards. The process was far from simple, but as MAIB Chairman Serghei Cebotari stated: “Regardless of how painful these reforms proved to be, they are of the utmost importance for the future of the bank and that of the whole banking system.” 76

Due to these reforms, the banking sector is much stronger now that huge efforts were made to improve the legal basis, regulations, quality, transparency, corporate culture and compliancy requirements. "Having a good image is very important for the sector and individual banks and the good thing is that the banking sector has entered a stage when it has already regained to a large extent its credibility. The fact that we have implemented all of these actions has helped us overcome the situation," Mr Cebotari says. Boasting almost three decades of operational experience, MAIB has always been at the forefront of the Moldovan banking sector. “Our bank was, and is, the one that sets the tone for the entire sector. We remain very much aware of the responsibilities this leadership role entails and operate accordingly. MAIB’s fair and transparent approach that was maintained throughout the adjustment period delivered the CFI.co | Capital Finance International

MAIB is recognised and appreciated for its involvement in numerous corporate social responsibility initiatives and community projects that improve living standards, preserve unique cultural values, promote quality education, and help with the development of the business sector. Considered by some as the ‘jewel of the Moldovan banking sector’, MAIB is currently looking to attract a fit and proper investor. After extensive negotiations, an agreement in principle has been reached with a consortium of foreign investors. The main expectation from this move is for MAIB to step up its reputation and regain access to foreign financial markets and facilities. The bank’s CEO feels confident: “MAIB represents an exceptional investment opportunity. The bank has always been an interesting asset for investors to consider, and now that the reforms have been successfully implemented and start bearing fruit, MAIB is even more of an opportunity. i

> Istanbul Portfoy:

Turkey’s First Independent Asset Manager Istanbul Portfoy is an 11-year old firm, established in April 2007 by an exbanker as the first fully independent asset management company in Turkey. The company still has no organic links with any financial group, bank, brokerage house, holding company, or corporation.

he firm was taken over by the current partners in April 2012, when the AuM stood at barely TRY 25m ($15m), composed of a handful of discretionary portfolios. The new partners, all capital markets professionals with an average twenty years’ worth of experience in financial markets and good networking capabilities, have restructured the company from scratch with an ambition to thrive in Turkey’s asset management business. With the vision to become Turkey’s best fullfledged multi-asset managers and multi-family office, the new management aims to deliver wealth creation to investors. Since their interests are perfectly aligned with those of investors, the management believes it must thrive in this pursuit. The new team has implemented ambitious strategies and started to offer hedge funds and mutual funds on top of discretionary portfolio management. Targeting absolute returns beating deposit rates, which still are the benchmark in local markets where more than 85% of savings sit in bank deposit accounts. With strategies yielding better than deposit rates, having some flavour of corporate bond risk and equity risk mix, the firm has caught investors’ attention by consistently registering top-of-the-line performance. AuM rose to TRY 425m ($140m) by the end of 2014 and doubled to TRY 857m ($267m) one year later. By the end of 2016, the TRY

"A mix of investment banking, equity research, fixed income trading, commodity trading, and equity portfolio management experience creates a unique platform for portfolio managers." 1bn ($350m) mark was reached. Currently, Istanbul Portfoy’s AuM hovers around TRY 3.1bn ($735m). The firm’s partners, executives, and portfolio/ fund managers are very experienced with an average tenure of twenty years in the industry. A mix of investment banking, equity research, fixed income trading, commodity trading, and equity portfolio management experience creates a unique platform for portfolio managers. Istanbul Portfoy teams up with the most credible institutions in Turkey. The firm is working with one of the best custodian banks in Turkey, Turkiye Is Bankası AS, and has outsourced its fund administration services to third parties in order to enhance transparency. The company is working with a very large number of brokerage houses and chooses the best to fit its needs. While the company grows organically through new investor acquisition and fund distribution

channels, it also grows inorganically by acquiring rivals that fit to its growth strategy and profitability targets. In 2017, Istanbul Portfoy has fully acquired Ashmore Portfolio Management Turkey and merged it into the company. This enabled the firm to reach investors with interests in EM bonds and new pension clients. The funds’ trading volumes make up 7% of total volume in the local fund trading platform (known as TEFAS) vs a market share of 1.8%. The firm currently manages three pension funds, eight mutual funds, nine hedge funds, and one private equity fund, covering almost all risk and asset classes. From the very lowrisk money market mutual funds suitable for ordinary very risk averse short-term investors, to high risk-high return hedge funds – in Istanbul Portfoy’s funds menu there is always a product suitable to any type of investor. Even in the illiquid asset class, the firm’s application has recently been approved by the Capital Markets Board to start the very first venture capital fund which will be specialised in Turkish technology start-ups. Istanbul Portfoy is working as asset managers for high-net-worth Turkish families and individuals, Turkish conglomerates, family offices, pension and insurance companies, and with thousands of Turkish individual investors who invest into the firm’s mutual funds. Istanbul Portfoy is also a proud partner of a large Nordic sovereign wealth fund since early 2017.

"Istanbul Portfoy is working as asset managers for high-net-worth Turkish families and individuals, Turkish conglomerates, family offices, pension and insurance companies, and with thousands of Turkish individual investors who invest into the firm’s mutual funds." 78

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Summer 2018 Issue

"As all finance experts know, wealth is derived from the capital markets if invested wisely and prudently. Turkey, as an emerging market, offers tremendous opportunities for smart investors." risks. Flexible and quick decision making and high networking capabilities differentiate us from our competitors. We at Istanbul Portfoy have the courage to do the firsts in our markets. We have combined our strengths with the alumni of the prestigious Bosphorus University in Istanbul to create the first technology start-up venture capital fund in Turkey. This fund was established at Istanbul Portfoy. We believe our collaboration with the business angels network of Bosphorus University Alumni will create a very powerful synergy.

CEO & Managing Director: Burak Ă&#x153;stay

EXCELLENCE AND EXPERIENCE IN ASSET MANAGEMENT By Burak Ă&#x153;stay The Turkish asset management sector is still in its early stages of development. The high inflation era and currency devaluations in the 1990s and early 2000s have pushed Turkish savers away from capital markets. When one looks at figures, around 85% of Turkish savers prefer the safety of short term bank deposits, at very low yields, sometimes below inflation. However, as all finance experts know, wealth is derived from the capital markets if invested wisely and prudently. Turkey, as an emerging market, offers tremendous opportunities for smart investors. Istanbul Portfoy is claiming to be one of the smart investors of Turkey. From fund management to operations, and from risk management to compliance and internal control, Istanbul Portfoy is positioned and ready to serve investors with various levels of risk appetite by offering 21 different types of funds.

With $735m equivalent AuM, our company is the leader amongst boutique asset managers in the country. Whilst ranked 12th in 48 asset managers according to AuM volume, Istanbul Portfoy is competing neck to neck with bank affiliated asset managers. We are aiming to be in the top ten by the end of 2018. Our team, composed of treasury, research, equity, and bond trading professionals with more than twenty years of experience, is dedicated to create wealth for our investors. Many of our team members having experience in global financial institutions bring their expertise onboard. German discipline and American risk taking are combined with Turkish flavour at Istanbul Portfoy. The Turkish economy has gone through many ups and downs since the 1990s. Our fund managers, board members, and risk managers have all lived through many crises and cycles, have gained very valuable experience. We believe this experience is an important asset in volatile markets which guide us when to stay away and when to take CFI.co | Capital Finance International

As the principles of portfolio management suggest, one should diversify risk and not put all eggs in one basket. Even though Turkish markets offer tremendous opportunities, we cannot turn a blind eye to global markets. Our team is also a pioneer by offering the first global macro hedge fund in Turkey, where we aim at delivering sustainable and satisfactory dollar returns to investors who are not satisfied with fixed income yields in their hard currency holdings. The pension fund industry is another segment where we have started to demonstrate our capabilities. The Turkish subsidiary of a large international firm selected us as the fund manager of their group pension fund in the country. Similarly, we have been able to win new mandates in the fierce competition for pension fund management. Last but not least, Istanbul Portfoy is also a unique example in the boutique asset management segment in Turkey. We are proud that, as a boutique asset manager, we have been able to win a mandate from a Nordic sovereign wealth fund. This is a very positive sign for Turkish asset management industry stakeholders as it shows that our sector has met the standards, and satisfies the needs, of large international funds. Istanbul Portfoy will continue to be the outstanding asset manager in Turkey, with the contribution of all its stakeholders. i 79

> Deloitte:

Change Will Never Be This Slow. Are EMEA Banks Ready? By Grzegorz CimochowskI and Daniel A Majewski

igital is an oft-repeated mantra in banking that in just a few years has progressed from the fringe to the core of banks’ strategic agendas. This shift is visible in the annual reports of Europe’s 20 biggest financial institutions, where ‘digital’ was mentioned an average of once per report in 2011 but increased to 55 mentions per report by 2016. The reasons for this shift are clear: changing consumer preferences driven by technological advancement, competition from fintech start-ups, and changing regulation, with the European Union’s Payment Services Directive (PSD2) coming into force in January 2018. But to quote Gordon Moore: “Change has never been this fast, and will never be this slow again.” Most top-five banks in each country consider themselves to be leaders when it comes to digital but what is the reality? All banks have been forced to invest in digital capabilities. However, strategies and outcomes have differed. What has been lacking until now is objective data. That’s where the Deloitte Digital Banking Maturity Project comes in, providing information on the position of each bank with respect to its digital offering, comparing apples to apples by

"All banks have been forced to invest in digital capabilities but strategies and outcomes have differed." taking into account the full spectrum of products and functionalities, mapped against consumer preferences in each market. The Deloitte Digital Banking Maturity Project is perhaps the most comprehensive of its kind for the banking sector, analysing over 197,000 data points – reviewing the digital functionalities of 248 financial institutions across 38 countries, evaluating mobile UX, and surveying 8,000+ customers. As such, it provides a wealth of nuanced information about each bank and each country’s banking sector. WHAT MAKES A DIGITAL CHAMPION? Digital champions are banks which (1) provide a broad variety of digital functionalities to

their customers, (2) meet or exceed customer preferences in their market, and (3) deliver a modern and intuitive mobile UX. An objective scoring on each of these measures enables true digital champions to be separated from smart followers, adopters, and digital latecomers. To provide a snapshot of the results and identify some broad trends in digital banking, the project compared the five largest banks by asset size of each country. Interesting patterns emerge in this EMEA view that allow us to make some qualified statements about what drives digital banking development. The two key environmental factors driving digital banking maturity are: 1. Customer preferences – When customers expect digital and omnichannel functionality from their banks, it becomes a competitive factor, which compels banks to deliver it. 2. Market pressure – When other banks in the market make the move into digital and leverage it as a key differentiator or area of competence, it puts pressure on competitors to keep up.

Assessed banks

Functionalities benchmarked

Assessed FinTechs

R E A L current accounts investigated thoroughly by Deloitte proprietary framework based on customer research. R E A L insights, without vague truisms.

Customer journey steps

Covered markets Customers surveyed

Mystery shopper researchers Digital channels

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Summer 2018 Issue

Digital champions PL

RU CH

Digital smart followers

CZ NO

Digital adopters

FR ZA

Digital latecomers

IE KW

JO SA

IL LB

LV AE

Note: To achieve comparable data, country averages are based on the results of the top 5 biggest banks in given market in terms of assets. Countries within the 4 categories are in alphabetical order – the position of the flag within the group does not imply the score against other countries from the same group.

These factors are often correlated, but not always. In some countries (e.g. Poland), market pressure has driven banks to develop digital capabilities at a faster rate than customers demand. These banks investing in their future competitiveness, under the belief that customer preferences will inevitably catch up. Branch hostages are customers that would prefer to perform their banking activities in digital channels but are still forced to go to branches. We identify two main types: multichannel customers that cannot fulfil all their needs online and traditional customers that have been discouraged

from using digital channels by onboarding that is too complex/time consuming, access that is too expensive, inadequate functionality, or poor UX. Together they are as much as 18% of all bank customers. Branch hostages represent a major opportunity for digital champions to win new customers, by convincing them to take advantage of a better digital customer experience (possible even while keeping their account at their traditional bank, thanks to PSD2). Beyond digitization – the transformation of traditional banking products and services from brick-and-mortar into internet and mobile –

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there is growing pressure on banks to enter a new world of banking, as a result of changing regulation (mainly PSD2) and competition from fintechs. The digital champions identified in the survey are also leaders in both Open Banking (expanding traditional banking products and services with new value-adding services, mostly delivered by third parties, e.g. APIs for developers and personal finance manager) and Beyond Banking (introducing non-financial value-adding services delivered by third party providers into their banking digital channels, e.g. e-government functionalities and paying for public transport tickets).

Digital champions

Digital smart followers TR

Digital adopters

• Customer pressure – expectations regarding level of service which should be available in digital channels • Competitor pressure – digital “arms race” ignited by a number of banks which decided to leverage their digital channels as key competitive advantage

Digital Banking Maturity

Digital latecomers

CH PL

ZA BG

NL EE

HR HU SI

DE IS

LV IE

Market pressure on the banking sector

81 High

High

Foreign Digital champions as attackers Digital champions will compete for highly demanding clients fueled by implementation of PSD2

Digital Banking Maturity

FinTechs as challengers of status quo Banking sectors which will not live up to market pressure will face competition not only from other countries, but also FinTechs

Digital banking maturity has become a lynchpin for the medium-term development of the EMEA banking landscape as it evolves toward Open Banking and Beyond Banking. For banks, surviving and thriving in this new era will take a complete understanding of their competitive landscape, encompassing how their functionality compares to their competition as well as how they measure up to customer preferences. For digital latecomers, now is the time to move out of the comfort zone of the traditional banking status quo and start transforming into a platform for services if they do not want to be left behind by more digitally mature incumbents and fintechs. However, the steep investment required for this transformation may steer some banks to focus on providing only a few banking products and services as a specialised banking provider. Digital champions should leverage their strong current position to expand from a banking 82

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Maintaining a competitive edge in Open Banking and Beyond Banking will be critical to determining the digital champions of the future. PSD2 will change the dynamics of competition in many markets by removing boundaries and allowing both banks and fintechs to compete for incumbents’ customers in their home markets. PSD2 is creating an environment where digital champions have an opportunity enter and capture market share in neighbouring markets (e.g. mBank’s expansion via Copernicus project), particularly those where there is a gap between customer expectations and incumbents’ digital capabilities. This creates a risk for incumbents that have not kept pace with their customers’ preferences for digital services.

Market pressure on the banking sector

platform into an exponential platform before other incumbents and fintechs fill this space. To achieve this, they will need to work closely with financial and non-financial services providers as the level of complexity of this strategic shift will require deep integration with external partners. Fintechs offering everyday banking services will face pressure from two sides: in order to not be left behind by digital champions, they will need to develop further in the direction of exponential platforms; and to meet customer demand for more complex banking products, they will need to expand their services in the area of traditional banking. Collaboration with both incumbents and other specialised fintechs will be a critical success factor. The recent examples of N26 and Revolut demonstrate that fintechs have these capabilities. It will be critical to maintain flexibility while scaling up their business – an issue which has been a stumbling block for the digital maturity of many incumbents (e.g. those struggling with legacy core banking systems). Whilst customers’ rapid adoption of digital channels (and particularly mobile) is putting pressure on banks to innovate, banks on many EMEA markets are not keeping up with what customers want. Innovation tends to be driven by competitive pressure, which has been mainly local until now. However, competition is set to intensify as PSD2 and Open Banking removes barriers to non-banks and non-locals entering the game. One out of every five customers is currently a branch hostage, an opportunity that speaks for itself. Are EMEA banks ready for the challenge? Open banking is not a tsunami but a big wave is coming that banks cannot stop; the time has come to learn to surf or be left behind. i CFI.co | Capital Finance International

Author: Grzegorz CimochowskI

Author: Daniel A Majewski

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Summer 2018 Issue

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> Maserati on Value Creation:

Trident Badge and a Heady Rumble Mean Business, On the Road and In the Showroom How many syllables would you like with your supercar? One? Porsche will do nicely. Two? Bentley, please. Three? Ferrari, of course. Four? Listen for the growl...

hen a 560 bhp 4.7-litre V8 engine coughs and rumbles to life, forget about syllables – and words. There’s nothing to compare to the living, breathing menace of a true performance vehicle, and the Maserati soundtrack is a feral and heady throb. This beast means business, even if you don’t. The threepronged trident on the radiator grille will prod anyone who hasn’t yet twigged. It’s a Maserati, and it doesn’t mess around. But suave has been seamlessly blended into the rock-hard Maserati mix, a velvet glove for the iron fist. “The absolute opposite of ordinary,” is how Maserati bills its desirable Ghibli, an almost humble member of the elite wolf pack. With a five-strong model range and the mission statement to "build ultra-luxury performance automobiles with timeless Italian style”, the Modena-based manufacturer is no stranger to success. In May 2014, Maserati sold a record of over 3,000 cars in one month, and nothing has tarnished the appeal in 2018. CFI.co caught up with Cecco Piergiorgio, CEO of Maserati, Switzerland, at the recent Geneva Motor Show. We asked him just what it is that sets Maserati apart from its competition in Switzerland – and elsewhere, of course.

"Suave has been seamlessly blended into the rock-hard Maserati mix, a velvet glove for the iron fist. 'The absolute opposite of ordinary.'" “We changed our position because before we were really only luxury… but the exclusivity stays with the brand.” Five models comprise the Maserati stable: the Ghibli, the Levante SUV, the Quattroporte luxury “race-bred” sedan, the two-door GranTurismo and the GranCabrio convertible; there are various engines and states of tune, none of them wallflowers. When it comes to matching internal technology with outer beauty, Piergiorgio is confident. “We are on the same level as our colleagues from Germany, but we are proposing something special because their cars have become very popular.

“Our competitor for (the SUV sector) is BMW with the X5 or Audi with Q5 and Q7, so it's a step further. The company has innovative customer care and services, but “our structures are very lean”. The big advantage of that stripped-back structure is that any problem – with a dealership, with customer care, or a technical issue – that will quickly be signaled to Piergiorgio. “If I see the problem can be only solved (in a certain way), I solve it and it's done. So we are very lean, but the decisions are taken very quickly.” Piergiorgio admits that innovation has taken a bit of a backseat because of the company’s modest size. “So we are maybe not very innovating because we don't have the people to do this, but we are very straight,” he admits. “We go to the point and then you have the chance to speak to me and then I can decide – me alone – because Switzerland is alone.” Passion is undiluted in the process, and a small team breeds trust while holding the torch high and proud. “If you work for the automotive branch, you have to be a fan. There are only

“Today, nobody can afford to build a car that doesn't work well,” said Piergiorgio. “Switzerland is a country apart, it's not like Italy or Spain. Switzerland premium has become volume, that's why I say if you really want to have something special, you have to get a distance between you and (other luxury brands) because everybody is driving Mercedes or Audi in Switzerland.” Maserati is determined to retain its place as an affordable luxury. “That's our play, we stay there and we build only 55,000 cars,” says Piergiargio, “and with these 55,000 cars worldwide we are very exclusive. The production worldwide of cars is over 80m.” That 55,000 figure represents quite a hike; back in 2011, Maserati made just 6,000 vehicles. 84

Piergiorgio Cecco, Managing Director of Maserati (Schweiz), left, talking to Mr Tor Svensson, Chariman of CFI.co.

CFI.co | Capital Finance International

Summer 2018 Issue

Maserati Levante MY19 GranLusso & GranSport

fans working for me, we are seven fans, seven friends.” But Peirgiorgio is a pragmatist, who used to work as a marketing director for BMW Switzerland. “I was fan then of BMW, and before that I was fan of Ford – so it's a matter of identification.” So the most important things are friendship, trust and... ? “Passion, passion for the brand.” How would he describe his management style? “We don't have the time to control each other so everybody works for everybody else. If we have to help each other, we help, and of course and we're very confident that the other guy's doing the maximum. “That's why I need people with passion. I'm working sometimes on Sunday evening at ten o'clock and I can see that my colleagues are

online too and then it's a bit of, ‘Go ahead’. We’re in the same boat. And only like this are we able to manage this volume and with so few personnel.” What about technological advances? “We have always been, and we will always be, followers,” admits Piergiorgio, “because such a little brand cannot afford to risk, invent something new and develop. “We are adopters, we buy as soon as we see, ‘OK, it works’. Today we have in our cars everything you need… We leave the Germans to make special things (that) nobody really needs. I mean an infrared night camera telling you, ‘Take care, a sheep is coming’? For them, maybe it's the only way to find something special. “For us, we propose a driver's car with all the CFI.co | Capital Finance International

features you need to drive, with highway assist and everything, but we don't exaggerate.” Maserati, like most manufacturers, is looking ahead to the electric revolution. “As soon as we see a positive business case – and this will be maybe in 2012 – we will come up with the technology (we want). We don't have to reinvent the wheel so we will buy something which is suitable to us, and sporty, and then we will (decide). But just now we see the others are struggling and losing money with these cars that they can't really sell. They propose it, but nobody buys it.” New CO2 emissions rules mean that eventually, electricity may provide the “go” behind the famous trident badge. But until then, listen to the beat of that mighty engine, and pay heed to the message. i 85

ANNOUNCING

AWARDS 2018 SUMMER HIGHLIGHTS Once again CFI.co brings you reports of individuals and organisations that our readers and the judging panel consider worthy of special recognition. We hope you find our short profiles interesting and informative. All the winners announced below were nominated by CFI.co audiences and then shortlisted for further consideration by the

panel. Our research team gathered additional information to help reach a final decision. In many cases, senior members of nominee management teams provided the judges with a personal view of what sets their companies and institutions apart from the competition. As world economies converge we are coming across many inspirational individuals

CFI.co | Capital Finance International

and organisations from developing as well as developed markets - and everyone can learn something from them. If you have been particularly impressed by an individual or organisationâ&#x20AC;&#x2122;s performance please visit our award pages at www.cfi.co and nominate.

Summer 2018 Issue

> BNY MELLON: BEST CASH MANAGEMENT SYSTEM GLOBAL 2018

Boosted by investor interest after registering a solid 9% increase of its year-on-year revenue in Q1 2018, Bank of New York Mellon Corp (BNY Mellon) has amply demonstrated its ability to grow organically, exceeding the expectations of even the most bullish analysts. That was enough to convince Warren Buffet to significantly up his stake in the bank. BNY Mellon has made waves with a series of successfully executed efficiency drives which streamlined procedures and further improved the bank’s operational performance as evidenced by the boost to its bottom line. BNY Mellon has invested considerable resources in a new technological platform which is expected to help drive growth both from internal

proficiencies and externally through improving the client experience. BNY Mellon’s treasury services offers international corporate clients premier cash management services based on their global treasury technology platform. Servicing 36 countries and 120 currency markets has forced BNY Mellon to think global when digitally innovating - to the benefit of their clients relying on business-critical payments across borders. BNY Mellon’s role as the frist payment originator on The Clearing House’s Real-Time Payments (RTP) network means it is capable of processing payment transactions with better liquidity, transparency and tracking

agility. Speeding up the value chains by enabling swifter payments results in value-add for commerce. The value creation enhancements of the cash management system benefit also other financial institutions as it is part of the private label treasury services solutions on offer. The CFI.co judging panel commends BNY Mellon on its proactive approach to the cash management and its overall treasury services business, particularly the company’s continued dedication to precisely tailoring its services to keep up with demands such as real time transparency. The judges are pleased to offer BNY Mellon the 2018 Best Cash Management System Global Award.

> MOODY'S DE MEXICO: BEST CREDIT RATING AGENCY MEXICO 2018

Consolidating and expanding its longtime leadership in the Latin American credit rating market, Moody’s has significantly strengthened the company’s presence in Mexico. Debt issuers and investors alike count on the expertise, credibility, and engagement of Moody’s thirty local analysts to detect micro and macro trends and ascertain the state of the overall market. In Mexico, Moody’s tracks close to 900 debt issuers and investment vehicles such as corporates, financial services providers, publicly-owned entities, investment funds, structured finance undertakings, and large projects, amongst others. Whilst monitoring

the financial markets, Moody’s adheres to a comprehensive code of conduct which ensures full transparency. The company publishes detailed descriptions of the methodology it employs to evaluate businesses, entities, and funds in each sector of the economy. This way both debt issuers and investors gain insights into the criteria used which, in turn, helps improve the overall quality of financial instruments. Worldwide, Moody’s monitors in excess of $72 trillion in financial instruments. The company employs over 1,100 analysts and has recently redoubled its already considerable CFI.co | Capital Finance International

efforts to include ESG (environmental, social, and governance) performance standards in its assessments. In Mexico, Moody’s helped guide, explain, and inform the environmental impact of the new $13bn airport, soon to become the largest in Latin America, being built to the north of the capital. The CFI.co judging panel commends Moody’s on its presence in Mexico and the work done to help issuers and investors tap into the resources needed to fuel sustained economic growth. The judges declare Moody’s winner of the 2018 Best Credit Rating Agency Mexico Award. 87

> INVEST IN AUSTRIA (ABA): AUSTRIA BEST DESTINATION FOR INVESTMENT IN INNOVATION EUROPE 2018

Austria’s national development promotion agency Invest in Austria (ABA), reports directly to the Ministry for Digital and Economic Affairs and provides professional consulting services to businesses seeking to establish a presence in the heart of Europe. Headquartered in Vienna and with a staff of around thirty professionals, ABA is the go-to place for the latest information on one of Europe’s most resilient, well-managed, and attractive economies. Located at the crossroads of the continent, Austria boasts an excellent and thoroughly modern logistics infrastructure

with air, rail, river, and road links to all parts of Europe. As the Balkan states gear up to join the European Union, Austria will be a natural gateway, facilitating trade in both directions. With a highly educated multilingual population and an education system that is finely attuned to match specific skill demands, Austria’s economy features high productivity. The country is particularly keen to continue its investments in education and scientific research in order to create a business climate that sparks innovation and welcomes start-ups. ABA has actively promoted Austria as a tech start-up hub, working in close cooperation with

a number of state-owned and private entities to offer research funding for high-tech firms. The agency also helps maintain a supporting network of seed capital investors, incubators, and business angels. The CFI.co judging panel notes that Austria has recently streamlined the procedure for setting up a business and maintains an investor-friendly environment with a unified corporate tax rate and generous tax credits for investment in research. The judges are impressed and declare Invest in Austria (ABA) winner of the 2018 Austria Best Destination for Investment in Innovation Europe Award.

> HE SAEED MOHAMMED AL TAYER: BEST GREEN ENERGY CHAMPION MIDDLE EAST 2017

By 2050, Dubai is expected to have the smallest carbon footprint in the world for a city of its size. The emirate is in the process of transforming itself into the most environmentally friendly city in the world. His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai launched the Dubai Clean Energy Strategy 2050, to transform Dubai into a global hub for clean energy and green economy by providing 7% of Dubai's total power output from clean energy by 2020, 25% by 2030 and 75% by 2050. Earlier in 2017, His Highness Sheikh Mohammed bin Rashid Al Maktoum, 88

unveiled plans for the construction of the world’s largest concentrated solar power facility which is expected to inject 700MW into the Dubai’s grid. The plant is part of the Mohammed bin Rashid Al Maktoum Solar Park, the largest single-site solar park in the world, based on the Independent Power Producer (IPP) model, that is designed to produce no less than 5,000MW of clean energy by 2030. HE Saeed Mohammed Al Tayer, DEWA’s Managing Director and CEO is the driving force behind the utility’s push towards sustainability and innovation which is incorporated in its vision. DEWA has also included strategic objectives within its strategy map with a focus on envisioning the future, CFI.co | Capital Finance International

innovation, and the happiness of stakeholders. The plans stretch far beyond good intentions. The utility is already now moving towards clean energy and has successfully announced green and Sharia-compliant bonds to help fund the transformation. The CFI.co judging panel notes that DEWA continuously monitors its environmental performance in order to meet corporate targets: largely thanks to Mr Tayer’s pursuit of operational and environmental excellence, ontime and on-spec have become bywords for the utility he leads. The judges are both pleased and honoured to offer DEWA’s MD and CEO Saeed Mohammed Al Tayer the 2017 Best Green Energy Champion Middle East Award.

Summer 2018 Issue

> BANQUE DE DÉVELOPPEMENT DE GUINÉE: BEST SOCIO-ECONOMIC IMPACT BANK WEST AFRICA 2018

It remains one of West Africa’s hidden gems – but perhaps not for long. With an abundance of natural resources, Guinea is poised to become a regional economic power of note, leveraging its strategic location and the availability of huge tracts of fertile soil, plenty of water, and a benign climate to kickstart its agroindustry. The country also intends to revitalise its promising fishing sector and extractive industry. Rich in bauxite, gold, diamonds, and many other minerals, Guinea now has a masterplan for its development which is being implemented with the help of multilateral financiers and their domestic counterpart, the

Banque de Développement de Guinée (BDG). The privately-owned bank aims to provide funds for the accelerated development of the country by underwriting major infrastructure projects such as the expansion of the port of Conakry and the building of expressways linking the country’s major urban centres. BDG also initiated a sustained push to increase Guinea’s power generating capacity and, in tandem, upgrade the national grid. In the mining sector, the pillar on which the local economy rests, the bank supports both artisan and large-scale mining operations. As the country’s principal investment bank, BDG

has been assigned a major role in Guinea’s poverty reduction programmes. Its operations, based on well-established global best practices, has enabled the bank to sustain a large social impact and help create an emergent middle class that is set to become the driver of Guinea’s development. The CFI.co judging panel notes that BDG is a key player in all sectors crucial to securing a prosperous future for Guinea: agriculture, infrastructure, mining, and energy. The judges declare Banque de Développement de Guinée winner of the 2018 Best SocioEconomic Impact Bank West Africa Award.

> ISTANBUL PORTFOY: BEST BOUTIQUE FUND MANAGER TURKEY 2018

At Istanbul Portfoy, asset management is all about sharing – and deploying – the knowledge and expertise of the firm’s seasoned professionals. This way, Istanbul Portfoy’s fund managers are able to consistently identify and seize exceptional opportunities within a well-defined and sensible risk profile. Though its fund managers are fiercely independent decisionmakers, Istanbul Portfoy offers a working environment that facilitates collaboration and establishes valuable synergies that create value for all stakeholders. The firm ranks first in Turkey for the management of bespoke portfolios and is the preferred partner of large institutional investors

seeking exposure to the country’s buoyant markets. Istanbul Portfoy currently maintains sixteen hedge and mutual funds, including top-performing high-risk high-return funds that regularly set new industry-wide benchmarks. The firm also teamed up with a highly credible angel investor network of the alumni from the prestigious Bosphorus University in Istanbul through a venture capital fund to help provide seed capital to promising start-ups that pursue breakthroughs in biotech, fintech, artificial intelligence amongst others. Istanbul Portfoy has been recognised for its ability to match investors with selected start-ups that are on the verge of breaking CFI.co | Capital Finance International

out. The firm is the only one in Turkey rallying venture capital and, as such, has created a market from scratch. The CFI.co judging panel agrees that Istanbul Portfoy is one – or a few – steps ahead when it comes to finding opportunities in one of the world’s most dynamic markets. The firm’s research and risk management practices have received ample praise for being spot-on, time and again. Istanbul Portfoy is a true pioneer, charting new territories and – just as importantly – leveraging its in-depth knowledge to extract excellent returns. The judges declare Istanbul Portfoy winner of the 2018 Best Boutique Fund Manager Turkey Award. 89

> KAISERWETTER ENERGY ASSET MANAGEMENT: BEST RENEWABLE ENERGY ASSET MANAGER GERMANY 2018

The management of renewable energy resources equates to the unrelenting pursuit of efficiency. That, in turn, requires the use of new technologies such as the integration and streamlining of processes via the Internetof-Things (IoT), big data analytics, and other innovative ways to maximise performance whilst minimising operating cost. Kaiserwetter Energy Asset Management of Germany manages 28 wind parks and 23 solar power facilities with a combined generating capacity of 470MW. Besides its home market, the company’s footprint extends to Spain, France, and Poland as well. Kaiserwetter has developed a

proprietary algorithm for predictive analytics as part of a big data processing push to bring down both capital and operating expenditures. The resulting data allows customers to implement effective risk mitigation policies and reduce downtime. By combining technical and financial data into a single stream, Kaiserwetter gives its customers access to a cloud-based dashboard that produces an instant overview of their facilities’ performance – from a single turbine to a country-wide series of wind and/or solar parks. Crucially, an integrated data variance model is included to account for meteorological trends and events. This enables operators to

immediately finetune their generating plants to ensure optimal performance under any and all conditions. Last year, the CFI.co judging panel marvelled at the innovations pioneered by Kaiserwetter. As renewables claim an ever larger share of the energy mix, their management becomes more important as well – to operators and investors alike. Kaiserwetter provides both the tools and the solutions that allow wind and solar parks to attain and retain maximum efficiency. The judges are pleased to offer Kaiserwetter Energy Asset Management the 2018 Best Renewable Energy Asset Manager Germany Award.

> AL WIFAQ FINANCE COMPANY: BEST SHARIA-COMPLIANT FINANCIAL SOLUTIONS UAE 2018

A wholly-owned subsidiary of Union National Bank Group (UNB), one of the leading financial services providers in the United Arab Emirates and the wider Middle East, Al Wifaq Finance Company offers a comprehensive range of Sharia-compliant banking products and services to both individual clients and businesses. Eminently customer-centric, Al Wifaq ensures proximity to its account holders via a network of ten branches. The company also maintains its own counters at UNB branches. Al Wifaq has established a solid reputation for excellence and expediency in customer-facing operations. The company implemented a set of streamlined procedures in 90

order to quickly unlock access to its products, speed up decision-making processes, and optimise customer satisfaction. Successive annual surveys show that Al Wifaq account holders feel exceptionally well-served and would gladly recommend the finance company to friends and family. Al Wifaq is also dedicated to empowering small and medium-sized enterprises (SMEs) with a full suite of products tailored to meet the need of businesses as they seek to expand their reach. The finance company also supports start-up companies and families longing to buy their first home. As part of a larger bank group, Al Wifaq has the ability to help its CFI.co | Capital Finance International

clients reach their personal or business goals. The finance company is considered the Islamic banking arm of its parent company. To ensure compliance with Sharia Law, Al Wifaq maintains a supervisory board of prominent Islamic scholars which regularly reviews the company’s products and services. The CFI.co judging panel recognises the growing importance of Islamic finance and the effort of Al Wifaq to design products and implement policies that meet the strict criteria its customers demand. The judges declare Al Wifaq Finance Company winner of the 2018 Best Sharia-Compliant Financial Solutions UAE Award.

Summer 2018 Issue

> AL-MAIDAN DENTAL CLINIC FOR ORAL HEALTH & SERVICES:

BEST HEALTHCARE CORPORATE GOVERNANCE KUWAIT 2018

Creating well over one million smiles, and counting. The Al-Maidan Clinic for Oral Health Services is the largest of its kind in both Kuwait and the wider GCC. Always incorporating the latest developments in oral health, the AlMaidan Clinic ensures that its patients benefit from to most up-to-date treatments anywhere. Its professionals are committed to lifelong learning in order to stay abreast of new techniques and procedures. The clinic was set up in 1987 as Kuwait’s first private dental practice by a small group of dentists who envisioned a facility that offers patients a combination of state-of-theart technology, professional expertise, and the

proverbial service-with-a-smile. That mission has been accomplished: today Al-Maidan Clinic comprises seven branches covering the country’s governorates in addition to a mobile clinic. The clinic’s over seventy dental clinicians and their support staff have established a reputation for personalised care. In order to safeguard the quality of its treatments, Al-Maidan Clinic maintains an in-house dental lab and a full complement of ultramodern medical hardware that allows its dentists and technicians to instantly provide diagnoses and treatment options without the need to outsource procedures. Al-Maidan Clinic maintains a

comprehensive corporate social responsibility programme that revolves around a number of initiatives to provide dental care to vulnerable and disadvantaged people. The clinic also sponsors public service campaigns that promote oral hygiene and the need for regular check-ups. The CFI.co judging panel notes the Al-Maidan Clinic serves a broad demographic and keeps the prices of its rather priceless services highly competitive – a comprehensive range of financing options is available as well. The judges agree to name Al-Maidan Dental Clinic for Oral Health & Services winner of the 2018 Best Healthcare Corporate Governance Kuwait Award.

> AFRICAN OPEN SKY: BEST PAN-AFRICAN AVIATION SERVICES PROVIDER AFRICA 2018

Africa’s largest flight support company goes the proverbial extra mile, and then some, to make sure its customers receive world class services that exceed expectations. African Open Sky (AOS) takes care of all aspects of pre- and post-flight ground handling services, including catering, refuelling, security, maintenance, stowage, warehousing, flight planning, and crew management amongst others. AOS has built a continent-wide network of more than fifty offices in order to deliver optimised services and maintain proximity to its clients. AOS’ large corporate footprint also allows the company to tap into local expertise and ensure ready access to aviation authorities. AOS is fully licensed by aeronautical regulatory entities in all jurisdictions where the company

maintains a presence. To maintain its high levels of service, the company refuses to outsource any of its operations to third-party agencies. Thanks to its unique “go local” approach, African Open Sky has registered exceptionally strong growth. The company fully explores and exploits market synergies, adapting to local circumstance without compromising on the quality of its services. Wherever state, commercial, corporate, or private airline operators need ground services, AOS stands ready to deliver. The CFI.co judging panels commends the Côte d’Ivoire company on it winning formula and wishes to recognise in particular the vision and accomplishments of AOS CEO Max O Cisse whose exemplary leadership has allowed the CFI.co | Capital Finance International

company to soar high. Mr Cisse was instrumental in establishing close cooperative relationships with civil aviation authorities across Africa, thus laying a solid foundation upon which the business has been erected. By refusing to compromise on safety and quality, Mr Cisse transformed AOS into a trusted partner of regulatory agencies. As a result of the confidence AOS inspires, the company is able to secure permits and licenses much quicker than others – and at a much lower cost as well. The judges congratulate the company and its CEO on a double win: African Open Sky is declared winner of the 2018 Best Pan-African Aviation Services Provider Africa Award whilst AOS CEO Max O Cisse is the recipient of the 2018 Best Aviation CEO Africa Award. 91

> TAJ HOTELS: BEST HOSPITALITY CORPORATE GOVERNANCE INDIA 2018

India’s Tata Group has come to represent a global hallmark of quality. The subcontinent’s largest corporate conglomerate, Tata Group is recognised both at home and abroad for its ethical and transparent business practices. The group is considered also a pioneer of sustainability and responsible investing. By putting in place a solid and comprehensive governance framework, Tata Group has mitigated risks and established a reputation for fairness in all its dealings. Part of the Tata Group, Taj Hotels also belongs to a select group of Indian

corporates which have been recognised by the Bombay Stock Exchange (BSE) for their excellence in governance. These A Group companies are selected on the basis of their market capitalisation, liquidity, compliance, and historic performance. Taj Hotels takes corporate governance to the next level by conducting its business involving all stakeholders and maintaining full transparency. Taj Hotels insists that suppliers adhere to the same high standards with respect to human rights, health and safety, gender equality, and corporate social responsibility,

amongst others. Already 67 of the group’s 79 hotels possess the coveted Gold Certification for sustainability and environmental care. By the end of the current year, all hotels are expected to have obtained the certificate. The CFI.co judging panel commends Taj Hotels for pushing the envelope of corporate governance. The effort, now part of the company’s corporate DNA, has made Taj Hotels into India’s premier provider of hospitality services. The judges declare Taj Hotels winner of the 2018 Best Hospitality Corporate Governance India Award.

> ABU DHABI AVIATION: BEST OFFSHORE AVIATION SUPPORT MIDDLE EAST 2018

Abu Dhabi Aviation (ADA) is spreading its wings, entering new markets, and consolidating the leading edge the company enjoys in the Middle East. With a modern fleet of 57 helicopters and 61 fixed wings aeroplanes, ADA provides airlinks to the on- and offshore oil and gas industry in addition to VIP passenger transport, search and rescue, crop spraying, firefighting, and a host of other aerial services. Despite operating in a taxing offshore environment which sees some of its rotary aircraft perform seven take-off and landing cycles per hour, the company maintains a perfect safety record. ADA maintains a staff of nearly 300 expert technicians to execute its comprehensive 92

quality and safety policy framework. Abu Dhabi Aviation is recognised for the excellence of its aircraft servicing department. The company is engaged by a number of large fleet operators in the Middle East for the maintenance of their fixed and rotary wing aircraft. ADA holds quality certifications from the world’s leading regulatory agencies such as the US Federal Aviation Administration and the European Aviation Safety Authority. Thanks to its large, modern, and versatile fleet, ADA is regularly asked to provide humanitarian support. For the past six years the company has dispatched seven helicopters to Jeddah and Mecca during Ramadan and Hajj at CFI.co | Capital Finance International

the request of the Saudi Red Crescent Authority. ADA now eyes the global market and has been hired to support mining operations in Ethiopia, Brazil, Madagascar, Papua New Guinea, and elsewhere. The company is expanding its maintenance services as well. The CFI.co judging panel notes that ADA employs well over 1,000 professionals. By keeping all operations in-house, the company is able to tightly control both the quality of its customer-facing services and the safety and readiness of its fleet. The judges are pleased to declare Abu Dhabi Aviation winner of the 2018 Best Offshore Aviation Support Middle East Award.

Summer 2018 Issue

> HE SAEED MOHAMMED AL TAYER:

LIFETIME ACHIEVEMENT AWARD FOR CONTRIBUTION TO CORPORATE GOVERNANCE MIDDLE EAST 2017

Corporate governance is an endeavour without end, subject to periodic reviews, updates, and enhancements. DEWA’s Managing Director and CEO Saeed Mohammed Al Tayer is only too aware that room for improvement may always be found, necessitating both constant vigilance and a commitment to the pursuit of excellence. Under his guidance, the state-owned DEWA has embraced good governance as a core value – and a strategic objective. DEWA is committed to adopting and implementing the best practices of good corporate governance in all its activities and operations. Today, the utility far exceeds the international standards as defined by the Organisation for Economic Cooperation and

Development (OECD) and other multilateral entities. Adherence to good corporate governance principles is no longer the exclusive domain of publicly-listed companies. Long before it became fashionable and mandatory, Mr Tayer instituted a solid governance framework at DEWA centred on four pillars: accountability, transparency, responsibility, and fair practices. This enabled DEWA to build an exceptionally strong relationship with all stakeholders and established the utility as a trusted partner – and an example for other corporates to follow. Good governance also includes the creation of a corporate culture that encourages and welcomes innovation – one without

organisational silos. DEWA now prides itself, justifiably, on being a horizontally integrated company which acts as a unified team to meet, with considerable aplomb, the challenges of tomorrow. Thus, Mr Tayer has shaped a company that, whilst in an essential legacy business, has become a formidable leader in disruptive technologies, seeking and finding new and exciting ways to stay well ahead of the curve. The CFI.co judging panel wishes to recognise Mr Tayer’s dedication to good – indeed, excellent – corporate governance. The judges feel honoured to offer Saeed Mohammed Al Tayer the 2017 Lifetime Achievement Award for Contribution to Corporate Governance Middle East.

> STEEL WOOD INDUSTRIES: BEST SUSTAINABLE PROCESS INNOVATION UAE 2018

By researching wood sources that can be harvested and used – without cutting a single tree, Steel Wood Industries launched a gamechanging revolutionary product – Steel Wood Density Board (SDB) – a new type of composite wood panel that is set to change the wooden furniture and associated industries in the region. SDB is a highly engineered 100% recycled wooden board having premium quality features by using a constant density gradient, revolutionary internal bonds, elasticity and compressed core creation processes to ensure flawless uniformity. The result is a balanced panel with a premium face, an edge screwholding capacity and very low associated emissions. The company is now set to launch its disruptive Gusolid-PCS (PCS: Precast) line of construction materials which have the

tensile strength of reinforced concrete at a significantly lower specific weight. All Gusolid products are made out of recycled green material and, as such, represent the building blocks of the future. This could produce a 100% recycled building from columns to beams, floorings, ceilings and the like. In addition, a palm tree can generate up to 10kg of fibrous wood leaves per year, for instance. The UAE has more than 50,000,000 palms which produce 500,000 tons of leaves, an abundance of natural sustainable material which can be used and reused to cover the demand for wood. Aside from SDB, Akmam is one of the innovative products which is specifically made from palm leaves. The company founded by a UStrained Lebanese scientist, takes particular pride in manufacturing environmentallyCFI.co | Capital Finance International

friendly products and the flame-inhibitors called Bardan. As part of its corporate social responsibility initiative, Steel Wood Industries actively promotes fire safety awareness in GCC. The CFI.co judging panel agrees that density board manufacturers all too often downplay the risks associated with their products. Steel Wood Industries places safety at the top of its priority list. Having R&D as its starting nuclei, the company is also recognized for its dedication to both quality and innovation. Moreover, Steel Wood Industries is the only wood panel manufacturer in the GCC and the first in the Middle East to put its entire production line on an environmentally-friendly footing. The judges are pleased to name Steel Wood Industries winner of the 2018 Best Sustainable Process Innovation UAE Award. 93

> ASIA PLANTATION CAPITAL: BEST SUSTAINABLE FORESTRY MANAGEMENT COMPANY GLOBAL 2018

Built around a corporate ethos prioritising ESG (environmental, social, and governance) values, Asia Plantation Capital (APC) now claims a prominent spot amongst the world’s top forestry management companies. The company has pioneered innovative sapling cultivation, growth, inoculation, and harvesting techniques which contributed to the optimisation of its plantations’ productivity. APC now also provides forestry management services to third parties leveraging the sustainable practices the company developed and implemented on its own plantations. APC has spun off a number of stand-alone companies that exploit synergies and offer a comprehensive range of products derived from the company’s core forestry

business such as oud oil distilled from agarwood trees and used in fine perfumes and skin care products, and the agarwood itself used in producing incense, bakhour and various health products. APC is also growing bamboo and is establishing a supply chain to provide bio-mass to clean energy plants in Africa and Asia. APC now has sustainable plantations producing Aquilaria, Bamboo and Teak and has become the world’s largest sustainable plantation manager for the production of Oud and Agarwood and is now involved with a major new global project to disrupt the illegal deforestation, still prevalent in South East Asian countries. SAX, the Sustainable Asset Exchange, will only offer legitimately sourced

products with the full provenance, secured in the blockchain, to evidence their origin, quality and supply chain trail. The CFI.co judging panel has followed the progress and achievements of Asia Plantation Capital for a number of years and presented the company with multiple awards. The judges agree that APC has significantly expanded the scope of its business whilst keeping in place the strict environmental, social, and governance safeguards demanded by both its customers and the end consumer. Given APC’s dedication to operational excellence, the judges feel wholly justified in granting Asia Plantation Capital the 2018 Best Sustainable Forestry Management Company Global Award.

> AUKA: BEST MOBILE PAYMENT PLATFORM EUROPE 2018

Nobody doubts that the future of retail banking is in mobile accessibility. Most clients no longer wish to manage their personal finances at local branch offices. Even booting up the desktop computer is often too much of an effort. Traditionalists by nature, retail banks find it hard to keep up with shifting consumer patterns. Mobile banking solutions are layered atop legacy platforms, adapted, and presented as true innovations. Alas, they are not and often feel clunky. Norwegian mobile payment solutions provider Auka built its system from scratch and in such a way that future developments and breakthroughs may be easily bolted on. Auka’s fully scalable mobile banking platform 94

incorporates the latest real-time P2P payment features and allows consumers to pay for purchases instantly without the need for additional POS hardware. The associated crossplatform app allows users to access their chosen merchant’s mini-shop without ever leaving the application’s secure environment. Merchants benefit from a vast range of easily implemented marketing options such as tailoring their online store to suit the client’s preferences and purchase history. Auka’s mobile banking solutions are turnkey systems that dovetail with existing IT systems used by financial services providers. The company’s platform is unique as includes the latest features demanded by savvy customers CFI.co | Capital Finance International

without requiring a full – a complicated and expensive – overhaul of legacy systems. Banks using Auka mobile payment solutions report significant growth of their customer base and increased levels of customer satisfaction thanks to gaining a competitive edge. The CFI.co judging panel notes that Auka has partnered with Google to design a robust cloud platform. The judges agree that the Norwegian company has developed an exceptionally resilient platform that takes mobile banking to the next level – and beyond. The judging panel congratulates Auka with its win of the 2018 Best Mobile Payment Platform Europe Award.

Summer 2018 Issue

> MASTHAVEN BANK: MOST INNOVATIVE DIGITAL RETAIL BANK UK 2018

It sounds so simple, only it isn’t. Online retail banks realise full well that advances in technology may wow customers, but it is the human touch that begets business. The question is how to extract synergies and tangible benefits from digits whilst keeping close to the customer and his or her unique banking needs and expectations. The UK’s Masthaven Bank, on the leading edge of a second wave of disruptor banks seeking to challenge established convention, has put its customers in charge. Surprisingly, Masthaven Bank refrains from deploying complex and often indecipherable algorithms and credit scoring mechanisms to gauge its accountholders. Instead, the bank’s staff is well-trained to treat

each customer as an individual who deserves the benefit of manual underwriting. This way, accountholders are not reduced to an entry on a spreadsheet to be marked according to strict, secretive, and often bewildering rules. Masthaven Bank has designed a comprehensive range of streamlined products that are easy to explain. The result of this approach is a suite of premier financial products that derive their sophistication from simplicity rather than complexity. Masthaven Bank is thus able to offer its savers a number of flexible account options that keeps the customer in control. The bank’s tailored savings bonds have consistently ranked near the top of Best Buy tables. Remarkably for an online-only bank, the

average age of Masthaven Bank’s savers hover around sixty. Customers appreciate the ease with which the bank may be approached – there is no labyrinth of automated message to navigate: callers get connected to a knowledgeable agent each and every time. The CFI.co judging panel notes that Masthaven Bank also offers second mortgages, bridge financing, and purpose-designed credit lines for small and medium-sized house builders. The judges are particularly pleased to note that Masthaven Bank has redefined the online-only banking by rescuing – and celebrating – the human dimension. The judges agree to declare Masthaven Bank winner of the 2018 Most Innovative Digital Retail Bank UK Award.

> ASSUPOL: BEST LIFE ASSURER SOUTHERN AFRICA 2018

For more than a century, South African life insurer Assupol has been an agent of change. The company continues to challenge the market, leading the industry towards improved sustainability and social inclusion. Assupol has set up a number of unique partnerships to open the insurance industry’s tightly regulated value chain to those yet unable to meet the stringent requirements. To that end, Assupol last year agreed to appoint 44 women university graduates with degrees in finance to its staff. The initiative, unique in both size and scope, is the result of a cooperative agreement signed with Omama Be Sizwe (Mother of the Nation) – an organisation with deep societal roots owned by black women. The new hires will be trained as financial advisers. In time, Assupol hopes to

open new distribution channels for its products this way, and broaden still further its client base. Assupol has been repeatedly recognised as one of South Africa’s best employers. Global business consultancy Deloitte granted the insurer its platinum seal of approval in the best company to work for category. Assupol is a favourite of customers as well: a high-performance insurer by nature and tradition, the company has deployed both technology and human expertise to offer a range of consistently superior products delivered efficiently and with full transparency. Assupol is especially known for significantly raising the benchmark of processing times for insurance claims. Its lightning-fast payout routine has received wide acclaim and CFI.co | Capital Finance International

thoroughly disrupted industry practices. It also helps bereaved families in their time of need. Amongst South Africa’s life insurers, Assupol boasts one of the lowest incidences of unclaimed benefits. The company maintains a dedicated department to identify and locate beneficiaries of unclaimed insurance pay-outs. The CFI.co judging panel has followed Assupol’s corporate trajectory for a number of years and is thus not at all surprised to note that the company continues to produce strong results: last year, Assupol saw its new business increase by an annual average of 25% over the past five years and in 2017 registered a 26.8% jump in operating profits. The judges congratulate Assupol on its solid achievements and its win of the 2018 Best Life Assurer Southern Africa Award. 95

> GHANA INVESTMENT PROMOTION CENTRE (GIPC): BEST INVESTMENT PROMOTION AGENCY AFRICA 2018

Ghana is open for business – big business. The country is actively looking for partners to help underwrite a number of megaprojects and has created a regulatory environment to match. For starters, Ghana aims to become the hub and consequently the breadbasket of West Africa. The country has over eight million hectares of fertile land ready for the plough. A pilot programme involving circa 200,000 local farmers has already been launched. The initiative and others such as the “One Village One Dam” and “One district One factory” aim to increase productivity and create tens of thousands of new jobs in the food processing industry. The Ghana Investment Promotion

Centre (GIPC) acts as a one-stop venue for investors interested in taking a stake in the country’s promising future. As one of the most stable countries in the region, Ghana ranks at or near the top on a number of crucially important criteria such as governance, the rule of law, press freedom, and safety. It is also seen as one of the fastest growing countries in the world in 2017 with a GDP growth rate of 8.5%, the pearl of West Africa is now going global with a sustained campaign to attract foreign direct investment by offering unparalleled conditions and opportunities. GIPC helps the country to realise its full potential by structuring large projects in a transparent way that appeals to investors.

The leadership of GIPC is, in fact, now headed by a professional with an investment banking background. Moving from aid to trade, Ghana has already achieved impressive results. Last year, its economy barrelled ahead by 8.5% - easily outpacing all other large markets in Africa. The CFI.co judging panel agrees that Ghana is now part of the exciting New World of African countries willing to cash in on their demographic dividend and shaping a business environment that empowers rather than restricts investors. GIPC is key to unlocking that exciting world. The judges are pleased to offer Ghana Investment Promotion Centre the 2018 Best Investment Promotion Agency Africa Award.

> INFRACREDIT: MOST INNOVATIVE INFRASTRUCTURE FINANCE SUB-SAHARAN AFRICA 2018

By some estimates, Nigeria requires US$3 trillion to finance its infrastructure deficit over the next 30 years. Others estimate that to bridge the current infrastructure gap and increase core infrastructure stock, Nigeria needs an investment of US$127 billion over the next 5 years translating to an average of US$25 billion per annum. Whatever the size of the deficit, fact remains that Africa’s largest economy is being held back by an absent or inadequate infrastructure. To address the most pressing needs of Nigeria-s core infrastructure requires investments of at least $127bn over the next five years. InfraCredit aims to help with that. The firm provides guarantees in local currency in order to help raise the quality of debt issued to underwrite larger infrastructure assets in the 96

country. Thus, InfraCredit bridges a gap left by Nigeria’s commercial banks which are unable to meet the demand for long-term capital. InfraCredit sees an opportunity to significantly deepen Nigeria’s nascent domestic capital market by attracting investment from entities that take the long view such as pension funds and insurance companies. The firm has developed a number of innovative products towards this end. Earlier this year, InfraCredit successfully completed its first-ever guaranteed bond transaction – a $28 million fixed rate bond due in 2027, issued by a company that designs, builds, and operates off-grid power-generating facilities. The Viathan Bond is also the first longterm corporate infrastructure debt instrument issued on the domestic capital market. Sixteen CFI.co | Capital Finance International

institutional investors, including twelve pension funds, subscribed to the bond. The CFI.co judging panel notes that InfraCredit boasts a triple-A credit rating on the local market. The firm was set up by the Nigeria Sovereign Investment Authority in close collaboration with GuarantCo – part of the Private Infrastructure Development Group (PIDG). In particular, InfraCredit seeks to offer solid investment opportunities to the country’s pension funds which, thanks to new legislation, are quickly becoming a major component of the domestic capital market. The judges recognise the supreme importance of financial engineering when it comes to unlocking funds for long-term development and agree to grant InfraCredit the 2018 Most Innovative Infrastructure Finance Sub-Saharan Africa Award.

Summer 2018 Issue

> PROVINCIA FONDOS: BEST FIXED INCOME FUND MANAGER ARGENTINA 2018

In Argentina’s often hectic world of finance, Banco de la Provincia de Buenos Aires stands out as one of the few constants – a reference point of the financial system and the oldest bank in Spanish-speaking Latin America, founded in 1822. Interestingly, Banco Provincia (as the venerable institution is known) was also the first private business set up in Argentina. With more than 420 branch offices in the Buenos Aires province, Banco Provincia maintains a deep presence in the largest state of the country that concentrates more than 30% of the economic activity and population. The bank, through its subsidiaries controlled by the Grupo Provincia, develops the most extensive offer of insurance and financial services to the community. Provincia Fondos, the bank´s fund

manager, benefits from the large footprint – unmatched by any of its competitors. Managed by professionals who have honed their skills in, arguably, Latin America’s most dynamic market, Provincia Fondos has established a strong reputation for protecting – and growing – its clients financial assets even during economic challenging times. As such, Provincia Fondos is considered a valuable and dependable anchor, particularly for small investors. The fund managers registered a significant growth in assets under management thanks, amongst others, to its exceptional performance and a very highly reputable team. Provincia Fondos maintains a comprehensive range of savings and investment products and allows investors to assemble a

balanced portfolio carefully tailored to suit their individual tolerance to risk. Investors may manage their fund online and benefit from a wide array of services and information available on Provincia Fondo’s website. The firm’s fixed income funds have been a long-time favourite amongst savers. Provincia Fondos also features a number of mutual funds that consistently return benchmark-setting results. The CFI.co judging panel is aware that Provincia Fondos, as a subsidiary of Argentina’s most prestigious bank, carries within its corporate DNA the mark of operational excellence and resilience. The judges are pleased to announce Provincia Fondos as winner of the 2018 Best Fixed Income Fund Manager Argentina Award.

> XM.COM: BEST MARKET RESEARCH & EDUCATION GLOBAL 2018

Success in trading comes from education and the experience that follows. Therefore, traders who value their money and aim to carve out a better future need to continually develop and hone their skills. UK-based XM.com maintains a staff of highly trained expert traders who are eager to share their knowledge of the forex market with both newbie traders and more experienced investors who long to reach the next level. The firm offers a wide array of courses and seminars that cater to traders of all skill levels. The company’s educational staff has lent its

knowledge to professionals from world class financial services providers such as global banks and brokerages. XM.com has designed a number of hands-on courses that emphasize practicalities, warn of common pitfalls, and offer valuable insights into the tricks of the trade. The courses allow traders to detect the early warning signs of major and minor market swings, allowing them ample time to optimise their exposure and maximise benefit. XM.com is also recognised for the exceptional performance and high quality output of its research department. Traders have access CFI.co | Capital Finance International

to a veritable wealth of information, organised in such a way that hard data is always just a few mouse clicks away. The firm regularly publishes overviews of broader market trends and special reports on specific trade opportunities that contain valuable nuggets of information for savvy and attentive traders. The CFI.co judging panel is no stranger to XM.com. The judges have followed the firm’s progress and dedication to the training of its traders. The judging panel is pleased to offer XM.com the 2018 Best Market Research & Education Global Award. 97

> FIDUOCCIDENTE: BEST ASSET MANAGEMENT TEAM COLOMBIA 2018

Colombian asset manager Fiduoccidente has surprised the market with a range of products segmented by investor class. The firm’s line-up has been split to serve the specific requirements of each market: Corporate and Institutional, Individual, Government and Enterprises. This way, Fiduoccidente is able to improve its client proximity and offer differentiated products and services that dovetail with the needs and aspirations of each market segment. Last year, a mutual fund was launched that aims to expose investors to the buoyant markets of the United States and a

select number of Latin American economies. Fiduoccidente entrusted the management of this new fund to the renowned Chilean asset management powerhouse LarrainVial. With clients who are comfortable with moderate risk exposure in mind, the firm launched the Fondo de Inversión Colectiva Renta Fija Dinámica fund, a dynamic fixed-income mutual fund, and is working on the launch of its first family of mutual funds backed by real estate. In order to perfect the management of client relationships, four dedicated divisions were set up to precisely gauge the needs of

each investor class and develop matching products. Additionally, the firm has made significant investments in developing and implementing digital initiatives to generate a positive impact on the customer experience The CFI.co judging panel is pleased to note that Fiduoccidente continues to move from strength to strength. The firm’s new approach to the asset management business was exceptionally well received by investors and has already paid off handsomely. The judges agree to name Fiduoccidente, a repeat winner, recipient of the 2018 Best Asset Management Team Colombia Award.

> WING (CAMBODIA) SPECIALISED BANK: BEST SOCIAL IMPACT BANK CAMBODIA 2018

The smartphone, ubiquitous in all corners of the world, is proving a powerful tool for the promotion of financial inclusion. Even those only armed with not-so-smart mobile phones can easily access a whole range of banking services previously unavailable to all but the wealthiest people. As such, the mobile phone helps level – and democratise – the playing field: the device ends the marginalisation of people of modest means who may now safely, securely, and cheaply manage their money. In Cambodia, Wing Specialised Bank has tapped into the vast universe of unbanked and under-banked people with a series of 98

purpose-designed products aimed at meeting the requirements of customers not served by the country’s large commercial banks. Launched in 2009, Wing Specialised Bank started its corporate life as a mobile phone-based money transfer service. Soon the bank expanded its suite of products to include bill payments, and disbursement and payroll solutions for small and medium-sized enterprises (SMEs). The bank also operates a vast nationwide network of over 5,000 Wing Cash Xpress outlets where its clients may complete transactions in person. Wing Specialised Bank is well on its way to fulfilling its corporate CFI.co | Capital Finance International

mission to provide every Cambodian with convenient access to formal financial services. The bank has also partnered with financial services providers in neighbouring countries in order to serve the large Cambodian diaspora. The CFI.co judging panels commends Wing Specialised Bank on its achievements. The bank has remained true to its founding principles and is recognised for the excellence of its services – and the speed and unfailing precision with which transactions are processed. The judges agree to name Wing (Cambodia) Specialised Bank winner of the 2018 Best Social Impact Bank Cambodia Award.

Summer 2018 Issue

> eDreams ODIGEO: BEST ONLINE TRAVEL PARTNER GLOBAL 2018

Deploying and showcasing the power of machine-based learning (MBL) technology, eDreams ODIGEO has managed to increase flight bookings by almost 50% last year, offering travellers a highly personalised experience based on a real-time predictive analysis of aggregated and anonymised data which presents a vast range of options and add-ons. Thus visitors to eDreams ODIGEO's websites and apps are welcomed to an online environment which is perfectly tailored to their personal preferences. The online travel company, a recognised pioneer of its industry, employs a crack team of some 400 software engineers to design

and finetune the eDreams ODIGEO platform and ensure it preserves a leading edge. The gargantuan effort pays off: last year the company saw all its main brands register solid growth with a 10% increase in the sale of ancillary products such as travel insurance, priority boarding, and preferred seating arrangements. eDreams ODIGEO’s management developed its own approach to IT by seconding software engineers to all of the organisation’s departments in order to gauge needs, identify bottlenecks, and offer solutions. Thus, the entire corporate structure of eDreams ODIGEO benefits from MBL and other innovative technologies

that not only offer customers a personalised experience but also streamline internal processes. The CFI.co judging panel has followed eDreams ODIGEO for a number of years. The company has consistently sought to leverage the power of technology to improve its operational efficiency and offer a superior product to travellers – one based on a holistic approach that includes attention to even the most minute details and leaves nothing to chance. The judges are unanimous in their decision to declare eDreams ODIGEO winner of the 2018 Best online Travel Partner Global Award.

> TANZANIA WOMEN’S BANK (TWB): BEST SOCIAL IMPACT BANK TANZANIA 2018

TANZANIA WOMENS BANK PLC

Benki Pekee kwa Wote

Empowering women entrepreneurs across the country, Tanzania Women’s Bank (TWB), set up in 2007 and open for business since 2009, aims to simplify the provision of credit and knowhow to micro, small, and medium-sized businesses whose needs are often ignored by commercial banks. Female entrepreneurs face a number of hurdles that conspire against success. Studies have found that banks usually refuse to engage with women business owners or, if they do, charge exorbitant interest rates and demand significant collateral for even small loans. Deprived of working capital, an untold number

of promising small businesses fail to take off or remain well below their potential. Closely enmeshed with the communities in which it operates, Tanzania Women’s Bank is able to lend a helping hand by knowing its customers. The bank’s staff seeks to establish a true partnership with clients in order to properly understand their needs, gauge the potential of their businesses, and offer advice – and credit. TWB also maintains a full suite of current and savings accounts tailored to the requirements and demands of each demographic. The bank offers, for example, accounts that help CFI.co | Capital Finance International

minors gain financial literacy skills and women wishing to secure their family’s future. The CFI.co judging panel has followed the trajectory of TWB for a number of years and has noted the bank’s achievements in helping women-led businesses break through the glass ceiling. As an instrument of social and economic empowerment, TWB has a significant impact on Tanzania’s national development. Moreover, the bank enables women to benefit from the country’s buoyant economy and, by doing so, helps redress social injustice. The judging panel declares Tanzania Women’s Bank winner of the 2018 Best Social Impact Bank Tanzania Award. 99

> CREDIT BANK OF MOSCOW (CBM): BEST BANKING CORPORATE GOVERNANCE RUSSIA 2018

Declared a “systemically important bank” by Russia’s central bank in 2017, and one of the country’s largest lenders, Credit Bank of Moscow (CBM) in the early 2010s embarked on an remarkable growth trajectory, gaining considerable momentum on the back of two distinct qualities: the ability to quickly adapt to changing market conditions and the determination to adhere to sensible, if not refreshingly conservative, standards of corporate governance. Interestingly, the bank’s go-by-the-book approach not only strengthened to bottom line but also allowed CBM to increase its market share and accumulate a first-rate loan portfolio. CBM has been particularly successful in attracting deposits from big corporate clients. Widely recognised as a safe haven in times of trouble, CBM has grown quickly by leveraging its reputation – one backed up by solid numbers and the policies

that underpin them. Having stringent internal policies and excellent reputation among the international financial community, the Bank has been extremely successful in raising international funding, having gained leading positions among CIS financial institutions on international debt capital markets in 2017 and 2018. Set up in 1992, CBM has prioritised corporate governance from its earliest corporate beginnings, proactively engaging all stakeholders – shareholders, customers, staff, and regulatory entities. The bank improves its corporate governance system on an ongoing basis in line with legal changes and best practices, both Russian and international ones. The bank’s internal and external operations, processes, and dealings benefit from full transparency. CBM’s ten-seat supervisory board includes five independent members and two who represent

the interests of small shareholders. CBM has received strong support, and assistance, from large multilateral financial institutions for the design, implementation, and monitoring of its corporate governance code. The bank also invited these institutions to appoint seasoned experts to a seat on its supervisory board. CBM’s Supervisory Board has also appointed a dedicated high profile professional to advise particularly on corporate governance development and further improvement. The CFI.co judging panel agrees that Credit Bank of Moscow represents a hallmark of quality in corporate governance. The bank’s dedication to openness and excellence in both operations and governance has built a financial powerhouse. The judges are pleased to declare Credit Bank of Moscow winner of the 2018 Best Banking Corporate Governance Russia Award.

> VOLTA RIVER AUTHORITY: BEST ESG POWER PRODUCER WEST AFRICA 2018

The first in Sub-Saharan Africa to meet the most important of the eight Millennium Development Goals (MDGs) – cutting the poverty rate in half – Ghana has now moved into the middle income category, thanks to a buoyant economy that boasts consistently strong growth rates. One of West Africa’s economic power houses, Ghana’s growth is fueled by the electric power generated by the Volta River Authority(VRA) – the country’s main supplier of Electricity since 1961. The VRA also exports power to neighboring Burkina Faso, Togo/Benin and has power exchange arrangements with Cote D’voire. The company has established a solid reputation for operational efficiency and 100

is considered a key component of Ghana’s development drive. The VRA is a constituent part of the West African Power Pool, a regional initiative that aims to interconnect national grids in order to facilitate the cross-border trade in electricity. In addition to its two large hydroelectric power stations that straddle the mighty Volta River, the Authority operates a number of thermal plants as well as a 2.5MW Solar PV Plant. The Volta River Authority injects around 2,600MW into the country’s grid and has unveiled plants to prioritize the construction of facilities that use renewable energy. VRA will add an additional 12MW of Solar Power to its portfolio by the end of 2019. The goal is to have 200MW of solar capacity CFI.co | Capital Finance International

installed by 2022 and alongside 80MW of wind power. The VRA has also lent its expertise to power generators throughout the region in order to improve operations and increase efficiency. The company is recognized for its professionalism and dedication to operational excellence. VRA was an early adopter of ESG(environmental, social and governance) standards and has used sustainability principles to perfect its operations. The CFI.co judging panel agrees that VRA has built an enviable reputation as a driver of sustainable development in Ghana and beyond. The judges declare the Volta River Authority winner of the 2018 Best ESG Power Producer West Africa Award.

Summer 2018 Issue

> MOLDOVA AGROINDBANK: BEST SOCIAL IMPACT BANK MOLDOVA 2018

A pillar of its country’s financial industry, Moldova Agroindbank (MAIB) earlier this year claimed the top spot in the domestic Bank Performance Raking as compiled by the Expert group – an independent trend watcher. MAIB boasted the largest market share by loan portfolio and deposits, and extracted the highest return on capital. Set up in 1991, the same year Moldova gained its independence, MAIB maintains a nationwide corporate footprint with over a hundred branch offices and more than sixty agencies. The bank is particularly well represented in the small and medium-sized enterprise (SME) sector. MAIB offers a full

suite of products designed to serve the specific needs of small businesses. Since 1994, the bank has received support for its SME products from a number of multilateral lenders. MAIB also introduced microcredit facilities for sole traders. Moldova Agroindbank is determined to lead its peers in technology, governance, and operational excellence – and thus help promote the country’s insertion into the wider European financial sector. MAIB keeps in close touch with Moldova’s large diaspora and has streamlined the procedures for receiving and paying out remittances from abroad. From its earliest

corporate beginnings, MAIB has recognised the importance of corporate social responsibility. It maintains a large number of initiatives aimed at helping disadvantaged Moldovan families, particularly with education and financial literacy. The CFI.co judging panel notes that MAIB is not only Moldova’s largest bank, but also an engine of economic growth and national development. More than just a financial services provider, MAIB is structured for maximum social impact. The judges have no hesitation in granting Moldova Agroindbank, a repeat winner who does not rest on his laurels, the 2018 Best Social Impact Bank Moldova Award.

> METITO: BEST WATER CLEANTECH PPP EMERGING MARKETS 2018

Pursuing close partnership with multilateral financiers, development agencies, and non-governmental organisations (NGOs), Metito helps improve access to clean and affordable water across the world – a key Sustainable Development Goal. With over 60 years’ in the water and wastewater industry, Metito focuses primarily on emerging markets, where demand is greatest. The company leverages expertise gained from its global operations to carefully and sustainably manage local resources. Metito makes considerable efforts to train local engineers and workers through skills development programmes. Metito is more than just a corporate entity; it is a strong advocate for water security and the sustainable management of scarce resources. In the GCC member states

and elsewhere, the company has supported desalination, wastewater recycling and reuse projects and other initiatives as viable, costeffective and dependable alternative sources of high-quality potable water. In Saudi Arabia’s King Abdullah Economic City, a brand-new business hub and port, Metito was awarded the contract to build a major desalination plant that uses the reverseosmosis technology and is partially powered by solar energy. This project marks another milestone in the Kingdom’s path to realising its 2030 Vision. In Rwanda, Metito was chosen as the preferred partner to develop and operate a $75m project to supply Kigali, the booming capital, with a more reliable supply of drinking

CFI.co | Capital Finance International

water. Metito has now established a whollyowned subsidiary – Kigali Water – to manage this concession. This is the first of its kind project in Sub-Saharan Africa. Metito’s water management solutions cover three distinct aspects of the business: engineering, chemicals, and investment, development and management of water assets and utilities. If Sustainable Development Goal 6 – Universal Access to Safe Drinking Water – is to be achieved, the world needs many more projects such as Kigali in developing countries. The CFI.co judging panel notes that Metito has proven its technical competence and vison to help deliver Goal 6 and is happy to declare Metito winner of the 2018 Best Water CleanTech PPP Emerging Markets Award.

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> MONTPENSIER FINANCE: BEST MULTI-ASSET FUND MANAGER FRANCE 2018

Set up in 2004 and today one of France's leading independent investment managing companies, Montpensier Finance has gained recognition — and acclaim — for bringing together a peerless group of seasoned asset management professionals. The firm has established an enviable track record by deploying analytical and decision-making processes developed and perfected in-house. ESG problematics (Environmental, Social and Governance) are well incorporated in the process to determine stock selection. Montpensier Finance is headed by a pioneering investment manager who introduced

the multi-management concept to France in 1988 — long before the modality became `de rigueur'. Multi-manager investment products benefit from the diversification of funds spread across different asset classes and markets — each segment entrusted to specialized fund managers — trying to maximize returns. The firm also developed the Montpensier Market Scan (MMS) which enables multi-asset and flexible management teams to rely on the four major drivers of asset allocation: macroeconomic momentum, monetary policy dynamics, market valuation, and market dynamics. Montpensier Finance has been

particularly successful in its mission to outperform the overall market over longer periods. The firm tops €2bn in assets under management and maintains a number of funds tapping into Eurozone, Europe-wide, and global markets and split according to different models adjusted for optimum return in varying categories of risk tolerance. The CFI.co judging panel notes that Montpensier Finance is a signatory to the United Nations Principles for Responsible Investment (UNPRI). The judges are unanimous in their decision to grant Montpensier Finance the 2018 Best Multi-Asset Fund Manager France Award.

> PARK STREET NORDICOM: BEST REAL ESTATE CORPORATE GOVERNANCE DENMARK 2018

A partner of choice to investors seeking to optimise their exposure to the buoyant Nordic real estate markets, Park Street Nordicom of Denmark offers a level of in-house expertise and professional dedication to excellence recognised throughout the business. For close to thirty years, the publicly-listed company has pushed the envelope on operational transparency in order to provide full disclosure to all stakeholders. As a result, Park Street Nordicom has gained the trust of investors and is able to navigate without undue stress the various cycles of the property market. The company’s portfolio comprises 102

sixty properties with an aggregate floorspace in excess of 250,000 square metres. Park Street Nordicom maintains an occupancy rate north of 90% and has a roster of more than 400 carefully selected tenants. Its properties are rented out to some of Denmark’s most iconic businesses and organisations, ensuring a robust and dependable cashflow. Park Street Nordicom squarely aims to be the best in its business and realises that excellence in corporate governance is key to meeting that objective. The company creates value through simplicity: short open lines of communication, dynamic operational CFI.co | Capital Finance International

systems that quickly adjust to changing market conditions, and comprehensive yet streamlined reporting procedures that ensure all stakeholders have full access to all information at all times. The CFI.co judging panel commends Park Street Nordicom on its almost disruptive approach to real estate investing. The company is present in the office, retail, and residential segments of the markets and has developed a number of shared-spaces initiatives as well. The judges are pleased to offer Park Street Nordicom the 2018 Best Real Estate Corporate Governance Denmark Award.

Summer 2018 Issue

> CHINA LITERATURE: BEST ONLINE LITERATURE PLATFORM EAST ASIA 2018 阅文集团YUX素材中心集团标准标识文档 | 阅文集团

标准状态

中文状态

Chinese readers have embraced the digital book, though not in quite the same way as booklovers elsewhere have. Instead of a solitary individual experience, readers in China look for a community. As they progress through a book, often delivered in instalments, Chinese readers will want to engage with each other, and with writers too; swapping ideas, examining plot lines, expressing feelings, and suggesting improvements – all in real-time. That requires a hefty dose of technology. China Literature, a subsidiary of gaming and social media giant Tencent, offers readers the holistic experience they crave on a high-tech platform that is without equal. China

Literature has an online catalogue of almost 10 million works distributed via the company’s two principal apps – QQ Reading and Qidian. These apps are not merely e-readers with a few added bells and whistles. Users of QQ Reading can, for example, send micropayments to authors. By carefully analysing online reading trends, China Literature is able to finetune its title lists and immediately respond to changes in demand. The company also intends to turn some of its best-selling books into featurelength films, television series, or games. Online publishing is big business in China, registering a 20% average annual growth since 2012. Book platforms such as those deployed by China

Literature help new authors find readers and hone their skills by directly engaging with the reading public. The CFI.co judging panel notes that the vast body of literature offered by China Literature is exceptionally well organised and divided over more than 200 different categories. With a few taps and swipes readers may easily access the full depth of the catalogue and find the exact book they are looking for. The judges are thrilled that the company now plans to offer its services outside China as well. The judging panel is pleased to declare China Literature winner of the 2018 Best Online Literature Platform East Asia Award.

> IMAGE NATION ABU DHABI: OUTSTANDING CONTRIBUTION TO REGIONAL MEDIA UAE 2018

*用户体验设计部YUX整理制作

Founded in 2007, Image Nation Abu Dhabi has grown into the leading film and media company of the Middle East. The company spearheads a new growth industry and, according to market watchers, is driving nothing less than a media revolution in the Arab world. The company has accumulated an impressive portfolio of major feature film productions including The Help (2011), Men in Black 3 (2012), He Named Me Malala (2014), and Roman J. Isreal, Esq. (2017). Image Nation is a forward-looking progressive media business that prioritises and supports artistic creativity. The company has focussed on nurturing local and regional talent – not only actors but also script writers, media technicians, and production specialists.

Image Nation is, in fact, credited with shaping an entire new and competitive industry which now offers exciting opportunities to both investors and professionals. Image Nation has also been recognised – and engaged – as a key media partner by Saudi Arabia which considers the company the only one in the region that operates to the high standards demanded. As it seeks to expand throughout the region, Image Nation deploys its successful corporate formula to tap into broader markets. The company caused a veritable media sensation with its 18-part legal drama series Qalb Al Adala (Justice), which follows an Abu Dhabi hotshot lawyer as she works cases based on reallife court proceedings. Image Nation joined local talent with leading Hollywood CFI.co | Capital Finance International

producers and screenwriters to create Justice, which received near universal praise as a prime example of what cross-cultural productions can achieve. The CFI.co judging panel has followed the trajectory of Image Nation Abu Dhabi for a number of years and agrees that the company has successfully placed the Arab World’s media industry onto a higher plane from where it may well become a global player before long. The judges also note that Image Nation has accomplished this by pursuing close cooperation and partnerships with the industry’s other main players. The judging panel declares Image Nation Abu Dhabi winner of the 2018 Outstanding Contribution to Regional Media UAE Award. 103

> TILNEY: BEST INVESTMENT ADVISORY TEAM UNITED KINGDOM 2018

Investment advisory is first and foremost a people business in which expert financial planners and investment managers work as a tight team to help customers attain their goals. Based in Mayfair, London, more than 300 seasoned professionals of Tilney manage over £20bn in assets on their clients’ behalf. The firm, founded in 1836 in Liverpool, is one of the oldest of its kind and fields a team of some 220 financial planners and 80 investment managers. With an exceptionally rich heritage, Tilney attracts the best talents from an industry renowned for its fierce competition. The formula that explains the firm’s

longevity and continued success is a surprisingly simple one: to offer a high-quality product at a fair price. Applied consistently, the approach – as down-to-earth as it is sophisticated – pays off for investors and managers alike. Internally, Tilney is structured as an inverted pyramid whereby the entire team works in close cooperation and harmony to support the frontline advisers in delivering the very best service. This ensures that each investor enjoys the full backing of the firm’s professionals, its vast experience, and the valuable insights which make each individual portfolio special. Tilney maintains a comprehensive

range of products and services that they expertly tailor to meet the specific needs of clients thus ensuring their financial goals are, at all times, being pursued diligently. That´s how the company realises the optimum return for its clients: by putting their resources to work to maximum effect. The CFI.co judging panel tips its collective hat to Tilney in recognition of the company’s impressive track record, dedication to excellence, and consistently superior performance. The judges are honoured to offer Tilney the 2018 Best Investment Advisory Team - United Kingdom Award.

> CCL SECURE: MOST INNOVATIVE BANKNOTE TECHNOLOGY GLOBAL 2018

The world’s largest manufacturer, by far, of polymer banknote substrate, CCL Secure has lifted paper money onto a high-tech pane. The company’s “plastic money” – the real thing as opposed to wallet-sized cards – is virtually indestructible and now incorporates a number of new security features that allow for the instant identification of individual banknotes to ascertain authenticity. CCL's Clarity™C film technology provides each note with a unique fingerprint, raising the bar for counterfeiters to a virtually insurmountable height. By demonstrating its willingness to share Clarity™C with other substrate suppliers, CCL Secure has ensured that its technology became the industry’s standard.

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The company argues that its innovative, if not revolutionary, approach to banknote security marks a paradigm shift that stands to benefit the entire industry. Clarity™C imposes no additional costs on customers and is now widely available thanks to its open architecture. CCL Secure provides 90 out of every 100 polymer banknotes globally. The company maintains three production facilities and five production lines in different parts of the world in addition to a dedicated research and development department in Australia and a state-of-the-art forensic laboratory in the UK. CCL Secure has manufactured well over fiftyfive banknotes which circulate in 24 countries. CFI.co | Capital Finance International

Each year, the company introduces five or more new denomination designs which enter into production and circulation. The CFI.co judging panel agrees that polymer banknotes – resistant to wear and tear, inherently secure, and exceptionally userfriendly – are the future. Polymer banknotes also represent a growth industry. The move away from paper money is gathering momentum with most Central Banks only now realising the enormous cost savings to be had from lower replacement rates and tamper-proof security features. The judges are pleased to offer CCL Secure, a repeat winner, the 2018 Most Innovative Banknote Technology Global Award.

Summer 2018 Issue

> CREDIT BANK: BEST COMMERCIAL BANK GOVERNANCE TEAM KENYA 2018

Helping microbusinesses grow, prosper, and reach the next level up by becoming sustainable small and medium-sized enterprises (SMEs), Kenya’s Credit Bank seeks to effectively underwrite the country’s economic future. Small business are not just an engine of growth; the sector is also where most new jobs are created. Usually fiercely competitive, the SME universe shapes the next generation of business leaders. Credit Bank looks at much more than just spreadsheets. The bank never loses sight of its corporate reason for being: furthering financial inclusion and offering structured solutions to enterprising Kenyans whose drive and savvy are unmatched by capital. Thus, Credit Bank is particularly keen to help SMEs vie for contracts, put in bids, and seize opportunity.

The bank helps small business owners establish sound operational practices and maintain good corporate governance no matter the scale of the enterprise. The bank’s operations and policies are based on a corporate governance framework that ensures the business adheres to international best practices. A board of directors sees to it that integrity, accountability, and transparency are maintained at all times throughout the organisation. Credit Bank works as a – moneyed – partner alongside entrepreneurs in a collaborative manner, dispensing valuable insights into business practices, regulation, and operational procedures. To that end, Credit Bank maintains a staff of experienced

professionals whose deep knowledge of local conditions is put at the disposal of customers. Credit Bank pursues a humane corporate policy that prioritises gender balance and promotes simple, yet crucially important, aspects such as happiness. That is, after all, what humans work for. The CFI.co judging panel admires Credit Bank’s approach to providing financial services to SMEs and customers who may not yet be all that familiar with banks. Its insistence on lowering the threshold for customers has brought in significant new business and broadened the bank’s client base. The judges declare Credit Bank winner of the 2018 Best Commercial Bank Governance Team Kenya Award.

> AZIZI BANK: BEST DIGITAL BANK AFGHANISTAN 2018

Afghanistan’s largest financial services provider, Azizi Bank has added to its already considerable momentum by incorporating the latest fintech developments into its corporate and client-facing processes, and expanding its global reach. The bank is the preferred partner of diplomatic missions, government entities, and development agencies. It is also the country’s largest commercial bank. Azizi Bank has also broadened and deepened its initiatives to promote financial inclusion and literacy with a number of products and services aimed specifically at people still outside the regulated banking system. Azizi Bank’s ground-breaking ‘door-step’ banking programme introduces financial services to

isolated rural communities previously ignored by the industry. The bank has signed up to a large-scale government programme, run in conjunction with the private sector, to further financial inclusion as an effective tool to encourage rural development. Azizi Bank has deployed the full power of internet and mobile banking to further its services to existing customers and bring new ones aboard. Thanks to its user-friendly deviceindependent platform, Azizi Bank has managed to pull ahead of the competition and consolidate its leading position. Afghanistan’s banking sector, barely fifteen years old, has recognised the opportunities available in a country of some 32 CFI.co | Capital Finance International

million inhabitants of whom, at present, not even 10% have access to financial services. Azizi Bank is now considered the country’s most socially-aware bank and has helped a large and growing number of Afghans overcome their initial reluctance to conduct their financial affairs through banks. As such, Azizi Bank has helped establish a paradigm shift in the popular attitude towards the entire banking sector. The CFI.co judging panel notes Azizi Bank’s exceptionally smart use of smart technology to maintain its operational excellence whilst at the same time broaden the bank’s client base. The judges declare Azizi Bank winner of the 2018 Best Digital Bank Afghanistan Award. 105

> BOXX GLOBAL EXPAT SOLUTIONS: BEST MOBILITY VALUE CREATION SERVICES EUROPE 2018

Helping corporates manage global employee mobility, Boxx Global Expat Solutions has developed a new and holistic approach that moves away from single product services – addressing only one or, at most, a few of the requirements – to a end-to-end and everything-in-between model that leaves no detail to chance. This way, Boxx Global Expat Solutions reinvented the expat services business and managed to become the largest of its kind in Europe. The company helps its customers obtain a full overview of all practicalities that result from moving professionals between jurisdictions. The ultimate goal is to make these moves as seamless as possible in order to fit

with overall corporate expectations and ensure the well-being and performance of employees. Boxx Global Expat Solutions is unique in that the company recognises the many failings inherent in the one-size-fits-all approach to employee mobility which rarely yields satisfying results. Instead, Boxx Global Expat Solutions designs and implements bespoke packages that tie in with existing human resources policies of its customers. The company maintains a vast and continually updated database that includes, amongst many other metrics, the cultural, legal, fiscal, and financial variables that come into play when professionals are moved between

countries. Crucially, the database also includes outcomes and, as such, provides pathways to success built on actual experience. The CFI.co judging panel recognises that the global expat business is, more often than not, erected on an ad hoc basis – or by throwing money at any problem that arises. This usually begets disappointment on all sides. By providing transparent and fact-based advice that includes all minutiae of employee mobility, outcomes are predictable, costs are contained, and all parties involved remain dedicated to the pursuit of corporate success. The judges declare Boxx Global Expat Solutions winner of the 2018 Best Mobility Value Creation Services Europe Award.

> MEGAINVER: BEST BALANCED EQUITY FUND MANAGER ARGENTINA 2018

In Argentina, investors are hard-up for choice. In dollar terms, the stock market has receded significantly this year. Corporate and government bonds also accumulated losses. Small wonder that investors are turning to markets overseas to find solace. There remain, however, a few safe havens in an otherwise depressed market such as the dollar denominated mutual funds set up and administered by MegaInver – one of Argentina’s principal asset management firms with exposure to the retail side of the market. Thanks to MegaInver, small savers have found a number of niches that preserve the integrity of their capital. The firm’s mutual 106

funds offer retail investors a chance to enjoy the solid yields offered by short-term treasury bonds (Letes), issued locally in US dollars. MegaInver was one of the first mutual fund administrators to recognise the benefits of Letes and set up a number of facilities that allow small savers to enjoy their excellent performance. The short term treasury bonds also enable retail investors to build up a dollar denominated portfolio that is inflation-proof. MegaInver maintain a comprehensive range of investment funds to suit different levels of tolerance to risk from dollar saving accounts, to fixed and variable income mutual funds and SME funds that CFI.co | Capital Finance International

tap into one of the country’s most dynamic economic sectors. Investors are encouraged to avail themselves of the firm’s local expertise to design a well-diversified investment portfolio that includes a number of hedges against the vagaries of the market. The CFI.co judging panel notes that MegaInver fields a team of exceptionally well-trained and experienced professionals and analysts. The firm’s performance is widely recognised as a benchmark for the asset management sector. The judges are unanimous in their decision to name MegaInver winner of the 2018 Best balanced Equity Fund Manager Argentina Award.

Summer 2018 Issue

> NCB CAPITAL MARKETS: BEST WEALTH MANAGEMENT TEAM CARIBBEAN 2018

A pioneer of the Jamaican stock market and one of the island nation’s oldest asset managers – and, indeed, the oldest brokerage firm in the English-speaking Caribbean – NCB Capital Markets traces its corporate origins to the mid1960s when the company – then called Edward Gayle & Co – held one of the first five seats on the Jamaican Stock Exchange. NCB Capital Markets has remained true to its original mission to help shape a vibrant financial industry, including a robust capital market that contributes towards the steady development of the country. As the wealth and asset management division of National Commercial Bank, Jamaica’s

largest financial services provider, NCB Capital Markets enjoys a commanding presence in the market, derived from its client-centric approach, comprehensive suite of investment and saving products, and its adherence to world-class standards. The firm has an exceptionally welldeveloped business strategy that allows it to thrive in a highly competitive environment. By exploring innovative investment solutions and ways to engage with customers, NCB Capital Markets has managed to stay at the leading edge of the industry. The firm maintains a number of initiatives that allow its analysts and

agents to continuously update and expand their skill set in order to source opportunities and tap into growth markets. As a result of this proactive approach, NCB Capital Markets regularly sets new industry benchmarks. The CFI.co judging panel notes and appreciates the buzz which permeates the firm: this is a place where professionals are excited, if not passionate, about their work. The judges agree that such an attitude benefits customers. The judging panel declares NCB Capital Markets winner of the 2018 Best Wealth Management Team Caribbean Award.

> HERITAGE BANK: BEST SME BANK NIGERIA 2018

The clue is in the name: Heritage Bank works in close concert with its customers to shape their future and, indeed, create a heritage. The Nigerian bank takes the long view on customer relations and prioritises the people aspects of the financial services industry. The bank’s staff is well trained in all aspects of the banking industry and receives numerous opportunities to further develop skills and embark on a life long learning quest. As a result of its pioneering human resources policy, Heritage Bank is able to deploy its superior knowledge of the local market and dedication to operational excellence to create value for all stakeholders.

The bank also keeps a leading edge over the competition by embracing innovation and advances in technology to offer customers an experience not matched elsewhere. The bank has accumulated a number of firsts during the course of its corporate history. Heritage Bank, then known as Society General Bank, was the first to install an automatic teller machine in the country. Today, Heritage Bank maintains a network of over 160 branch offices throughout Nigeria in addition to close to fifty automated banking centres. Heritage Bank is particularly recognised for its strong presence in the small CFI.co | Capital Finance International

and medium-sized enterprises (SMEs) segment – one of most buoyant parts of the market – and perhaps one of its most important as well. As such, the bank stands to benefit from the Nigerian government’s recent decision to improve the business climate for small entrepreneurs. The CFI.co judging panel notes Heritage Bank’s determination to keep close proximity to its SME customers. The bank also caters to their needs with a comprehensive array of products and services designed to dovetail with the specific requirements of SMEs. The judges are pleased to offer Heritage Bank the 2018 Best SME Bank Nigeria Award. 107

> AHLI UNITED BANK KUWAIT: BEST BANK GOVERNANCE KUWAIT 2018

Tracing its corporate roots to 1941, Ahli United Bank Kuwait is the oldest financial services provider of the country, sustaining a rich legacy that keeps it at the forefront of the industry. A 100% locally owned bank since 1971, Ahli United Bank Kuwait in 2010 converted to Islamic banking – one of the first to do so. The bank maintains a Sharia board of four eminent Islamic scholars to ensure all its processes, products, and services comply with Islamic Law. From its earliest beginnings, Ahli United Bank Kuwait has prioritised transparency and pursued excellence in corporate governance as the twin pillars that support its business, growth, and sustainability. Last year, the bank

published a revised and thoroughly updated corporate governance manual that charts, delineates, and guides all aspects of its operations. Performance is gauged by qualified and certified teams supporting the corporate governance and compliance functions. The bank also maintains a number of staff training and skills development programmes that allows employees to keep abreast of the latest developments in the banking industry and be fully aware of the rules and regulations that govern their business. Ahli United Bank Kuwait also recognises the importance of continuously engaging all stakeholders and keeps in close

touch with regulatory entities to ensure compliance. The bank’s dedication to excellence in corporate governance pays off in superior operational performance with strong results across all key parameters. Ahli United Bank Kuwait consistently leads the industry in returns on both equity and assets. The CFI.co judging panel notes that the bank is managed by veterans of the industry. The management team comprises banking professionals with thirty or more years of experience in finance. The judges declare Ahli United Bank Kuwait – a repeat winner – recipient of the 2018 Best Bank Governance Kuwait Award.

> BANCO DEL CHUBUT: BEST SOCIAL IMPACT RETAIL BANK ARGENTINA 2018

Banco del Chubut is going places: not only has the Argentine bank sustained solid growth over the past five years, it also serves the far-flung communities that dot the plains of Patagonia. One of Argentina’s most recognisable provincial banks, Banco del Chubut has been an instrument of development and social support since its earliest corporate beginnings. In business for close to six decades, the bank maintains a countrywide network of branch offices. However, in Chubut – a sparsely populated part of the country that stretches from the Atlantic seaboard to the Andes mountain range – the bank is present in even the smallest communities. Here, Banco del Chubut often sits at the very core of local economic and social

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life – and offers provincial authorities a way to ensure that its development policies and social initiatives reach and benefit the province’s entire population. Founded in 1959, Banco del Chubut is considered a textbook example of what a financial institution with a dual mission may accomplish. The bank not only offers a complete array of financial products and services to individuals, businesses of all sizes, government entities, and investors; it also provides seed capital and services to support specific demographics and segments of the market that need help or a nudge to grow and prosper. Banco del Chubut has launched a number of initiatives that aim to encourage the development of CFI.co | Capital Finance International

promising small and medium-sized enterprises (SMEs). Small traders may also count on the bank’s support. Additionally, Banco del Chubut is recognised as a pioneer of corporate social responsibility and maintains a number of outreach programmes via a foundation set up for that purpose. The CFI.co judging panel notes that Banco del Chubut involves all stakeholders in its corporate undertakings. The bank also adheres to international standards and best practices in order to keep its operations on a sustainable footing. The judges are unanimous in their decision to grant Banco del Chubut the 2018 Best Social Impact Retail Bank Argentina Award.

Summer 2018 Issue

> AMAC AEROSPACE: BEST PRIVATE AVIATION SERVICES EMEA 2018

Serving the needs of the global jetset, Swiss specialist aviation company AMAC Aerospace is flying high from locations in Europe and the Middle East. The company, the largest privately-owned of its kind in the world, has become a leader in VVIP completion. In four hangars located at the Basel-Mulhouse airport, AMAC Aerospace is able to service all classes of planes up to and including Airbus 380s. The facility covers a floorspace in excess of ten hectares. The company is the preferred partner of governments, private clients and corporations that seek to renew, update or refurbish their singular aircraft and/or their fleet of VIP aircraft. AMAC Aerospace is currently working on one Boeing B747-8i, amongst others and has recently received the approval

by Airbus Corporate Jets to be a dedicated and recommended completion centre for the new Airbus A350XWB long-range wide body aircraft. AMAC Aerospace are one of three completion centres in the world selected to be an approved completion centre for this Airbus variant. The company is currently underway to finalising work on the first Airbus A320 NEO in VVIP configuration. AMAC Aerospace also operates its own maintenance facility at the Bodrum-Milas airport in Turkey. Here, the company services selected Airbus and Boeing products. Since opening this new centre, AMAC Aerospace has secured a number of large maintenance contracts. In 2016, the company acquired French cabin interiors manufacturer JCB Aero which specialises in the conversion of aircraft

to VVIP standards as well as rotar wing craft in VIP configuration. Currently AMAC's sister company, JCB Aero produce 4x ship sets per month to Airbus Eurocopter, based in Toulouse, France. The company now employs well over one thousand professionals and operates on the one-stop-shop principle: customers may address all their needs and requirements via a single point of contact. This ensures optimum efficiency throughout all stages of VVIP aircraft completion projects. The CFI.co judging panel notes that AMAC Aerospace is recognised as a corporate group comprised of four distinct companies: AMAC Corporate Jet, AMAC Aerospace Turkey, JCB Aero. The judges agree to name AMAC Aerospace winner of the Best Private Aviation Service EMEA Award.

> GAMBIA INVESTMENT AND EXPORT PROMOTION AGENCY (GIEPA):

BEST FOREIGN INVESTMENT PROMOTION TEAM WEST AFRICA 2018

The Gambia is open for business and welcomes investors to one of West Africa’s most enterprising nations. The country has overhauled and updated its legislative framework to shape a business-friendly climate that offers both opportunities and safeguards. The Gambia is an active member of the Multilateral Investment Guarantee Agency (MIGA), part of the World Bank group. The country’s government is determined to turn The Gambia into a regional trade and manufacturing hub and has set up a specialised entity – the Gambia Investment and Export Promotion Agency (GIEPA) – to help investors source opportunities and navigate the now streamlined licensing processes –

most of which may now be completed online. The government has also formed a National Business Council in order to match executive and legislative initiatives with the needs of the private sector. The Gambia is the largely untold success story of West Africa: thanks to its open trade regime, and tight fiscal and monetary policies, the country has enjoyed an enviable degree of economic stability. The Gambia has also dedicated significant resources towards the upgrading of its economic infrastructure. GIEPA is charged with keeping The Gambia globally competitive and maintaining a healthy business environment. The agency is also a key component of the country’s Vision CFI.co | Capital Finance International

2020 and the government-backed Programme for Accelerated Growth and Employment. The agency is staffed by a team of seasoned business professionals and has established a solid reputation for effectiveness in helping entrepreneurs establish a presence in the country. GIEPA also assist local businesses looking for export opportunities. The CFI.co judging panel notes that GIEPA works with all stakeholders and adheres to a comprehensive code of ethics that prioritises transparency. The judges agree to name the Gambia Investment and Export Promotion Agency (GIEPA) winner of the 2018 Best Foreign Investment Promotion Team West Africa Award. 109

> LANDESBANK BADEN-WÜRTTEMBERG: BEST ESG BANKING TEAM GERMANY 2018

The German Landesbank BadenWürttemberg (LBBW) has managed to take the lead in the move towards green banking, whereby sustainability principles are placed at the very core of all operations and both internal and customer and market-facing processes are re-evaluated for compliance with strict and well-defined ESG (environmental, social, and governance) parameters. Applied to financial services providers, ESG principles and guidelines offer a well-delineated framework that ensures optimum performance for all stakeholders. By mitigating risk across all operations and beyond conventional parameters, corporate top performance and sustainability are ensured. An outgrow of its ESG leadership, LBBW has enjoyed remarkable success with the bank’s first two green bonds which were

both well oversubscribed and excellently received by international sustainable investors. This has whetted LBBW’s appetite for a deeper dive into the green bond market. The bank has assured investors that it will regularly issue new green opportunities using its now fully-operational and experienced platform. In addition, LBBW DCM has lead-managed numerous sustainable bond transactions for reference issuers like KFW, NRW, Berlin Hyp, and DNB. LBBW is, thus, actively promoting the transformation towards a more sustainable banking and helping this evolving market to set new quality standards. The proceeds of the bonds are earmarked for the financing of renewable energy projects and green commercial buildings, amongst others. LBBW has engaged a specialist building technology consultancy to

define and develop a real estate portfolio that meets the highest standards. Only buildings situated amongst the top 15% for carbon efficiency – as certified by the German energy agency Dena – are eligible for inclusion. By putting its entire operating on a sustainable footing, LBBW has become a model that other banks, including institutions outside Germany, now follow. The CFI.co judging panel agrees that adherence to solid ESG standards mitigates overall risk to investors and businesses alike. It also makes sense when considering long-term returns. LBBW has demonstrated that green banking meets customer demands and is the only sensible approach when future-proofing a business. The judges declare Landesbank Baden-Württemberg winner of the 2018 Best ESG Banking team Germany Award.

> NORDEA LIFE ASSURANCE FINLAND: MOST SUSTAINABLE ASSURANCE NORDIC 2018

A leader of the life insurance sector and known for its corporate nimbleness in reacting to market dynamics, Nordea Life Assurance Finland designs and offers a product range that incorporates sustainability principles throughout the process cycle. By adhering to strict ESG (environmental, social, and governance) standards the firm has succeeded in reducing its exposure to risk and pursues a set of corporate policies that take the interests of all stakeholders into account. Nordea Life Assurance Finland’s operations are anchored in its Life 2020 Strategy which includes improvements to the overall customer experience. The firm is aware of the need to offer its customers a personalised experience on any platform as a prerequisite –

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and driver – of business growth. The company wants to be seen as highly responsive to current and prospective policyholders. To that end, Nordea Life implemented a streamlined yet comprehensive platform that prioritises the customer effort score over the more traditional net promoter score. Being responsive and nimble is, however, only part of the story; in order to meet not only customer demand but also address customer concerns, life insurers need to become ESG-aware and put their operation on a sustainable footing. Nordea Life ascribes its leading market position, in part, to its early adoption of green policies that do not just involve cosmetic changes but permeate throughout the company and also determine the way customer CFI.co | Capital Finance International

funds and savings are handled and put to work. Nordea Life’s Savings Product Strategy 2020, a complement to the broader Life 2020 Strategy, includes a whole range of ESG initiatives and now guides the firm’s investment policies and decision-making processes. The CFI.co judging panel notes Nordea Life has also been recognised as a Great Place to Work. Employees are encouraged to sign up for skills development programmes, community engagement initiatives, and come up with innovative ideas and suggestions in a ‘Ideas to Values’ process. The judges feel pleased to grant Nordea Life Assurance Finland the 2018 Most Sustainable Insurance Nordic Award.

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> BANK ONE: BEST CORPORATE BANK INDIAN OCEAN 2018

Taking the long view and establishing mutually beneficial partnerships with its customers has enabled Mauritius’ Bank One to grow and prosper in one of the world’s most competitive banking environments. Though Bank One serves all market segments – retail, corporate, private, and international – with equal distinction, the bank sources a major share of its business from the island nation’s corporate universe. Mauritius is booming and so are its businesses. The country enjoys the highest per capita income in Africa, is home to the continent’s fastest-growing economy, and ranks in the top of the global ease-of-doingbusiness index. In such a dynamic environment, opportunities abound and businesses need a

reliable partner to help seize the moment. Bank One is such a partner. The bank has developed an approach that not only includes a full suite of products and services but also entails the building of strategic relationship centred on flexibility and scalability, and delivered with almost lightning speed – should the need arise. The corporate division of Bank One is staffed by experienced professionals who cultivate a thorough understanding of their customers’ circumstances and needs in order to offer sensible and competitive products and services that add value and deliver tangible results. The team includes experts on each major segment of the Mauritius economy. Bank One has carefully crafted and shaped its operations to fit seamlessly with the

requirements of different businesses. The bank cherishes its customers as brand ambassadors. By outshining the competition, Bank One has gained both market share and recognition as a premier financial services provider. The CFI.co judging panel is delighted to see Mauritius assume regional leadership as the world’s first blue economy. The judges agree that the country’s success is derived to a significant extent from its role as a regional financial centre – a hub for the markets bordering the Indian Ocean. Bank One forms an essential component of that hub and, indeed, raises the benchmark of operational efficiency. The judges are therefore pleased to declare Bank One winner of the 2018 Best Corporate Bank Indian Ocean Award.

> JANA SMALL FINANCE BANK: BEST INCLUSIVE FINANCE SERVICES INDIA 2018

With a comprehensive online platform that rivals those of big banks, Jana Small Finance Bank helps India unbanked access a full complement of financial services. Founded as a non-profit organisation in 1999, and the country’s first urban micro-credit institution, Jana grew into a fully licensed bank that now serves well over 4.2 million accountholders. However, Jana Small Finance Bank remains true to its roots and keeps its operations customer-focussed, as opposed to productdriven. At Jana Small Finance Bank, most

customers may be of modest means but receive a level of service and attention normally only encountered at private banks. Staff has been trained to deal with customers who may have difficulty in understanding the complexities of modern banking. By showing the utmost respect, Jana Small Finance Bank not only helps its accountholders navigate the system, but also extract benefits. The bank’s unique business model ensures sustainable growth propelled by word of mouth. Thanks to its customers – who effectively have become brand ambassadors – Jana Small Finance Bank expects to top eight CFI.co | Capital Finance International

million accounts by 2020. The Jana-approach to retail banking, and the brand loyalty it inspires, virtually assures future growth as customers, now financially empowered, become more affluent. Tapping into India’s vast development potential, allows the bank to broaden and deepen its customer base. The CFI.co judging panel commends the bank on its corporate mission and vision. The judges agree to name Jana Small Finance Bank winner of the 2018 Best Inclusive Finance Services India Award. 111

> FBS: BEST COPY TRADING APPLICATION GLOBAL 2018 & BEST FOREX BROKER ASIA 2018

Few markets are as dynamic and competitive as foreign exchange trading. Around the world, millions of people, from retail investors to large corporates and everything in between, access the forex markets hoping to nurture and grow their cash. Though trading platforms share an often bewildering array of features, successful traders know that bells and whistles only go so far; education and carefully honed skills result in an acquired market-savvy that allows investors to minimise exposure to risk and sustain gains over the medium and long term. Global broker FBS, one of the world’s largest forex platforms with a corporate footprint that spans 190 countries, offers its traders a comprehensive suite of educational resources. FBS training programmes are tailored to individual needs and skill levels. Newby traders can safely and securely evaluate their knowledge

in a virtual environment, before venturing onto the real market. Once ready to go live, FBS customers may continue to develop their skill set with more advanced courses that enable novice traders to confidently broach more advanced market segments and set up complex trades in a variety of instruments. FBS also offers its accountholders access to a state-of-the-art copy trading application that tracks the moves of the firm’s most successful investors. The deviceindependent FBS CopyTrade platform allows traders to benefit – and profit – from the experience and knowledge of the industry’s best professional traders. The app also enables veteran traders to share their insights – and get paid for doing so. The app makes full use of smart technology and social media to bridge the distance between traders and their preferred

markets. FBS CopyTrade is also a perfect solution for casual and dedicated investors who lack the time to research markets and just want their funds to benefit from the social trading revolution unleashed by FBS. The CFI.co judging panel notes that FBS sustains over eight million traders and engages with some 315,000 partners to extend its global reach and maintain a close proximity to its traders. The firm regularly organises seminars to bring its accountholders details and inside scoops on broader market trends. The judges have followed FBS, a repeat award winner, for a number of years and agree that the company remains at the forefront of the forex market. The judging panel is pleased to offer FBS a double win in recognition of its achievements: the 2018 Best Copy Trading Application Global Award and the 2018 Best Forex Broker Asia Award.

> EURO EXIM BANK: BEST GLOBAL TRADE SERVICES BANK 2018

A trade facilitator with a global reach, Euro Exim Bank is a trusted partner that helps businesses extend their footprint by tapping into lucrative new markets and sourcing excellent opportunities. Euro Exim Bank, headquartered and licensed in St Lucia and with a representative office in London, is a specialist in providing financial services to small and medium-sized enterprises (SMEs), regardless of where in the world they are located. Euro Exim Bank offers a full suite of trade-related banking services such as letters of credit and guarantee, global funds transfers, 112

export letters of credit, and a host of other financial instruments designed to facilitate trade flows. Customers are kept appraised of the latest trends and developments via a monthly newsletter – The Trailblazer – which also highlights various Euro Exim Bank services and shows how SMEs may extract optimum benefit from them. Euro Exim Bank expends considerable effort to check for compliance with all relevant rules and regulations. A third of the bank’s staff is engaged in ensuring the bank meets and exceeds all demands made CFI.co | Capital Finance International

upon it as a financial services provider. This also assures customers that Euro Exim Bank is at all times able to quickly respond to their own requirements since the bank continuously updates its knowledge of compliance-related issues in multiple jurisdictions. The CFI.co judging panel agrees that SMEs the world over can and should benefit from the expertise of a bank specialised in global trade. The judges are pleased to offer Euro Exim Bank the 2018 Best Global Trade Services Bank Award.

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> AVIVA: BEST INSURTECH RESPONSIBLE VALUE CREATION GLOBAL 2018

The largest insurer in the United Kingdom with well over 33 million customers, Aviva looks after almost half the country’s inhabitants, and does so with a comprehensive suite of insurance and savings products that aim to provide a comfortable future and a solid hedge against uncertainty. The company can trace its corporate roots to the late 17th century but remains a disruptor, albeit one with 322 years of experience in shaping the market. In the age of ‘insurtech’ that seeks to leverage to power of digital to increase operational efficiency, Aviva has managed to build up a significant technological edge. By transposing its full line of products and services

onto an easily navigable online platform, Aviva has pointed the way to the future for the entire industry. The MyAviva platform not only allows customers to manage their products but also shows how their money is invested and what their post-retirement life will look like. The company has spared no effort to deliver a powerful commercial differentiator that propels growth and broadens – and deepens – its already vast customer base. Aviva realises that funding retirement is but a single aspect, albeit an important one, of the future. To help shape a sustainable world, the company is exceptionally active as a promoter of market reform and restructuring

in order to ensure compliance with all relevant environmental, social, and governance (ESG) parameters. Aviva is well aware of the shifts in sentiment and demand and aims to anticipate change by helping drive that change and be an advocate of sustainability. The CFI.co judging panel commends Aviva on its forward-looking approach to the insurance and savings business. It is how the company has managed to stay in business – and profitable – over the centuries – by keeping abreast of change. The judges agree to declare Aviva winner of the 2018 Best InsurTech Responsible Value Creation Global Award.

> VISA: BEST BRANDING CARD SERVICES GLOBAL 2018

Long before fintech became a buzzword and digital payment systems made their first appearance, Visa was already connecting the world with its ubiquitous card: accepted nearly everywhere and allowing users ready access to their cash. After many failed attempts to introduce a unified all-purpose payment card, Bank of America solved the riddle with its revolutionary – in today’s parlance: disruptive – BankAmericard which in 1976 became Visa. The secret to Visa’s enduring success was the original issuers willingness to license its product to other banks and allow its rebranding – first outside the US and later also domestically.

Now detached from its parent, Visa has become one of the world’s largest financial services providers with twin data centres in the US able to jointly process 30,000 transactions simultaneously and perform some one hundred billion computations per second. Visa unequalled IT backbone checks over 500 variables in each transactions it processes, including more than one hundred parameters to detect fraud. Visa is not just big; the company is extremely agile as well, driving developments in fintech and adopting innovative technologies that further improve the card’s convenience CFI.co | Capital Finance International

to holders and merchants alike. In 2014, the company partnered with Apple to develop the iPhone Wallet app which enables users to link their Visa and other debit and credit cards into a single payment platform. The CFI.co judging panel considers Visa a textbook case of how to drive corporate growth through the decentralisation of operations whilst maintaining a tight grip on the underlying processes. The company has also pioneered a way to benefit massively from the reach and reputation of its licensees. The judges are pleased to name Visa winner of the 2018 Best Branding Card Services Global Award. 113

> Africa

Longing to Feed the World In order to keep offering its youth jobs, Africa needs to create close to 330 million jobs over the next twenty years. Development experts agree that luring young people back to farming is a crucial part of the solution. In order to revert the current migration pattern that moves in the opposite direction, access to modern farming technology needs to be improved. That is the conclusion of a study conducted by Youth Think Tank â&#x20AC;&#x201C; a research initiative supported by the Mastercard Foundation â&#x20AC;&#x201C; and its local affiliate Restless Development Uganda. Talking to young farmers and agronomists in seven Sub-Saharan countries, the study concluded that the best way to bring people back to the land is to put in place an IT infrastructure that allows the use of modern crop management and planning techniques. This entails, amongst others, the use of soil sensors, weather drones, and cloud-based computing. The researchers emphasise the need to increase productivity as the competition for land heats up and results in smaller individual plots.

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outh Think Tank calls on governments to improve educational programmes by including new technology and supporting innovators by setting up incubators where aspiring farmers may swap ideas and work together to develop new farming-related applications. According to the Food and Agriculture Organisation (FAO) of the United Nations, the average age of farmers in Africa hovers around 60 – underlining the need to engage young people. The FAO estimates the continent comprises around forty million farms, 80% of which is smaller than two hectares. Around 530 million people, mostly women, work the land. The New Partnership for Africa’s Development (NEPAD), a development programme maintained by the African Union (AU), estimates that agriculture each year creates almost twenty million new, albeit poorly paid, jobs. NEPAD agrees that agriculture is key to unlocking the continent’s future. Former AU chairwoman and current minister for Planning, Monitoring, and Evaluation of South Africa Nkosazana DlaminiZuma argues that only agriculture is able to provide the sustainable growth Africa needs: “In order to create wealth and conserve natural resources for future generations, we need to better exploit our land, using smart technology to up productivity and convince young people to pursue a career in farming.” NEPAD’s chief executive Ibrahim Assane Mayaki advocates an immediate rebasing of policies to revive the continent’s agriculture: “Up to the 1960s, Africa was self-sufficient in cereals. Since then it has become a net importer. A diversified crop at first, cereals today is mostly maize which is now being hit by a fall armyworm infestation that decimates yields and undermines the food security of around 200 million people.” The pest has spread to 51 of Africa’s 54 states and caused an estimated $13bn in crop losses.

as pressure mounts. The global population is growing rapidly and the climate is ever-changing. Agribusinesses are making changes to go hightech. From data-gathering drones to artificial intelligence farming, technology is making the agricultural sector more precise and efficient.” Mr Moephuli now wants to make sure Africa is included in the second green revolution: “The continent has the largest reserve, by far, of as yet uncultivated arable land, an estimated 600 million hectares or 60% of the world’s total.” Africa can, in fact, feed the world. The continent not only contains vast areas of arable land but also sufficient water resources to irrigate crops. According to Akinkwumi Adesina, president of the African Development Bank (ADB), the continent currently only uses about 2% of its readily available water resources against a world average of 5%: “The potential of agriculture in Africa is almost limitless. Sadly, one cannot eat potential.” Mr Adesina points out that whilst the balance of food staples moved from a deficit to a surplus in Europe and Asia, Africa went in the opposite direction: “This signals that something is fundamentally wrong or missing from the equation. Currently, African countries spend a total of $35bn annually on food imports, money that could be put to work in a more productive manner.” Whilst over the past forty years cereal yields tripled in South Asia and increased six fold in East Asia and Australia, those in Africa barely doubled. Mr Adesina blames the lack of credit: “In Latin America and Asia sufficient funds were made available to launch and sustain the Green Revolution. This did not happen in Africa which explains why yields continue to lag.” The numbers back this up. Whilst in Latin America the spending on research and development represents about 1.3% of agricultural GDP, in Africa R&D outlays barely touch 0.4% - and going down.

The rapid spread of the fall armyworm has intensified calls for high-tech solutions. Shadrack Moephuli, CEO of the Agriculture Research Council, appealed to participants of the third Global Food Security Conference, late last year in Cape Town, to prioritise innovative approaches to mitigate the losses of smallholders: “The present challenges reinforce the critical role of innovation to make agriculture more competitive and sustainable. Innovation is the new normal in agriculture,” Mr Moephuli said.

The Consultative Group on International Agricultural Research (CGIAR), a global partnership of agricultural R&D centres, calculates that every dollar it spends on ways to improve farm productivity in Sub-Saharan Africa, generates over six dollars in economic benefits. The problem is far from new: already in 2003 the African Union recognised the need to invest significantly more resources in agriculture. “Everywhere else in the world, governments understand the need to properly finance agriculture and embrace new technologies. African countries must now also recognise that something needs to be done – and fast,” says Mr Adesina.

That new normal was detailed in the 2016 Africa Agribusiness Insights Survey compiled and published by PwC. The survey concluded that agriculture stands on the verge of a second green revolution which includes, amongst others, a decisive shift in how IT technology is applied to ensure higher yield whilst improving environmental sustainability. The survey concludes that, “Innovative technology and advancements in productivity are becoming increasingly important

The ADB president advocates for the commercialisation of markets as a first step towards a more pragmatic approach to agriculture. This must, however, include all farmers – subsistence, medium scale, and largescale. “Policies must empower markets, open borders to intra-regional trade, welcome investors, and reduce bureaucratic obstacles. Exploiting Africa’s potential in agriculture is a big job, but a worthwhile one.” i

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> Life Assurance in South Africa:

Moving with the Times and Bending with the Wind to Embrace All Clients’ Needs Years ago, insurance company Assupol made a promise to improve efficiency and turnaround and to ensure hassle-free claims payments; it has honoured that promise.

hange, they say, is the only constant: adapt or die. South African insurance company Assupol changes and adapts, day-by-day, and has done since its inception in 1913 when it was established as a burial service for members of the country’s police force. By gearing itself to be an agent of change, and embracing the flux of life, the company has grown to become a leading provider of life insurance products to a broader market. The highly regulated South African insurance industry can be daunting, with increasingly demanding requirements, and the country’s high unemployment rate – even among university graduates – is a persistent national problem. In August last year, Assupol partnered with the female-owned organisation Omama Be Sizwe, (Mother of the Nation) whose members wanted to participate in the insurance value chain – but lacked the requisite experience and qualifications. Assupol recruited 44 female university graduates, mostly from disadvantaged backgrounds, who had taken financial degrees. It trained them to be financial advisers in an initiative that has proven so successful that it is due for expansion.

Omama Be Sizwe members are now able to participate in the insurance value chain, employment opportunities have been created for the graduates, and a distribution channel for Assupol products has been created in the respective communities. Assupol sees its recent and long-standing employees as key to its success; a satisfied employee, the company wisdom goes, will walk that extra mile for clients. A bold first step was to canvass those employees: how did they view Assupol as an employer? The company participated in the Deloitte survey Best Company To Work For and was rewarded with the highest seal of achievement, platinum (70 percent score). In 2017, the company participated in the annual Careers24’s HR Future Awards. Factors

including employee engagement and wellness, skills, learning initiatives and workplace culture were considered. Assupol took top honours as Employer of Choice for Large Organisations, for advancing the impact of human capital management Assupol has performed well under South Africa’s challenging and variable economic situation. The strength of its brand – it has been servicing the market for 105 years – its understanding of the market and the knowledge of how best to serve it helped it to thrive in a market where many companies battle just to survive. Committed employees, financial advisers and other distribution partners that are dedicated to serving Assupol clients have helped to bring about strong relationships with all the stakeholders. Assupol isn’t about to rest on its laurels. It ploughs funds back into local communities through CSR (corporate and social responsibility) initiatives. The company looks forwards, and plans to broaden its presence to include other employer groups. While it has a full range of products available, most Assupol turnover is still in the funeral business; this sector also has expansion plans in place to better meet clients’ needs. This is no hit-and-hope scheme. The company has plans in place to upskill its sales force to bring broader, more effective financial solutions to a traditionally neglected segment of the population. A new distribution channel is to be established, along with a Wealth Division that will service the clients who need (for example) retirement advice. Other distribution arrangements will be established with third parties. Corporate culture is taken seriously, and Assupol is always looking for ways to improve client service, and deploy technology more effectively. While Assupol’s current, and successful, distribution channels focus on face-to-face contact, the company leaders have noted the opportunity to become more efficient and costeffective through the use of digital tools and channels. CFI.co | Capital Finance International

In a world where new ways of doing business can be disruptive, Assupol remains open to that eternal constant of change. It can now finalise funeral and investment claims within an hour of submission (if all the required documents have been submitted – the ball is sometimes in the clients’ court). Assupol pays funeral claims benefits twice a day and clears the funds to be immediately available – irrespective of the bank the clients use. And in an age of digital transfers, retina-scanning and cryptocurrency, Assupol even retains a facility to pay benefits to clients who have no bank accounts. Heraclitus of Ephesus – who first coined the “change is the only constant” phrase some 2,500 years ago – would approve. i

Assupol – with almost 700 employees – sees its recent and long-standing family of workers as key to its success. CFI.co engaged in a Q and A with Assupol’s Group Executive Director (HR) Siphiwe Ndwalaza to learn more… HOW MANY EMPLOYEES DOES ASSUPOL HAVE? We have 695 permanent staff members and 3183 tied agents. We take responsibility for the training and development of our tied agents, who are independent contractors. Our continued investment in their development constitutes the lion’s share of our training spend. HOW DO YOU GO ABOUT RECRUITING THE RIGHT PEOPLE? We believe in growing our own timber, i.e. developing our own employees and giving them opportunities to realise their full potential in their roles. To ensure that we keep diversifying in our skill-set, we employ varying channels in attracting people to the company. One of the most effective is the employee referral programme, where our employees recommend suitable candidates for consideration. We also have a very active recruitment portal on our own website. As our “employer brand” grows stronger, we see more volumes of interested aspirant employees coming through this channel. The use of specialised recruitment agencies is 117

TELL US A BIT MORE ABOUT THE DELOITTE SURVEY IN WHICH YOU WON THE PLATINUM SEAL OF ACHIEVEMENT. WHAT SORT OF QUESTIONS WERE ASKED? CAN YOU SHARE SOME OF THE BEST RESPONSES TO THOSE QUESTIONS? At Assupol, we have long understood that our employees play a critical role to our continued success. We are continuously searching for ways to provide the “ultimate” employee experience and have regularly opened ourselves up for scrutiny, by competent external (independent) verification entities, to regularly assess our employment practices and provide us with valuable scientific assessment on how we fare compared to other employers. We seek to attract the most talented of employees and fully understand that the most talented employees want feedback – more so than the less talented ones – and it is our job to keep providing it.

Lonea Matsoso

Boniswa Sheron Magida

still the most utilised channel of attracting skills to Assupol. In recruiting the right people, we place great emphasis on “culture fit”. Whilst, no doubt, all the specifications for the role must be met during the shortlisting phase, it is important for us that we attract candidates that subscribe to our philosophy of doing business i.e. zero tolerance for dishonesty and shortcuts, patient building of a sustainable earnings base and preoccupation with the building of a loyal client base.

We prioritise internal appointments for all our promotions unless if there are no suitable skills internally to tap on. d. Lastly, we have created an environment where employees share our vision of growth, values and benefits. We also believe in sharing on the upside with all our employees that perform at exceptional levels. We are probably the only company in South Africa that has often made 14th cheque bonus payments to lower-level employees. This is in addition to the widely paid 13th cheque bonuses. Employees understand that this is not guaranteed and is linked to performance.

HOW DO YOU RETAIN STAFF: WHAT ARE THE SECRETS OF A HAPPY AND PRODUCTIVE WORKFORCE? We follow a simple philosophy: a. We aim to ensure that every employee has a focused, empowered and accountable role to play in our company. Every Assupol employee, irrespective of their level in the company, is made to understand that there is a “big picture” to what they do. Depending on the level, the link to the big picture is not always immediately obvious but everyone’s role does have that link. When employees get this their engagement levels immediately improve. b. We strive to create an environment where our employees can stretch themselves to become the best that they can be. Any employee can apply for study assistance and enrol in an institution of their choice to study for any qualification that they wish to study for. We only require that it be relevant to their current field of work or future/ desired field of work (within our business) and that the institution must be appropriately accredited for the qualification. We also run an innovation programme that rewards employees for any new ideas that help us maintain our qualitative edge as a ground-breaking operator in our market. c. As we grow stronger and bigger as a company, we want our employees to experience, on a personal level, this growth as well as the benefits of being associated with a successful company. 118

WHY ARE EMPLOYEES KEY TO YOUR SUCCESS? For years now, we have operated under the thinking that it is the employee, rather than the client, who is king. Clearly, without a happy client we are without a business – but if an employee is miserable and demotivated, s/he cannot make a client happy. A happy employee is key to a happy client. You get the sequence right then you are on your way to serving your clients more effectively. We have developed our competitive edge as a company on this premise and we have not looked back. The product range that we develop, the services we offer to our clients and the technology we utilise are all made more effective based on this premise. It is often difficult for competitors to simply replicate a highly engaged quality workforce that is well trained, motivated and competitively rewarded for the role they play in a company. We punch well above our weight based on the quality of talent that we have attracted and retain in the company. DO YOU HAVE A RECRUITMENT CONSULTANT, OR IS THIS DONE IN-HOUSE? Depending on the nature of the vacancy at hand, we would use a specialised recruitment agency to assist us. We also have a small but very dedicated in-house talent management team that co-ordinates all our recruitment activities. CFI.co | Capital Finance International

To this end we have regularly participated in the Deloitte Best Company Survey, which is probably the most prestigious and respected of its kind in South Africa. The survey is used by organizations that value the importance of retaining and getting the best from their people In this year’s survey, we attained the Deloitte Platinum Seal of Achievement, the highest possible, and exceeded the benchmarks in two of the most crucial indices by a fair margin. Some of the questions that were asked are listed below and the best responses to those questions, as reflected in the scores obtained, are indicated in brackets: • The work I do is important to this organisation (96%) • I have a high level of respect for my manager/ immediate leader (96%) • I can identify with the values of this organisation (92%) • Leadership embraces the organisations values (89%) YOU WON AN AWARD FOR EMPLOYER OF CHOICE FOR LARGE ORGANISATIONS FOR “ADVANCING THE IMPACT OF HUMAN CAPITAL MANAGEMENT”: WHAT IS THAT, EXACTLY? CAN YOU ELABORATE? It was on the basis that Assupol invests in the growth and development of its employees. Among other initiatives, we advance the impact of human capital management in the following programmes that we run;

Internships: The Assupol Internship Programme is a work-based experienced programme and aims to provide opportunities for students for field experience relating to their career interests. Our management team and specialists share their knowledge, skills, information and expertise to foster the intern’s personal and professional growth within the company. Focus areas are Actuarial Sciences, Underwriting, Claims, Financial Risk, Legal, Compliance, IT Development, Marketing and Client Services. More than 85 percent of interns have successfully

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completed their internship has been appointed into permanent positions.

SAICA: Assupol is an approved South African Institute for Chartered Accountants (SAICA) training provider. It enables Chartered Accountants (SA) students to complete the training programme necessary for qualifications. To date, three of our trainees have progressed to the level of CA (SA)’s, while an additional six trainees completed their training successfully. Actuarial Sciences: Assupol is a registered training office with the Actuarial Society of South Africa (ASSA), dedicated to developing actuarial skills and support employees with their actuarial studies. Our students are making excellent progress, as is evident from the fact that Assupol now boasts three qualified actuaries and eight actuarial students. Regulatory Requirements: Assupol operates in a regulated environment and we aim to develop our employees to exceed the requirements of the Financial Services Board. We invest heavily in the development of key individual (KI’s) in our business.

Bursaries: Our study assistance programme allows employees to study towards a national qualification with a recognised tertiary institution. In the last financial year, 69 employees were assisted through this programme. “COMMITTED EMPLOYEES HAVE HELPED TO BRING ABOUT STRONG RELATIONSHIPS WITH ALL THE STAKEHOLDERS” – IS THIS BECAUSE OF FACE-TOFACE INTERACTIONS, OR JUST GENERAL EFFICIENCY? We believe it is because of face-to-face interactions. We are actively involved on engaging stakeholders as a company and this is done at the highest levels. The CEO of Assupol Life, Bridget Mokwena-Halala, for instance, dedicates a considerable amount of her time to building and maintaining relationships with key stakeholders. DOES ASSUPOL ENSURE A “PERSONAL TOUCH” WHEN PEOPLE GET IN TOUCH WITH THE COMPANY (BY PHONE, FOR EXAMPLE)? DOES A PERSON ANSWER PHONES, OR IS IT THE TYPICAL, “PRESS ONE FOR FUNERAL PLANS… PRESS TWO TO GET DETAILS OF YOUR ACCOUNT” AND SO ON? We have a sizable call centre dedicated to offering top of the range client services to our customers. However, in order to ensure the most efficient routing of client queries, we do make use of an automated call routing system to improve efficiencies. We have well trained dedicated client services administrators that attend to client’s queries and our client satisfaction ratings attest to our efforts in this regard. From time to time we do fall beyond our expectations due to technical issues. We have over 80 dedicated client contact

centres (branches) throughout the country where most of our face-to-face interactions occur. ARE THERE SPECIAL SKILLS WHICH ARE NEEDED FOR EMPLOYEES DEALING WITH THE FUNERAL BUSINESS? Yes, they need to be “fit and proper” and understand our funeral products/services and the relevant legislation pertaining to insurance. For example, understanding an “insurable interest”, being able to conduct a financial needs analysis and being able to document properly a “record of advice”. A number of promulgations (e.g. policyholder protection reviews) are regularly announced by the regulator and employees need to have a reasonable understanding of these. HOW IS ASSUPOL MOVING TO IMPROVE CLIENT SERVICE? We invest heavily in our client-satisfaction interventions. Every year we embark on roadshows, visiting branch employees and updating them on our new processes, legislation, products and services to help them serve our clients better. We have also invested in the appointment of a dedicated “soft skills” trainer with a specific aim of helping our employees improve the manner in which they serve clients.

“In August 2017, Assupol partnered with the female-owned organisation Omama Be Sizwe and recruited 44 female university graduates, mostly from disadvantaged backgrounds. It trained them to be financial advisers in an initiative that has proven so successful that it is due for expansion.” –– CAN YOU TELL US MORE ABOUT OMAMA BE SIZWE AND YOUR INVOLVEMENT WITH THE ORGANISATION? Omama Be Sizwe Investments is a company committed to serving one million women in the country, across various LSMs, disciplines and demographics. Their view is that women’s economic empowerment is a critical imperative for any country and their aim is to contribute to stronger and more inclusive societies. Assupol Life is proud to be associated with an organisation that places an emphasis on community development at the heart of its operating model. Our goal is to empower our partners in their mission to encourage economic emancipation and equitable participation by women in the South African economy and particularly in the financial services sector. By providing employment opportunities to unemployed graduates, specifically females, we contribute to solving our country’s unemployment problem. This will enhance the dignity of our people and will assist in closing the gap relating to the presence of female advisors in the financial services sector. CAN YOU PROFILE ONE OR TWO OF THE PEOPLE YOU RECRUITED? Matshediso Lonea Matsoso has obtained her diploma in 2014 from IMM Graduate School of Marketing and Boniswa Sheron Magida has obtained her degree in 2018 from the University of Johannesburg. After graduating, Lonny and CFI.co | Capital Finance International

Boniswa had found it difficult to find permanent employment relevant to the degree they had obtained. Boniswa joined our programme in December 2017 and Lonny in February 2018. Currently they are some of the top performing representatives for the Assupol Women Distribution Channel and we see a great future for them in Assupol and beyond. CAN YOU TELL US ABOUT SOME OF THE EMPLOYMENT OPPORTUNITIES THAT HAVE BEEN CREATED FOR THOSE GRADUATES? WHICH ROLES DID THEY MOVE INTO? The financial services industry is a highly competitive but very rewarding environment for young women to develop and create their own future. Assupol Life embarks on the training of the respective recruits thereafter providing them with a conducive environment to develop their careers in the financial services sector. Assupol established a programme consisting of information and personal growth sessions as well as a pre-course and training session to introduce the candidates to applicable legislation, products and sales skills. Graduates are assessed on their capabilities and competencies in relation to sales. After completion of the programme, the representatives are appointed by Assupol as financial planners. For purposes of providing the ladies with an opportunity to be empowered, we create marketing and unlock opportunities and approach relevant entities and departments to introduce our representatives. Whilst working for Assupol, we continue to empower the financial planners by providing them with further development programmes e.g. assisting them to pass the regulatory examinations set by the regulator. HOW DID THE EMPLOYMENT OF THOSE GRADUATES, AND THIS INITIATIVE, BENEFIT COMMUNITIES? AND WHAT WERE THE SPIN-OFF BENEFITS FOR ASSUPOL? The main benefit is the creation of financial inclusion for the communities. The financial planners are from various parts of the province. Once they have completed the programme they are qualified financial planners and they are able to go back to their communities and offer advice on financial wellness. In addition, the advisors identified fellow students from their communities that are also placed on the programme. CAN YOU TELL US ABOUT ONE OR TWO OF YOUR OTHER INTERESTING OR HIGH-ACHIEVING STAFF MEMBERS? We have Nkululeko Mndaweni who joined the company fresh from university. Today he is a registered Chartered Accountant and is responsible for budgeting and management accounting for the entire organisation. We also have Esrom Kgaphola who has been with the company for over 20 years starting as an Agent and now is the CEO for Cornerstone which is a subsidy of the Assupol Group. They both came in at entry level and worked their way to the top. Alta Duvanage is our longest-serving employee. She has been with the company for 35 years, and is employed as a Client Services Administrator. i 119

Economic Transformation... At the very heart of who we are at Credit Bank is the desire to transform the social-economic welfare of our people by offering innovative financial solutions. Our solutions cut across businesses and individuals empowering you to grow.

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Summer 2018 Issue

> CFI.co Meets the CEO of Ghana Investment Promotion Centre:

Yofi Grant

ofi Grant is currently chief executive officer of the Ghana Investment Promotion Centre. He was appointed by President Nana Addo Dankwa Akufo-Addo in February 2017. Mr Grant is a renowned Ghanaian investment banker with over thirty years of experience in banking and finance. Having served in various capacities in corporate finance and advisory, and corporate banking and marketing, Mr Grant has accumulated broad knowledge in, and great exposure to, the international finance markets and cultivated strong relationships with international private equity funds, portfolio and investment managers, and brokerages. He was responsible for the development and implementation of AAF SME Fund LLC, one of the largest agriculture SME funds in SubSaharan Africa and helped achieve its first close of $30 million. Mr Grant is a council member of the Continental Business Network of the African Union which advises African governments on private sector finance and infrastructure and has served in many directorship roles in both the public and private sector. As a partner in the Databank Group, he also served as director in the following subsidiaries of the Databank Group: Databank Agrifund Manager, Databank Financial Services, and Databank Brokerage Services. In 2009, he was the executive director for Business Development for the entire Databank Group. In 2002, Mr Grant was a consultant on finance and business for the Africa Asia Business Forum (AABF) organised by the UNDP which run workshops in twelve African and six Asian countries. Additionally, he has been in senior advisory roles and led many of the groundbreaking transactions in Ghanaian and other African capital markets. Mr Grant is partner and co-founder to a number of companies including Grant Dupuis Investment, a real estate investment advisory firm, and Coldwell Banker Ghana, a company which holds the master franchise license for Coldwell Banker – part of the Realogy Group in New Jersey, US, the world’s largest real estate organization – for Ghana and Nigeria. In addition to this, he founded Praxis Fortune Calibre, a firm that offers general business advisory and consulting services across the continent. Mr Grant holds several supervisory board mandates in private sector companies in the telecommunications, commodities, and education sectors and has also played many policy advisory roles for government, particularly in private sector development. He was chairman

CEO: Yofi Grant

of Ghana Telecom (One Touch) and the Listing Committee of the Ghana Stock Exchange, amongst other prestigious organisations.

is a member of the Ministerial Private Public Partnership Approval Committee of the ministry of Finance and Economic Planning.

Mr Grant was also special advisor to the minister for Private Sector Development between 2002 and 2007 where he advised and assisted the minister with policy formulation and implementation and also on financing for private sector development projects. He currently serves on the advisory boards of the ministry for Foreign Affairs and Regional Integration, the Ghana Export Promotion Authority (GEPA), and

As the CEO of the Ghana Investment Promotion Centre, which reports to the Office of the President, it is Mr Grant’s singular vision to make Ghana the ‘best place to do business in Africa’. He lives by the guiding principles of honesty, integrity, and a constant search for solutions, and is a fellow of the Aspen Global Leadership Network’s African Leadership Initiative, West Africa. i

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> Ghana Investment Promotion Centre:

Propelling Economic Growth

he Ghana Investment Promotion Centre (GIPC) is the agency of government reestablished in 2013 under Act 865 to create an enhanced, transparent, and responsive environment for the development of the Ghanaian economy, and to encourage, promote, and facilitate investment in Ghana. The GIPC has the vision to make Ghana ‘the first destination of choice for investing in Africa’ and sets on a mission to be the official and most accurate information hub for investors in Ghana by providing seamless high value-added services following the one-stop-shop approach.

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The centre is governed by a ten-member board of directors headed by Kwesi Abeasi, a former chief executive officer of the centre. Mr Abeasi serves directly under the office the Republic of Ghana. The CEO of the Centre, Yofi Grant is a seasoned investment banker and heads a management team of eight made up of directors and heads of the various divisions and departments of the GIPC. The centre is represented in four regional capitals of Ghana with its headquarters in Accra. CFI.co | Capital Finance International

The key functions of the centre are: • Formulating investment promotion policies and plans, as well as promotional incentives and marketing strategies, to attract foreign and local investments in advanced technology industries and skill-intensive services which enjoy good export market prospects. • Initiating and supporting measures that will enhance the investment climate in Ghana for both Ghanaian and non-Ghanaian enterprises. • Initiating, organizing, and participating in promotional activities such as exhibitions, conferences, and seminars for the stimulation of investments, to present Ghana as an ideal

Summer 2018 Issue

"The GIPC has the vision to make Ghana ‘the first destination of choice for investing in Africa’." country through continued communication to help existing businesses to expand. • Promoting forwards and backwards linkages between foreign affiliates and local SMEs. The GIPC also provides investors with the following resources and support services: • Assistance in obtaining immigrant quotas and residence permits. • Assistance in the acquisition of land for setting up of businesses. • Providing aftercare services. • Assistance in registering and obtaining permits from relevant government agencies such as the Environmental Protection Agency, National Communications Authority, etc. • Assistance in getting certain utilities such as electricity, water, and telephone connections. Some Incentives for Investors involved in various sectors of the economy under GIPC Act, 2013: • Customs duties exemption for plant, machinery, equipment, and parts thereof. • Graduated and reasonable corporate tax rates. • Location incentives of between 25%-50%. • Tax rebates for manufacturing companies. • Tax holidays ranging from five to ten years depending on sector and business location. • Automatic immigration quotas depending on the paid–up capital. • Other attractive tax concessions for plant and buildings, five years carry forward losses and R&D expenditure deductibility. • Relief from double taxation and employees where applicable. At the beginning of 2017, the GIPC, under a new management, set out to achieve an ambitious target of $5 billion in foreign direct investment (FDI) inflows for the country. Investments recorded for the fiscal year ending December 31, 2017, hit $6.19 billion with the FDI component reaching $4.91 billion (i.e. approximately 98.2% of the original target for the country). investment destination. • Collecting, collating, analysing, and disseminating information about investment opportunities and sources of investment capital, incentives available to investors, the investment climate, and advising, upon request, on the availability, choice, or suitability of partners in joint venture projects. • Registering, monitoring, and keeping records of all enterprises in Ghana. • Registering and keeping records of all technology transfer agreements. • Maintaining a liaison between investors and ministries, government departments and

agencies, institutional lenders, and other authorities concerned with investments. • Identifying specific projects and preparing project profiles on investments and joint venture opportunities in Ghana and attracting interested investors for participation in such projects. • Bringing about harmonisation in investment policy formulation through coordination of the activities of all other institutions and agencies relevant to investment promotion. • Evaluating the impact of the centre on investments in the country and recommending appropriate changes where necessary. • Focusing on established investors in the CFI.co | Capital Finance International

The investments recorded have opened the exciting prospect of generating a minimum of 22,570 jobs. This achievement among others has barrelled Ghana’s economy ahead by 7.9% – easily outpacing all other large markets in Africa in 2017. Currently, the GIPC has won two awards for being the best investment promotion agency in Africa: at the Annual Investment Meeting (AIM) in Dubai for the second time running and, more recently, from the CFI.co (Capital Finance International) journal. i 123

> Banque de Développement de Guinée:

Investing with Confidence in the Republic of Guinea Guinea remains one of the world’s least developed countries but there are positive signs that this could be beginning to change.

nder the strong leadership of the present head of state who is committed to progress and change, the country aims to mobilise its abundant natural resources – including hydropower, agricultural and fishery potential as well as mining reserves – to drive forward its economy. Known as “the water tower of West Africa”, Guinea is the source of most major rivers in the region. The sheer immensity of river flow offers real promise for hydropower generation to satisfy demand of most of its local population and those of neighbouring states. In fact, the country is aspiring to become the energy reservoir of ECOWAS (the Economic Community of West African States). The potential of its agricultural sector will hopefully be realised by the construction of hydro dams, which will improve irrigation. The resulting electrification will further support processing plants for the country’s plentiful produce. It is worth emphasising that each of the four regions of the country (maritime, upper, middle, and forest) has its own favourable climate and soil conditions for different crops. The abundance of its fisheries is explained by the fact it has the largest continental shelf fishing grounds (generally regarded as the richest seafishing areas) in West Africa and its 300km maritime façade open to Atlantic.

"A master plan for Guinea has been put in place by the present administration to focus on infrastructure construction and development activities needed using the mining sector as support to help the republic take its next big step forward." Guinea also has proven potential in the mining sector with some of the most important resources in the world, including high quality iron ore, one third of the world’s quality bauxite, and significant deposits of gold and diamonds. BDG’S ROLE IN GUINEA’S DEVELOPMENT PLAN A master plan for Guinea has been put in place by the present administration to focus on infrastructure construction and development activities needed using the mining sector as support to help the republic take its next big step forward. The government’s endeavour is being implemented with the promotion of governance, economic transformation, development of human capital, the preservation of the environment, and sustainable development. It obviously needs support from international financial players which will provide funding, financial advice and monitoring.

BDG team manning the technology separating the gold from the ground.

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Banque de Developpement de Guinee (BDG) stands as a partner in this venture, working with the country’s administration and international financiers as a central, trusted presence in assessing, processing, and delivering financial advisory services to help take projects from blueprint to the building phase. As the only investment bank in the country – and one with a stated nation-building ethos – BDG’s expertise means investors can be confident their assets are secured whilst government, and the communities who work with it, will also see the difference. In January 2018, BDG was named by presidential decree as the only non-government member in the operating committee responsible for reviewing projects in the country with Chinese investment. China is now Africa’s largest supplier of foreign direct investment (FDI) and has already signed a $20 billion master loan agreement with Guinea in September 2017. BDG’S MISSION The bank is committed to adopting strict international standards and best practices, emphasising transparency, corporate governance, internal controls, and corporate social responsibility. It is also striving to be accredited to the World Bank, IFC, African Development Bank, and

Summer 2018 Issue

Grains of gold sifted by a machine washer.

Gold leaf bought by the bank.

Artisan miners dig for gold in Guinea's mining territory.

Women using hollowed-out pumpkins pan for gold the traditional way.

Concentrating in class: lessons at the school supported by BDG in Kankan.

Girls take a break outside one of the classrooms needing refurbishment.

other NGO’s such as Green Climate Fund, to be partners in financing – or to gain grants for projects in Guinea. BDG is close to completing its first green project – a solar energy plant – by bringing in a top Chinese partner which will establish further solar development over the coming years. BDG is also involved in an artisanal miner pilot project supporting the Ministry of Mines and Geology to improve operations and the livelihood of artisanal gold miners by installing a gold washing machine to streamline the extraction process, and splitting the gold recovered fairly with the miners.

Since BDG was founded it has moved in the same forward direction as Guinea. Over the last few years, the bank has gathered valuable information on priority projects, built a solid working relationship with different ministries and fostered robust connections with international investors, particularly those in China. Its management is confident the bank is now ready to accept challenges to bridge the gap between international investors and opportunities in Guinea to support the country’s socio-economic development. The ultimate goal of the bank is to find long-term strategic investors whose investment goal align CFI.co | Capital Finance International

with the national interest of the country and its people. IN SERVICE OF THE COMMUNITY BDG seeks a positive connection with the communities where it has its operations. In the gold-mining area of Kankan, it is working with the town’s secondary school to refurbish (roofless) classrooms, source new furniture, and repair the hand-pump used to draw water. With more than one thousand children aged five to fifteen, it is hoped that this modest helping hand is a small way to demonstrate the commitment to a country which has so much to offer. i 125

> CFI.co Meets the Banque de Développement de Guinée Management:

Banking for Nation-Building

uinea’s connection with world finance dates back to the 17th century when gold from the region was used to mint the first machine-formed gold coins in Great Britain, known as “guineas”.

Today, the country still possesses significant gold and diamond, bauxite, and iron ore reserves as well as abundant hydropower and agricultural resources. Yet, the republic remains one of the least developed countries in the world. The present administration is committed to ensuring the wealth of its natural resources is mobilised to improve its economy and infrastructure so its people can share the benefits and be alleviated from poverty. Banque de Developpement de Guinee (BDG) is playing its part in this endeavour. Since January 2018, it has been the only non-government member of the operating committee set up by the administration to review projects attracting Chinese investment.

Deputy MD Fatoumata Camara Toure & MD David Ng

Established in 2013 by a consortium of private shareholders in Hong Kong, BDG strives to bridge the gap between investors and opportunities in Guinea. It also commits to strict international standards and best practices, including corporate social responsibility. Managing Director David Ng brought 35 years’ experience as a senior banker in Hong Kong when he arrived in Conakry in February 2017. Mr Ng said: “We saw that there was a lack of investment banking services here and that many Chinese companies are interested in taking part in Guinean projects – especially after the signing of the $20 billion master loan agreement between China and Guinea in September 2017.” The first few years after set-up were mostly spent on acquiring information on priority projects for Guinea, building trust with government ministries – and bringing in the right talents. “Besides being a veteran banker myself, our deputy MD, Fatoumata Toure, is Guinean and had returned from the US to whole-heartedly dedicate herself to national development. From an elite family, she was educated in France and America, before building an impressive career with Citibank and PNB Bank. She is a vital element in our formula for success. Ms Toure was recently named vice president of the Guinean Professional Bankers’ Association. 126

CFO: Ken Looi

“My CFO, Ken Looi, is Malaysian Chinese and qualified as an accountant in Australia before working for KPMG and JP Morgan Chase ahead of setting up BDG four years ago. He is vice chairman of the Business Association of Malaysians in Guinea, members of which include alumni, graduates, and business professionals from Malaysia working in Guinea.” This team of executive directors is under strong leadership from the London based non-executive chairman, Andrew Chak, who previously advised CFI.co | Capital Finance International

the UK Treasury Department and has significant capital markets experience. A group of Hong Kong-based non-executive directors also offers valuable counsel. Mr Ng added: “We believe BDG has built a strong corporate spirit and is ready to accept challenges in helping Guinea attract interested and professional investors. Our ultimate goal is to find long term strategic investors whose goals are in line with the national interest of the country and its people.” i

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> Responsible Approach to Mining in Angola:

Diamond Mining Done Right

The Catoca mining company is the largest private employer in Angola with around 2,190 employees on its payroll and more than 1,500 workers holding jobs with subcontractors.

he company also generates more than 10,000 indirect jobs. In the diamond sector, Catoca is the largest tax contributor. Overall, the mining company’s tax bill is only surpassed by corporations in the oil and natural gas sector. As such, Catoca’s operations have a considerable social-economic impact on the Lunda Sul Province and the country as a whole. Catoca’s production levels are set annually by the company’s shareholders: Endiama (40.9%), Alrosa (40.9%) and Holding LLI BV (18.2%). In order to meet its targets, Catoca employs stateof-the-art technology of both Russian and South African origin – the two major players in the global diamond market.

"Catoca’s diamond production directly impacts Angola’s economy, and helps drive the country’s growth. The company is Angola’s largest diamond miner, responsible for up to 80% of the domestic output." Catoca’s diamond production directly impacts Angola’s economy, and helps drive the country’s growth. The company is Angola’s largest diamond miner, responsible for up to 80% of the domestic output.

Sergei Amelin, CEO: “The awards presented to Catoca are the fruit of the joint work with top management and all of Catoca workers.”

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The company is actively engaged in promoting the transfer of technology. To this end, Catoca liaises with other mining companies in order to help them gain access to modern mining methods and, thus, increase efficiencies and production volumes. Catoca displays a keen awareness of the company’s social responsibility in the areas where it operates, such as Saurimo, the capital city of the Lunda Sul Province. Here, a number a corporate social responsibility initiatives have been deployed to improve the social infrastructure in the surrounding towns and villages, to encourage sports, distribute meals, assist teachers, help further public health, and provide building materials, amongst others.

Summer 2018 Issue

SKILLS DEVELOPMENT Catoca’s human resources policy is geared towards local skills development. As a result, fully 95% of the workforce has been recruited in Angola while 85% of management jobs are held by Angolan professionals. Catoca maintains a comprehensive programme that aims to help its employees gain and develop valuable skills. The company also implemented a skills evaluation programme with a view to encouraging excellence and thus lay the foundations for future corporate growth. Catoca’s human resources policy has merited recognition from a number of non-profit entities and is consistently ranked as one of Angola’s best employers. Thanks to its highly qualified workforce, Catoca has managed to obtain and sustain outstanding longterm financial results. This also underpins a number of expansion projects. Catoca management considers skills development key to its business. In 2012, and less than sixteen months after the implementation of an integrated management system, Catoca was audited by SGS ICS Portugal which confirmed the company’s ISO9001 certification. The following year an internal audit was undertaken to evaluate the company’s management processes. This audit was, in turn, followed by a systems analysis undertaken by SGS ICS Portugal. As a result of its excellent performance, Catoca was awarded with the International Trophy for Quality in Paris, France. The company was also nominated for the International Award for Leadership in Image and Quality. Thanks to the implementation of the integrated management system, Catoca also received recognition from the Other Ways International Association in Rome, Italy. In 2015, the company was the first in Angola – and only the third in the world – to be ISO9001:2015 certified. In February 2015, the results were published of a number of prospecting initiatives developed by Catoca in its New Kimberlite concession area. Two deposits discovered by Catoca - the Luemba Project (Tchiuzo mine) and the Luele Project (Luaxe mine) – offer Angola the possibility of becoming the world’s largest diamond producer within six to seven years. The Luaxe mine is poised to overtake Catoca with reserves in excess of 230m tonnes of ore. THE ENVIRONMENT Over the years, Catoca has made significant investments in order to fully comply with environmental regulations and ensure waste products are properly processed, recycled, and/or disposed of. The company maintains facilities for the retreading of tires and the recycling and upgrading of used lubricants to ensure clean burns. A number of reports have also been produced, such as an environmental impact study and mine closure landscape recovery, water usage, environmental management, and waste management plans.

In 2016, work has started on a comprehensive internal emergency and environmental contingency plan. These initiatives aim to further improve corporate performance by mitigating and eliminating risk. CFI.co | Capital Finance International

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Catoca also works towards increased energy efficiency with a number of projects that will provide increased sustainability by tapping into renewable energy sources. Currently, Catoca already powers its operations with up to 45% of renewable energy, including power provided by the Rio Chicapa hydroelectric plant of which the company is a shareholder. In order to slash power costs, Catoca has invested in more energyefficient hardware. CORPORATE SOCIAL RESPONSIBILITY Mindful of its long-term corporate responsibilities, Catoca maintains a large prospection programme to locate new ore deposits and opportunities in Angola with ongoing explorations in the concession areas of Luaxe, Vulege, Gango, Quitubia, Tchiafua, Luangue, Luemba, Lapi, and Gambo. Corporate social responsibility (CSR) is divided in two segments: internal and external to the company. External CSR provides assistance to communities in close coordination with the provincial government of Lunda Sul. • Meals are supplied to primary schools, orphanages, and the paediatric ward of the provincial hospital in partnership with the Brilhante Foundation, the Saurimo Diocese, and provincial authorities. • Support for the Superior Polytechnic Institute of Lunda Sul and the Lueji A’Nkonde University. • Nutritional support for retirement homes. • Drinkwater supplies. • Support for local entrepreneurs. • Support for community gardens and agricultural cooperatives. • Maintenance of a mobile cinema unit. • Sponsoring of cultural initiatives such as theatre, dance, and literature. • Partnerships with local government such as the Economic Development Support Programme (PADES) which aims to increase the local production of foodstuffs and promote aquaculture and food security. Internal CSR deploys a number of initiatives to optimise the social conditions of the company’s employees and their families. Internal CSR initiatives directly and indirectly affects the lives of more than 10,000 people. • FUNCAT – the Catoca Pension Fund. • Healthcare – medical first aid station with a capacity to offer care to 200 people per day and public health and HIV programmes. • Healthcare insurance. • Life insurance. • Housing – the Mwono Waha Programme encourages home ownership in an purpose-built estate and with attractive financing options. • Mobility - automotive credit lines • Cash advances • Support for bereaved families • Professional development programmes and bursaries. Reaffirming its commitment to the improvement 130

of the social conditions in the region, Catoca also maintains its Vila Sagrada Esperança Programme which includes the building of 220 houses for company employees and, as such, contributes towards the lessening of the housing deficit in the provincial capital. QUALITY IS THE WATCHWORD THAT DRIVES THE MINING SOCIETY OF CATOCA (SMC) The implementation of an Integrated Quality System, which brought new dynamics to the company’s management and evaluation processes, has proven a major milestone. There has been global recognition of SMC’s adoption of International practice at management level, and of quality assurance in production standards. SMC remains committed to the development of a sustainable base for the growth of business to benefit. “The awards that have been presented to us in recent years are the result of close co-operation between top management, department heads, section heads and the faithful workforce, without CFI.co | Capital Finance International

which none of this would be possible,” says Sergei Amelin. The SIG (Sistema Integrado de Gestão Integrated Management System) was created as far back as 2011 to focus on implementing SMC’s Integrated Quality System and addressing environment, safety, occupational health and social responsibility targets. “(We created) a structure to manage the four certifiable standards. We now have the quality certified and recognised,” says Mr Amelin. “Others have noticed the work and dedication of the Catoca team in the drive for sustainable development.” FINAL CONSIDERATIONS Catoca is dedicated to continuously improve the operational efficiency of its mines and to optimise the performance of the company’s processing plants in order to control costs. The company also proactively pursues its prospecting mission in order increase output and help boost Angola’s economy. i

Summer 2018 Issue

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> InfraCredit:

Unlocking Long-Term Local Currency Financing for Infrastructure in Nigeria Infrastructure Credit Guarantee Company (InfraCredit) is an infrastructure credit enhancement facility established by the Nigeria Sovereign Investment Authority and GuarantCo – a member of the Private Infrastructure Development Group – to provide guarantees to enhance the credit quality of local currency debt instruments issued to finance eligible infrastructure assets in the country. The company has been accorded a AAA rating from both ratings agencies Agusto & Co and GCR, a first for a domestic local currency guarantor in Sub-Saharan Africa. InfraCredit is a commercial institution with a developmental role. The company commenced commercial operations in the second quarter of 2017 and is still within its first phase of corporate development.

hinua Azubike is the chief executive officer of InfraCredit. He has garnered over fifteen years’ experience in corporate/structured finance and debt capital market roles. Mr Azubike has a strong and practical know-how of domestic debt capital markets with a firm interest in market development, and has acted as a lead adviser in the establishment of key development finance institutions in Nigeria. He was the project lead responsible for the establishment of InfraCredit in 2016, and prior to this role, the managing director of Dunn Loren Merrifield Advisory Partners, a corporate finance advisory firm. He holds an Msc in Finance & Financial Law from University of London and studied law at the University of Lagos. He is currently the chairperson of the Regulation Consolidation Sub-Committee of FMDQ Debt Capital Market Development Project. InfraCredit's guarantees act as a catalyst to attract the investment interest from pension funds, insurance firms, and other long-term investors in infrastructure, thereby deepening the Nigerian debt capital markets with a new asset class. Within its first year of operation, InfraCredit successfully completed its maiden guarantee transaction by supporting a NGN 10.0bn 16.0% Series 1 senior guaranteed fixed rate bond due 2027 which was successfully issued by Viathan Group, an off-grid power developer. Sixteen institutional investors, including twelve pension funds and two insurance companies, invested NGN10.5 billion out of the total issue size of NGN10 billion translating to a 105% subscription, demonstrating strong investor confidence, diverse investor base, and market acceptance of InfraCredit’s AAA guarantee. This was also the first corporate infrastructure bond issued in the Nigerian debt capital markets with a tenor of ten years, extending the yield curve for corporate debt issuances, and creating a

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NGN510 billion and NGN810 billion in issue by 2021 and 2022 respectively. This translates to a projected compounded annual growth rate (CAGR) of 140% and average growth rate of 147% per annum compared to the sluggish growth of the corporate bond market. InfraCredit’s successful operation will address the constraints facing the Nigerian corporate bond and pension markets by creating a new asset class – corporate infrastructure bonds – and motivating the involvement of long-term investors. According to Mr Azubike, “the amount of infrastructure financing covered by the private sector could be more than doubled if countries harness the full potential of local capital markets.” In today’s environment, accelerating the development of domestic capital markets, particularly for local currency debt, is more crucial than ever.

CEO: Chinua Azubike

new long-term asset class to match the maturity structure of pension assets. Infrastructure is the foundational basis for advancing economic development, sustainability, job creation, and higher living standards in Africa; to sustainably finance the development of infrastructure, the domestic debt capital markets need to be relatively well developed. In Nigeria, corporate bonds currently make up about 3.6% of the bond market with FGN Bonds at 92.3% and state bonds at 4.1%. The outstanding value of corporate bonds decreased from NGN508 billion in December 2013 to NGN304.8 billion in May 2018. According to Mr Azubike, InfraCredit expects to have an aggregate guarantee portfolio in the form of corporate infrastructure bonds of CFI.co | Capital Finance International

According to According to the National Integrated Infrastructure Master Plan (NIIMP) an estimated $3 trillion is required to finance Nigeria’s infrastructure deficit over the next thirty years. Nigeria needs investments of $127bn over the next five years alone. InfraCredit’s mission is to successfully unlock the potential for long-term local currency infrastructure finance in Nigeria through innovative credit enhancement solutions on an evolving basis, creating value for all stakeholders. The company has successfully been able to achieve its key performance target during the initial phase of operations. Moreover, within its first year of commercial operations, the company has demonstrated financial resilience by turning profitable in Q1 2018 with a projection to achieve a full year of profitability by the close of the 2018 fiscal year. i

> PwC:

Nigerian Report on Ease of Doing Business

In 2016, the Nigerian economy was in a recession recording negative growth of 1.5%. This was mainly triggered by the fall in crude oil prices. There were also foreign exchange shortages and inflation which affected the growth of the services and manufacturing sectors. Central Bank of Nigeria’s (CBN) policies to protect the currency resulted in a decline of foreign direct investment (FDI) and foreign portfolio investment (FPI). These factors formed the catalyst for the government to diversify the economy by creating a business environment to attract investment.

n the 2018 World Bank Ease of Doing Business Report (Report), Nigeria was ranked 145 out of 190 economies, moving up 24 spots from the previous year. According to the report, Nigeria was one of the top-10 most improved economies and topthree improved Sub-Saharan countries, including Malawi and Zambia. Nigeria’s improvement in the Ease of Doing Business rankings did not happen overnight. The improvement can be traced directly to certain initiatives and policies introduced by the federal government’s Presidential Enabling Business Environment Council (PEBEC.) PEBEC was set up in July 2016 as an intergovernmental and inter-ministerial body. It is chaired by the vice-president of Nigeria and comprises ten ministers including the ministers of Industry, Trade and Investment, Power, Works and Housing, the head of the Civil Service of the Federation, the governor of the Central Bank of Nigeria, representatives of the Lagos and Kano State governments, the National Assembly, and the private sector. The Enabling Business Environment Secretariat (EBAS) is the vehicle through which PEBEC implements its policies. PEBEC’s core mandate was to improve the ease of doing business, specifically for micro, small and medium-sized enterprises (MSMEs) by removing bureaucratic burdens and administrative bottlenecks across government ministries, departments, and agencies (MDAs). At inception, PEBEC’s principal remit was to increase Nigeria’s Ease of Doing Business rankings 20 places. At the time, the country ranked 169th. One year later, PEBEC had already exceeded its goal. This is commendable, and kudos to PEBEC and the EBAS, but the critical question is whether this progress is sustainable? More importantly, in the highly competitive global environment, can Nigeria improve further on its ranking?

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"At the end of the 60 days, EBES recorded a 70% success rate on all reforms and subsequently a 100% rate of success after 90 days. Following the reforms, Nigeria’s ranking increased across board." WORLD BANK INDICATORS AND METHODOLOGY In determining the ranking of each economy, the World Bank analyses eleven indicators directly affecting business owners. Each indicator is analysed to determine economic outcomes and identify regulations or policies needed to improve the ease of doing business. The indicators are: starting a business, labour market regulations, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, trading across borders, paying taxes, enforcing contracts, and resolving insolvency. Economies are measured based on the ‘distance to frontier’ (DTF) methodology where each economy is given a DTF score and benchmarked against a ‘frontier’ economy which represents the best performed economy - the highest score being 100 and lowest zero. The overall ranking of the 190 economies is determined by sorting the aggregate DTF scores. NATIONAL ACTION PLAN 1.0 In February 2017, PEBEC introduced a 60day National Action Plan 1.0 to implement initiatives aimed at improving the ease of business specifically for MSMEs. The initiatives were implemented across eight indicators including seven of the World Bank indicators. CFI.co | Capital Finance International

The indicators are starting a business, obtaining construction permits, getting connected to the grid, registering property, access to credit facilities, paying taxes, trading across borders, and entry and exit of people. In May 2017, the federal government issued the Executive Order No. 001 of 2017 on the Promotion of Transparency and Efficiency in the Business Environment. The order is broken down into six major pillars: Transparency, Default Approvals, One Government Directive, Entry Experience of Visitors and Travelers, Port Operations, and Registration of Businesses. Some of the initiatives implemented by PEBEC under the National Action Plan 1.0 include: STARTING A BUSINESS Before now, the Corporate Affairs Commission (CAC) did not have a functional online / electronic platform for prospective business owners to register their businesses. This led to unnecessary queues and congestion at the CAC offices. In addition, the manual registration involved filing seven different forms. There was also a separate process of visiting the stamp duties office for assessment and payment of stamp duties. These challenges often resulted in undue delays, as much as six weeks, to register a company. The average time globally is about two days. PEBEC set an objective to make it possible to set up a business in 24 to 48 hours. To achieve this, the following measures were introduced: • Online name searches • Allowing online registration of businesses • Improving the reliability and user interface experience of the online portal • Reducing the forms from seven to one • Integrating the payment for stamp duties with the registration process

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100 90 80 70 60 50 40 30 20 10 0

Nigeria: ease of doing business, 2018.

Currently, the registration process has greatly improved such that it is now possible to register a business in four to five days.

NigeriaCONSTRUCTION – Ease of PERMITS Doing Business 2018

Before the reforms, it took at least 42 days to obtain construction permits. Some of the causes of delay included lack of an online platform to apply for permits, lack of clarity in the procedures, applicable fees, and qualification of professionals (architects and engineers) permitted to supervise construction activities. In addition, the criteria for obtaining waivers for soil and environmental impact assessment tests were not clear leading to uncertainty and failed applications. To address these challenges, major reforms were introduced in Lagos and Kano (the most populous states). In Lagos, the Lagos State Physical Planning Permit Authority (LASPPPA) introduced an online platform for applying, tracking, and paying for permits. Rules and procedures on applying for permits and relevant fees were published on LASPPPA’s website. Information on the appropriate qualifications, as well as the applicable laws relating to the qualifications, were published on LASPPPA’s website. To streamline the requirements on soil and EIA tests, soil tests were no longer required for construction below four-stories not being in marshy areas whilst EIA tests are no longer required for low scale construction. REGISTERING PROPERTY The procedure for registering titles to land was characterised by long delays in obtaining governor’s consent due to the large number of applications, multiple stages in the application process, as well as multiple fees paid by the applicants. There was also no effective complaints mechanism to pass on complaints to relevant authorities and the procedure for

conducting due diligence searches at the registry were unnecessarily cumbersome.

Act) and the Secured Transactions in Movable Assets (Collateral Registry) Act (STMA Act).

To remove these bottlenecks, powers to issue governor’s consent were delegated to specific commissioners. E-signatures were also introduced to replace the governors’ handwritten signatures. The process of registration was also streamlined and a single payment introduced to consolidate multiple payments. A Complaints Unit has been set up for applicants to direct any complaints to and the procedure for conducting searches has been made easier by removing the need for getting a sworn affidavit from the courts.

The CBS Act promotes access to accurate and reliable credit information for creditors to rely on in granting loans to MSME. Under the act, credit bureaus can issue credit ratings of borrowers to banks and other creditors who then have sufficient information before granting loans.

Similar to Lagos, Kano now publishes the list of documents, fee schedule, and service standards for property transactions making the land registration process more transparent. CONNECTION TO GRID Before the reforms, there were nine steps to getting connected to the grid. On average, it took almost 200 days to get connected to the grid. However, to improve the process, the Nigerian Electricity Regulatory Commission (NERC) – the regulatory agency – issued draft orders reducing the steps from nine to five and the number of days to 61. ACCESS TO CREDIT Nigeria ranked sixth overall for access to credit and was one of four Sub-Saharan African (SSA) countries ranked top 10 in this area. Before the reforms, MSMEs encountered considerable difficulty in obtaining loans for their operations due to insufficient information and creditors’ reluctance to accept moveable assets as collateral. In addressing these challenges the National Assembly (the federal legislative arm) enacted two laws – the Credit Bureau Services Act (CBS CFI.co | Capital Finance International

Two of the primary objectives of the STMA Act are to improve lending to MSMEs and facilitate assess to credit secured by movable assets. The act provides the framework for MSMEs to register, in the National Collateral Registry, movable assets used as collateral. The web based register allows creditors carry out due diligence searches on collateral by providing creditors with sufficient information to assess any security interests registered on collateral to help them determine loan terms and conditions. TRADING ACROSS BORDERS Many of the goods imported into Nigeria are brought in through the ports in Lagos, particularly Apapa and Tincan. Before the reforms, goods were imported into Nigeria without being properly packaged in pallets and manifests were not available. This caused disorder at the ports as cargoes were not properly packaged and it became almost impossible to determine the arrival of cargo. Because of this, importers made screening arrangements by themselves without going through the Nigerian Customs Service (NCS.) This created more confusion and opportunities for bribery and rent seeking. Documentation requirements were also onerous. Sometime in 2017 and January 2018 respectively, the Revised Import Guidelines, Procedures, 135

and Documentation Requirements under the Destination Inspection Scheme (Guidelines) were revised and then an addendum was added to the guidelines. Amongst other things, the guidelines now mandate all containerised cargo to be palletised, the Combined Certificate of Value and Origin has now been replaced with a single Certificate of Origin, and the NCS is now responsible for scheduling and coordinating the Mandatory Joint Examinations to ensure there is a single point of contact between importers and other regulators / officials. The documentation has also been reduced from ten to seven (in the case of exports) and fourteen to eight (in the case of imports). ENTRY AND EXIT OF PEOPLE Travelers were often faced with filing multiple entry and exit forms, had their luggage subjected to manual searches, uncertainty in the rules for obtaining visa on arrival, infrastructure deficit at airports and their environs, as well as inordinate delays in issuance of visas at Nigerian missions. PEBEC reforms to address these challenges include consolidating arrival and departure forms, simplifying the rules and procedures for obtaining visas on arrival, eliminating manual searches of luggage, and imposing a 48-hour timeline for issuance of visas by Nigerian missions abroad. Business visas are now issued to expatriates where a temporary work permit would have otherwise been required. The Nigerian Immigration Service (NIS) also decentralised the passport re-issuance process by allowing state commands to re-issue passports instead of only at its headquarters in the Federal Capital Territory (FCT) Abuja. A total of 28 new residence permit production centres have also been opened across state commands. Previously, three state 136

commands shared a zonal production centre, often causing delays and backlogs. NIGERIA’S PROGRESS At the end of the 60 days, EBES recorded a 70% success rate on all reforms and subsequently a 100% rate of success after 90 days. Following the reforms, Nigeria’s ranking increased across board. NATIONAL ACTION PLANS 2.0 AND 3.0 Due to the success of the reforms, PEBEC implemented National Action Plans 2.0 and 3.0. Under 2.0 (October – December 2017), PEBEC introduced even more initiatives to these areas as well as three additional areas (enforcing contracts, selling to government, and trading within Nigeria) to consolidate the reforms and progress made under the 1.0 Plan. Some of the new initiatives include: ENFORCING CONTRACTS PEBEC resolved to reduce the time taken to resolve cases related to commercial contracts by training magistrates to handle commercial cases. Recently, the Lagos State government introduced the Small Claims Court under the Magistrates’ Court Law (Practice Directions on Small Claims) where magistrates have jurisdiction to hear commercial cases of claims not exceeding N5 million (c. $16,400). These courts provide easy access to an inexpensive and speedy resolution of debt recovery disputes. It is expected that other states would set up similar courts. SELLING TO THE GOVERNMENT The Bureau of Public Procurement (BPP), the agency responsible for monitoring and the procurements by the federal government, has various procedures to encourage transparency CFI.co | Capital Finance International

in the public sector. These procedures are often burdensome for MSMEs. In view of this, PEBEC resolved that simplified processes should be introduced for MSMEs. Many MDAs are now issuing simplified procedures for smaller businesses. TRADING WITHIN NIGERIA To encourage the easy movement of goods and people across Nigeria, PEBEC resolved that all illegal roadblocks be removed from all roads across the country. In September 2017, the Nigerian Police Force ordered the immediate removal of roadblocks in all states. This is not the first time government has ordered a removal of roadblocks. However, it appears that many roadblocks have now indeed been removed. Before, the trademark registry had a backlog of marks yet to be registered. The registry has now been directed to clear all backlogs and then publish over 30,000 outstanding marks. In February 2018, the government introduced National Action Plan 3.0 to implement more reforms within a 60-day period. About 27 government agencies were involved in implementing the reforms. Some of the major reforms include: Introducing an online feedback platform where businesses can give feedback to PEBEC. This would allow government to receive real time and direct feedback on the effectiveness of the reforms. • Setting up PEBEC secretariats in each state to allow effective monitoring of reforms. • Enacting an Omnibus Bill to give legislative effect and force of law to executive orders as well as other initiatives.

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• Creating airport concessions starting from the major airports – Lagos, Abuja, Port Harcourt. TOP TEN ECONOMIES OF AFRICA Whilst Nigeria was one of the top-ten most improved economies, it remains outside the top 10 economies in SSA. Currently, it sits at number 22 in Africa. The top 10 SSA economies are:

in the time required to pay tax, to 360 hours), businesses still bear the burden of multiple taxes from different tiers of government and multiple agencies. On the average, businesses are exposed to about 21 different type of taxes. This remains a huge impediment to the ease of doing business.

Even though Nigeria made notable progress in the 2018 rankings, there is still scope for improvement when compared with Africa’s top-ranked economy – Mauritius. To close the gap, Nigeria would require at least an annual investment of $100-$120 billion over the next three years (2018-2020). Based on a PwC study on the sub-national business environment in Nigeria, land availability and security, and tax harmonization remain the top challenges to doing business at the state level.

CONCLUSION Government efforts have proved effective given the results contained in the report. However, other critical areas are insecurity, multiple taxation, outdated labour laws, and a lackadaisical civil service. There is also the pressure on different state governments to raise their internally generated revenue. In some cases this has resulted in policies that were not perceived as being business friendly. For example the Lagos State Government introduced a new Land Use Charge Law which effectively increased the duties paid by businesses and individuals. Many taxpayers kicked against this. On a more positive note, the senate recently passed a bill to enact a new Companies and Allied Matters Act. The act gives many of the reforms statutory effect and introduces the Limited Liability Partnerships and Limited Partnerships as additional entities to be relied on by businesses. Other welcome reforms to increase the ease of doing business would be amendments to the Land Use Act and other outdated tax and commercial laws. i

In 2018, Nigeria improved eleven steps (from 182 – 171) on the 2018 Paying Tax Report rankings. Whilst reforms were made to paying taxes, requiring taxpayers to pay tax at the nearest tax office and enforcing use of the centralised electronic payment system (which resulted in a reduction, by 69 hours

ABOUT THE AUTHOR Folajimi Olamide Akinla is a Manager and Tax Lawyer in PwC Nigeria’s Tax & Regulatory Services unit. He writes regularly on topical legal and tax matters. His core interests are resolving complex legal and tax problems, advising on tax policy and private wealth matters.

1. Mauritius (25) 2. Rwanda (41) 3. Kenya (80) 4. Botswana (81) 5. South Africa (82) 6. Zambia (82) 7. Seychelles (95) 8. Lesotho (104) 9. Namiba (106) 10. Malawi (110)

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He is a member of the Ministerial Committee on the Voluntary Asset and Income Declaration Scheme (VAIDS), Nigeria’s first full scale tax amnesty. Before joining PwC, he worked in a law firm renowned for its dispute resolution practice. He is an alumnus of Queen Mary, University of London (LLM, Tax Law) and the University of Lagos (LLB). ABOUT PwC PwC Nigeria is one of the leading professional services firms in Nigeria with offices in Lagos, Abuja and Port Harcourt, over 1,000 staff and 31 resident partners.

"We are committed to serving as a force for integrity, good sense and wise solutions to the problems facing businesses and the capital markets. We are guided by one promise – to do what is right, be it with our people, clients, community, or environment."

Author: Folajimi Olamide Akinla

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> Middle East

Saudi Arabia: A Blueprint for the Kingdom’s Future Build it and they will come. On that thought, Crown Prince Mohammed bin Salman of Saudi Arabia last October unveiled a grand plan to erect a megacity straddling three countries. Neom, in the far north-western corner of the kingdom is to become the crowning achievement of the prince’s Saudi Vision 2030 initiative – first defined in 2016 – which aims to reduce the kingdom’s dependency on oil. Prince Mohammed announced that he will personally take charge of the planning and construction of the city which, in about a dozen years, is expected to contribute upwards of $100bn annually to the country’s economic output (GDP). The first building contracts – for a district of palaces to house the royal family – have already been assigned, underscoring the urgency to get the project underway.

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eom is expected to require some $500bn to build. The Saudi government is ready to provide about half that sum with the remainder sourced from overseas investors. According to Klaus-Christian Kleinfeld, the former CEO of Siemens and Alcoa who was appointed project director, Neom has sparked “massive interest” from foreign investors. “The crown prince is determined to remove all legal and bureaucratic obstacles that could deter business. He has specifically asked for a regulatory framework to be drawn up that is both investor-friendly and future-proof.” Mr Kleinfeld noted that his office has received an encouraging number of inquiries from companies that are interested in sandboxing their advanced technology in a purpose-built environment without legacy issues. “Neom offers a blueprint of the future; a place that will invite and reward innovation, and a playground for businesses seeking to push the technological envelope.” Though Prince Mohammed has put the full weight of Saudi Arabia’s $230bn sovereign wealth fund (Public Investment Fund) behind the project, officials hope to bankroll Neom mainly with the proceeds of the privatisation programme, including the sale of a 5% stake in Saudi Aramco. The divestments are slated to raise at least $300bn over the coming few years. Neom dwarfs King Abdullah Economic City (KAEC) on the shores of the Red Sea which is still taking shape and now looks rather small by comparison. So far, KAEC has struggled to attract investors and boasts only 7,000 or so inhabitants despite being set up as a freehold city with more social and personal freedom than enjoyed elsewhere in the kingdom. Including a range of light manufacturing districts and facilities, and anchored on a deep water seaport, KAEC is running behind schedule. Designed as a logistics and manufacturing hub, the brand new city experiences difficulties in finding its economic role and has so far welcomed only about thirty foreign companies to its industrial districts with a similar number mulling a move there. KAEC port is, however, doing much better, registering a 20% increase in container traffic last year. The port handled 1.7m 20ft equivalent units in 2017. KAEC officials expect their city to benefit from the pick-up in economic activity once the building of Neom starts in earnest.

"The crown prince is determined to remove all legal and bureaucratic obstacles that could deter business. He has specifically asked for a regulatory framework to be drawn up that is both investor-friendly and future-proof." Off the record, Saudi officials admit that the concept behind KAEC may have contained a few flaws. These are now being addressed and used to give Neom a more solid footing. In the desert, nothing goes to waste: those times are gone. Saudi Vision 2030 is meant to take the state out of the economy, or at least significantly reduce its dominant role, and thus increase efficiency and productivity. It aims to do so by creating almost half a million jobs in the private sector by 2020 and reduce unemployment to 9%. Most of the jobs will not necessarily be new but transferred to the private sector as the sell-off of state enterprises continues. Though past attempts at diversifying the economy of the kingdom have met with various degrees of success, Prince Mohammed has repeatedly indicated that his Vision 2030 masterplan is, in fact, the blueprint of the kingdom’s future. Finance minister Mohammed al-Jadaan assures that the government has indeed learned from its past mistakes and will adjust its plane accordingly: “I am confident and see momentum building up, and results coming in.” Interestingly, Neom will become an autonomous entity within the kingdom with more liberal laws. The idea is not just to create a megacity from scratch, but to recreate a Hong Kong-like enclave in the desert. Some 26,500km2 of land – including pristine beaches along the Aqaba Gulf and towering mountains of the Madiyan

Range – has been set aside in Saudi Arabia for the city. Neom will also include parts of southern Jordan and be linked by a causeway and bridge to Egypt’s Sinai peninsula. Prince Mohammed understands that in order to maintain and expand the kingdom’s prosperity, he needs to cash its demographic dividend. An estimated 51% of Saudi Arabia’s more than 33 million inhabitants is 25 or younger. With cushy government jobs no longer as readily available as before, the country’s young adults need jobs. Should the prince’s far-reaching reforms continue to bear fruit, more women will enter the workforce as well. According to Tom Rogers, associate director at Oxford Economics, Neom may well signal a turning point and the driver of both societal and economic change: “Foreign investors may want to take note and let go of their reluctance to commit funds to non-oil projects. Saudi Arabia enjoys a number of key strengths such as a low level of public debt and a relatively stable political and social environment. These metrics are particularly relevant to infrastructure investors.” Saudi attitudes to foreign investment are changing as well although this has so far not resulted in increased inward FDI flows. The reforms introduced by Prince Mohammad caused many investors to adopt a waitand-see approach. Jane Kinninmont of the Chatham House Middle East and North Africa Programme suspects that the radical changes to the kingdom’s domestic policies and agenda implemented by the crown prince may have introduced a degree of uncertainty: “Whilst there exists a general recognition that the status quo was unsustainable, investors typically react with caution to change. Once the reforms have been consolidated, investors will return to the kingdom.” The size and scope of Neom represent a veritable treasure trove of opportunities that cut across nearly all economic sectors. The city is not only to become a hub of innovation laid out to accommodate driverless vehicles and G5 mobile internet, it also plans to attract vast numbers of tourists to its beaches, academics to new universities, and professionals of all sorts to drive its businesses. If any project has the capacity to drive Saudi Arabia’s economic development in a post-oil world, and thus ensure the kingdom’s future, Neom is likely it. i

"The size and scope of Neom represent a veritable treasure trove of opportunities that cut across nearly all economic sectors. The city is not only to become of hub of innovation laid out to accommodate driverless vehicles and G5 mobile internet, it also plans to attract vast numbers of tourists to its beaches, academics to new universities, and professionals of all sorts to drive its businesses." 140

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Summer 2018 Issue

> UAE Banking:

Credit Growth Warranted By Guy Wall

Business loan application success is often boosted by an independent financial review in support of a better understanding of future cash flow.

he release of the Central Bank of the United Arab Emirates (CBUAE) Financial Stability Report (FSR) (or stress test as it is known) on 21 May 2018 provides an excellent opportunity to assess the current state and effectiveness of the UAE banking market and options being taken up by its participants. The annual FSR reviews the general condition of the UAE banking position, identifying and assessing major risks to the system, suggesting market or policy changes to address concerns, and providing a good perspective on how financial risks may be changing over time. The 2017 stress test shows a resilient UAE banking system describing macroeconomic and financial market conditions in the UAE as remaining stable against a background of improving global and domestic economic growth and business activity, and amid strengthening credit quality and â&#x20AC;&#x153;ample liquidity and confidence in the UAE financial system.â&#x20AC;? The improved performance can be attributed to strengthening oil prices, stable funding, a wellcapitalised UAE banking sector, coupled with an increasingly diversified and export oriented economy which has driven non-oil GDP growth. Sluggish credit growth however, has meant that the improved economic conditions have not led to a credit expansion, particularly affecting the retail and small business sectors, with the financial cycle and real estate prices remaining in a contractionary phase. Lending growth showed a marked slowdown to 1.7% during the year compared to 6% in 2016. The slowdown came as non-performing loans rose, reaching 4.6% for the retail sector in 2017, up from 3.8% in 2016.

"On one hand, lenders simply did not have enough applications, while on the other, lenders remain cautious of taking risk." So how can we facilitate increased lending from the improved economic conditions? Our broad range of banking clients, although optimistic, still operate under well structured and strict lending criteria for the SME space within the UAE. When asked why they were not lending to the extent that they preferred, the responses were mixed.

In conclusion, to facilitate continued growth in the UAE, a genuine improvement needs to occur on both the side of lenders and borrowers. Loan applicants need to approach their banks with a stronger understanding and more robust documentation of their company, whilst banks need to work more closely with their customers to provide viable solutions that lead to higher loan application successes. i ABOUT THE AUTHOR Guy Wall Leads the Restructuring and Insolvency practice for Grant Thornton UAE and provides liquidation and restructuring services for companies in the UAE. Guy has more than a decade of professional experience with the Big Four and boutique restructuring and insolvency firms, including Deloitte Australia. He is CPA from Charles Sturt University.

On one hand, lenders simply did not have enough applications, while on the other, lenders remain cautious of taking risk, particularly when a client submits inadequately prepared financial statements which indicates a weak understanding of their own policies and ability to stay cash flow positive. Our experience suggests that banks would like to see increased lending but would also like greater certainty surrounding the policies and procedures enacted by their applicants to ensure they have a greater ability for repayment. In conjunction with numerous banks, we have found that by engaging a third-party to perform a light independent lending review of the companyâ&#x20AC;&#x2122;s financials, a greater understanding is had by both the bank and the customer.

Author: Guy Wall

"Loan applicants need to approach their banks with a stronger understanding and more robust documentation of their company, whilst banks need to work more closely with their customers to provide viable solutions that lead to higher loan application successes." CFI.co | Capital Finance International

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> Abu Dhabi Aviation:

Global Reach Powered by Operational Excellence

bu Dhabi Aviation (ADA) provides aviation offshore oil support and other services worldwide and in particular for the Emirate of Abu Dhabi’s oil and gas production companies. The company also provides VVIP passenger services, search & rescue for the United Arab Emirates (UAE) and neighbouring borders, crop spraying, aerial construction, seismic support, firefighting in Europe, and third party maintenance support. ADA is the largest commercial helicopter operator in the Middle East and North Africa and currently operates a fleet of 61 aircraft, 57 helicopters -

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comprising AgustaWestland AW139, AW109, Bell 412, Bell 212 models – and 4 Bombardier Dash-8 series turboprop transport aircraft. ADA employs a staff of over one thousand, including more than 150 pilots and 283 engineers/ technicians for its operations. Key elements in all the company’s decisionmaking and operational processes are its quality and safety management philosophy and systems. ADA has held the prestigious Helicopter Association International’s Platinum Award of Safety since 2006. The company exceeded one million helicopter flight hours with an enviable CFI.co | Capital Finance International

safety record – especially given the extremely high number of offshore takeoffs and landings: each offshore helicopter averages seven cycles per hour. This level of activity demands the highest caliber of flight and maintenance crews supported by a noteworthy quality assurance and training regime. ADA was selected as the Best Offshore Aviation Support Middle East by Capital Finance International. ADA continues to build on its reputation as a specialist aircraft maintenance company servicing both helicopters and fixed wing aircraft, both in-house and as a significant provider of

Summer 2018 Issue

Arabia (GACA), and the International Standards Organisation ISO 9001:2000. The company also secures maintenance authority from a number of regional aviation regulatory agencies when required.

Amongst the many other advantages of having a fleet of heavy-jet transport aircraft available within the Abu Dhabi Aviation operating group, the acquisition also provides ADA with the ability to position its helicopters around the world.

As well as its important maintenance work, ADA continues to provide a number of humanitarian and support services on a year-round basis. These include aerial application missions, aid relief support in disaster areas, including medical evacuation when required. ADA worked with the Saudi Red Crescent Authority (SRCA) for six years, providing helicopter emergency medical services (HEMS) which covered Jeddah and Mecca throughout the year, including the Ramadan period and Hajj, deploying seven helicopters.

Abu Dhabi Aviation has built its own simulator, which covers the training needs of all of its clients in the UAE and the wider MENA Region. Clients in the Middle East will be able use this training facility instead of going to Europe for training. To expand this business, Abu Dhabi Aviation has constructed a separate state-of-the-art building to house and operate its flight simulator and will develop this infrastructure further with a view to becoming an international hub for helicopter training. This would help build a different platform, type ratings on different aircraft, and allow manufacturers to use the simulator and enable them to cater to their clients.

ADA has supported, and continues to support, on- and offshore oil production and mining exploration in Ethiopia, India, Brazil, Indonesia, Madagascar, and Papua New Guinea in addition to its ongoing operations in the wider Middle East region. Contract negotiations are well under way for expansion into the South American and Far Eastern markets. Additionally, ADA expects even more growth to come from the expansion of the company’s maintenance, repair, and overhaul activities.

third party maintenance services. The company has fixed and rotary wing contracts for heavy maintenance and the modification of some of the region’s largest helicopter fleets, as well as a number of maintenance support contracts with the UAE armed forces.

The company has continued to expand its business into other markets as well. It is a 50% equity holder in a VVIP jet company, Royal Jet (www.royaljet.ae) which is the award-winning world’s largest commercial operator of Boeing Business Jets (BBJ). In addition to its BBJ fleet, Royal Jet operates a varied fleet of other business jet aircraft (Falcon / Challenger / Gulfstream), to suit the requirements of its elite clientele.

In addition to its UAE civil aviation authorizations, ADA also holds international maintenance and quality certifications from prestigious regulatory authorities, such as the European Aviation Safety Authority 145 (EASA), Federal Aviation Administration of the United States of America (FAA), Presidency of Civil Aviation of Saudi

Another growth area for Abu Dhabi Aviation is the specialised heavy-jet air cargo market. In 2008, ADA acquired a medium-size company based in Abu Dhabi that specialises in global cargo operations, Maximus Air Cargo (www. maximusaircargo.ae). Since then ADA has obtained full ownership of the company. CFI.co | Capital Finance International

Some of the elements comprising ADA’s success flow from its corporate vision: one team propelling ADA safely and profitably into the future. The company values include safety and quality, customer focus, teamwork, integrity, and ethics. These guiding values, which the management and employees developed together, enable the company to capitalise upon its strengths. • Group total assets – $1,306m. • Management depth – Forty years corporate experience and diverse executive and management skills. • People depth – An international staff supported by sophisticated training regimes. • Systems depth – Mature safety and quality systems, mature maintenance management systems, mature operational management systems, and mature logistics and spares systems. These and many other factors contribute to providing ADA’s valued customers and partners with the security of an established and growing organisation that is continuously reinventing itself to meet the demands of the market and its own corporate objectives. i 143

> Image Nation:

Middle Eastern Media Powerhouse

ince winning the 2016 CFI.co Corporate Leadership Award, Image Nation Abu Dhabi – one of the leading media and entertainment companies in the Middle East – has shown no sign of slowing down.

Under the continued guidance of Chairman (HE) Mohamed Al Mubarak and CEO Michael Garin, the company has continued to propel the growth of the sector whilst adhering to its commitment 144

to build a high quality and sustainable media industry in the region. By pioneering multiple local film and television productions and creating ground-breaking international and regional partnerships, Image Nation has helped to accelerate the exciting new media developments in both in the UAE and Saudi Arabia.

viewers around the globe have come to expect. Image Nation invested heavily in the pioneering production – hiring over seventy regional filmmakers and a cast of over 1,500 actors and extras – fulfilling its mandate to provide jobs and opportunities for professional development in the region.

In 2017, Image Nation released its landmark TV series – Qalb al Adala (Justice) - the region’s first legal drama series, which met the high standards

Image Nation’s film Zinzana, directed by Majid Al Ansari, was the first Arabic-language film to be acquired by Netflix. Variety named Mr Al Ansari

CFI.co | Capital Finance International

Summer 2018 Issue

the Arabic Filmmaker of the Year, calling Zinana ‘a dazzling thriller’. Since winning this accolade, Mr Al Ansari has been named as the director of HWJN, a feature film based on the best-selling Saudi novel and co-produced by Image Nation and MBC. Dystopian thriller The Worthy, directed by Ali Mostafa, had its world premiere at the prestigious BFI London Film Festival and was the first Arabic film to be released in cinemas in 4DX. Like many Image Nation productions, the global release of The Worthy was a valuable channel for the UAE’s public diplomacy, demonstrating the nation’s ability to create original and high-quality content that attracts international audiences. Image Nation has completed production of three ambitious feature films shot on location in the UAE and Oman: • On Borrowed Time, a comedy directed by Iraqi Yasir Al Yasri, which premiered at Palm Spring International Film Festival in January 2018 to rave reviews followed by sold out screenings across North America; • Scales, a mermaid fantasy from Saudi director Shahad Ameen; and Rashid; and • Rajab, a body switch comedy from famed Freej creator Mohammed Saeed Harib that will premiere later this year. Image Nation’s documentary division, established in 2012, continues to create content that supports the UAE’s efforts to develop its civil society – supporting important issues including women’s education, polio eradication, and autism awareness. In 2018, Image Nation partnered with the Environment Agency Abu Dhabi (EAD) to create Back to the Wild, a 30-minute documentary about the scimitarhorned Oryx – extinct in the wild – which the EAD is now reintroducing back into the Chadian wilderness. Having premiered in Abu Dhabi, the series will be screened around the world in support of the EAD’s diplomacy outreach for the Oryx programme.

Premeiere: The Worthy

"Quest Arabiya, Image Nation’s first Arabiclanguage factual entertainment TV channel, has continued its mandate to provide highquality television content telling stories about the region, for the region." CFI.co | Capital Finance International

Quest Arabiya, Image Nation’s first Arabiclanguage factual entertainment TV channel, has continued its mandate to provide high-quality television content telling stories about the region, for the region. Since launching in 2015, the channel has climbed up the ratings and is now the top-13 rated channel in the region. The channel has invested in producing regional content, creating long and short-form series for MENA audiences and their core markets in the UAE & KSA. Following the channel’s first action/adventure series Nabd Al Noghamar (Pulse of Adventure), Quest Arabiya launched Etlaa Baraa (Get Out) – a weekly outdoor and adventure magazine show hosted by up-andcoming Emirati TV presenter Ali Al-Khaja and his Saudi co-host Areej Al-Abdullah. Continuing its investment in original programming, Quest will 145

AFS young filmmakers

Qalb Adala

Behind the Scenes: On Borrowed Time

CICC: Image Nation Partnership

broadcast a brand-new slate of Arabic shows starring regional talent later this year. In addition to investments in production and development, Image Nation continues to devote time and expertise to building talent in the region. The company’s award-winning training and development programme, Arab Film Studio now in its sixth year, trains narrative and documentary filmmakers, scriptwriters, and high school students. Since its launch in 2012, the programme has seen its films selected by more than 200 international film festivals winning numerous awards and accolades along the way. In December 2015 the UAE and China announced a $10 billion strategic investment fund followed by a pioneering strategic partnership between Image Nation and China International Communication Center (CICC), marking a new breakthrough in cultural cooperation between China and the UAE. The partnership agreed to train and develop up-and146

coming media talent; launched a new Arabiclanguage Silk Road television series now seen in all 22 Arab countries; and co- produced Dan Gilroy’s Roman J Israel Esq. which earned an Academy Award nomination for best lead actor, Denzel Washington. Earlier this year, Image Nation announced two additional international partnerships. In January, the company joined with Stuart Ford, IM Global’s founder, in the creation of AGC Studios, Mr Ford’s new film, television, and licensing company. The company represented the biggest film at this year’s Cannes International Film Festival, Roland Emmerich’s WWII action feature Midway, starring Woody Harrelson and Mandy Moore. In spring of this year, Image Nation formed a strategic partnership with Futurism – one of the web's leading science and technology publications. Under the new partnership, Image Nation and Futurism are set to develop and CFI.co | Capital Finance International

produce feature films and documentaries, along with scripted and unscripted television series. With Saudi Arabia focusing its sight on building a media and entertainment industry, and the historic opening of cinemas in the country, Image Nation is joining forces with leading organisations in the kingdom to build a sustainable film industry for the region. This effort is well underway with the completion of a major production deal with MBC, the largest private media company in the Middle East and North Africa, to co-finance and co-produce a slate of Saudi films and television series for local, regional, and international audiences. And more such partnerships are expected soon. As the GCC launches itself onto the main stage as a media and cultural hub, Image Nation continues to be one of the major players in the region and will certainly be the one to watch as the industry continues to take shape. i

Summer 2018 Issue

> CFI.co Meets the CEO of Al-Maidan Dental Clinic:

Yousef Al Sarraf

graduate of the University of South Carolina Business School, class of 1996, Yousef Al Sarraf is a people’s person. Naturally inspiring, Mr Al Sarraf brings out the best in all and knows how to spot talent too. Armed with his degree in Business Administration, a specialisation in human resources followed at the Institute for Human Resources Management Education (IHRME) where he followed numerous courses ending in the top five percentile of his class. Returning to Kuwait, his home country, Yousef Al Sarraf was engaged by the Human Investment Corporation to help screen professionals for top positions in the private sector. The candidates he selected after careful examination of their credentials unfailingly found rewarding careers in the financial services sector and other industries, cementing his reputation as an excellent HR manager. Moving to Wataniya Telecom (NMTC) in 1999 as a HR generalist and process improvement supervisor, Mr Al Sarraf was instrumental in the development and implementation of systems and programmes for identifying and forecasting staffing needs. Whilst at the telecom provider, Mr Al Sarraf was also put in charge of preparing the company’s budget for training and staff development. Additionally, he was responsible for producing periodic overviews and evaluations of existing training and staff development programmes and initiatives and measure their outcomes against company expectations. Finally, Mr Al Sarraf implemented a comprehensive performance management system which ensured that all employees have access to a personal development plan and have their performance assessed in a consistent manner. CEO: Yousef Al Sarraf

As CEO of Kuwait’s renowned Al-Maidan Dental Clinic, Yousef Al Sarraf is able to fully deploy his expertise in the management of high-growth businesses. The company, a countrywide network of seven dental clinics with associated labs and state-of-the-art workshops, is both unique and revolutionary as it provides world class oral health services to both Kuwaitis and patients from abroad who seek excellence, convenience, and access to the most experienced and welltrained dental professionals in the business. “Al-Maidan Dental Clinic sets itself apart from others by providing an iron-clad warranty on all of our work. In other words: we have the fullest confidence in the quality of our dental work and will fully stand by it. There is currently no other dental clinic that gives a guarantee on its

work. Patients in Kuwait are often subjected to extensive and expensive dental treatments at private clinics that refuse to compete on quality. Al-Maidan Dental Clinic is firmly established on the other end of the spectrum and, in fact, does a lot of remedial work for customers who were disappointed elsewhere.” Mr Al Sarraf is adamant: “We can only compete on the quality of work delivered consistently and without fail by our dental physicians. We make a lot of people smile. In fact, we’ve successfully completed well over six million treatments. Thanks to our reputation for excellence, AlMaidan Dental Clinic welcomes a growing number of customers from outside Kuwait. That has prompted us to expand internationally and CFI.co | Capital Finance International

establish a number of clinics throughout the GCC Region. This way, Al-Maidan can come to its customers instead of the other way round. It adds convenience and allows customers elsewhere to enjoy the same benefits as those enjoyed by Kuwaitis.” Mr Al Sarraf emphasises that Al-Maidan Dental Clinic maintains a number of corporate responsibility initiatives as well. The clinic’s fully-equipped mobile dental clinic travels the country to visit, and offer its services, to remote communities where they may not have the means to visit any of Al-Maidan’s main clinics. Moreover, the company is heavily engaged in campaigns to promote public awareness about the importance of maintaining oral health. i 147

> Al-Maidan Dental Clinic:

Excellence in Dental Care In 1987, a small group of Kuwaiti dentists pioneered the first private dental practice to provide the best possible dental services available anywhere in Kuwait and the wider GCC region.

harq, a prime business area in Kuwait City, was chosen as the location for the first-ever Al-Maidan centre. It was equipped with the latest technology and materials, and staffed with a professional team of dentists and technicians to provide customers with a worry-free experience. The expansion plan continued and Al-Maidan Dental Clinic successfully established six major centres to cover all Kuwait’s governorates. In fact, its services continue to be based on providing value and quality to the community. Only at AlMaidan, dentistry is an art to assure healthier teeth and a brighter smile. From the moment customers step into any of the clinics throughout Kuwait, they will experience a sense of confidence and assurance in Al-Maidan’s diagnostic techniques and treatments, a relaxing luxurious atmosphere in spacious clinics along with the welcoming and friendly attitude from the professional medical and nursing team. Treatments are carried out on a consistent high level of quality throughout. Al-Maidan is able to cater to all dental requests and needs, from simple routine check-ups and oral hygiene to more complex treatments. Al-Maidan Clinic is proud of its mission to provide the best oral health care in Kuwait at the most competitive prices for the entire family, and is also proud of the fact that Al-Maidan Dental Clinic continues to be the leader in its field. Since 1987, the clinic’s mission has combined affordability, certification, and educational awareness in one

"Al-Maidan is able to cater to all dental requests and needs, from simple routine check-ups and oral hygiene to more complex treatments." exceptional organisation, which is based on its team of outstanding professional dentists and technical people who remain the cornerstone of its continued success. The Al-Maidan Dental Clinic for Oral Services was listed at Kuwait Stock Exchange in October 2008 with a capital of 25 million Kuwaiti dinars. TREATMENT GUARANTEE Based upon the trust inspired by experience, Al-Maidan is chosen by more than one million patients from all over Kuwait to be their first and preferred dental services provider. The clinic’s doctors, nurses, technicians and other staff enjoy a solid reputation for their professionalism. To date, the Al-Maidan Dental Clinic is the only to issue its customers a special warrantee card that offers full guarantees on the treatments performed. WHY AL-MAIDAN? • Affordable fees and flexible finance options • Internationally renowned reputation

Al-Maidan mobile clinic

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• Highest level of quality care • Over seventy leading dental clinicians and experts all under one roof • Seven branches covering Kuwait’s governorates • The first dental clinic in Kuwait that operates a mobile dental clinic • No other dental clinic in Kuwait guarantees its dental treatments and has a special guarantee card for its patients • No other dental clinic in Kuwait provides such comprehensive, integrated and cutting-edge services • Al-Maidan Dental Clinic has a special department (Patient Care) to follow up all our patient complains and ensure full satisfaction • For emergency cases, the Hawally branch welcomes the patients every day including Fridays and public holidays from 4pm till 12 midnight. • Over one million treatment cases were successfully concluded • Over 750,000 patients in Kuwait trust AlMaidan and chose the clinic as their preferred dental provider • Al-Maidan Dental Clinic has a special call centre that receives all incoming calls and arrange appointments for patients • The only clinic that owns and operates a central dental laboratory with more than 45 technicians who work under one roof to provide the most artistic cases CENTRAL DENTAL LAB Al-Maidan Central Dental Lab (a certified dental laboratory) provides the highest quality dental restorations to ensure complete satisfaction to

Summer 2018 Issue

dentists and their patients. The lab provides a wide-range of restorations from traditional crown and bridge restorations, implants, dentures, orthodontics appliances to the latest all ceramic systems, veneers and zircon. The lab embraces leading-edge technology and uses the most advanced equipment, techniques, and materials. Its staff is highly trained and skilled to create the smile of their patients’ dreams. All porcelain metal works such as crowns, casts, dentures, orthodontics works, mouth guards, implant works, etc are executed by professional lab technicians to provide the clinic’s dentists with the best aesthetic prosthetics that satisfy patients. DENTAL INFECTION CONTROL DEPARTMENT Dental health continues to be one of the clinic’s priorities. An infection control department, the first of its kind in Kuwait, has been installed at all Al-Maidan centres, headed by dentists with expertise in sterilisation and infection control.

Al-Maidan clinics are now using autoclaving machines – dental sterilisers that processes instruments faster and more effectively than ever before. In autoclaving, instruments which are first cleaned, dried, and placed in a special steam-penetrable wrap, are subjected to pressurised steam for fifteen to twenty minutes. The instruments are then left in their protective packaging until they are needed. Continuous education seminars and training programmes especially designed for Al-Maidan’s dental staff take place throughout the year. AL-MAIDAN DENTAL CLINIC BRANCHES Sharq: This branch opened in 1987. The Sharq Centre is Al-Maidan’s oldest and largest facility. It is conveniently located on the mezzanine of Raed Tower on Ahmed Al Jaber street. The Sharq Centre offers a beautiful and relaxing view over the Gulf. Farwaniya: This is one of Al-Maidan’s busiest CFI.co | Capital Finance International

centres. The Farwaniya branch opened its doors in 1993 and was recently expanded and renovated. Fahaheel: This branch is considered the clinic’s most elegant facility. The Fahaheel branch opened in 1992 and was relocated to Ajial Mall in 2004. This clinic is open 24/7 to provide dental service any time. Jahra: This facility opened in 1994 and was relocated to a much-improved location in 2008. Hawally: Open since 2003, the Hawally Centre boasts twelve clinics and is conveniently located on the third floor of the Beirut Complex. Sabah Salem: With the opening of the Sabah Al Salem Centre in 2006, Al-Maidan has become the only private dental clinic in Kuwait that operates in all of the country’s six governorates. Salmiya: This centre is Al-Maidan’s newest facility and opened in 2015. It offers a great sea view. i 149

> Al Wifaq Finance Company:

Poised for Growth

Al Wifaq Finance Company is a private joint stock company incorporated in the Emirate of Abu Dhabi, United Arab Emirates in 2006. The company is a subsidiary of Union National Bank Group, one of the leading and most respected banking institutions in the UAE and the wider Middle East. MANAGEMENT HH Sheikh Nahayan Mabarak Al Nahayan, Al Wifaq Finance Company’s chairman, UAE cabinet member, and minister of Tolerance, is well supported by the board of directors comprised of eminent business leaders. The highly qualified and experienced management team is led by Mohammad Nasr Abdeen, UNB Group CEO and managing director of Al Wifaq Finance Company, and Ayman Mokhtar, CEO of the company. The company’s Sharia Supervisory Board consists of distinguished and eminent scholars. The board carries out both supervisory and consultative functions and regularly reviews Al Wifaq Finance Company’s products and services to ensure compliance with Sharia principles. Al Wifaq Finance Company defines the core of its business through its customer-centric policies that drives its pursuit of excellence in every aspect of the business. VISION The vision of Al Wifaq Finance Company is “to be a premier Sharia-compliant finance brand in UAE.” Guided by this vision, the company offers innovative financial products and services to both organisations and individuals. It caters to all segments of the market through a wide range of retail banking, SME, and corporate products and services by combining trusted and traditional values with innovation and technology, delivering superior and modern financial solutions in compliance with the rules and principles of Sharia Law. FINANCIALS For the financial year 2017, Al Wifaq Finance Company reported net profit of AED 92.1 million, an increase of 15.7% compared to AED 79.6 million in the previous year. The net profit margin for 2017 increased by 20.7% compared to 2016 at AED 137.3 million, mainly due to the increase of income form financing which is up by 24.9% at AED 210.2 million in 2017 compared to AED 168.3 million in 2016. The financing portfolio increased by 20.4% to AED 2.9 billion, as a result of strong growth in the retail segment. 150

Headquarters: Al Wifaq Finance Company

Deposits from corporate and financial institutions increased by 64.3% to AED 2.3 billion compared to AED 1.4 billion in 2016 due to the company’s strategy of diversifying its customer base. CSR Corporate social responsibility is at the heart of Al Wifaq Finance Company’s business as it continues to invest in the community through various initiatives. The company has supported CFI.co | Capital Finance International

the Emirates Autism Center, UNB Health Checkup Day, Earth Hour Event, International Woman’s Day, International Day of Happiness, Mother’s Day and participated in the Tawdheef Emiratisation Exhibition as well as the National Career Exhibition. Going forward, Al Wifaq Finance Company is poised for business expansion and growth in view of its sound fundamentals and positive economic outlook during the coming years. i

Summer 2018 Issue

> Oman India Fertiliser Company:

A Proud Statement

By Sharanappa Gurappa Gedigeri

Oman India Fertiliser Company (OMIFCO) has been established to construct, own and operate a modern world scale two-train Ammonia-Urea fertiliser manufacturing plant at the Sur Industrial Estate in the Sultanate of Oman.

MIFCO is owned 50 per cent by Oman Oil Company (OOC), 25 per cent by Indian Farmers Fertiliser Cooperative Limited (IFFCO) and 25 per cent by Krishak Bharati Cooperative Limited (KRIBHCO). The plant has the capacity to produce 1,750 T/D of Anhydrous Ammonia from two Ammonia plants and 2,530 T/D of Granular Urea from two Urea plants. The project was completed in July 2005 at a cost of $ 968 mn. The Government of India has agreed to purchase certain contractual quantity of the Urea produced by OMIFCO under a long term Urea-Off-Take Agreement for 15 years at predetermined prices. The Sultanate of Oman has committed to supply the natural gas feedstock for the life of the project. A highly skilled workforce from IFFCO and KRIBHCO is participating directly in operation and maintenance of the project under a Personnel Supply Agreement (PSA). Building and Operating OMIFCO, a modern world scale two-train Ammonia-Urea fertiliser manufacturing plant at the Sur Industrial Estate on Omani soil, is a proud statement by itself. OMIFCO in its uniqueness has given and continues to contribute much to the Omani economy and to the Omani people. ENVIRONMENT PROTECTION OMIFCO considers the issue of reducing the environmental impacts resulting from its operations as its top priority along with the promotion of production to raise the national economy. OMIFCO has made heavy investments in eco-friendly operations which have resulted in little or no negative impacts on the environment. The company is constantly on the lookout for opportunities that contribute to the upliftment of the country's face in terms of the international ecological footprint measurement. OMIFCO’s environmental management system boasts management of air emissions, effluents and solid wastes, including a monitoring system for each source of pollution. The company’s environmental policy states OMIFCO’s commitment to fully comply with environmental laws, local and international regulations while producing Ammonia and

Managing Director: Sharanappa Gurappa Gedigeri

Urea. The company thus shoulders the responsibility to develop its business addressing all environmental issues. CORPORATE SOCIAL RESPONSIBILITY CSR at OMIFCO is a business management mechanism and a vehicle to engage the company and its employees with the community and collectively determine the social-economic and environmental priorities in the community in line with the company's objectives. OMIFCO considers CSR as one of its most important obligations towards the surrounding environment and the local community. The company is seeking to create enduring partnerships with the local community to serve common goals and to develop Omani human resources in addition to identifying critical issues affecting the community. CFI.co | Capital Finance International

OMIFCO’s community investments strategy ensures that all resources within the reach of the company, including its finances and human resources, are strategically utilised for the benefit of the community. It is looking to leverage its various resources and competencies in order to effectively support projects and initiatives that have a positive long term and sustainable impact on the community. OMIFCO has begun the process of adopting sustainability management that integrates management of economic, environmental and social performance for delivering enduring value to all our stakeholders including the government, shareholders, customers, employees, local community, partners, suppliers and the environment. i 151

> Rabah Arezki:

An Oil-Price Test for MENA Governments

n recent years, Middle Eastern and North African countries have been weaning consumers off domestic energy subsidies, while modernising and diversifying their economies. With oil prices recovering, however, there is a risk that these countries will revert to their old wasteful spending habits. Since January 2016, when oil prices ended a sharp two-year slide, the price of crude has more than doubled. As a rule, higher prices are bad for oil-importing countries and good for oil 152

producers. But, in the Middle East and North Africa (MENA), the recent price rebound presents a critical test for importers and producers alike. The outcome will determine the region’s future economic trajectory. MENA countries – both energy importers and producers – have long depended on energy subsidies to provide social protection and, in the case of producers, to spread the benefits of resource wealth. According to the International Monetary Fund, the region’s total pre-tax energy CFI.co | Capital Finance International

subsidies amounted to nearly $240 billion in 2011 – equivalent to 22% of government revenue, and nearly half of all global energy subsidies. Yet, in recent years – and especially since oil prices began to slide in 2014 – MENA countries have been working to wean consumers and businesses off subsidised energy, while modernising and diversifying their economies. With oil prices having climbed to higher levels, however, there is a risk that these countries will

Summer 2018 Issue

extended further. Indeed, as the price rises, OPEC members, in particular, will not feel the urge to comply with the restrictions and will boost output, which in turn will bring the price down. All of this means that the near-term outlook for oil prices is uncertain, at best. MENA governments that took advantage of falling oil prices to reduce budget-busting fuel subsidies should thus tread carefully. The long-term consequences of abandoning critical and difficult reforms could far outweigh any short-term benefits. For now, rising global oil prices will cause domestic prices to rise as well, unless governments use subsidies to limit the passthrough to local consumers. But while that approach might prevent demand from falling in the short run, it would also increase publicdebt levels and leave fewer resources to invest in private-sector development and broader economic transformation. Even if governments relied on spending cuts elsewhere to pay for the subsidies, the net result would be negative. For example, if they reduce transfers to low-income households, they would impose further hardship on some of their most vulnerable citizens. Given the high propensity of poor households to consume, such cuts would also weaken aggregate domestic demand. That would translate into slower economic growth and job creation in countries struggling to generate employment opportunities for large numbers of young people. In short, the more governments attempt to protect consumers from the effect of higher oil prices, the more they (or, in some cases, distributors) stand to lose. Instead of taking this path, therefore, MENA governments should, first and foremost, continue working to increase the efficiency of public investment, including by completing the elimination of fuel subsidies.

revert to wasteful spending, raising the likelihood of spiralling debt. A reversion to old habits is particularly risky, because there is no guarantee that oil prices will continue to climb, or even remain stable at their current levels. To be sure, vigorous global growth in oil demand, reinstatement of sanctions on Iran by the United States, and lower production in Venezuela and Angola, will put upward pressure on prices. But

the rapid response of US shale producers to changes in the market is likely to have strong moderating effect on global prices, meaning that the triple-digit peak prices reached in 2014 are unlikely to return. Moreover, while the price rally that began in 2015 accelerated considerably in late 2016, when the members of the Organization of the Petroleum Exporting Countries (OPEC), Russia, and a few other producers agreed to cut output, it is unclear whether these restrictions will be CFI.co | Capital Finance International

Those governments should then use their savings to expand and strengthen social safety nets, thereby protecting the poor while enabling the economic dynamism needed to give the poor a chance to escape poverty. Meanwhile, governments should invest in structural reforms to support a renewed and more competitive private sector and develop smart regulations that crowd in private investment. In some countries, this would mean removing the hurdles impeding the adoption of modern digital infrastructure and payment systems. The combination of thriving private sectors and strong social safety nets would encourage risktaking and entrepreneurship â&#x20AC;&#x201C; both of which amount to powerful engines of long-term growth. That, not more budget-busting energy subsidies, is what the MENA countries need. i ABOUT THE AUTHOR Rabah Arezki is the chief economist for the Middle East and North Africa Region at the World Bank. 153

THE EDITOR’S HEROES

Shaping the Past, Present, and Future

n this day and age of social media and instant communication, the horrors of war are delivered, first-hand, to a global audience. However, the sheer volume of eyewitness accounts from Syria, Afghanistan, and other current trouble spots often overwhelms the public whilst the absence of filters also allows news streams to be manipulated almost at will. The passage of time usually enables truth to emerge. Eventually, historians will set to work and figure out what really happened by painstakingly examining records and shifting through conflicting stories. The outcome is, usually, a clear and neatly arranged tableau that tracks all major protagonists as they decide the fate of their minions. It is unusual for a historian to record the impressions of foot soldiers and bystanders. In academia, oral history is frowned upon and considered but a poor cousin of the broader pursuit to place major conflagrations in their proper context by mining archival records left by kings, presidents, generals, and other major players. A blending of official and oral history as practiced by master historian Antony Beevor is most unusual.

Whenever former Singapore Minister of Foreign Affairs Kishore Mahbubani opens his mouth, Western governments tremble. Mr Mahbubani is on to them and argues that the world has changed profoundly which means that its multilateral structures are no longer in tune with geopolitical realities. As the balance of economic power moves to Asia, the Singaporean advocates for changes to the present world order, designed and dominated by Western powers. He has a point. So does the veteran French politician Michel Barnier who was put in charge by the European Commission to negotiate the United Kingdom’s exit from the bloc. Almost two years into the talks, Mr Barnier must still remind his counterparts that an exit from the union includes no parting gifts or halfway houses. For the Frenchman, out means out and that’s pretty much the end of it. Talks of any future accommodation between the EU and the UK must not include the structures and privileges reserved for member states. Any other proposed solution is, essentially, fake news since it fails to comply with the union’s rules and objectives.

Mr Beevor, a gifted and accomplished writer, is one of only a handful of historians with the ability to drive the horrors of war home – presenting his readers with the full human drama of armed conflict. In Mr Beevor’s work, gory details are presented not for special effect, but as integral part of the narrative, lest the reader should forget that the lofty strategies of generals have an immediate and profound impact on those doing the actual fighting. Mr Beevor doesn’t deal in clichés as he brings history alive.

Alt-truths – much talked about, often seen, but not easily identified – is what concerns Soledad Gallego-Díaz, the newly-appointed chief editor of the daily El País – the paper of record for the Spanish-speaking world. Whilst not adverse to social media and other online platforms, Mrs Gallego-Díaz is first and foremost a passionate defender of solid journalism as practiced by trained and experienced professionals as opposed to concerned and/or interested citizens. She promises to keep El País a high-brow paper and refuses to dumb-down its contents in an attempt to reach a still broader audience.

British scientist and writer Adrian Owen does the same thing to people in a vegetative state; he unlocks their trapped minds and is thus able to bring them back to live. Dr Owen developed a number of revolutionary, yet seemingly simple, techniques to establish two-way communication with people who suffered severe brain damage. He proved beyond any doubt that many vegetative patients respond to events and remain aware of their surroundings whilst unable to express themselves. Dr Owen has found a way to let these patients speak.

US publisher Tim O’Reilly also aims to edify the masses. In his case, it is computer coding for everyone. With his publishing house, Mr O’Reilly has helped educate an entire generation of programmers. There is hardly a coder to be found anywhere in the world who has not been introduced to the latest languages and technologies by O’Reilly books. Literally thousands of O’Reilly manuals have been published, written by expert programmers in an easily accessible step-by-step way. Mr O’Reilly may be credited with shaping a significant part of today’s online environment. i

> MICHEL BARNIER Keep Calm and Carry On He has the patience of a saint – and then some. Former French minister of Foreign Affairs Michel Barnier has the unenviable job of explaining to the British government that Brexit means Brexit – to paraphrase Prime Minister Theresa May who first introduced the combative slogan and has lived to regret it; the words keep bouncing back. In July 2016, Mr Barnier was appointed chief negotiator by the European Commission to help steer the United Kingdom towards the exit whilst safeguarding the interests of the remaining 27 EU member states. To this end, Mr Barnier was given a clear but limited set of instructions by the European Council which includes all heads of state and government leaders of the union. He was also charged with maintaining the full transparency of the negotiating process and decline any and all offers to seal backroom deals. Whilst the commission may perhaps have displayed a slightly greater sensitivity to the feelings of the British – whose love of all things French is particularly understated – Michel Barnier proved, in the end, an excellent choice. The Frenchman has almost singlehandedly redefined the meaning of stoic. Unperturbed by the firestorm kicked up by the tabloids, Mr Barnier refuses to lose his cool, limiting his periodic interventions to curt, yet elegantly worded, dismissals of the latest scheme produced by his counterparts as they seek to fit their square peg into a round hole. Mr Barnier is not one to bend the rules, engage in flights of fancy, or deviate from the script he was handed. He also remains perfectly calm and carries on – patiently explaining the workings of the European Union to the uninitiated and delineating the playing field set by his mandate and within which the disentanglement of the United Kingdom from the European Union must take shape. Sometimes, though, keen observers think they may detect a hint of irritation in Mr Barnier’s sporadic utterings such as when he had to explain, yet again, that the militarily useful features of the European navigation system Galileo – a constellation of thirty satellites – is the preserve of member states only as per the agreement that underpins the €10bn undertaking. Ironically, the clause excluding non-members states from accessing the encrypted bits of Galileo – which will feature and estimated position error of less than one centimetre – was, at the time, included at the express insistence of the British. Mr Barnier would like nothing more than for the United Kingdom to understand that leaving the European Union implies severing all ties to the bloc, including unfettered access to

its specialist agencies, markets, and regulatory entities. So far, the Frenchman has discharged his task with considerable aplomb welcoming and appreciating the steps taken by Prime Minister May to infuse the talks with a greater sense of realism. Born into a Gaullist family and growing up in the Alpine Isère Department next to Grenoble, Michel Barnier graduated from the École Supérieure de Commerce du Paris, one of France’s Grandes Écoles, which only admits the exceptionally bright. Touted as the world’s oldest business school, Mr Barnier, however, choose politics as his trade. He was elected to parliament, age 27, and went on to rise through the ranks. He helped organise the 1992 Winter Olympics in Albertville and, the following year, joined the cabinet of Prime Minister Edouard Balladur before receiving an appointment as Secretary of State for European Affairs. In Europe, Mr Barnier served as commissioner for Regional Policy between 1999 and 2004, returning to the French cabinet as minister of

Foreign Affairs, before again taking up a seat on the European Commission as commissioner for Internal Market and Services (2010-2014). The experience gained in this position now serves Michel Barnier well as he tries to remind his interlocutors of the need to reserve the benefits EU’s single market to member states and associated members who abide by the union’s four freedom – the free movement, of capital, services, goods, and labour. At times, it seems that Mr Barnier keeps to the maxim first pronounced by the 26th US president Theodore Roosevelt who inhabited the White House between 1901 and 1909: Speak softly and carry a big stick. Mr Barnier knows, more than most, that he need never raise his voice, express frustration, or become irritated for he represents the world’s largest bloc of democratic nations who have – to the surprise of friend and foe – kept a united front despite their differences in the face of the United Kingdom’s likewise democratic decision to exit the European Union. Mr Barnier’s job is to make this happen.

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> KISHORE MAHBUBANI The Pendulum of History

Kishore Mahbubani thoroughly enjoys yanking the West’s chain every now and then. The Singaporean diplomat has the uncanny ability to identify with pinpoint precision the weak spots in the discourse of developed nations, exposing embarrassing thought processes grounded in the lingering leftovers of times long since gone and powers lost decades ago. Mr Mahbubani makes no secret of the fact that he particularly dislikes the inclination of European and North American governments to freely dispense their wisdom and embark on lectures in order to show interlocutors – mostly developing nations – the error of their ways. “Western minds simply refuse to understand that now is not the time to intervene in other countries’ domestic affairs or criticise internal arrangements. By doing so, the West acts against its own best interests.” Mr Mahbubani takes the long view of geopolitics and points out that for much of humanity’s convoluted history, China and India constituted the world’s largest economies and only superpowers. It was only the Industrial Revolution which, barely 250 years ago, tipped the balance of power in Europe’s – and later still North America’s – favour. “At the beginning of the 21st century, the world turned yet another corner with its centre of economic and political gravity returning to its original position. “The ascendancy of Asia is one of two great power shifts taking place; the other one is the IT revolution that erupted in California and has changed the world to beyond recognition.”

In his most recent book – Mr Mahbubani is a prolific writer – the diplomat offers a new, and quite controversial, take on post-war history. In Has the West Lost It?, Mr Mahbubani concludes that “no major Western figure” has had the courage to state “the defining truth” of our times. That truth includes the fact that the West is now becoming a mere footnote, or at best a minor chapter, of global affairs. The West is no longer able to set the global agenda, exploit its economic might, or maintain its technological edge. If Mr Mahbubani is to be believed, the West will – in due time – again be confined to the margins of world affairs, an outer region that follows rather than leads. Mr Mahbubani considers this scenario a historic inevitability, albeit one brought about by the diplomatic mishandling by the United States of its position as the world’s sole superpower during the years following the collapse of the Soviet Union. The Singaporean diplomat does not hide his surprise at – bordering on disdain for – what he describes as US “bungling”. An utter lack of vision on what the role of the country should be in a unipolar world created a sort of power vacuum which others major players such as China tumbled into. According to Mr Mahbubani the US lost its lead with first the war in Afghanistan followed by the invasion of Iraq. Both grand and violent projects aimed to forge new nations in the image of their creator. That mission was not accomplished. Whilst dismissing Donald Trump as “ignorant of world affairs”, Mr Mahbubani forgets, perhaps conveniently, that the current US president has condemned the interventions in Afghanistan and

Iraq repeatedly and remains reluctant to commit his countries forces to new overseas adventures. There is, however, some good news for beleaguered Western nations: Mr Mahbubani does not think it inevitable that China should take over as leader of the world. Asia’s rise, remarkable as it is, by no means guarantees that the region should once more become the centre of the world. Ambitious newcomers must deal with a world that is still organised along Western liberal thought – which, Mr Mahbubani concedes, is not necessarily all bad. Multilateral institutions such as the United Nations, the World Bank, and the International Monetary Fund are all designed to “benefit the West”. Whilst that may be too much of a blanket statement, it is to some extent true that these institutions all saw the light at a time when the West’s dominance remained undisputed. Since things have changed considerably since then, Mr Mahbubani argues that some room must be made at the top table to accommodate the rising powers of Asia – a proposal not at all controversial. Hence, Mr Mahbubani suggests the West to actively and generously cooperate with Asia and relinquish some of its power lest it be taken away altogether by developments. After a career spanning 33 years at Singapore’s Ministry of Foreign Affairs, Mr Mahbubani became dean of the renowned Lee Kuan Yew School of Public Policy at the National University of Singapore where he also held a professorship in the Practice of Public Policy. Late last year Mr Mahbubani retired from academia. He continues to write thought-provoking books.

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> ADRIAN OWEN Brain Whisperer He is almost universally hailed as a miracle worker; a scientist who can release minds trapped inside bodies on artificial life support and suspended in a vegetative state. By using fMRI (functional magnetic resonance imaging) and an array of new techniques, Adrian Owen has detected and mapped brain activity in patients deemed completely unconscious. Shown a Hitchcock movie, Jeff Tremblay’s brain lit up with activity. Mr Tremblay also reacted to sounds and images; in fact, his frontal and parietal lobes responded just as those of a fully conscious person. At the time of Dr Owen’s experiment, Mr Tremblay had been in a coma for a full fifteen years, victim of a brawl. The British neuroscientist is convinced that not all vegetative patients are “braindead”. He describes his findings as a fascinating book, published last year. Into the Gray Zone begins with the well-known story of Cambridge nursery school teacher Kate Bainbridge who lapsed into a coma after suffering a bad cold that caused the inflammation of her brain and spinal cord. Though Ms Bainbridge’s coma lasted but a few weeks, she only slowly recovered her mental faculties. The ordeal, which the teacher remembers well and is now able to describe in minute detail, allowed neuroscientist a unique insight into the workings of the brain, its capacity to self-heal, and ability to function – though only partially – even when severely damaged. The plight of Ms Bainbridge, and her surprising recovery, sparked Dr Owen’s interest in the twilight zone that separates life from death. The Cambridge teacher distinctly remembers feeling trapped as if locked in a prison without any clue of her surroundings – or the reasons for her predicament. After examining numerous patients with severely reduced brain function, Dr Owen suffered a welcome epiphany – as he remembers, – whilst on a beach in Australia. In order to proof that a vegetative patient is mentally alive, Dr Owen decided that he would have to coax them into making a wilful decision and catch the resulting brainwave. To do this, he wired his patients up and asked them to imagine, say, a game of tennis or a walk around their home. In each case, a different part of the brain would show activity. Dr Owen had reached into deep inner space for now he could ask simple yes or no questions to be answered by thoughts of sports matches or strolls around the house. Dr Owen gained almost instant fame when, in the presence of a BBC camera crew, he established communication with Scott who

for twelve years lingered in a vegetative state. Hooked up to a scanner, Scott indicated that he was in no pain and proceeded to answer a host of questions. The patient knew where he was, who he was, and showed a clear notion of the passage of time. “The first time this approach worked, it was like pure magic: we had actually found a lost person.” Since then, Dr Owen has unlocked the minds of many vegetative patients. The techniques he developed are now in wide use. Methods for assessing the mental state of patients in an apparently vegetative state have also improved significantly and currently use electroencephalography which is both less expensive and hardware-intensive. Patients may be examined for brain activity at their bedside. However, establishing some form of rapport with trapped minds has not helped these

patients regain their full faculties. Dr Owen admits that a trajectory towards full recovery is still “many years” away. The British neuroscientist has also conducted ground-breaking research into the assessment of cognitive functions, developing innovative and comprehensive tests, available online, to scientifically determine memory, reasoning, planning, and attention skills and capabilities. In another large-scale experiment, Dr Owen also investigated the susceptibility of the brain to respond to specific training exercises that seek to extract peak performance. Whilst improvements were indeed measured and quantifiable, the acquired skills are nontransferable – only a single specific function may be bettered, with no detectable beneficial spillage to cognitively closely-related tasks. The brain, in a word, will not be trained.

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> ANTONY BEEVOR History as a Collection of Telling Details He did it again and delivered an instant classic. After Stalingrad, Berlin, Crete, Paris, and the Ardennes, military historian and author Antony Beevor now revisits and re-examines the fighting in and around the Dutch city Arnhem in The Battle for the Bridges 1944 – a shortcut to victory masterminded by Field Marshal Bernard Montgomery and an almost successful attempt to bypass the German Siegfried Line which shielded the country’s industrial heartland. In a field crowded with exceptionally gifted military historians, Antony Beevor stands out for bravery. Few history writers would dare to rework the entire Second World War in a single, albeit hefty, volume and draw new conclusions. In his almost universally praised The Second World War (2012), Mr Beevor includes all fronts, beginning with the Japanese invasion of Manchuria in 1931 and ending fourteen years later with Japan’s signing of the instruments of surrender aboard the USS Missouri in Tokyo Bay which signalled the end of hostilities. Mr Beevor pulls no punches when unravelling the many myths amplified by the passage of time. He concludes that the reputations of both Bernard Montgomery and Erwin Rommel, the two opposing field marshals who met on the battlefields of North Africa, are vastly overblown. The historian points out that Rommel refused to accept responsibility for the German debacle in the desert sands whilst Montgomery proved overly cautious and as a result was unable to fully exploit his advantage. Mr Beevor brings history alive by giving a voice to its participants. This makes for a gripping account and delivers haunting particulars not usually included such as the details provided by a Russian soldier in a letter to his mother: “One walks on corpses, sits down to rest on corpses, and eats one’s meals on corpses. For about ten kilometres, there are two corpses of Fritzes on each square metre.” Eyewitness accounts such as this one appear throughout his books and help explain why Mr Beevor calls WW2 the greatest man-made disaster in history. As he relates the widespread cannibalism amongst starving Japanese soldiers, Mr Beevor drives home the unspeakable horror of war and shines a much-needed light on its human dimension. He does so again in his latest book about the battle for the bridges (Operation Market Garden) which, Mr Beevor writes, was doomed from the start, but still might have succeeded. The writer approaches the epic battle as a

forensic investigator, unearthing all minutiae in an attempt to describe the chaos on the ground as lived by the troops. Again, Mr Beevor assigns a significant portion of the blame for the unfortunate outcome to Field Marshal Montgomery who is depicted as an insufferable bore equipped with an inflated ego. Mr Beevor also rescues the reputation of Polish general Stanislaw Sosabowski who opposed the operation from the start and was made into the scapegoat of its failing. Mr Beevor also disassembles the myths that accumulated thick and fast after the battle was fought and lost. He makes no attempt to embellish the defeat and turn it – in the vein of Dunkirk – into a heroic victory. Unlike Cornelis Ryan whose 1974 account of the Battle of Arnhem – A Bridge Too Far – was made into a Hollywood blockbuster, Mr Beevor dives headlong

into to gory details of a ill-conceived operation that cost more than 3,300 lives on both sides in addition the countless civilian casualties. The German retribution that followed – a blockade of the northern half of The Netherlands – which plunged to non-liberated part of the country into its “Hunger Winter”, the famine of 1944-1945 that killed an estimated 22,000 people. In his signatory style, Antony Beevor lets the survivors tell their tale, thus highlighting the plight of Dutch civilians caught in the crossfire – an aspect often overlooked or treated as a mere footnote to the grand military procedures unfolding in the Arnhem marshes. Antony Beevor is a prolific researcher and writer. He has also published major works about the Spanish Civil War and the Soviet Union. Early on in his career, Mr Beevor also wrote two novels, a genre he – perhaps thankfully – never revisited.

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> TIM O’REILLY Coding for the Masses Founder and CEO Tim O’Reilly of O’Reilly Media is not at all surprised that Google, Facebook, and Apple are struggling to preserve their aura of cool. Mr O’Reilly points to New York Times columnist David Brooks, who was been caught wondering out loud if Big Tech is destined to follow Big Tobacco as “peddlers of destructive addiction”. Mr Brooks argues that social media has not delivered on its promise to end loneliness and has increased solitude and awareness of social exclusion instead. This happens during the lifecycle of every major new technology, Mr O’Reilly believes. He has been quoted as saying that television, once hailed as a great educator, has made us into “dumbed-down couch potatoes”. The automobile has changed the world but has come a culprit of pollution. With each new development, Mr O’Reilly notes, initial optimism is eventually replaced by a more balanced – and often much less rosy – assessment of the technology’s impact, usefulness, and ultimate meaning. Tim O’Reilly did exceptionally well out of that optimism. Early on, he recognised the many opportunities of the IT revolution to empower people with a solid understanding of the technologies driving the internet. Starting with HTML, O’Reilly Media launched a series of books – often hefty tomes – and courses to explain programming languages to the uninitiated but curious. Via exceptionally well-structured stepby-step courses, students were able to dive deeper into their language of choice, emerging not only with a solid understanding but also with the ability to apply their knowledge instantly to real-life situations. Tim O’Reilly is credited with coining the phrase “open source software” for non-proprietary technology and coming up with the concept of Web 2.0 to describe dynamic websites that interact with their users – as opposed to static sites that merely display content. In 1993, Mr O’Reilly’s company also made history by building the internet’s first web portal – the Global Network Navigator (GNN) which two years later was sold to America Online (AOL), a deal which kicked off the dotcom bubble that burst in 2001. An internet guru with a large following, Mr O’Reilly is not overly concerned about the concentration of power in the hands of a few tech giants; the dominance of these large corporates, he believes, will prove their undoing. Whilst working at Microsoft, early in his career, Mr O’Reilly watched that company exercise so much control over the personal computer market that it would dictate to venture capitalists what to invest in, and tell business people what to do. Innovators were no longer able to make any

real money, so they started looking elsewhere. Then along came a new-fangled thing called the internet, and the playing field opened-up. Mr O’Reilly sees evidence of history repeating. Venture capitalists and entrepreneurs are always trying to figure out how to hitch a ride on the tailcoats of Google, Facebook, Amazon and the other big tech companies, hoping to gain some market share before being gobbled up or put out of business by the big boys. Big Tech is notoriously slow to catch-on and will take a while to turn the ship. Mr O’Reilly sees these repetitive movements in a more philosophical light: long-term greed, increasingly rare, is actually a good thing because it can engage with customers and partners to make the pie bigger. Everybody can gorge on a larger slice. But Big Tech is mostly motivated by short-term greed and a zero-sum approach to business. Market share becomes all important;

not the size of the market. Few people in the IT business have done more to educate new generations of programmers than Tim O’Reilly. Many of today’s innovators got their first crack at coding whilst hunched over an O’Reilly book – always with a picture of some fuzzy animal gracing the cover – trying to push the boundaries of a language or coming up with novel ways to implement functions or establish routines. As the coding environment got fragmented with a bewildering number of languages, O’Reilly Media diversified its courses, staying on top, if not a few steps ahead, of developments and trends. The company’s current subscription-based Safari Online series of courses and publications is still the go-to place for anyone brave enough to venture into programming. There is little doubt that the next generation of geeks will also be shaped by Tim O’Reilly.

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> SOLEDAD GALLEGO-DÍAZ Truth to Prevail at Spain’s Largest Newspaper She is indefatigable in the defence of quality journalism and highly critical of the way the established press has reacted – or failed to do so – to the onslaught of alternative truths, fake news, and other forms of fact-free reporting. At the beginning of June, Soledad Gallego-Díaz (67) was asked to take over the editorship of El País – Spain’s flagship newspaper which she joined shortly after its founding in 1976. Mrs Gallego-Díaz enjoys the near unanimous backing of the paper’s journalists. In a secret vote, fully 97% of El País’ newsroom staff backed the board’s nomination of the experienced journalist and former foreign correspondent. Mrs Gallego-Díaz is the first woman to lead Spain’s largest – and often most feared – newsroom. With a daily circulation bordering 200,000 copies, El País remains Spain’s most-widely read general newspaper. Only the sports tabloid Marca sells more papers. The appointment of Mrs Gallego-Díaz almost coincided with the presentation of the new cabinet of freshly installed Prime-Minister Pedro Sánchez who named eleven women to his seventeen-strong ministerial team – securing himself a place in the history books as well. Although it is still a relatively young paper in a country that measures the longevity of its national institutions in centuries, El País has become mandatory reading in the Spanishspeaking world and, indeed, has become its paper of record. The international editions in English and Portuguese reach out to readers in the United States and Brazil where the online edition of El País attracts considerable attention from readers. In Spain, El País is synonymous with the country’s return to democracy after the death of Generalissimo Franco in 1975. Six years later, the paper gained worldwide fame and acclaim when it put out an emergency edition in defence of the constitution whilst mutinous officers of the Guardia Civil held a large number of members of parliament hostage in Madrid and tanks of rebellious army units took to the streets in Valencia. Even before King Juan Carlos I forcefully intervened to restore order, El País had managed to rally the nation for democracy. Other national papers, invited to join the constitutional cause, decided to wait and see which side would emerge victoriously – and were later soundly condemned for failing to respond in a time of need. That courage has become the hallmark of El País, now entrusted to Soledad GallegoDíaz. However, the new editor faces a number of challenges. The paper’s daily circulation has

dropped from a high of about 435,000 in 2008 to less than half that number today. Whilst El País has embraced the internet, it was slow to recognise the ascendancy of mobile devices and only belatedly introduced its own cross-platform app. Staunchly pro-European and of a socialdemocratic persuasion, the paper has also been caught on the wrong side of popular sentiment. Mrs Gallego-Díaz is not likely to change that course and has repeatedly vowed to uphold El País’ long-standing principles and resist pressure to make its content slightly less high-brow. A graduate from the prestigious Universidad Complutense where she read Philosophy, Mrs Gallego-Díaz repeatedly ran into trouble for speaking out during the Franco Era. In 1975, she

was fired from her job at the now-defunct Pyresa news agency after organising a strike to protest the execution by firing squad of five antifascist fighters – the last time capital punishment was carried out in Spain. Upon accepting her new job, Mrs GallegoDíaz reminded newsroom staff that their job is more important than ever: “It is our duty to report facts, not fiction or opinion. Journalist must erect an impenetrable barrier to alt-truths and fake news. These falsehoods have no place in our columns and undermine the credibility of the press – our most valuable asset.” Mrs GallegoDíaz also said that she considers fake news a “poison” that distracts from the main issues society faces and, as such, silence the debate on what matters most.

"It is our duty to report facts, not fiction or opinion. Journalist must erect an impenetrable barrier to alt-truths and fake news. These falsehoods have no place in our columns and undermine the credibility of the press – our most valuable asset." CFI.co | Capital Finance International

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> Latin America

Argentina: Trying for a Quantum Leap The International Monetary Fund (IMF) may have changed since 2001, Argentina apparently has not. The country returned, cap in hand, to its former foe â&#x20AC;&#x201C; blamed for the 2001 economic meltdown â&#x20AC;&#x201C; and secured a $50bn line of credit to avoid a cash crunch.

Buenos Aires, Argentina: National Congress

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he deal, much larger than the markets anticipated, comes with plenty of strings attached: the funds may not be used to prop up the long-suffering peso and the money presses must be switched off – no new pesos may be printed to make up for the shortfall in state revenues. The IMF also asked for the independence of country’s central bank to be firmly anchored in law. The Argentine government, in turn, promised to close the primary deficit, which excludes interest payments on the national debt, in four rather than six years and adjust its inflation target downwards. The negotiations between Argentina and the IMF were concluded in just three weeks. The positive outcome, made public early June, helped stabilise the peso which retreated only 1.3% after the central bank ceased its interventions in the days following the announcement. So far this year, the peso has lost about 24% of its value. Bond prices, on the other hand, rallied instantly, reflecting the markets’ surprise at the volume of the deal and its rapid completion. “The deal was already a success even before its full scope was unveiled,” says Claudio Loser of the Centennial Group Latin America and a former head of the IMF’s Western Hemisphere Department. According the Mr Loser, both Argentina’s government and the IMF reacted remarkably fast: “As soon as the first signs of trouble appeared they went into overdrive. The deal is historic for several other reasons as well: it is the largest-ever financing package put together by the IMF and calls for a cautious, as opposed to radical, adjustment of economic policies.” IMF Managing Director Christine Lagarde’s claim that the package was “owned and designed by the Argentine government” sounded credible in light of the conditions attached. These are perfectly aligned with President Mauricio Macri’s own policy objectives, albeit on a reduced timescale. In fact, the deal appears to have been made with Mr Macri’s political survival in mind. The IMF is, however, loathed by most Argentines who blame the fund for needlessly prolonging the economic depression which started with erratic growth patterns towards the end of the 1990s and ended with a massive debt default in the last week of 2001 by which time almost 20% had been lopped off the country’s GDP. Only after ditching the IMF and adopting expansive fiscal policies did Argentina manage to spark an economic rebound. Between 2002

"Once one of the world’s richest countries and a magnet for immigrants and investors alike, Argentina has endured almost a century of decline." and 2011, the size of the economy almost doubled whilst the purchasing power of wages rose by over 70%, convincing most Argentines that the IMF had it wrong all along. After a thorough review of its practices and policies, the fund admitted that its recipes had indeed not contributed towards Argentina’s speedy recovery and may have prolonged the country’s economic downturn. For President Macri all that is yesterday’s news and irrelevant to the country’s present plight. He craves an opportunity to put his country on a sound and sustainable economic footing. To this end, his administration has produced an ambitious reform agenda which is gradually being implemented. Mr Marci’s orthodox approach differs sharply from the heterodox policies – aka voodoo economics – pursued by his predecessor Cristina Fernández de Kirchner from whom he inherited outsized current account and spending deficits. Absent a deep domestic capital market, Argentina has traditionally been highly dependent on outside financing to fund its development. Given the country’s poor track record in repaying its loans, creditors – enticed by quick gains – usually run for the exit at the first sign of trouble, often triggering a crippling exodus. However, this time around, Argentina got caught between a dollar strengthening on the back of anticipated rate hikes and a declining investor appetite for emerging markets. Fund managers now no longer feel the urgency to chase yield by moving capital to exotic locales. Interestingly, the IMF’s demand for central bank independence is squarely aimed at ending the rather curious practice of burning dollars ($8bn over the past six or so months) to buy up pesos in the forex markets whilst buying up pesodenominated government bonds via the next window. The policy of Argentina’s central bank – taking pesos out of the market via forex and injecting them straight back into circulation

buying government bonds – defies logic and helps explain the currency’s weakness. Part of the $50bn now made available by the IMF is earmarked to pay off the Central Bank Notes (Letras del Banco Central) – short-term bonds carrying interest rates of up to 40% – and wind down the carrousel. Both the IMF and the Macri Administration insist that Argentina is merely facing a liquidity crisis and remains solvent – able to meet its international obligations. The country’s forex reserves stand at approximately $50bn. All eyes are now trained on the peso’s exchange which should drop to around twenty to the dollar in a sign that the crisis has been contained. Perhaps just as importantly, political analysts keep a close watch on President Macri’s approval rating. The initial popular reaction to the IMF deal has been uncharacteristically mild. Meanwhile, the business community hopes that the administration will now speed up the implementation of its reform agenda and put in considerable effort to reduce inflation, currently running at 28%. The slow pace of the Macri Administration may, in part, be explained by the president’s attempts to deeply embed his reforms into law so that they may not easily be undone by future governments of a different persuasion. Once one of the world’s richest countries and a magnet for immigrants and investors alike, Argentina has endured almost a century of decline. Two years ago, the World Bank downgraded Argentina from a high-income to a middle-income country on par with Peru and Colombia. As such, Argentina’s contemporary history reads as a cautionary tale of the damage wrought by dysfunctional politics and populism. Few Argentines can muster any degree of trust in their government; they vote but do not think their ballot makes any difference. President Macri is all too aware of his country’s steady decline and the reasons for it. Mr Macri is convinced that he can reverse the process of more bust than boom and pour a foundation on which Argentina may once again rise as a prosperous nation. Most political analysts declare him a fool for even believing the country capable of reinventing itself. Mr Macri’s convictions may indeed be foolhardy, but the alternative – already tried out ad nauseam – is to accept as an inevitability that Argentina is a lost cause and enact stop-gap legislation aimed merely at slowing the country’s decline. i

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> Fiduciaria de Occidente:

Transforming Strategy to Improve Customer Experience Fiduciaria de Occidente is a financial services firm specialising in asset management through collective investment funds, private equity funds, and trusts. It has a track record of more than 27 years in Colombia and a direct presence in the country’s ten main cities as a subsidiary of Banco de Occidente and member of Grupo Aval (NYSE: AVAL), Colombia’s largest financial conglomerate and one of the leading banking groups in Central America.

he assets managed by the trust company amounted to $11.7bn as of April 30, 2018, $1.3bn of which are collective investment funds and private equity funds; $5.8bn are pension liability trusts; and $4.6bn are other managed trusts. The company is aware of the global financial industry’s great challenges related to the growth and consolidation of the digital economy, and how relevant it is today to provide customers with highly specialised attention and a compelling service experience. This is why the company is in the process of implementing its new corporate strategy, which involves three fundamental aspects: switching from a productoriented organisational structure to a market approach, developing new products tailored to customer needs, and implementing the digital transformation. CHANGE IN THE ORGANISATIONAL STRUCTURE Fiduoccidente has left behind the idea of offering individualised products and developed a strategy based on the needs and objectives of each type of customer. Hence, it is focused on four markets: corporate and institutional, government, enterprises, and individuals. This transformation, which will help the company grow in a sustainable and profitable manner, has required a change in the organisational structure, which ensures comprehensive, tailored, and timely service for each customer. This is how the trust company went from a product-based business to one focused on markets and customers, which led to the creation of the Vice-Presidency of Individuals and the Vice-Presidency of Enterprises (corporate and institutional, government and companies). The organisational structure of Fiduoccidente is led by the Office of the CEO under Mario Andrés Estupiñan. The front office is composed

"Fiduoccidente has left behind the idea of offering individualised products and developed a strategy based on the needs and objectives of each type of customer. Hence, it is focused on four markets: institutional, government, enterprises, and individuals." of the Vice-Presidency of Individuals and the Vice-Presidency of Enterprises which carry out the competitive strategy and ensure the value proposition defined for each market. The back office is made up of three vice-presidencies and three departments: Vice-Presidency of Customer Service, Vice-Presidency of Legal Affairs, Vice-Presidency of Investments, the Department of Finance, the Department of Risks, and the Department of Technology and Information Services. The company's development will be led by the Vice-Presidency of Strategy and Talent which is in charge of the fundamental pillars for the future of the organisation, including innovation, marketing, key projects, and human talent. It is important to mention that the VicePresidency of Investments is composed of three areas, each with its own level of specialisation: first, the area of Economic Research and Strategy which leads the research into, and proposal of, the main investment opportunities for the different portfolios; the Portfolio Managers Area which is responsible for the management and administration of each of the assigned portfolios; and finally the Money Desk Area with responsibilities focused on optimally executing investment orders placed by portfolio managers in the electronic order book. CFI.co | Capital Finance International

PRODUCT INNOVATION Fiduoccidente is constantly working on the development of products and services that meet the different characteristics of each market segment with the aim of offering various alternatives to customers. Thus, in 2017, it launched the Fondo de Inversión Colectiva Balanceado Internacional, a fund with exposure to the US and Latin American markets in which investors can have access to fixed income and equity investment instruments. This is also the first investment fund in Colombia with a foreign manager in charge. In the first quarter this year, with clients who are comfortable with moderate risk exposure, the trust company launched the Fondo de Inversión Colectiva Renta Fija Dinámica which manages its customers’ surplus liquidity through investment in fixed income securities, mostly rated from A+ to AA+. The portfolio structure allows for expected returns greater than those of a demand investment fund, assuming a 30-day lock-up period. The dynamics of product innovation are nonstop. That is why the trust company is working on the launch of its Fondos de Inversión Colectiva Inmobiliarios (FICI) – a family of funds. Through this product, customers – both corporates and individuals – will be awarded the opportunity to access the real estate market with very low investments and low management costs. MAXIMUM RISK RATINGS Fiduoccidente is the only trust company in Colombia with the maximum counterparty and portfolio management risk ratings, granted by international rating agencies, BRC Standard & Poor’s and Fitch Ratings. At the beginning of 2018, Fitch Ratings assigned the domestic Long and Short-term Counterparty Risk rating of Fiduciaria de Occidente at AAA (col) and F1+ (col), respectively, thus ensuring minimal risk to managed funds and ensuring their good performance. These ratings reflect the 165

CEO: Mario Andrés Estupiñan Alvarado

company’s stability, the professionalism of its employees, and the maturity of its processes, including the ability to efficiently manage the assets of customers – who remain the backbone of the corporate strategy. DIGITAL TRANSFORMATION The company has invested considerable efforts in developing and implementing digital initiatives that will conclude in the second half of this year, with an expected positive impact on the customer experience. The first project of this type refers to a new transaction website for ease of consulting product status and carrying out transactions in a quick, easy, and secure manner. The second project aims to implement a new service on Banco de Occidente’s website for customers of the Fondo de Inversión Colectiva Occirenta that will allow the transfer of resources between accounts and funds in real time. Finally, there is the launch of a new and secure financial messaging service that will 166

VP of Strategy and Talent: Adriana Chávarro Callejas

provide corporate and institutional customers with flexibility and speed in their transactions. It is important for Fiduoccidente to be at the forefront of technological developments that allow the company to make quick strategic decisions. That is why it has implemented statistical analysis and data mining tools that help understand customer behaviour, segment the customer base, and implement loyalty, engagement, and service add-ons that improve the overall customer experience. Fiduoccidente is constantly working to strengthen its culture of innovation based on the needs and requirements of financial consumers in the country. In October last year, it became the first trust company to partner with Colombia Fintech, a start-up guild leveraged on technology to provide financial services. Without a doubt, this alliance is a major step in the company’s digital transformation. CFI.co | Capital Finance International

THE FIDUOCCIDENTE MANAGEMENT TEAM Mario Andrés Estupiñan Alvarado – chief executive officer Mario Andrés Estupiñan Alvarado assumed his current position as CEO of Fiduciaria de Occidente in February 2015. As CEO, Mr Estupiñan establishes the trust company’s strategic management for the short, medium, and long term and strategic partnerships to ensure its positioning in current and potential markets. Furthermore, Mr Estupiñan’s role is to ensure expected returns to shareholders and compliance with an effective and practical approach to a dynamic legal framework. He has led the company to be recognised as one of Colombia’s most notable brands in 2016. Throughout his time at Fiduoccidente, Mr Estupiñan has ensured that Fiduoccidente remained an active member in the Colombian fiduciary, private equity, infrastructure, and

Summer 2018 Issue

VP of Customer Service: Rocío Londoño Londoño

real estate sectors. He has also pioneered the implementation of international standards of best practice. Mr Estupiñan holds a bachelor’s degree in Economics from Universidad De Los Andes, with post graduate studies in Economics, Financial Legislation, Risk and Information Economy, and Senior Management and Strategic Leadership. Mr Estupiñan has more than nineteen years of experience in Colombia’s financial sector and has also worked in the United States and Peru. He has held top-level positions leading successful innovation, internationalisation, and sales expansion processes. He has ample fiduciary knowledge in sales, legal, financial, tax, accounting, and operating areas. Adriana Chávarro Callejas – vice-president of Strategy and Talent Adriana Chávarro Callejas a BSc. in Industrial Engineering from Universidad de Los Andes with executive training in marketing and areas related to the structuring and creation of financial vehicles and project management. She has more than nineteen years of experience in the trust sector in high executive positions at various companies, as well as extensive knowledge of

VP of Investments: Jorge Enrique Cortés Rojas

the market and trust products. This has allowed Mrs Chávarro Callejas to successfully lead the design and implementation of business, trade, innovation, and marketing strategies. At Fiduoccidente, she is responsible for the company’s strategic management through key projects and talent attraction and retention. She is also responsible for the processes of product innovation and development and marketing and communications, which includes brand positioning and customer relations. Rocío Londoño Londoño – vice-president of Customer Service Rocío Londoño Londoño holds a BSc. in Finance and Foreign Trade and a postgraduate degree in Finance and International Business. She has more than eighteen years of experience in the trust sector, specifically in the setup and management of public and private businesses, structuring and marketing of financial services, operational risks, winding-up proceedings, strategic planning, and quality management systems. As the vice-president of Customer Service, Ms Londoño Londoño is responsible for ensuring CFI.co | Capital Finance International

compliance with the highest operating and transactional standards and offering the best quality in customer service. Jorge Enrique Cortés Rojas – vice-president of Investments Jorge Enrique Cortés Rojas is currently in charge of the Investment Department. He has ample knowledge of portfolio management in Colombia and abroad, and in accounting, finance, statistics, economics, liquid asset risk, and portfolio management. He holds a bachelor’s degree in Business from Pontificia Universidad Javeriana in Colombia and did post-graduate studies in Corporate Finance. With over 25 years of experience in the Colombian financial sector, he has occupied toplevel positions in front, middle, and back offices, leading processes for innovating, updating, and modernising the liquid assets of Fiduciaria de Occidente. As vice-president of Investments, Mr Cortés Rojas is responsible for strategic investment management in the short, medium, and long term to keep positioning Fiduciaria de Occidente with the highest standards in asset management. i 167

> CFI.co Meets the Provincia Fondos Management Team:

The Team who Made it Possible Provincia Fondos Sociedad Gerente de Fondos Comunes de Inversion is the asset management arm of Banco Provincia. The company is managed by an executive team led by its chairman and CEO, Eduardo Eleta.

From left to right: Jorge Blanco (COO), Alvaro Aviles (Head Portfolio Manager), Eduardo Eleta (CEO) & Esteban de Apellaniz (Marketing & Sales Manager).

r Eleta joined the company in January 2016, after Maria Eugenia Vidal was elected governor of the Buenos Aires Province. Mr Eleta and his team have carried out a thorough corporate restructuring resulting in high growth and outstanding performance of the assets under management. Within this period, Provincia Fondos’ market share increased from 0.6% to more than 3%, while its fixed income funds performed within the top-5 in their categories. Mr Eleta holds a degree in Public Accountancy from the Universidad Católica Argentina and has developed an extensive career in the financial markets for more than thirty years. For over a decade, he chaired the managing boards of ABN AMRO Asset Management, ABN AMRO Trust, and ABN AMRO Securities in Argentina. Mr Eleta also held office as director at ABN AMRO USA (New York) in charge of the Latin American Equity division. Afterwards, he founded his own asset management company – RIG Asset Management – which was later acquired by a major local financial group.

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When Mauricio Macri held office as governor of the City of Buenos Aires, Mr Eleta was appointed Undersecretary of Modernisation and then deputy CEO in city government-owned Banco de la Ciudad de Buenos Aires. He currently chairs the boards of Provincia Fondos and Provincia Bursátil and is also member of the supervisory board at Caja de Valores, the only central securities depository in Argentina. In addition, Mr Eleta chairs the management committee of Provincia Fondos which also includes Esteban de Apellaniz, Alvaro Aviles, and Jorge Blanco. Esteban M de Apellaniz joined the company in 2016 as Marketing & Sales manager. Prior to joining Provincia Fondos, he held management positions at Citibank and ABN AMRO in Argentina. Mr De Apellaniz worked as Marketing & Sales manager at ABN AMRO Asset Management and was CEO of Tornquist Sociedad Gerente de Fondos de Inversión. Mr Apellaniz received a degree in Business Administration from Universidad Católica CFI.co | Capital Finance International

Argentina where he also held a professorship. He is a highly reputable businessman in the agricultural sector. Alvaro R Aviles is head portfolio manager of Provincia Fondos. He joined the group in 2011 as an investment advisor, then became one of the portfolio managers in Provincia Fondos, and in 2016 was promoted to head of the portfolio managers team. Mr Aviles has previously worked at Premium Asset Management and Accenture in both financial advisory and management control roles. Mr Aviles graduated from Universidad Torcuato Di Tella with a Bachelor’s degree in Corporate Economy and a Master’s in Finance. Jorge Blanco is the COO of Provincia Fondos. He started his career at KPMG and later held management positions at ABN AMRO Securities, ABN AMRO Trust, and ABN AMRO Bank in Argentina. He also worked as COO in Equity Trust Company (Argentina). Mr Blanco holds a Public Accountant degree by Universidad de Buenos Aires. i

Summer 2018 Issue

> Provincia Fondos:

Changing the Business Model

fter a deep restructuring, Provincia Fondos achieved the highest assets under management (AuM) growth of the industry. The firm’s fixed income funds performed within the top-5 in 2017.

Founded in 1994, Provincia Fondos is the asset management arm of Grupo Provincia, a conglomerate of companies owned by Banco de la Provincia de Buenos Aires. The Grupo Provincia is a strong player in the Argentine economy, offering a comprehensive array of services to the community such as insurance, brokerage, financing, and technology. Banco de la Provincia de Buenos Aires is the second largest bank in Argentina. Founded in 1822, it was the first bank in Latin America, printed the first banknotes for the Republic of Argentina, and in 1856 granted the first mortgage loan. Since then, the bank helped thousands of families to fulfil their dream of owning a home. As a solid institution serving the core of the Argentine economy – the agriculture sector and SMEs – the bank was also the first grantor of microcredits in the country, granting more than 160,000 loans to small businesses. The bank has 420 branches in the Buenos Aires Province where more than 30% of the country population resides and economic activities are concentrated.

"Provincia Fondos is a successful example of a state-owned company that creates value through the professional management of savings from people, companies, and entities of the Province of Buenos Aires."

As a consequence of these changes, the results from January 2016 to May 2018 are as shown below in Graph 1. Even though Argentina’s mutual funds market experienced an important growth thanks to the macroeconomic changes introduced by the Macri Administration, Provincia Fondos AuM significantly outpaced overall market growth, from ARS $1,2bn to ARS $20,1bn, which represents an increase of market share from 0.6% to 3.2%. This places Provincia Fondos within the top-10 Argentine asset managers ranked by AuM. Furthermore, in 2017, all fixed income funds managed by Provincia Fondos performed within the top 5 of each category. Additionally, an improvement in the credit quality of the underlying assets made Moody’s grant the firm an upgraded rating to four out of its seven corporate funds.

In December 2015, Mauricio Macri was elected president of Argentina and Maria Eugenia Vidal governor of the Province of Buenos Aires. As part of this new administration, Eduardo Eleta was appointed CEO of Provincia Fondos. He has developed an extensive career in the financial and capital markets sectors both in Argentina and the United States.

macroeconomic conditions. Provincia Fondos provides products and services that help clients build a better financial future. • Improve investment, sales, and operational processes – The decision-making process was professionalised and strict investment and risk policies were drawn up. By providing the company with the latest technology available, risks were minimised and online transactions made available to customers. At the same time, codes of ethics and compliance, as well as contingency and anti-money laundering policies were updated. • Define a marketing and sales plan – Clients come from every corner of the province. Amongst them are governments, companies, foundations, and thousands of individuals. A detailed strategy was put in place to approach these different segments and a series of matching products was designed. As online communication with clients is key, a more accessible and comprehensive overview of fund information was made available.

Before that, the company was a small player in the market holding the 31st position within a total of 45 asset managers ranked by AuM. Together with his management team, Mr Eleta started a corporate restructuring process based on four pillars: • Build a professional team – Provincia Fondos put together a highly specialised team formed by the most talented staff within the company and by outside veteran specialists. Functions of each area were redefined, ambitious goals set, and training, performance, and compensation plans updated. The team is passionate about its work and intensely focused on performing at the highest levels. • Offer high-quality products – The fund menu was carefully developed on the basis of client needs, existing products in the market, and

Graph 1: AUM - Provincia Fondos vs Market. Source: Camara Argentina de Fondos Comunes de Inversión (cafci.org.ar).

CFI.co | Capital Finance International

Provincia Fondos expects continuous growth and new opportunities for the Argentine asset management business. This upbeat assessment is based on recent legislative changes that allow for the creation of new products and introduce private retirement funds, a new tax code for close-ended funds, and the incorporation of ETFs to the Argentine market. These measures place Provincia Fondos in an enviable position to continue its growth and consolidate the company as a key player on the Argentine mutual funds market. Provincia Fondos is a successful example of a state-owned company that creates value through the professional management of savings from people, companies, and entities of the Province of Buenos Aires. i

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> Banco del Chubut:

A Small Bank with an Important Job

anco del Chubut is the financial services provider of the Province of Chubut in Argentina. The bank’s majority shareholder is the provincial government. Chubut, located in Patagonia, is one of Argentina’s 23 provinces. The business outlook for Banco del Chubut is exceptionally good. The bank is ranked amongst the country’s top 25 financial services providers 170

in both assets and equity. Banco del Chubut is the sixth-largest publicly-owned banks in Argentina.

$291 million. The bank’s equity stands at $2.415 million, 15% higher than in December 2017.

The balance of the bank’s credit portfolio now stands at $8.115 million, 7.5% higher than in December 2017. The accumulated results for the year 2016 were $371 million, whilst in 2017 this increased by 39% to $515 million. As of June 2018, the accumulated amount reaches

The strengths of the Banco del Chubut derive from a growth strategy that includes further improvements to efficiency and leadership within the province. This has allowed the bank to achieve a very good performance and continue to generate value for its stakeholders.

CFI.co | Capital Finance International

Summer 2018 Issue

President: Julio Tomás Ramírez

The bank is recognised as a dynamic and growing financial institution with a successful model of social banking, easily accessible to people, customer-focussed, and providing unique and different opportunities and services. The members of the bank’s board of directors boast the knowledge and skills necessary to clearly understand Banco del Chubut’s social and economic responsibilities and act with the loyalty and diligence of a good businessmen. The board’s enduring success is passed, in large part, on its willingness and eagerness to closely engage with staff. Pioneers in the placement of small loans, Banco del Chubut offers financial services to customers whose needs and requirements are often ignored by traditional commercial banks. The bank has offered hundreds of Chubut families access to premier banking services regardless of their place of residence or income level. Likewise, the vast majority of companies, whether small, medium or large, achieve their growth objectives with the support of the provincial bank.

"The business outlook for Banco del Chubut is exceptionally good. The bank is ranked amongst the country’s top 25 financial services providers in both assets and equity."

Banco del Chubut developed and launched its own credit card – Patagonia 365 – already twenty years ago, counting on its dominant position in the local market. To date, more than 80,000 cards have been issued. Confirming its social role, Banco del Chubut has also introduced its Banco Móvil (Mobile Bank) service which sees armoured trucks traveling the vast expanses of the province to deliver CFI.co | Capital Finance International

services to places not reached by other financial services providers. Banco del Chubut maintains a province-wide network of 29 branches and 127 ATMs. A large numbers of corporate social responsibility initiatives channelled via the bank’s own foundation with a view to strengthening provincial development and an emphasis on providing educational opportunities. The Banco del Chubut is also proud of its contributions to the development of human resources in the province. The bank has been awarded the coveted ‘healthy workplace’ certification by the national ministry of Health and which recognises three major achievements: the institution of a smoke-free environment, the promotion of healthy eating habits, and the encouragement of physical activity. Banco del Chubut has also pioneered ‘teleworking’ with the full support of the ministries of Labour and Education. This allows the bank’s employees who lack mobility to work from home. Framing its operations in a comprehensive and detailed code of ethics and code of banking practices, allows the Banco del Chubut to support the community and function is a transparent way which build both trust and clients loyalty. Thus, Banco del Chubut creates opportunities for accountholders and considers its impact on all stakeholders. It is a bank that grows in tandem with the community that surrounds it. i 171

> Mexico:

The Outgoing President

residential elections in Mexico were usually met with a yawn. Outcomes were, as a rule, if not predetermined, at least highly predictable. During 71 years the, Institutional Revolutionary Party (PRI) ruled supreme, winning every single election until its electoral alchemists lost their magic touch, or perhaps gained a renewed appreciation of ethics, and allowed the opposition to claim victory. Political plurality had arrived in Mexico and the country’s political arena sprang to life. In 2012, voters returned the PRI, now reformed and but a shadow of its former arrogant self, to power with the relatively youthful Enrique Peña Nieto (51) at the helm.

Special Feature - Mexico

President Peña Nieto promised – and delivered – a reform agenda that reinvigorated the country’s economy and created an estimated two million new jobs over a six-year period. The administration also streamlined legislation and simplified bureaucratic procedures in a bid to attract foreign investors. The approach worked and in just the first two years of president Peña Nieto’s term in office, close to $20bn flowed into Mexico’s automotive sector with Mercedes Benz, BMW, Audi, Nissan, Kia, and a host of other manufacturers setting up new plants or expanding existing ones. Much more controversially, the president also pried open the country’s jealously guarded oil and natural gas sector, ending a state monopoly that until recently was considered one of Mexico’s prized crown jewels. The economy has now picked up considerable steam with GDP growth reaching a robust 4.6% in Q4 2017. Both industrial production and the services sectors are the main drivers of the expansion. Now that inflation has been tamed, wages are again gaining in real terms after a one-year lull. Mexico’s economic resilience is all the more remarkable in light of troubles brewing over NAFTA, the North American Free Trade Agreement which US President Trump during his election campaign described as the “single worst deal ever approved [by the US]” and is now being renegotiated at the White House’s request. In force since 1994, the trilateral trade bloc has proved particularly advantageous to Mexico which erected an entire export-oriented

industrial sector on the premise of unfettered access to a buoyant market of 480m or so eager consumers. Nafta’s renegotiation is not proceeding at the anticipated pace as a number of deadlines have already been missed. This means that any new deal will have to wait another year for congressional approval in the US. Still unresolved sticking points include a new and stricter rules of origin framework for the automotive industry, strengthened investor-state dispute settlement procedures, and improved market access for US diary products. President Peña Nieto

Washington has also asked for a five-year sunset clause to be included in the final deal which would allow the trade bloc to simply expire unless all three parties agree on an extension. Both Canada and Mexico are dead set against such a sunset clause which, they argue, would deter investment and undermine long-term economic and development policy by introducing a degree of uncertainty. With a presidential election looming, Mexico’s trade negotiators in June had little appetite for conciliatory moves. Included, at the very last moment and to everyone’s surprise, in President Trump’s import tariffs on steel and aluminium, Mexico and Canada reacted with dismay and barely concealed anger. Former Mexican ambassador to the US Jorge Guajardo, an experienced trade negotiator, explained that his country cannot be expected to negotiate with a gun pointed to its head: “We have been very specific that the talks need to take place in a cooperative environment.” Things almost got out of hand when in late May Canadian Prime Minister Justin Trudeau cancelled a trip to Washington after US VicePresident Mike Pence called him to demand the inclusion of a sunset clause in any new NAFTA deal. Only a few days later, US Commerce Secretary Wilbur Ross admitted that the delays in the negotiation of a new trade deal caused Canadian and Mexican steel and aluminium producers to be subjected to the extra tariff: “There is no longer a very precise date when the talks may be concluded, and therefore they were added onto the list of those that will bear tariffs.”

As a result of this and other spats and irritants, Canada and Mexico seem willing to walk away from the talks altogether – their willingness to address legitimate US concerns over NAFTA has now all but evaporated. President Trump has also threatened to walk out and discard the trade deal entirely. The mood in Washington soured further after Canada announced the imposition of $12.8bn tariff surcharges on US products entering the country, and Mexico slapped $8bn worth of retaliatory tariffs on pork, blueberries, and lightbulbs moving southwards across its border. The tit-for-tat countermeasures will further affect the tenor of the NAFTA talks. Lobbyists for large corporates have been working overtime to convince administration officials and members of congress to think twice, or preferably thrice, before throwing NAFTA under the proverbial bus. Whilst NAFTA’s immediate future remains uncertain, one aspect of the trade deal has already changed considerably: President Peña Nieto of Mexico has kept his cool in a most statesman-like fashion offering constructive engagement. He has refused to respond to slurs directed at his country and maintained a business-like pragmatic attitude throughout. Most Mexicans, used to leaders who shout their faux indignation theatrically from the rooftops, absolutely loved it and felt a sense of national pride in having a president not easily perturbed or, indeed, intimidated. This, perhaps, is a sign of the country’s political maturity and its economic prowess. Thanks to Enrique Peña Nieto, Mexico has, it would seem, found its stride. i

"Whilst NAFTA’s immediate future remains uncertain, one aspect of the trade deal has already changed considerably: President Peña Nieto of Mexico has kept his cool in a most statesman-like fashion offering constructive engagement." 172

CFI.co | Capital Finance International

Summer 2018 Issue

> The

President Andrés Manuel López Obrador

n also-ran twice over, Andrés Manuel López Obrador at long last secured his apotheosis – a landslide victory that saw the leftist firebrand claim 53% of the vote in Mexico’s July 1 presidential election. Mr Obrador left his opponents quite literally in the dust, pulling ahead some thirty percentage points over his nearest competitor. Mexican voters are ready, if not anxious, for change and the presidentelect promises to deliver – although it is not yet entirely clear how he proposes to do this. However, Mr Obrador’s astounding triumph also exposes the marketing myth of ‘Modern Mexico’ – a country that embraced progress, globalism, and efficiency but does not yet include the entire nation. Whilst great strides have been made since the early noughties – the economy opened up, growth rates improved, and red tape was cut (a little) – still about half of Mexico’s almost 130 million inhabitants remain mired in poverty and an estimated 60% of the country’s labour force works off the books in the informal economy. Mexico’s ability to successfully compete in manufacturing with Asian economies is primarily the result of low labour costs rather than innovation or technology. The North American Free Trade Agreement (NAFTA), now being renegotiated at the request of the US government, has benefited border states to some extent but not the central and southern parts of the country.

This need not necessarily mean that Mexico is ready to join Venezuela as yet another failed experiment in tropical socialism. A comparison

with Brazil would perhaps be more apt. The fit is far from perfect, of course, though when Brazilian voters – likewise fed up with politicsas-usual – in 2003 elected Workers’ Party leader Luiz Inácio ‘Lula’ da Silva to the presidency, fears that anti-business policies would carry the day were proven wrong. Instead, Brazil entered a phase of accelerated growth propelled by foreign investment whilst tens of millions of people were quickly lifted out of poverty by generous social programmes. In the end, of course, the piper had to be paid: the former president now serves a twelve-year prison sentence for money laundering and passive corruption whilst the country he ruled for two consecutive four-year terms tries to shake off the worst recession in living memory. This is decidedly not the legacy Mexico’s president-elect wants to leave behind. Though Mr Obrador has repeatedly been branded a policy dunce, populist, and demagogue by those who see in him a second coming of Hugo Chávez, the president-elect proved an able administrator as mayor of Mexico City. Even his fiercest opponents concede that he seems untainted by corruption. With a reputation for personal austerity, Mr Obrador ran a grassroots campaign, promising to address the inequality that splits Mexican society, leaving untold millions behind. According to Oxfam, the sixteen richest Mexican businessmen saw their fortunes increase five-fold over the past two decades whilst the per capita income over that time expanded only by an average of around one percent annually. The fairly robust economy of the country lifts some boats much more than others. In Mexico, trickle-down economics have produced disappointing results. Take booming Jalisco, one of ‘Modern Mexico’s’ success stories. The state on Central Mexico’s Pacific seaboard is home to over eight million people and, amongst others, to a booming tequila industry. The capital Guadalajara, an agreeably leafy and cosmopolitan mid-sized city, is surrounded by modern industrial estates that house light manufacturing plants. However, of the state’s estimated 3.6 million economically active people, only some 24,000 earn more than $12,000 annually. In fact, three-quarters of Jalisco’s workers only take home between $1,200 and $6,000 per year. A salary paying the equivalent of $6 per day is considered acceptable. Statistics show that real wages haven’t noticeably increased over the past ten years. The situation is not much different in Baja California, another of the country’s economic powerhouses. Mr Obrador envisions a different approach: he has promised to raise pensions, boost spending on education and infrastructure, put in place employment programmes for young people, and grant the state a central role in jump-starting the economy. The president-elect, who will take office CFI.co | Capital Finance International

on December 1, of course also will want to tackle the staggering levels of violence and corruption that continue to plague his country. These are amongst the most pressing issues Mexico’s next president needs to address, if only to assert his authority over parts of the country that are now, effectively, being ruled by crime syndicates. Gun violence has claimed at least 200,000 lives since 2007. During the latter stage of the election campaign, when it already had become evident that he would secure a win, Mr Obrador moved away for his more radical positions such as reverting the opening up of the energy sector and cancelling the new airport being built for the capital, a controversial megaproject that has suffered delays, cost overruns, and the misuse of funds. President-elect Obrador called new facility ‘pharaonic, technically flawed, and a fount of corruption’. Still, he indicated that it may be too late to cancel. Mr Obrador, then, aims to represent a national transformation, the fourth in the country’s modern history after independence (1821), the War of Reform that pitched conservatives against liberals (1857-1860), and the revolution of 1910 which ushered in an era of nationalist policies. The president-elect has so far offered few details on the actual plans of his administration other than that ‘the poor will come first’. Mr Obrador is the first Mexican president since the mid-1990s to enjoy a majority in both houses of congress. His three-party coalition Junto Hacemos Historia (Together We Make History) claimed 312 seats in the 500-strong chamber of deputies and 70 of 128 seats in the senate. This gives Mr Obrador exceptional powers to push through his reform programme, a necessity if the presidentelect is to meet the high expectations of ordinary Mexicans who believe their time has come. Happily, Mr Obrador inherits a country that has made considerable progress over the last six years under the administration of outgoing president Enrique Peña Nieto whose much-praised reform agenda has reinvigorated the economy. Mr Obrador has already sent reassuring signals to investors that the ground rules will not change. He also immediately sought to temper fears of a clash with US president Donald Trump, vowing to pursue a constructive foreign policy and address any concerns Washington may have over NAFTA and bilateral trade. Mr Obrador believes that President Trump is mistaken in identifying the country as a competitor and hopes to emphasise the complementary nature of the US and Mexican economies. Pundits actually expect the two to hit it off surprisingly well as neither of the men is a pushover and both understand power politics, albeit from different angles. i 173

Special Feature - Mexico

Business leaders often talk of the ‘Mexican Paradox’ which denotes the apparently unworkable, yet functioning, mix of third world realities such as lawlessness in its many guises and a series of impressive first world accomplishments – a relatively modern economic infrastructure supporting well-functioning markets with an emerging middle class. This combination, though, is perhaps not sustainable for very long. As Mr Obrador’s landslide shows, Mexicans are seriously fed up.

Incoming President

> EY:

Argentina - New Public Works Financing Programme By Sergio Caveggia & Flavia Cimalando

Argentina has opened up investment opportunities of approximately $265bn across multiple areas since December 2015 when the new government was elected. In this regard, public-private partnerships (PPP) are a core pillar that facilitates local and foreign companies to structure the financing and development framework of different projects.

y the end of 2016, the Argentine government set forth a new programme for financing public works through PPP agreements. Such contracts are entered into with entities from the national public sector, and private or public parties, to conduct projects in infrastructure, housing, services, and IT innovation. In general, the model establishes that the PPP contractor creates a special-purpose vehicle (SPA) in charge of oversight and performance until the termination of the agreement. This programme is an alternative to agreements regulated by public works laws. Some of the main characteristics and aims of this legal framework are: 1. Fostering financing and private investment. 2. Allowing to customize each agreement to the project’s specific requirements and differing financing structures. 3. Term of the agreements may last up to 35 years. 4. PPP arrangements may include, amongst others, the performance of the public works financed through different securities or bonds. 5. A PPP trust is created as well with the purpose of carrying out and/or ensuring payment to contractors. Such PPP trusts will issue securities and bonds. 6. All securities and bonds are to be issued in US dollars and will be irrevocable and transferrable freely without any PPP trust’s consent. The Ministry of Finance defined over fifty PPP projects and foresees investments for $26bn approximately. One of the first projects is related to infrastructure: building highways and roads. A total investment of almost $17bn is expected to be made which will include some 5,200km of roads and highways across Argentina (see Table 1 and Map 1). This first project will be organised in three phases. The bidding process for the first phase took place in May 2018. The bidding for the second phase is expected for September 2018. 174

Source: Argentina investment and trade promotion agency

Railway projects – laying 685km of track - is also anticipated. Additionally, different projects in healthcare, education, energy, and mining are in the government’s pipeline as well. The bidding schedule is, however, still pending. Since the PPP structure comprises third-party construction, reconstruction, or repair services, specific income tax provisions are applicable. Section 74 of Income Tax Law establishes that when the works affect more than one tax period, the PPP contractor may opt to: a) allocate to each tax period the gross income (total amount collected multiplied by the percentage of gross income expected by the taxpayer for the total works) or, b) allocate, to each tax period, the gross income resulting from deducting from the amount to be collected for each of the works carried out, the expenses, and the elements that determine the costs of such works (the working progress method). Budget Law establishes a third option since it provides the contractor with the possibility of allocating income arising from the performance CFI.co | Capital Finance International

of works to the year in which the PPP trust transfers its securities and/or bonds to the contractor. Ultimately, the contractor should determine the tax effects based on the financial model of the work. Moreover, the PPP contractor may finance the undertaking by discounting the bonds, which will entail, at first view, the recognition of a loss for the assigned discounts if the rate paid is higher than the imputed interest related to the instrument. Section 19 of Income Tax Law sets forth that NOLs from the sale of certificates of participation in financial trusts and any other right over trusts and similar agreements, will be deemed of specific nature. Therefore, this loss may not be used against ordinary income obtained by the performance of the PPP agreement. The PPP contractor will be subject also to turnover tax, stamp tax, and municipal taxes in the jurisdictions that are empowered to levy these. However, the PPP agreements are exempt

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Table 1

Map 1: Argentina

"In general, the model establishes that the PPP contractor creates a special-purpose vehicle (SPA) in charge of oversight and performance until the termination of the agreement. This programme is an alternative to agreements regulated by public works laws." from stamp tax in the Province of Buenos Aires, including contracts for the incorporation of business companies that will act as PPP contractors and the agreements signed by these companies with third parties to comply with the PPP agreements. The Argentine government invited all provinces to exempt these agreements from stamp tax. Finally, the purpose of the PPP programme is to offer tenders for public works via a transparent, flexible, and competitive procurement process, grant legal certainty in the financial design of the model, and encourage the contractor to carry out better quality work.

This new financing programme, in a country with a significant demand for infrastructure work, may be of interest to potential investors that aim for increased profitability and a diversified portfolio. i ABOUT THE AUTHORS Sergio Caveggia is a tax partner currently in charge of the Transaction Tax Area in Argentina. He joined EY Argentina in 1994 and has developed strong expertise over 24 years in international taxation and mergers and acquisitions. He is highly experienced in acquisition structures for inbound and outbound investments, buy side, sell side, and restructuring services within the Transaction Tax area.

Mr Caveggia has given lectures at national universities and is a frequent speaker at tax seminars. He has also written several articles dealing with Argentine tax issues. Mr Caveggia is a certified public accountant and graduated from University of Belgrano in Argentina. He also obtained his tax specialist degree at the University of Belgrano and obtained a postgraduate certificate in Business and Management from Universidad Catรณlica Argentina (UCA). He is a member of the Professional Council of Economic Sciences of Buenos Aires and the Argentine Fiscal Association. Flavia Cimalando is an executive director of the Transaction TAX Area in Argentina. She joined the tax division of EY Argentina in 2000. Mrs Cimalando has developed strong expertise over eighteen years in tax advisory services, tax planning, and due diligence for local and international companies. She specialises in international and local business acquisitions and M&A consulting.

Author: Sergio Caveggia

Author: Flavia Cimalando

CFI.co | Capital Finance International

Mrs Cimalando is a certified public accountant and obtained a Bachelor degree in Business Administration from the University of Buenos Aires. She worked as an assistant professor of Tax Theory and Technique at the School of Economics of the University of Buenos Aires during the last seven years. She has also written several articles dealing with Argentine tax issues. 175

> North America

US Trade Deficit: Lessons from Recent History If recent history offers any guidance, the imposition of tariffs may not be the most effective way to address a persistent trade deficit. The present discussion about China’s trade practices mirrors the concerns of the 1980s over Japan’s outsized trade surplus. In fact, most articles and studies published some thirty-odd years ago could be easily rehashed by swapping Japan for China. Apart from the perceived culprit, very little has changed in the perception of reality. This may well explain the US administration’s frustrations with its main trading partners: as soon as one issue is solved, others crop up leaving the overall picture – a gaping deficit on the trade balance – largely unchanged.

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he trade tensions with Japan of the 1980s, which came close to erupting into a full-blow trade war, were largely solved via the Plaza Accord of 1985 whereby the governments of the US, Japan, West Germany, France, and the UK (G-5 countries) agreed to act jointly in an attempt to depreciate the US dollar against both the West German mark, Japanese yen, and other major currencies. Then, as now, a strong dollar discouraged US exports and cheapened imports. Over the three years following the signing of the agreement, coordinated central bank interventions gradually shaved 51% off the dollar’s value against the yen. The dollar lost a similar amount of ground against the German mark, French franc, and British pound. Though now largely forgotten, the Plaza Accord at the time represented a number of remarkable firsts: never before had the world’s principal central banks agreed to act jointly towards a common goal. For the first time, target exchange rates were set signalling the onset of a globalised economy. In order to redress economic imbalances, West Germany agreed to lower corporate taxes, Japan opened its domestic market, and Great Britain decided to reduce public expenditure and prioritise the development of its private sector. Meanwhile, the US abandoned its strong dollar policy. The G5 member states, effectively, traded sovereignty for globalisation. The dollar’s slide did much more than merely rebalance cross-border trade flows. Japanese and German exporters soon saw their market share whither as US consumers declined to pay an exchange rate premium for imported cars, electronics, and other goods. The obvious solution manufacturers came up with was to move offshore and establish a presence in the US. Starting from around 1980 and continuing to the present, Japanese investments in the US have soared. According to the Japanese Business Federation, the country’s corporations have created more than 860,000 jobs in the US, paying an average annual wage of $84,000. If spin-offs are included, the total amounts to some 1.6m new jobs. The estimated total annual payroll of Japanese corporates in the US exceeds $72bn. US companies also moved to Japan and now employ around 380,000 employees in that country, representing a total wage bill in excess of $26bn. Even though the dollar last year retreated significantly against major currencies – losing almost 10% of its value in what some market watchers describe as the worst performance since 2003, the International Monetary Fund (IMF) still considers the greenback overpriced by as much as 10%. On a trade-weighed basis, the dollar lost only 3% to 4% of its value. Also, when considering the dollar’s 2014 rally, the US currency is still up 13% against the euro and yen. Eyes are now fixed on the European Central Bank as it unwinds the massive quantitative easing programme that has depressed the euro vis-à-vis the US dollar. The move should help the euro gain 10% or more on the dollar over the coming year or two.

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A weaker dollar should, of course, help the US shrink its trade deficit and the wider current account deficit, and is probably a much more effective means of addressing the imbalances than the imposition of tariffs. Global market strategist Hannah Anderson of JP Morgan Asset Management expect the dollar to come down by the end of the current year, though cautions that the current shortterm rally may still have some inertia in it. Considering the rising trade tensions, Professor of Economics Paul Hallwood of the University of Connecticut fears that Japan, China, and the Eurozone have waited too long: “Had they allowed their currencies to appreciate, the US administration would probably not have needed to turn the tables on them, making the US deficits their problem too.” According to Prof Hallwood, China and Europe can no longer maintain that their surpluses are merely a US problem, indicative of the country’s underlying economic weaknesses. Though a Plaza Accord 2.0 could provide a solution, changed realities in the geopolitical make-up of the world make a repeat agreement unlikely. At least that seems to be the assessment of US Secretary of Commerce Wilbur Ross, a corporate turnaround specialist who learned his trade at the New York office of UK investment bank NM Rothchild & Sons where he headed the Bankruptcy-Restructuring Department. Mr Ross no longer believes in the capacity of the global marketplace to even out imbalances over time; he now claims to be “prosensible trade”, the proviso indicating a willingness to punish trading partners that tilt the playing field in their favour: “They should not get away with it – they should be punished.” Branded, perhaps unfairly given his track record, a “protectionist”, Mr Ross knows all about the fight over Japan’s trade surplus in the 1980s which he followed closely. He does not necessarily favour the unilateral imposition of tariffs but would rather pry open restricted markets to US goods. China, of course, comes in for a clobbering over its government support of industry, the relaxed approach to intellectual property right, and countless restrictions on foreign investment which keep entire sectors of the country’s economy hermetically sealed off – even after some restrictions were lifted, 36 industries remain out of bounds to foreigners. What the commerce secretary also seems to realise is that the tough trade measures taken against Japan in the early 1980s – before the Plaza Accord was signed – failed to reduce the US trade deficit. At the time, a loose fiscal policy – coupled to tight monetary policy – caused the deficit to surge. This completes, as it were, the circle and offers a way out: tighten the federal purse strings and coordinate central bank efforts to depreciate the US dollar. The timing for such a major endeavour seems just about right as the Eurozone is ready to change its monetary tune and China may well chose to cooperate rather than face the wrath of a thoroughly irked US administration which is about to lose its patience. i CFI.co | Capital Finance International

Summer 2018 Issue

> CFI.co Meets the CEO & Chairman of NESR:

Sherif Foda

herif Foda has served as NESR’s chief executive officer and chairman since its inception. He has a quarter-century’s worth of professional experience in the oil and gas industry around the world, primarily at Schlumberger. At that company, he served as senior advisor to the chairman, as president of the Production Group, and as the president of Schlumberger Europe and Africa. Prior to that, he served as Schlumberger’s vice-president and managing director of the Arabian market, was worldwide vice-president for Well Intervention, and was Schlumberger’s vicepresident for Europe, Caspian, and Africa, amongst other roles. Mr Foda began his career in 1993 with Schlumberger, working on the offshore fields in the Red Sea. He graduated in 1991 from Ain Shams University in Cairo, Faculty of Engineering, and he holds a BSc double major in Electronics and Automatic Control. Mr Foda is a board member of Energy Recovery, Inc. (NASDAQ: ERII), a technology company based in California. Also, he serves on the board of Trustees of Awty International School in Houston and is a board member for Al Fanar Venture philanthropy in London. Mr Foda built a strong team of executives, led NESR through its initial public offering, spearheaded the acquisition effort, and negotiated both terms and government approvals related to the transaction. His ability to build relationships, assess valuation and risks, negotiate the unexpected, and leverage a global network of supporters has been credited to NESR’s ongoing success. The balance of the NESR executive team also has proven leadership experience, both in the oilfield services and energy industries, as well as in functional areas such as legal, tax, entrepreneurship, operations, finance, and private equity. Together with the operational leadership at GES and NPS, this team has built a combined company that is able to compete effectively with large global players and provide an in-country solution to many of the MENA region’s top oil and gas producers. Commenting on NESR’s future, Mr Foda said: “We believe that we have capitalised on the right opportunity at the right time in the right place and we are at the beginning of an exciting journey.” i

CEO & Chairman: Sherif Foda

CFI.co | Capital Finance International

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> National Energy Services Reunited:

Providing In-Country Solutions to MENA Oil and Gas Producers

The Middle East North Africa Region continues to be one of the most attractive oil and gas markets in the world, attracting global investment from hundreds of leading companies and governments. As a result, it is also one of the most active markets for oilfield services companies. Its low cost of production, large and diverse workforce, and continual investment over many decades have cultivated a marketplace that is fertile for intelligent investing in the future of energy production. NATIONAL ENERGY SERVICES CORP Against this thriving backdrop, enter National Energy Services Reunited Corp. NESR began as a special purpose acquisition corporation, or SPAC, designed to invest in the future of energy production. After significant due diligence across a wide variety of opportunities, NESR recently announced its investment selections, two of the most respected oil field services companies in the region: Gulf Energy SAOC (GES) and National Petroleum Services (NPS). NESR announced the acquisitions of the two firms in November 2017 and expects to close the transaction in the second quarter of 2018. The business combination creates a regional oilfield services leader in the Middle East North Africa Region. It provides a platform to accelerate growth and bring new technology to the region. It combines experienced management teams with deep sector expertise and a successful track record. It brings together a diverse and strategic group of large institutional investors. And it forms the first and only NASDAQ-listed national oilfield services company in the MENA region. NESR spent considerable time evaluating a wide variety of opportunities around the world. In the energy services sector, it saw the best opportunity in the Middle East where the market remains fragmented, demand is strong, and where customers are seeking alternatives to the larger international providers. The acquisitions of NPS and GES provide NESR with an opportunity to create a sizable player in the marketplace. With the combined expertise of the three companies, NESR believes it can expand even further. As standalone companies, NPS and GES outperformed most of their peers through the most recent industry downturn, and have prepared themselves for solid growth in the coming years. NESR’s approach will be to aggressively accelerate and build on that track record and market positioning through the injection of new technologies. 180

"In the energy services sector, it saw the best opportunity in the Middle East where the market remains fragmented, demand is strong, and where customers are seeking alternatives to the larger international providers." Most of the initial key investors in NESR will roll over all or a substantial portion of their holdings into the combined entity. Some of these investors have also executed lock-up provisions as a sign of their commitment to the combined company. In addition, NESR secured long term investors to come alongside and provide financing capital for the transactions. This is both unique to SPACs and is a testament to investor belief in the long-term value proposition of NESR and its leadership. ATTRACTIVE COMPETITIVE POSITIONING Customer focused: Because NESR is located and operates primarily in the Middle East, with local employees and regional customers, its primary mandate is to serve customers in the region. NESR has existing partnerships with key suppliers, technology providers, and operators in the region, and will continue to develop new partnerships in the coming years. Leveraging these partnerships and driving technological innovation will allow NESR to compete effectively in a market predominately and historically served by international operators. In addition, NESR’s size relative to the competition allows it to be more flexible when assessing and solving customer problems, enhanced by quick turnaround times and rapid innovation. As a result, NESR can deliver tailored, world-class solutions based on customer needs, rather than CFI.co | Capital Finance International

externally-generated solutions that are retrofitted to individual customers. Local talent and resources: NESR’s employee base is virtually all regionally-based, enhancing NESR’s knowledge of the marketplace and the key players who will drive the next generation of exploration and production. These employees also bring a wealth of cross-country experience within the EMEA region, along with an understanding of best practices across countries and geographies. In-country value creation: NESR is committed to in-country value creation. By leveraging its customer focus and local talent, along with its extensive relationships in the region, the company will also drive business to suppliers, operators, and technology providers in the region. This will increase the overall strength of the partners with which NESR does business, and will highlight the value proposition that NESR brings to operators. This in-country value creation is a highly value-additive element of their offering. It aligns the company’s core abilities with the strategic initiatives of their customer base and also will drive innovation and customisation for the specific needs unique to the region. This will be achieved organically as well as with partnering with technology providers with whom regional R&D facilities will be opened. Vision: NESR’s ultimate goal is to leverage all its competitive advantages to create the first in-region global player that brings world-class service to its customers, prioritises regional investments, including to employees and partners, and ultimately become the preferred vehicle for future investment in the thriving EMEA region. FROM THE REGION TO THE REGION AND BEYOND Additionally, NESR’s vision is to grow outside the region and have a MENA based company servicing the neighbouring Asia and Africa markets. This will provide exposure to the

Summer 2018 Issue

employees, continue to drive diversity, show the strength and know-how of local talent, and serve as a new source of employment for the young talent coming out of the region. GULF ENERGY SAOC (GES) GES is one of the major service providers in Oman with significant market shares in its main business lines: two-thirds of its portfolio is focused on drilling technologies and onethird is centred on production services. It has operated in the region for more than a decade, and has significant, established relationships with virtually all of the major operators in Oman as well as with international clients. One aspect of GES’s business was particularly attractive for potential investors: the structure of contracts in Oman generally are longer term and are commonly 5-7 years, providing an underlying financial foundation for future growth. As a result, GES has a very high percentage of its revenue base secured for years to come due to their superior delivery and technology portfolio. This not only provides a foundation for growth, but also increases its ability to form quality partnerships and negotiate favourable terms with partners. NATIONAL PETROLEUM SERVICES (NPS) Formed in 2004, National Petroleum Services is significantly diversified in terms of geography, and nicely complements GES’s competitive positioning. The majority of its business is in production and completions, and it has a strong presence in Saudi, Iraq, Algeria, and other countries in the region. NPS is recognised as one of the premier service providers who can compete with the major international and regional services companies in these countries. It has consistently gained market share due to its high-performance culture and service quality, and, like GES, it has a very strong portfolio of contracts which serve to further ballast its business.

THE BUSINESS COMBINATION Attractive Region: On a macro level, the cost of oil and gas production in the Middle East is the cheapest in the world. Service cost is a fraction of the production cost in this region – low singledigit dollars per barrel. Contrasted with North America where completion service costs are over 60% of the cost per barrel, one can appreciate the advantage NESR has. Furthermore, there are a lot of technology companies in the US who have been unable to introduce their niche technologies in the region. With NESR’s position, knowledge, experience, as well as its presence in the US, it will provide a platform for these companies to introduce these pathbreaking technologies to the Middle East market. A Complimentary Portfolio: As a combined company, NESR, GES and NPS complement each other in the portfolio of services they provide and in the geographies they serve. The combined company will be strategically placed to expand a full complement of service offerings across the region and will have significant cost and revenue synergies even without any incremental acquisitions. Together, NESR, NPS and GES will be the largest regionally-focused oilfield services player and will be positioned to grow both organically and through follow-on acquisitions. Post transaction, NESR’s operating companies will service virtually all of the major national and international oil companies in the region. This is important in that it will allow the companies to cross-sell different segments in countries where either NPS or GES have an existing footprint. One of the reasons these two companies have grown and successfully expanded their core markets is because of their entrepreneurial spirit. NESR wants to keep the entrepreneurial DNA of CFI.co | Capital Finance International

both the companies intact, and that has driven the retention and continuity in leadership at both companies. NESR’s vision is to be the national flagship carrier of service to its clients. It intends to manufacture in the region, employ the future generation, inject technology, and help its esteemed customers achieve their goal of more than 50% in-country value. At closing, NESR will be the leading regional oilfield services player. Even without additional acquisitions, it has the potential to outperform most in the market. Sherif Foda, CEO of NESR, described the company’s vision: “We have a vision of creating something extraordinary which will not only provide superior returns to our investors but also will have a lasting impact on the region with in-country value creation and employment opportunities. We also have a strong ethic to help our clients achieve their goals. We have very aggressive growth plans – both organically and inorganically – and we will be supplementing our existing portfolio of services with additional technology offerings.” ATTRACTIVE VALUATION AND FINANCIAL STATISTICS Part of what made the transaction so attractive to investors was its valuation compared to the oilfield services market. At the time of the announcement, on a trading multiple basis, industry peers traded at approximately 10 times 2018 expected EBITDA (earnings before interest, taxes, depreciation, and amortisation), compared to more than a 40% discount for NESR, providing significant upside for investors. In addition, while most of the public peer companies contracted from 2014 to 2017, both NPS and GES grew. Finally, both GES and NPS have very conservative balance sheets, so the resulting combined entity will enjoy the ability to use leverage to both expand its business and entertain acquisitions to grow inorganically. i 181

> Obituary - Tom Wolfe (1930-2018):

Keeping a Close Eye on America

eet a group of working journalists and watch “a shape-up line for the homeless” waiting for the church soup kitchen to open. Tom Wolfe, journalist, writer, and most of all wordsmith par excellence, cared deeply about style and elegance – in writing and sartorial standards. He deployed his first-ever paycheque from The New York Herald Tribune to buy a sharply-cut silk tweed suit which promptly 182

proved wholly inappropriate for New York’s dog days. He did, however, look the part and it wasn’t long before the substance matched the style. Tom Wolfe, who passed away on May 14, dissected and deconstructed American society as few of his contemporaries dared. He devised his own tools and methods in order to reach deeper and capture the soul of the nation. Long before the Wolf of Wallstreet baffled unsuspecting CFI.co | Capital Finance International

audiences with the high drama of high finance, Mr Wolfe had already caught a bond trader in his net, spinning a yarn of life, love, and loss on The Street in The Bonfire of the Vanities – perhaps his most acclaimed novel. Linked by New Journalism with the late Hunter S Thompson – who hijacked the genre originally developed by Tom Wolfe and added a few layers of acerbic irreverence to spice things up

Summer 2018 Issue

– both writers initially failed to bond on any level. Mr Thompson strenuously objected to his being demoted to just another exponent of Mr Wolfe’s New Journalism. In a letter dated March 3, 1971, he expressed his displeasure: “You worthless scumsucking bastard. I just got your letter of Feb 25 from Le Grande Hotel in Roma, you swine! Here you are running around f*cking Italy in that filthy white suit at a thousand bucks a day laying all kinds of stone gibberish & honky bullshit on those poor wops who can’t tell the difference… while I’m out here in the middle of these goddamn frozen mountains in a deathbattle with the taxman & nursing cheap wine while my dogs go hungry & my cars explode and a legion of nazi lawyers make my life a goddamn Wobbly nightmare…” However, animosity was not the alpha and omega of the relationship between the two, arguably, greatest journalists of the time. Mr Thompson famously quit his job at the National Observer – complete with the obligatory slamming of doors and copious swearing – after its editor spiked his favourable review of Mr Wolfe’s soon-to-become-iconic Kandy-Kolored Tangerine-Flake Streamline Baby about Southern California’s custom car culture – a topic chosen long before reality shows discovered the scene. In a letter to his sort-of pal, Hunter S Thompson details his decision: “If it does you any good in the head to know that it caused the final severance of relations between myself and the Observer, then at least it will do somebody some good. As for myself I am joining the Hell’s Angels and figure I should have done it six years ago.” In the event, Mr Thompson did not join the motorcycle club/gang and continued to file, often grudgingly and always chaotically, fascinating indepth reports on nearly every topic that could hold his attention for longer than five minutes. The great reporter shot himself in 2005 but not after he had finally managed to distance himself from Tom Wolfe’s New Journalism with a creation of his own making: Gonzo Journalism.

"As a writer, Tom Wolfe was without equal."

The difference is not just semantics. Whereas Gonzo Journalism goes straight for the reader’s jugular, New Journalism is more refined – in presentation as well as content. Though the category is only loosely defined, its exponents employ a non-traditional narrative-oriented style that forges a more subjective, disruptive, and personal read. The literary movement emerged in the late 1960s around a group of writerreporters, including Norman Mailer, Truman Capote, Joan Didion, and Gay Talese. However, Tom Wolfe and Hunter S Thompson remained New Journalism’s twin avatars – both highly individualistic; one angry and rebellious, the other sceptical and eager to denounce hypocrisy. The book that put Tom Wolfe – and New Journalism – on the map is without doubt The Electric KoolAid Acid Test, first released in 1968 – everything seems to have happened in that year – and in print ever since. The seminal text of the genre, the slim CFI.co | Capital Finance International

volume follows author Ken Kesey and his Merry Pranksters as their improbable collective takes to the road in a psychedelically painted school bus, dropping acid along the way and meeting The Grateful Dead, Hell’s Angels, and – of course – poet du jour Allen Ginsberg. Kenneth Kesey, hero of the counterculture and writer of the landmark One Flew Over the Cuckoo’s Nest, is portrayed as the prime link between the Beat Generation of the 1950s (Jack Kerouac et al) and the Flower Power Generation that followed in the 1960s. Before anyone truly understood the magnitude of that moment in history, Tom Wolfe had nailed it down in prose – for all to feel. Mr Wolfe again proved his keen eye for detail, and understanding of the subliminal, in Radical Chic & Mau-Mauing the Flak Catchers. The 1970 book firmly established the writer as a chronicler of America’s changing times and shifting mood. The first of the two non-fiction stories takes place at the Park Avenue apartment of composer and conductor (of the New York Philharmonic) Leonard Bernstein. Here, the liberal in-crowd of the great metropolis – i.e. everybody who is somebody – is gathered to gape at a few members of the Black Panthers Party, invited to the event as a flirt with danger. It is here that Mr Wolfe coins the phrase Radical Chic – since entered into the Oxford English Dictionary (see sidebar for additional creations of Mr Wolfe) – to describe fashionable liberal outrage at any perceived injustice which overshadows liberal ignorance: in a word, hypocrites, albeit of the merry and wellheeled kind. His ultimate intent was political: to unmask and satirise the hypocrisy of the status-obsessed, the trendy, and the self-indulgent from Ken Kesey and His Merry Prankster, almost desperately trying to belong to an alien world, to Leonard Bernstein hosting violent terrorists. Though, Mr Wolfe painted a most entertaining picture of limousine liberals, he also questioned their common sense, if not morals. Predictably, the conservative essayist and commentator William F Buckley Jr (1925-2008) approved, whilst Norman Mailer (1923-2007) did not, writing disparagingly of Mr Wolfe’s work whenever afforded a soapbox. In that way, Tom Wolfe, perhaps, paved the way for the sustained and carefully choreographed attack on liberalism that was to follow starting with President Ronald Reagan and continuing unabated under the present Trump Administration. As a writer, Tom Wolfe was without equal. Though his style is a matter of taste, and one hotly debated in literary circles, a sentence written by Tom Wolfe can be identified from a proverbial mile away; it stands tall as a mountain and with a like sense of purpose – unmovable. A feast of asterisks, all-cap words, and a scattering of exclamation marks; Mr Wolfe was not one for convention. Kurt Vonnegut of Slaughterhouse 5 183

fame likened him to Mark Twain and, a bit less complimentary, the fifth Beatle. Mr Wolfe did at all not fear to take on the literary establishment. He had but scant regard for iconic publications such as The New Yorker (“somnambulant”) and the venerable New York Review of Books and its long-time editor Robert Silvers (1929-2017) of whom he mischievously wrote: “His accent arrived mysteriously one day in a box from London. Intrigued, he slapped it into his mouth like a set of teeth.” The NYRB gave as good as it got and wrote in a review of The Right Stuff – an riveting tale of space cowboys in the early days of NASA – “Just as Mr Wolfe hates human vices and follies, he loves their opposites – manifestations of competence, courage, and skill.” It wasn’t meant as a compliment. Mr Wolfe’s second novel, A Man in Full (1998), brought about a clash with established literary greats such as the already ill-disposed Norman Mailer, John Updike, and John Irving – all heavy hitters. Norman Mailer opened the assault, comparing the experience of reading the 742-page doorstopper to falling in love with a 300-pound woman: “Once she gets on top, it’s over. Fall in love, or be asphyxiated.” John Updike provided the follow up, calling A Man in Full “entertainment, not literature, even literature in a modest aspirant form.” Even so, the novel became a runaway bestseller. Mr Wolfe defended his work vigorously in an essay entitled My Three Stooges. The Bonfire of the Vanities and A Man in Full stand at the apex of a vast body of work. Mr Wolfe’s two later novels – I Am Charlotte Simons (2004) and Back to Blood (2012) – were somewhat less well received by the public though, by now, the literary establishment had accepted, albeit reluctantly, Tom Wolfe as one their own. Interestingly, and tellingly, Mr Wolfe earned a PhD in American Studies from Yale University but failed to become a jargon-spouting automaton: “Usually, grad schools take the best writers and turn them, in a few short years, into cliché machines. Mr Wolfe is highly unusual in developing, refining, and keeping to his own style. That is the hallmark of a master,” says Daniel W Drezner, professor at the Fletcher School of Law and Diplomacy at Tufts University. On his time at grad school, Mr Wolfe wrote just a single paragraph: “I had just spent five years in graduate school, a statement that may mean nothing to people who never served such a stretch; it is the explanation, nonetheless. I’m not sure I can give you the remotest idea of what graduate school is like. Nobody ever has. Millions of Americans now go to graduate schools, but just say the phrase — “graduate school” — and what picture leaps into the brain? No picture, not even a blur. Half the people I 184

THE LEGACY OF TOM WOLFE The founding father of New journalism, Tom Wolfe, who passed away on May 14, not only designed a new genre to suit his signatory style, but also enriched the lexicon with a flashy sense of language. The Oxford English Dictionary contains over 150 quotes taken from his copious writing, often the first recorded instances of words and phrases that wriggled their way into common usage. Looking for a verb to describe the behaviour of dignitaries invited to attend the reopening of New York’s Museum of Modern Art in 1964, Mr Wolfe came up with aw-shucks, a neologism defined by the OED as “to behave with (affected) bashfulness or self-deprecation” as a fitting portrayal: “Up on the terrace, Stewart Udall, the secretary of the Interior of the United States, is sort of aw-shucksing around.” In the 1970s, Mr Wolfe coined his most iconic phrase, “radical chic”, whilst attending an otherworldly party at the Fifth Avenue apartment of composer Leonard Bernstein: “the fashionable affectation of radical left-wing views.” The title of the slim Mau-Mauing the Flak Catchers enriched the English language with two more coinages: mau-mauing (“using menacing or intimidating tactics”), and flak catchers (“one who deals with and deflects adverse or hostile comment, questions, etc, in order to protect a person or institution from unfavourable publicity”). Here are a few more memorable words and phrases of Mr Wolfe’s legacy:

The “Me” Decade – A new attitude of Americans originating in the 1970s and prevalent in the 1980s moving society towards atomised individualism and away from communitarianism, in clear contrast with social values prevalent during the 1960s. Also known as the Third Great Awakening, a period knew in graduate school were going to write a novel about it. I thought about it myself. No one ever wrote such a book, as far as I know. Everyone used to sniff the air. How morbid! How poisonous! Nothing else like it in the world! But the subject always defeated them. It defied literary exploitation. Such a novel would be a study of frustration, but a form of frustration so exquisite, so ineffable, nobody could describe it. Try to imagine the worst part of the worst Antonioni movie you ever saw, or reading Mr Sammler’s Planet at one sitting, or just reading it, or being locked inside a Seaboard Railroad roomette, sixteen miles from Gainesville, Florida, heading north on the Miami-to-New York run, with no water and the radiator turning red in an amok psychotic over CFI.co | Capital Finance International

characterised by an obsessive preoccupation with personal fulfilment and self-gratification.

The Right Stuff – An expression previously only used in aeronautical circles for people eager to push boundaries and approach or go beyond the current limits of performance. Also, the necessary qualities for a given job or task, i.e. the mysterious and elusive essence imbuing the test pilots and future astronauts of NASA’s space programme. Screw the Pooch – To make a disastrous mistake. Plutography – A play on pornography. Plutography is the graphic description of the acts of the rich. Mr Wolfe was on to Paris Hilton, the Kardashians et al long before the idle rich discovered reality television. Master of the Universe – A phrase coined to describe the life and attitude of Sherman McCoy, the main protagonist of The Bonfire of the Vanities: a person or being that controls everything. Later co-opted by toy manufacturer Mattel for its superhero franchise. Fuhgedaboudit – The amalgamation, common amongst New York cops and mobsters, of “forget-about-it”, also from The Bonfire of the Vanities and made famous in a scene from the 1999 romcom Mickey Blue Eyes where English art dealer Michael Felgate (Hugh Grant) tries in vain to acquire the vernacular from his fiancée’s irritable dad, local mafia boss Frank (James Caan). Edge City – A notional place outside the bounds of conventional society. Hardballer – A person who is ruthless and uncompromising, especially in politics or business. boil, and George McGovern sitting beside you telling you his philosophy of government. That will give you the general atmosphere.” Thus he did what couldn’t be done. And hasn’t been done since. And is unlikely to be done by anyone else for quite some time. There may not be a lack of topics for an acidic take on contemporary America, but there is a lack of writers to take on the job – not just scratching the surface but having the courage to immerse deeply and show – rather than tell – the catch of the exercise. Tom Wolfe, writer, journalist, and wordsmith, passed away age 88 at a New York City hospital on Monday, May 14, 2018. i

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> Asia Pacific

North Korea: Investors Eye an Almost Irresistible Challenge The historic meet-and-greet summit celebrated by US President Donald Trump and North Korean Supreme Leader Kim Jong-un in Singapore had barely concluded when share prices started moving on the Korea Exchange in Seoul. Propelled by retail investors hopeful of a more comprehensive future deal, share prices of South Korean companies that could possibly benefit from a thaw in the north, such as steel maker Posco, oil refiner SKI Innovation, and – curiously – Korea Aerospace, started to climb in what traders promptly dubbed the Rocket Man Rally. “The impression is that small investors pushed up stock prices in anticipation of an opening in North Korea,” says Paul Choi of the CLSA brokerage firm.

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ith an economy barely half the size of Gwangju, South Korea’s sixth biggest city, North Korea is positively tiny, bordering on the insignificant. Yet, it also is the last untapped growth market in Asia; one with vast mineral resources – including coal, iron ore, uranium, gold, and much sought-after rare earths – and an enterprising population accustomed to create something out of nearly nothing. Though strict sanctions remain in place, some businesses have begun putting together taskforces to draw up tentative plans in case the unexpected happens. A sudden change in North Korea’s business climate would not be entirely unprecedented. Myanmar, long subject to crippling international sanctions, re-joined the global community in a lightningquick process that saw the country become the darling of investors – and a land of opportunity. The chances of North Korea putting in a repeat performance are slim – but not altogether inexistent. A few well-chosen words and gestures – token or otherwise – from the supreme leader would probably suffice to secure the support of his new best friend in the White House for a rapid dismantling of the sanctions regime – a development that would almost instantly spark a veritable business scramble for the Hermit Kingdom. “This is where money is to be made,” says Justin Hastings, associate professor of International Relations and Comparative Politics at the University of Sydney, adding quickly that the trick is not to get expropriated: “If you can figure that one out, you’re in the money.”

That is a big if: only a select few, mostly South Korean and Chinese, companies have dared venture north of the 38th parallel, the demarcation line that splits Korea in two since the stalemate that has existed since the early 1950s. China’s Haicheng Xiyang Group, a mining and steel company, described its fouryear sojourn in North Korea as a “nightmare”. The group developed a $45m iron-ore powder processing plant in the country but was unceremoniously kicked out in 2012 after accusing the host government of violating its own investment laws. The Chinese company also complained of having to deal with “endemic corruption” and blackmail. After completing its plant, the price of water, power, and labour was suddenly jacked up in a barely veiled attempt to force the company to abandon its new facility. In the end, all pretence was dropped and the Chinese miner and steel producer was told to pack up and leave. At the time, the Korean Central New Agencies (KCNA), the government’s official mouthpiece, assured that the “legitimate rights and interests” of all investors are safe as long as they fit within the songun policy which prioritises national security and the needs of the armed forces. 188

"Though strict sanctions remain in place, some businesses have begun putting together taskforces to draw up tentative plans in case the unexpected happens." Hyundai’s Keasong Industrial Park, a 65km2 enclave built in 2003 by the conglomerate as an enclave to host mostly South Korean businesses seeking to benefit from the cheap skilled labour available in the north, was opened and closed repeatedly by the host country to the tune of the bilateral relations. In 2016, the government of South Korea asked businesses to suspend operations at the facility to protest the launch of a ballistic missile by the north. The Pyongyang government, in turn, expelled all South Korean workers and executives from the country and froze the assets of their businesses. The 123 companies with operations in the industrial park lost a combined $1.3bn. An added complication to a renewed economic opening is the greater role of the north’s domestic enterprises, almost exclusively stateowned, which have tried, and sometimes succeeded, in filling the vacuum left by the toughened-up sanctions. These companies will not want to welcome outside competitors into their newfound realm. For all their bite, the sanctions have so far failed to fully derail North Korea’s economy – prices of food staples and the (black market) exchange rate have remained fairly stable. According to defectors, there are many shortages but no signs of an impending famine. “If you think the North Koreans would revolt or the regime would collapse because of sanctions, you don’t know anything about them,” says Kang Mi-jin, a defector who collects data on consumer prices in the north for the Bank of Korea, the south’s central bank. Even though his country is isolated and impoverished, Supreme Leader Kim Jongun has made some headway in delivering on his promise to establish a middle class and improve the lives of all North Koreans – at least in Pyongyang where, notwithstanding the fuel shortages, streetlights burn throughout the night and people seem much better dressed than before with most sporting mobile phones. Instead of burning imported oil, power plants are being converted to use domestic coal. North Korea is only allowed to import four million barrels of crude annually – less than half the volume needed to keep the country’s estimated 280,000 cars and trucks running. CFI.co | Capital Finance International

The Pyongyang government has responded to the sanctions by giving companies and private citizens a bit more leeway in the management of their affairs. Farms and factories have gained a degree of autonomy and may sell some of their goods on the free market. People are encouraged to find novel ways of making a living by setting up small businesses. As of yet, no millionaires have appeared but a moneyed class of entrepreneurs is slowly and visibly emerging. Ms Mi-jin emphasises that North Korea’s economy is exceptionally resilient: “There are markets, people have cash reserves, and smuggling provides an escape valve. The north is far from done.” Earlier this year, a United Nations panel of trade experts estimated that the volume of illegal trade last year exceeded $200m and possibly much more when small night time smuggling activity along the border with China is included. Reports from Dadong, a Chinese border city, talk of collusion between border guards and the secret police that gives smugglers a few hours each night to cross into China and back without fear of arrest. A small cast of North Korean shuttle traders have received permission to move back and forth freely to sell goods in China and bring back hard currency. A new export corridor, circumventing sanctions, has also been opened via Russia. Goods, mostly shellfish from North Korea’s unpolluted waters, are first trucked to Vladivostok from where they move south again to Hunchun in China carrying a veneer of legality. The route now receives such heavy traffic that the road’s 100-kilometre stretch is being reinforced and resurfaced. Both South Korea and China stand ready to help the north rebuild its quasi non-existent economic infrastructure – ports, roads, railways, power grids, etc. – should Kim Jong-un manage to get the sanctions lifted or eased. According to a recent survey by the South Korean business daily Maeil, fully 75% of 167 companies queried would be willing, if not eager, to invest in the north as soon as sanctions are lifted. Past experiences, it seems, are not necessarily indicative of future results. With about 25 million people who lack nearly everything, as evidenced by a nominal GDP of barely $28bn, North Korea constitutes, perhaps, the ultimate frontier economy – an almost irresistible challenge. i

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> CFI.co Meets the Management of The Indian Hotels Company Limited (IHCL):

Puneet Chhatwal & Beejal Desai

MD & CEO of the Indian Hotels Company Limited (IHCL): Puneet Chhatwal

n the 6th of November, 2017, Mr Puneet Chhatwal joined IHCL as the Managing Director and Chief Executive Officer. He is a global professional with over three decades of leadership experience at highly-acclaimed hotel groups in Europe and North America. His vision is to drive performance and oversee the next phase of expansion. In February 2018, the group unveiled the Group’s five-year business strategy titled Aspiration 2022 to drive growth and strengthen market leadership. He sits on many Tata company boards including The Indian Hotels Company Limited, Taj GVK Hotels and Resorts Limited, Piem Hotels Limited, ELEL Hotels and Investments Limited, Oriental Hotels Limited, Taj Sats Air Catering Limited and Roots Corporation Limited.

Senior VP, Legal & Company Secretary and CCO of the Indian Hotels Company Limited (IHCL): Beejal Desai

Prior to this, Mr Chhatwal was the Chief Executive Officer and Member of the Executive Board of Steigenberger Hotels AG – Deutsche Hospitality. He was also the Chief Development Officer of The Rezidor Hotel Group – Carlson Hotels Worldwide. Mr Chhatwal is a graduate of both Delhi University and Institute of Hotel Management, Delhi. He has completed an MBA in Hospitality from ESSEC, Paris and an Advanced Management Program from INSEAD. Mr Chhatwal has won awards including the prestigious Carlson Fellowship and was rated as one of Europe’s 20 extraordinary minds in Sales, Marketing and Technology - HSMAI European Awards 2014. He was also the First Alumni included in the ESSEC-IMHI Hall of Honor 2014. CFI.co | Capital Finance International

BEEJAL DESAI Mr Desai is a Senior Vice President - Legal & Company Secretary and Chief Compliance Officer of The Indian Hotels Company Limited. He holds an L.L.B. degree from Mumbai University and is a Fellow Member of the Institute of the Company Secretaries of India. He has previously worked across various leadership positions with different organizations and has over 32 years of cross-functional experience in the areas of Legal, Secretarial, Compliance and Investor Relations. He also closely liaises with SEBI, RBI and various regulatory authorities. He has pioneered digitalisation of various legal and compliance projects within the organisation and won several awards. i 189

> IHCL's Iconic Taj:

Custodian of Indian Heritage INDIAN HOSPITALITY AT ITS GLOBAL BEST IHCL is South Asia’s largest and finest Indian hospitality companies founded by the legendary Jamsetji Tata in 1899. It opened its first property – now called The Taj Mahal Palace – in Mumbai in 1903. The Company and its subsidiaries bring together a group of brands and businesses that offer a fusion of warm Indian hospitality and world-class service. With a legacy of over 115 years, IHCL has built a reputation of unrivalled leadership in the Indian hospitality industry. The Company has been a pioneer in transforming cities and towns into holiday destinations and has created history by putting Goa, Kerala, Rajasthan and the Andamans as leisure hotspots on the world map. IHCL operates with the distinct advantage of having the largest system-wide revenue. It is one of the leading networks of properties that span classic landmark hotels, historic palaces and the highest number of leisure hotels. The Company also has a strong portfolio of resorts and safaris, along with other business offerings catering to various customer and business segments across four continents and 12 countries. IHCL with its 115 year old legacy is a true custodian of Indian heritage.It has the unique distinction of managing authentic living Palaces. The iconic Taj Hotels is Indian Hotels Company Limited’s (IHCL) brand for the world’s most discerning travellers seeking authentic experiences in luxury. From world-renowned landmarks to modern business hotels, idyllic beach resorts to authentic Grand Palaces, each Taj hotel offers an unrivalled fusion of warm Indian hospitality, world-class service and modern luxury. All the four Grand Palaces in its portfolio – be it Rambagh Palace, Jaipur; Taj Lake Palace, Udaipur; Umaid Bhavan Palace, Jodhpur and Falaknuma Palace, Hyderabad are renowned

Dining Falaknuma Palace

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"With a legacy of over 115 years, IHCL has built a reputation of unrivalled leadership in the Indian hospitality industry." iconic destinations for travellers across the world. The company has lovingly restored these Palaces to make a rich slice of history come alive. Palaces evoke a wonder in the guests because of amplification of their grand scale,the regal splendor, rich history and majestic design. In fact, a stay in a Taj palace hotel feels like a combination of staying in a richly-decorated museum, a sumptuous private home and a luxury heritage hotel all at once. Today’s modern conveniences are delicately balanced with the Royal traditions of the past. The equilibrium of a highly but not intrusive service is the hallmark of the Taj Palaces. The palaces hold a much deeper importance not just for the royal families – some of whom still live in the palaces and call them home – but also for their surrounding communities where the building acts as a cultural and historical landmark. Originally built in 1835, Rambagh Palace in Jaipur has stepped gracefully through many royal transitions—from the home of the queen’s favourite handmaiden, to royal guesthouse and hunting lodge, and later as the residence of the Maharaja Sawai Man Singh II and his queen, Maharani Gayatri Devi. Taj took over its management in1972. Seventeen painstaking years of extensive redesigning and renovation have restored the hotel into a magnificent heritage hotel.

New architectural features were introduced and existing ones modified. Many Rajputana elements like jharokas, stylised porches, and stone fretwork were added. Spaces were altered so 104 rooms became 78. Interiors received extensive makeovers with customised products. Exquisite pure silk (including zardosi) furnishings, meenakari, thekri, and gold-leaf frescoes for walls and ceilings were added as were superb period furniture/accessories like four-poster beds, chairs, paintings, gilded mirrors, lights, etc. It was also ensured each room and public area looked different by styling each differently down to the smallest detail. Taj Lake Palace, Udaipur, the most romantic hotel in the world, appears to float serenely on the waters of Lake Pichola amid the Aravali Hills. The sublime palace built of white marble with gardens, fountains, Jharokhas and landscaped courtyards, is one of the most recognisable residences. The restoration of the 300 year old Taj Lake Palace in Udaipur was started in 2000.The six years long renovation restored the elements of the original Rajput Palace which were inadvertently lost in the process of the hotel trying to rebuild sections to meet the demands of the growing number of visitors to the palace. The restoration process was based on the expert inputs from restoration specialist, as well as on the old paintings and photographs of the Lake Palace through history. Umaid Bhawan Palace is the last of India’s great palaces with its expanse of 26 acres making it one of the largest residences in the world. Built between 1928 and 1942, this golden hued monument, made of desert sandstone, was designed by the famed Edwardian architect Henry Lanchester. Commissioned by H. H. Maharaja Umaid Singh,the grandfather of the present Maharaja of Jodhpur, it is a celebration of the Art Deco style on the grandest scale.

Grand Presidential Suite, Sukh Niwas, Rambagh Palace

CFI.co | Capital Finance International

Summer 2018 Issue

Rambagh Palace

Umaid Bhawan Palace

Taj Lake Palace Pool

Taj Falaknuma Palace, Hyderabad

Taj Lake Palace

On arrival at Umaid Bhawan Palace, guests are greeted with a Maharaja welcome that involves horses from the royal stables, war drums, trumpet, shower of rose petals and rose water, service of warm/cold face towels and the traditional Aarti tikka garland extended by young women in traditional wear which is known as ‘Poshak’. The royal welcome also involves a range of local tribal performers known as ‘Langa’ who greet everyone at the Palm court followed by a local performance of ‘Ghoomar’ at the magnificent dome. Perched 2,000 feet atop the City of Pearls,Taj Falaknuma Palace in Hyderabad is indeed a mirror of the sky nestled among clouds which is the literal translation of its name. This 1894 masterpiece has an elaborate design, eloquent stuccowork and timeless elegance, carefully restored by Princess Esra who is a part of the Royal family and Taj.

Taj Falaknuma Palace in Hyderabad reopened in 2010 after ten years of extensive and sensitive restoration, which infused new life into the 124-year-old palace. The palace’s carpet restoration alone took over three years; the highest quality of New Zealand yarn was dyed over 200-300 times to match the exact colour of the old carpets. The fabrics in the palace are over 70 years old and were imported from Europe with all the handmade designs. It took almost four years to restore the fabrics to their original splendor. The Billiards table is an original from Burroughes & Watts of the UK. While the felt on the table had to be replaced, the rest of the table has been carefully restored from the original. The rich history that shaped the palaces, the cultural nuances attached to the careful and CFI.co | Capital Finance International

sincere service still practiced in them, the architecture and art that adorns the palaces, the authentic cuisine of the royal families are the fine elements that create an esoteric experience and makes a palace tick. From being welcomed by an entourage of elephants, camels, to the stay in regal suites, unique dining experiences using gold crockery and cutlery at the restaurants, or riding in the fleet of vintage cars and Victorian horse carriages, personalized service is central to all the Palaces. Specially curated palace experiences like the ceremonial and ritual welcome rooted in the local cultures, the authentic cuisine of the royal families, heritage walks, royal baths, unique spa experiences etc ensure that the guests are made to feel like Maharajas and Maharanis. i 191

> Asia Plantation Capital:

How a Company Turns Agarwood into a Sustainable Business Model

n most Arab houses, the intense and rich woody scent of agarwood wafts in the air – indicating power, affluence, and esteem. Agarwood, known as the ‘wood of the gods’, is formed in the heartwood of aquilaria trees, and is – interestingly – produced when the trees become infected by mould, which is most likely the reason it is very rare in the wild. The resin-impregnated heartwood is fragrant and, as a result, highly valuable. The trees are extremely valuable for their heartwood that yields, once 192

distilled, a highly-prized and extremely expensive essential oil, called oud. Oud has been used in cultural and religious rites and ceremonies for thousands of years and is now one of the most sought-after ingredients in the global fragrance industry. Demand for the product is almost insatiable, accounting for a substantial illegal trade in previous years, and the indiscriminate logging of a species that has only narrowly escaped the fate of extinction. At the CFI.co | Capital Finance International

end of the 20th century, CITES or the Convention on International Trade in Endangered Species of Wild Fauna and Flora listed aquilaria trees as an endangered species, and since then has ensured that only CITES-approved plantations and establishments are allowed to trade this valuable wood. Asia Plantation Capital (APC) is one of those establishments. The company has established a reputation for itself in the global forestry sector

Summer 2018 Issue

only operate sustainable plantations, produce pure oud oil, and have full provenance on all products, including CITES certification. With that in mind, APC is now involved in the creation of a new Sustainable Asset Exchange (SAX). This will be the world’s first blockchain-based secure trading platform and marketplace where SAX will modernise, legalise, certify, globalise, and harmonise the global oud industry, which is estimated to be worth between $10-$20 billion annually. PLANTATIONS, PRODUCTION AND VALUE-ADDED PRODUCTS The group is one of the world’s fastest growing plantation management companies, leading the way in sapling cultivation, forestry growth, pioneering inoculation methods, harvesting techniques, distillation methods, and product processing, whilst bringing important economic benefits to local communities. It also provides sustainable forestry and agricultural land acquisition and development services to the global forestry and agricultural sector and has been doing so for more than ten years. The products made from the trees on APC’s estates have full CITES approval and certification – a testament to the fact that the company is passionate about its role in not only making sure that there are agarwood supplies around for future generations, but also that products are sourced ethically and sustainably. Fragrance du Bois is one of the diverse standalone businesses originally established by APC as a niche luxury perfume house that specialises in the creation of distinctive and unique oud-based fragrances, crafted by fifth generation perfumers from the 17th century French traditions of Grasse. All the oud used by Fragrance du Bois is ethically produced and sourced on APC’s sustainably managed aquilaria plantations. Recently, APC signed an oud oil supply agreement with dynamic, new skincare and accessories brand, Oud Essentials.

Saplings

with its remarkable vertically integrated business model that is neatly encapsulated in the ‘soilto-oil-to-you’ story. Seeing the importance and potential of the Aquilaria, APC started its very own plantations specifically for growing this endangered species in a sustainable manner. Ever since, Asia Plantation Capital has reintroduced the species to its natural habitat in several parts of Southeast Asia and is currently expanding its portfolio of forestry projects. What

makes APC’s business model stand out, however, is not only the inherent sustainability of the 100% pure, natural oud that it produces, but the way in which it has been integrated into a complex but irresistibly efficient supply chain. Unfortunately, the oud industry is rife with corruption, grey and black-market trading, illegal de-forestation, and product tampering with the oud being diluted or mixed with inferior or often illegal additives. APC, however, strives to CFI.co | Capital Finance International

PEOPLE, PLANET, PROFIT With more than $650 million in assets either owned or under management, APC is proving that taking the moral high ground doesn’t necessarily have to affect profitability. APC embraces the mantra of ‘people, planet, profit’ as the only way forward during an extended period of global economic instability, and will always point to a consistent, upward trend in the value of forestry assets over the last 200 years. “We believe in the idea of ‘holistic sustainability,” says Barry Rawlinson, Asia Plantation Capital’s Global CEO, “which means that it is at the forefront of all the decisions we make and the processes that we put in place. Sustainability can’t simply be at one link in the overall supply chain. It has to be at every link, and we believe that our business model accomplishes this. It hasn’t been easy, of course,” he concludes, “and it’s certainly not always the best way of making money for either ourselves or our stakeholders, 193

but it’s something that we believe in wholeheartedly, and those who know all about us and what we do, appreciate our values and the commitments we have made.” Whilst investors are becoming increasingly aware of the necessity for a ‘hedge’ against traditional asset classes that are always prone to the vagaries of the modern-day investment world, natural commodities, such as aquilaria trees, will always grow, and will always have an inherent value – irrespective of the tumult on money and/or stock markets. Asia Plantation Capital’s turnover has increased year on year, with client purchases now exceeding $200 million, and net profits have grown on a constant basis. APC is proving that sustainability and environmental awareness can be incorporated into a successful business model that provides excellent returns on investment as well as peace of mind – a rare combination, perhaps, in this day and age when sustainable business models are not only becoming ever more desirable, but increasingly imperative.

Mature trees

BARRY RAWLINSON Barry Rawlinson is a British national with extensive overseas executive and management experience. Graduating from the University of Canterbury with a Master of Business Administration (MBA), he has held the position of group chief executive officer of Asia Plantation Capital since 2010. Mr Rawlinson has more than thirty years of expertise in senior management, with ten years based in the agroforestry industry, developing and managing sustainable plantations. Mr Rawlinson has an extensive amount of experience derived over the last three decades from working for large international businesses from Pestana Group, a multinational hotel chain, to his own successful consulting business. He has provided consultation services to various industries looking to develop business opportunities overseas with a particular focus on Southeast Asia. Now residing in Bangkok, Thailand, Mr Rawlinson uses his many years of experience in technical project management, focusing on improving knowledge in statistical processes, developing specialised marketing programmes to improve turnover and performance, and leading contract negotiations with local and international vendors and suppliers. Mr Rawlinson’s interest in the environment and ecological sustainability issues, together with a commercial background, attracted him to the forestry industry in Thailand and subsequently to Asia Plantation Capital where he is currently serving as group chief executive officer. He has orchestrated and piloted a range of social and environmental projects that have become a core principle of Asia Plantation Capital’s corporate and commercial philosophy. i 194

Oud oil

Bracelet

Barry Rawlinson (right)

CFI.co | Capital Finance International

Summer 2018 Issue

> CFI.co Meets the President & CEO of Azizi Bank:

Mohammad Salem Omaid

zizi Bank, Afghanistan’s largest commercial bank with a PanAfghanistan presence across thirty provinces and headquartered on Zanbaq Square in Kabul, is the outcome of the professional and entrepreneurial commitment of its founder Mirwais Azizi and its top management team, to establish a high quality, customer-centric, service-driven, private Afghan bank catering to the future businesses of the Islamic Republic of Afghanistan. Azizi Bank, established in 2006, has been recognised as one of the top and fastest-growing banks in the region by prestigious international media houses and global advisory firms, and has received several international honours from across the globe. The bank caters to various business segments that include retail & corporate banking, treasury, payment & settlement, remittance services through Western Union, credit, alternate delivery channels, and sustainable practices through responsible banking via numerous corporate social responsibility initiatives. The bank is steadily evolving as the professionals’ bank of Afghanistan with the long term mission of “building the finest quality bank of the world in Afghanistan” by 2020. Azizi Bank has adopted international best practices, the highest standards of service quality and operational excellence, and offers comprehensive banking and financial solutions to all its valued customers. Today, Azizi Bank is the largest bank in the country with more than 140 branches along with its 100% subsidiary bank, the Islamic Bank of Afghanistan, the country’s first full-fledged Islamic bank. Azizi Bank also has a fleet of more than 100 ATMs – the highest in the country. President & CEO: Mohammad Salem Omaid

In its digital expansion phase, the bank has procured Flex Cube to change its existing core banking system and introduced many first-ofits-kind technological innovations in the country such as mobile wallet solutions, agency banking, pay commerce, amongst others. The bank is spearheaded by Mohammad Salem Omaid who is currently its president and chief executive officer. Mr Omaid has been working for the bank since its inception. Mr Omaid served the bank in various capacities and carries immense experience in the diverse areas of strategic polices, financial regulation, forex management, and banking operations. He has been also associated with maintaining International business relations with key corporates, banks, and stakeholders.

He is a doctorate in Financial Management from a leading Indian University and is also a post graduate and a holder of a MBA with specialization in Banking, Risk Management, and Finance. Mr Omaid has been recognised by the government of Afghanistan and international agencies on different occasions for his persistent efforts in developing the banking structure in the country. A few of his accolades are listed below: • Awarded by the government of Afghanistan for playing an effective role in the development of the Afghan banking sector. • Awarded by the Ministry of Defence for the establishment of a proper and transparent salary payment system for the Afghan soldiers. • Promising Young Banker Award by the Asian CFI.co | Capital Finance International

Banker, Singapore. • Queen Victoria Badge by the Europe Business Assembly, UK. • Best Private Banking CEO, Afghanistan by the South Asian Partnership Summit – A SAARC initiative. Mr Omaid also holds the following portfolios and memberships: • Chairman - Afghanistan Banking Association. • Member – Thames Valley Chamber of Commerce, UK. • Member – World Confederation of Business, USA. • Member – International Chamber of Commerce. • Guest Faculty at the various Universities of Afghanistan. i 195

> Wing (Cambodia) Limited Specialised Bank:

Bringing the Unbanked Online

The smartphone, ubiquitous in all corners of the world, is proving a powerful tool for the promotion of financial inclusion. Even those armed with notso-smart mobile phones can easily access a whole range of banking services previously unavailable to all but the wealthiest people.

n Cambodia, Wing (Cambodia) Limited Specialised Bank has recognised the needs of unbanked and under-banked people, and provided with a series of purpose-designed products and services aimed at meeting the requirements of customers not served by the country’s large traditional financial institutions.

"The company’s vision is to provide every Cambodian with convenient access to mobile financial services relevant to, and for the improvement of,

payments, and access internet banking payment solutions. Wing also operates a nationwide network of over 5,000 Wing Cash Xpress outlets. This in itself has brought jobs and security to the bank’s agents whilst clients may obtain services just a few steps from their home.

Recognised for the their daily lives." excellence of its services Conceived in 2009, and unfailing precision Wing continuously fuels with which transactions are processed, Wing is the blistering pace of financial inclusion in beyond humbled to receive 2018 Best Social the Kingdom of Cambodia by providing its Impact Bank Cambodia Award provided by customers easy mobile banking solutions. Capital Finance International (CFI.c) for the The company’s vision is to provide every first time. Such award would not be made possible without the support of shareholders, the Cambodian with convenient access to mobile relentless efforts of employees, the loyalty and financial services relevant to, and for the dedication of agents, and trust given by partners. improvement of, their daily lives. The bank Most importantly, Wing is thankful to its millions understands the needs of its customers, and harnesses innovation and technology to offer a of customers who entrust the bank with the management of their funds and finances. variety of economic and financial improvements that help drive the economic growth of Through its ten years in Cambodia, Wing has Cambodia as a whole. initiated various corporate social responsibility (CSR) activities ranging from education and Drawn by convenience and reliability, customers environment to poverty reduction – all meant can do things at the touch of a button on to help build a sustainable society. In addition, their phone – either through the Wing Money to providing funds and materials, Wing also Mobile App or USSD Code *989# – such as maintains a financial literacy programme for pay utility bills and loans, process online and families residing in the countryside on how to offline cashless payments, top-up phones, and transfer money domestically or internationally, best manage their finances, avoid debts, and use savings to expand their business. Wing also amongst others. The platform offers both encourages everyone to start thinking about convenience and quick access to financial ways to help the environment through, for services that a large parts of the population example, tree-planting initiatives. To encourage has never experienced before. It also puts the the donation of funds, Wing charges no service bank’s customers in control of their money. fee to donors who gift money via Wing agents or the Wing mobile app to the Kantha Bopha Alongside this continuous financial blaze, Foundation which supports five hospitals which Wing has also helped numerous businesses provide free medical healthcare to children. i to manage funds disbursements, business 196

CFI.co | Capital Finance International

Summer 2018 Issue

> Thailand's BCPG:

Energy for Everyone

CPG, a public company, started as the green power business unit of Thailand’s Bangchak Corporation (BCP). In under two years since its establishment, the company has already doubled in value following its initial public offering in 2016. Today, the business has investments in solar, wind, and geothermal power generators. With a diversified portfolio and keen technological know-how to accommodate changing energy trends, BCPG has successfully evolved into an energy aggregator as it manages and develops renewable power of all types. The flagship of the green power business of BCP, one of Thailand’s leading energy companies, BCPG operates exclusively in the renewable energy sector of the country. BCPG has secured a total installed capacity of approximately 600MW from renewable power plants in four countries in the Asia Pacific Region: Thailand (solar and wind), Japan (wind), The Philippines (wind), and Indonesia (geothermal). The company’s portfolio is growing continuously. While BCPG expands its base within traditional wholesale business – whereby electricity generated from renewable sources is sold to national or local power authorities – the company is also transforming itself in the digital domain, driving an energy revolution in Thailand by building a system that will enable households to buy and sell solar power to one another using solar-powered microgrids. The first such project in Thailand sees BCPG working with the country’s top real estate company Sansiri to develop micro-grid community projects that will bolster its retail energy business by installing and operating generation capacity that is close to consumers. Partnering with Power Ledger, a leading peerto-peer marketplace for renewable energy from Australia, BCPG applies blockchain technology to introduce energy trading and management in Thailand, the first such initiative in Southeast Asia. The system will allow peer-to-peer sharing of electricity between residents and comes with an option to sell excess electricity back into the system. To tap into the potential of peer-topeer energy sharing, homes and businesses will require advanced meters to track energy use and apply blockchain technology to help buy, sell, and trade excess energy. The peer-to-peer solar trading concept has been well received in many countries as a potential way of reducing the pollution generated through traditional methods of energy production. Whilst small-scale producers will be able to generate

extra revenue, the larger system will gain a new source of environmentally-friendly energy. Blockchain makes a new energy sharing economy possible, one that facilitates an open exchange of power between homes, with all transactions recorded through a decentralised ledger. This represents a fundamental change in the way energy is generated, used, and distributed. With CFI.co | Capital Finance International

internet of energy, the company is transforming the energy industry by making renewable power accessible for and affordable to all under the Energy for Everyone concept. As a sustainable growth company, BCPG strives to create a sustainable future for all, enabled by renewable energy, smart technology, and innovation. i 197

> ValueLabs:

Whatever-It-Takes to Create Value for the Customer

alueLabs is a leading global technology company specialising in digital enablement and product development. Through its unique OneCompany model of engagement, ValueLabs helps companies unleash the potential of digital technology to achieve real business outcomes, make processes frictionless, and take the lead in disruptive times. The innovative solutions and a flexible engagement model helps clients stay ahead of the curve, drive revenues, and enhance market position. Over the nearly two decades since inception – thriving on the principles of perfection, love, unselfishness, and character strength (PLUS) - ValueLabs has been “inspired by potential” and firmly believes in the company as a platform (CaaP) concept. ValueLabs has built a business that is driven and guided by the core values of PLUS. Its ability to do the right thing for clients, irrespective of the revenue impact on the company, is unmatched and something ValueLabs is very proud of. The company can go from identifying client pain points to creating a solution roadmap, building out the solution, and finally managing end-to-end operations. Oftentimes, ValueLabs ends up bootstrapping the initial effort in order for the client to realise its value. The company is powered by innovation and backed by the OneCompany approach. Companies worldwide are struggling to engage in the traditional vendor relationship because the journey is becoming more collaborative and iterative, requiring skin-in-the-game from

"ValueLabs understands how the platform business model works by developing an ecosystem to bring producers and consumers together. It is an open system for two-way value creation, both for the producers and the consumers." both parties. The sheer magnitude of change in the technology landscape makes it difficult for companies to respond meaningfully and quickly. The way to stay relevant is to rapidly innovate, using a wide variety of technologies in areas previously unexplored. All of this, within an agile environment. ValueLabs believes that this is a unique category to play in. With the OneCompany model of execution, ValueLabs is able to deliver outstanding value to its clients through a selfless mindset and a frictionless workplace. OneCompany implies that it is “one” with clients, taking up their business problems as its own and solving them by investing in understanding their business and by leveraging twenty years of software delivery expertise. On top of this, ValueLabs investments in people, partnerships, accelerators, and R&D over the last few years are helping clients realise the promise of digital. Companies need a trusted partner that can own the problem, experiment, invest, and deliver

Arjun Rao, Founder & CEO, ValueLabs with the employees

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technology solutions – and deliver them faster than ever. This is where ValueLabs comes in. The company derives its inspiration from potential. SOLUTIONS • xChange: An enterprise integration solution that enables seamless data transfer between applications. • Robotic Process Automation: A software programme that orchestrates and manages enterprise applications to streamline processes. • Cognitive Automation Platform: A system of intelligent solutions to convert unstructured text into a structured form without the need for supervision or human oversight. • Total Automation Framework: A testing solution that integrates the various stages of testing onto a single framework. • Nephele: A cloud-based platform for brokering IaaS, PaaS, SaaS, and VAS for available cloud service providers. • Chatbot: An integrated packaged programme capable of engaging in a conversation without human intervention. • Remote Management Solution: An IoT-based platform offering a complete monitoring solution with real-time updates. HOW IS VALUELABS DIFFERENT? ValueLabs focusses on clients, rather than any domain, technology, or service. Of its current client-base of over 180 companies, fifteen consider the company a strategic partner due to the impact ValueLabs makes on their business. The average tenure of these engagements is over ten years, and in many of relationships, ValueLabs teams are larger than the client’s teams, with respect to IT and support. In most

Summer 2018 Issue

Employees at ValueLabs

Hyderabad: Corporate Office

of the cases, the company has started out with one service (for instance, QA) and has grown into other services, such as development and customer support, based on the strength of its delivery.

in India by SiliconIndia magazine. SiliconIndia recognises how ValueLabs helps customers meet specified product engineering requirements and adheres to the highest standards of quality while ensuring timely delivery.

Based on the client feedback, some of ValueLabs other differentiators include: • Focused on building partnerships with clients, based on trust, ethics, and the value added to operations. • Ability and experience in taking end-to-end responsibility for product/services delivery. • Mature processes and experience in building extended teams. • Mindshare of a “small” company; support of a “large” company. • A deep sense of ownership brought to the work assigned to the company, its whatever-it-takes attitude to help clients. • Focused on the best interests of its only two stakeholders – clients and employees. • Personalised attention to every client. • Ability to succeed in new domains/ technologies. • Tremendous growth. • Keeps the team motivated and on its toes • Allows the company to choose clients and work • Allows the company to do business ethically and honestly

EMPLOYEE SATISFACTION At ValueLabs, employees are the company’s best advocates and brand ambassadors – even more so than clients. The company believes nurturing its employees will, in turn, help nurture its clients. The company has been recognised and awarded by renowned industry bodies in the sphere of human capital management and employee satisfaction.

CUSTOMER SATISFACTION ValueLabs has been honoured and recognised as a key partner in the IT services domain for superior technical capabilities and excellence in customer service. The company’s net promoter score (NPS) is equivalent to that of a bank or an insurance company. Its last quarter NPS was 74%, while peers in the industry get scores in the range of 20%-40%. NPS is a management tool that is used to gauge the loyalty of a firm’s customer relationships. ValueLabs’ high NPS is a reflection of its commitment and dedication to the overall success of the customer. ValueLabs has been featured in the 10 Most Promising Product Outsourcing Companies 2017

ValueLabs hase been ranked seventh overall in the Dream Companies to Work For awards organised by Times Ascent, which had over 1,700 companies participating from multiple industries across India. In addition to the overall ranking, ValueLabs has also been recognised in the categories of Managing Health at Work, Innovative HR Practices, Talent Management, and Fun at Work. ValueLabs has been featured in the list of 100 Best Companies for Women in India 2017 by AVTAR. The AVTAR Group, in partnership with the Working Mother Division of Bonnier Cooperation (US), honours companies that help their women employees have sustainable careers. FACILITIES ValueLabs has three delivery centres in Hyderabad, India from where projects are primarily executed. The main delivery centre is a 175,000 square feet facility with a seating capacity of 1,550 people. The other two have a seating capacity of 500 people each. They have recently opened a new facility measuring around 10,000 square feet with a seating capacity of 1,200 people. The ValueLabs facility is equipped with world-class infrastructure in terms of space, hardware/software, communications, ambiance, etc. The company has redundancy, disaster recovery, and business continuity plans in place. Employees of many of its clients work out of ValueLabs facilities, and don’t find it very different from their own workplaces. CFI.co | Capital Finance International

QUALITY OF RESOURCES Today, ValueLabs is a 5,000+ people company that takes pride in being people-friendly, with a flat hierarchical structure and an open-door policy. ValueLabs creates an employee-friendly work atmosphere, and informally – and honestly – measures this for each project using a funindex. If this falls below 7 on a scale of 10, the company organises a meeting with the PM and the client to restore motivational levels to acceptable standards. Over the years, ValueLabs has created a core team that identifies with the company. Most of its project managers have been with the company since its inception. Attrition amongst people who have been with the company for at least two years, is almost zero. Adoption of conscious programmes to control and manage employee attrition has helped ValueLabs achieve best-in-class figures and the company currently operates at a level far below industry attrition ratios. WAY FORWARD: CaaP – COMPANY AS A PLATFORM ValueLabs believes the company is more of a platform than just a business entity. It is a platform where various stakeholders can come together and fulfil their individual aspirations, all the while helping others fulfil theirs. It is a platform that captures the true spirit of the company. ValueLabs is all about creating opportunities and fulfilling them, by bringing together the right team members from across the organisation, of their own free will, in a dynamic and fluid manner. ValueLabs is also all about doing everything possible to delight clients, without being unduly concerned by short-term gains or internal role definitions. ValueLabs understands how the platform business model works by developing an ecosystem to bring producers and consumers together. It is an open system for two-way value creation, both for the producers and the consumers. The company believes the next five to ten years are going to be about platform companies. ValueLabs is working towards becoming a platform company from a SaaS company. i 199

> IIFL Group:

India’s IPO Experts IIFL’s investment banking division has grown rapidly over the past few years and is currently one of the leading investment banks in India. The IIFL Group is one of India’s leading diversified financial services providers offering a comprehensive range of services such as lending, asset and wealth management, retail and institutional broking, investment banking, and realty services through its various subsidiaries

IFL Group, promoted by first generation professionals Nirmal Jain and R Venkataraman, has marquee private equity investors such as Fairfax, General Atlantic, and CDC. The company has overseas offices in London, New York, Toronto, Geneva, Hong Kong, Dubai, Singapore, and Mauritius. The investment bank was ranked first in terms of raising equity capital for India’s private sector in 2018 and prides itself on being the preferred partner of businesses and investors seeking to maximise their exposure to the country’s buoyant economy. The firm has helped a large number of companies prepare for and obtain a public listing and is without equal when it comes to designing and implementing a successful IPO strategy. IIFL covers clients across the size spectrum from mega-caps to mid-caps and even smaller companies. Over the past twelve months, the firm has been involved in some of the most noteworthy and unique capital market transactions coming out of India – a testimony to strong corporate and investor relationships.

nationwide network of over 2,200 service points which is critical when it comes to placement and distribution, particularly of IPOs in India. IIFL has leveraged its strong distribution platform across institutional, wealth, and retail segments to build a robust investment banking business. The investment banking division comprises over twenty experienced professionals. The team is led by Nipun Goel who has an experience of 22 years in advising Indian corporates in equity capital markets, M&A, and private equity advisory. i

Also a hallmark of excellence, IIFL generates a significant amount of repeat business and referrals – the firm has become the go-to place for business owners aiming to go public and desirous of entering the corporate major league. Cornerstones of IIFL’s success include its research, institutional equities platform, wealth management practice, and retail reach. The research team comprises more than 25 analysts and regularly produces ground-breaking sectoral studies that unearth gems particularly valued by domestic and overseas investors. IIFL closely monitors and evaluates well over 350 publicly listed companies and counts more than 400 of the world’s largest institutional investors amongst its clients. IIFL is also backed by its wealth management subsidiary which is one of the largest in India in terms of AUM and has a 200

President of Investment Banking: Nipun Goel

CFI.co | Capital Finance International

Summer 2018 Issue

> CFI.co Meets the Founder and CEO of ValueLabs:

Arjun Rao

rjun Rao is a first-generation entrepreneur who has transformed his vision of creating a unique company into a flourishing reality – one with an entirely different approach to business.

ValueLabs was founded in 1997 with the aim of building trust-based, long-standing partnerships with both clients and employees. Since then, the focus has been on building and sustaining relationships, growing with purpose, having a long-term outlook, and fulfilling social responsibilities. As the founder and CEO of ValueLabs, Mr Rao provides strategic direction to the company and ensures – by example – that the organisation never loses sight of its culture and values. He is a dynamic leader who is self-reliant and nimble but flexible in thought. Those who work closely with Mr Rao experience the full import of his belief that all the education one needs is inherently present and when driven by ‘character energy’ and a ‘sense of perfection’, one can learn and achieve anything. Mr Rao holds an MS Degree from Cornell University, US, where he held the AD White Fellowship. He has a Bachelor’s Degree from the Indian Institute of Technology (IIT), Madras, where he graduated at the top of his class. EXCERPTS FROM THE BOOK THE VALUELABS STACK The genesis of ValueLabs can be traced back to a single, spontaneous selfless act. Over the two decades of its existence, the company has emerged as a leading and trusted information technology partner for businesses across the globe. And, as the organisation continued to scale up, Mr Rao felt a need to communicate to his employees and clients, what the company is and stands for, in a concise yet memorable way. Following a lot of thought and reflection, Mr Rao realised that the best way to do this is through the so-called ValueLabs Stack. “In this world of disruptive times, it will be good to think of a partner akin to a technology stack. The most difficult part of a partnership is to get things to work over the long haul. How can we continue to deliver value to our longstanding clients year after year, both incremental and paradigm shifting? How do we help our employees evolve continuously, as they work in the same long-standing relationships year after year?” “We have structured the company, ValueLabs, as a stack; a structure that addresses the above questions and more. The three-layered Stack,

Founder and CEO: Arjun Rao

with each layer standing on the shoulders of the previous one, forms the basis of all our thoughts, interactions, and processes. The foundational layer of values, which are immutable, guides us. Then comes the business model layer which defines how we engage with various stakeholders. And, in these days of disruption, we would not be relevant without being innovative, and that forms the third layer.” “Values - This layer is fundamental to who we are and what we stand for as an organisation. Being strong on our values has been a core thought process since we established the company, hence the name, ValueLabs. Doing the right thing - This is our operating philosophy. Everything we do is measured by whether we did the right thing. They are four of the most difficult words to live by in daily life. While they often lead to shortterm pain, one always comes out the winner in the long run. The ‘unselfish gene’ is essential to be able to do the right thing.”

The most foundational aspect of ‘who we are’ and ‘why we are here’ revolves around four simple words — Doing the Right Thing. While I didn’t even know that I would start a business like this in the beginning, the one thing I was very clear about was that I have to do the right thing in everything I do. “We think of the world through the ‘Head, heart, and hand’ lens. I believe that for any task to be successful, the head (which stands for planning), the heart (which stands for empathy), and the hand (which stands for execution) need to be in sync. This is something that resonates well with most of our clients and employees.” CFI.co | Capital Finance International

Every time we review a relationship internally, we apply this filter: ‘Did we really think it through? Did we feel for it? Did we act on it? “One of my biggest challenges, as we have grown from 5 to 50, to 500, and now 5000+ employees, is this: how do we ensure that our entire employee pool is bound by the fabric of love? If we don’t do that, the organisation can very quickly get split into silos/turfs, and politics can creep in. I do not believe you can ever do perfect work if you don’t love what you are doing. I don’t believe there can be perfect teamwork if you don’t love the people you are working with. And it is just so special for me to see the openness that we have with a lot of our clients, which is just not possible if you don’t love the client.” “I have always maintained that we are in the business of ‘Building Trust’. We do this by exceeding expectations and doing the right thing, day in and day out. It is a very simple and honest way of looking at what we do. It is not about the technology, it is not about the solutions, it is not about consulting – it is more about building trust with our clients and our employees. It’s quite stunning to see the NPS (net promoter score) that came back in the last few quarters of 2017 when we did our CSAT survey (with close to 400 respondents). We had achieved an NPS of 70+.” “I would like to leave you with a thought that I am absolutely convinced about: ‘Unselfishness is more paying when we have the patience to practice it.’ And there is truly another way to build a business – powered only by values.” i 201

> Michael Pettis from China:

High Wages Versus High Savings in a Globalised World Democracies will increasingly have to choose between raising wages and redistributing income or maintaining free trade and capital flows. Because they are likely to choose the former, the world may face a long-term reversal of globalisation.

nvestment-driven growth can broadly occur in the form of one of two models, each with a different way of treating wages and household income. One model, which I will call the high-wage model, incorporates and encourages high wages as the engine behind growth and productivity gains. I will call the other model the high-savings model. In this model, growth seems to be driven mainly by growth in savings, which provides the cheap capital that drives investment, which in turn drives productivity gains. The classic version of the high-wage model historically is probably the American System that evolved during the early nineteenth century, which was later formally described by the German economist Friedrich List, who was especially insistent that “the power of producing wealth is infinitely more important than wealth itself.” In a 1997 paper, Israeli economist David Levi-Faur writes:

According to List, the real distinction between backward and well-developed economies is based on the quality and quantity of the productive powers. Productive powers – mental capital, natural capital and material capital – are to be found in large quantities in developed economies, whereas they are present to a much lesser extent in backward economies. Thus, development is perceived as a process of augmentation of mental capital. In the American system, high wages reward the development of human, or mental, capital whilst driving growth in consumer demand that itself drives growth in private sector investment. In the high-savings model, on the other hand, rather than drive growth, high wages are the consequence of growth. The best-known version is the so-called Japanese model, also known as the East Asian development model. This model boosts savings by encouraging wage constraint and other mechanisms that slow growth in household income relative to overall growth. The high-savings model sees higher wages as the ultimate goal, but rather than spur growth, higher wages are a trickle-down consequence of growth. In other words, both models are designed to boost growth, wages, and investment, but they 202

"It turns out that the way to force up savings is to force down the household share of GDP." do so in different ways and create different kinds of domestic imbalances. All rapid growth is unbalanced, of course, and all imbalances must eventually be reversed; but while some versions of the high-savings model seem capable of driving more muscular, higher rates of growth in the short term, it may be that the imbalances are deeper and harder to reverse, and the subsequent adjustment process may be more difficult. HIGH-SAVINGS MODEL The Chinese development model is largely based on the Japanese version of the high-savings model, and analysts in China and abroad have long noted similarities between Chinese growth in the past two decades and Japanese growth in the 1970s and 1980s. This model at least partially describes the recent development not just of Japan and China but also of South Korea, Taiwan, and one or two other East Asian economies, along with Hong Kong and Singapore perhaps, although – the latter two being trading entrepôts – it is not clear to me how relevant they may be. Wikipedia conveniently describes some of the characteristics of this East Asian model: Key aspects of the East Asian model include state control of finance, direct support for state-owned enterprises in “strategic sectors” of the economy or the creation of privately owned “national champions”, high dependence on the export market for growth, and a high rate of savings. This economic system differs from a centrally planned economy, where the national government would mobilise its own resources to create the needed industries which would themselves end up being state-owned and operated. The East Asian model of capitalism refers to the high rate CFI.co | Capital Finance International

of savings and investments, high educational standards, assiduity and export-oriented policy. HIGH SAVINGS VERSUS HIGH WAGES I would argue that the key difference between the two investment-growth models is their treatment of wages and savings. Gerschenkron argued that investment in developing countries was typically constrained by low domestic savings. This made developing countries generally both overly reliant on the import of volatile foreign savings and subject to high capital costs. This is why Gerschenkron argued in favour of policies that forced up domestic savings as a way to speed up the development process. It turns out that the way to force up savings is to force down the household share of GDP. This explains the high savings accrued not just in China and Japan but also in Germany and other economies with high savings rates and large current account surpluses. Because household consumption is largely a function of household income, this forces down the overall share of consumption in an economy’s GDP. Of course, the inverse of a low consumption share is a high savings share, so policies that force down the relative share of household income automatically force up a country’s savings rate. This didn’t happen in the United States. The American System was developed in opposition to the then-dominant economic theories of Adam Smith and David Ricardo, in part because classic British economic theory seemed to imply that reductions in wages were positive for economic growth because they made manufacturing more competitive in international markets. A main focus of the American system was precisely to explain what policies the United States, which enjoyed much higher wages than Europe, had to engineer so as to generate rapid growth. In the US model, high wages turned out to be a source of economic strength, not a weakness. In fact, sustaining high wages became one of the key aspects of the American system; one consequence of this approach was continuous pressure to drive productivity growth through institutional reform and well-aligned entrepreneurial incentives rather than mainly by pouring money into capital investment.

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This is not to say that Washington and local governments in the nineteenth century did not play an active role in building and funding American investment: they did. And governments, especially local governments, were a major reason for very high levels of American investment. But their role was mainly to fund infrastructure that supported private sector entrepreneurial activity. In the high-savings model, by contrast, it seems that investment in infrastructure is the driver of growth.

In a globalised world economy, the high-wage investment growth model can be derailed because of its impact on international competitiveness. When transportation costs are very low and there are few trade barriers, high wages cause demand to shift to foreign, lower-wage producers by undermining competitiveness; as a result, rather than force local producers to invest in productivity-enhancing innovations, foreign, low-wage producers simply force them out of business.

SUMMARY I want to stress that these are all preliminary thoughts about two very different growth models with opposite approaches to wages, but perhaps there are a few conclusions that we can draw:

Germany’s experience of reducing wages during this century illustrates the problem by showing how the process worked in reverse. For over a decade, Germany suffered from high unemployment as its producers were priced out of the market by foreign competitors. In 2003– 2004, Berlin implemented a number of labour reforms – referred to as the Hartz reforms – whose net impact was to weaken the bargaining power of workers and substantially slow wage growth to well below GDP growth. When this happened, Germany’s trade deficit became one of the largest surpluses in history as its unemployment level fell sharply. In a globalised world, the way to gain competitiveness is to reduce the real value of wages, either by reducing nominal wages (as Germany did), or by undervaluing the currency (as many Asian countries do).

In the high-wage growth model, high wages are the driver of growth. In the high-savings model, infrastructure investment is the driver of growth, with investment subsidised by hidden or explicit transfers from the household sector that simultaneously reduce the household share of GDP and force up the savings rate. Both of these growth models aim for high investment and high wages, but in one case wages lead and in the other they follow. The former uses high wages to create the market that makes private sector investment profitable and to incentivise innovation. The latter forces up savings and channels these resources into investment to drive up wages. Because the high-savings model results in weak domestic demand, especially once investment needs have been largely met, countries that pursue the high-savings model almost always require large trade surpluses to resolve the economy’s inability to absorb all that it produces. It seems that the high-savings model has been capable of generating more vigorous periods of substantially higher growth over the short- and medium term, but the high-wage model has generated more sustainable growth over the long term. The period of rapid growth under the high-savings model has always been followed by a very difficult adjustment, during which much of the relative advancement achieved during the growth period has been reversed. This may be because the imbalances generated by this growth model have been especially hard to reverse.

The difficult adjustment experienced by Japan and other investment-driven miracle economies may be implicit in the high-savings model. It is almost certain, for example, that China, too, is undergoing a difficult adjustment. While Beijing pledged ten years ago this March that rebalancing demand would be its top economic policymaking priority, this task has been very politically difficult to pull off.

to resolve low domestic demand. As the world becomes increasingly protectionist, however, both countries may be forced into much more rapid adjustment and a possibly dramatic resolution of their debt burdens. The trade intervention process begun under the Trump Administration is likely to spread to Europe and continue long after the Trump Administration has been replaced. This is because as the problem of income inequality becomes an increasingly important political issue, especially in democracies, attempts to reverse income inequality will be undermined by the requirements of a globalised world economy. Democracies will face two options: either ignore income inequality, and allow it to get worse, or begin to impose constraints on trade and capital flows so that reforms aimed at reversing income inequality do not lead simply to higher unemployment. i ABOUT THE AUTHOR Michael Pettis, an expert on China’s economy, is professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets as a Carnegie Senior Fellow. He is an accomplished author and well-followed blogger. Michael’s professional background is in capital markets and corporate finance on Wall Street for Manufacturers Hanover (now JPMorgan), Bear Stearns, and Credit Suisse First Boston. He holds degrees, including an MBA, from Columbia University.

Japan seems to have reached the end of a fairly limited rebalancing that occurred in the 1990s and 2000s, during which consumption rose from 52% of GDP to 58%, while the country’s share of global GDP collapsed from 17% to 7%. China began the process around 2011, even though it had been promising to do so since at least 2007; consumption in the country has grown from 48% of GDP to 53% today, a still astonishingly low figure. Unfortunately, until the rebalancing is complete, both countries require large trade surpluses CFI.co | Capital Finance International

Author: Michael Pettis

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> CFI.co Meets the VP & MD of CCL Secure:

Bernhard Imbach Bernhard Imbach has experienced almost every aspect of the banknote industry throughout his successful career over the last 35 years. Starting on the shop floor and working up to senior management; designing banknotes by hand to using computer-based technology; and printing on paper to printing on polymer substrate – just some of the journeys on which Mr Imbach has embarked.

r Imbach now leads the team at CCL Secure that manufactures the world’s most sophisticated banknote substrate Guardian™. It is currently issued on over 80 mainstream denominations in 24 countries and impressively outperforms paper-cotton, coated-paper, and varnished banknotes in security, durability, cleanliness, and eco-friendliness.

Australia into a world-class quality printer. At CCL Secure, we have a workforce culture that is collaborative, accountable, and committed to innovation, and our people are the reason we’ve had continued success,” Mr Imbach said. CCL Secure is able to provide its central bank and printer customers with effective end-to-end solutions thanks to its many staff members, like Mr Imbach, that have worked in those companies themselves.

Mr Imbach started his career on the shopfloor at the Swiss banknote printer Orell Füssli. As a young man, he was at first overwhelmed by the millions of Swiss Francs’ worth of notes that he saw every day. However, he quickly transitioned from seeing it as money to a product that had to be delivered efficiently and to a high standard of quality. “Back in 1982, everything was based on your manual skill set. Computer-driven printing equipment simply did not exist; banknotes were produced by hand drawings. Whereas today, almost everything is accomplished with technology.” “These developments have brought many new advantages and opportunities to the industry, though I am grateful for having experienced both worlds. It has given me a deep understanding of how we’ve arrived to where we are today, as well as a platform for where we can go tomorrow,” says Mr Imbach. Mr Imbach spent 25 years at Orell Füssli, which included holding the positions of chief operations manager and member of the executive team. He saw the company go from printing banknotes solely on paper, to introducing polymer in 2003 to expand the company’s capability and market.

Knowing what he knows now, Mr Imbach said the advice he would give to his apprentice self is to “remain focused on quality, continue to develop your passion, and always push the boundaries.”

VP & MD: Bernhard Imbach

While he understands and champions the advantages of new technology, he places the highest value on people. Mr Imbach worked at Note Printing Australia from 2007 to 2014 during which he was chief executive officer for seven years. One of his greatest takeaways that he brought to CCL Secure from this time was the notion that a company’s greatest assets are its employees. “Without dedicated and passionate employees, I believe it is impossible to be successful. With this philosophy, I was able to build Note Printing

Fitting advice given that pushing boundaries is what CCL Secure was founded on almost thirty years ago when it introduced the world’s first polymer banknote in Australia. Ever since, CCL Secure has been a partner to many of the world’s leading central banks that have adopted Guardian™ and provided them with support, advice and solutions taken from the experience of more than 55 billion banknotes issued on Guardian™ substrate. While Mr Imbach did not divulge the intricate details of CCL Secure’s future plans, he did reveal there will be some very exciting and innovative upcoming products that will revolutionise the world of banknotes once more.

Bernhard Imbach is vice-president and managing director of CCL Secure, the manufacturer of the world’s most sophisticated banknote substrate Guardian™. With more than three decades of industry experience, Mr Imbach was previously CEO of Note Printing Australia and held senior roles at Orell Füssli Security Printing. i

"While he understands and champions the advantages of new technology, he places the highest value on people." CFI.co | Capital Finance International

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> CCL Secure:

Guardian™ at the Forefront of Banknote Security

As more central banks adopt Guardian™ polymer banknotes, CCL Secure redefines banknote security.

he company was born out of a central bank’s vision to build a better banknote – one that was cleaner, safer and stronger – and this goal has underpinned Guardian™ polymer substrate technology ever since. Following several years of extensive research and development, Australia began the transition to Guardian™ polymer in 1988 with the release of the $10 bicentennial commemorative banknote. Polymer and the clear window had begun their journey into history. Since then, the innovative Guardian™ banknote substrate has been used to issue in excess of 55 billion banknotes, gaining the confidence of more than 40 central banks for use in over 160 mainstream and commemorative notes that circulate in some of the world’s most demanding cash cycles. CCL Secure’s polymer technology continues to evolve at an incredible rate. The development of new security features and designs are key drivers of this change. They inspire banknote designers to focus on the synchronisation of polymer and associated security features. However, all the complex elements that ultimately represent and protect the identity of a nation’s currency must be adapted to the printing systems. The aim is not to design a complex banknote that is difficult to produce, it is to design one that is difficult to counterfeit.

"The combination of layers means the design possibilities for Guardian™ are limitless. A banknote designer can allow their imagination to transcend multiple layers, rather than being restricted by the flat surface of a paper substrate." A WINDOW INTO THE FUTURE When the first polymer banknote was launched in Australia in 1988, the presence of a clear window represented a new paradigm in security. It was a revolutionary new base material that, when combined with unique security features, instantly prevented casual and semi-professional counterfeiters from reproducing the notes. The film effectively combated photocopying. The clear polymer window has been so successful in deterring counterfeits that it has even inspired the creation of window features on a number of paper substrates. Today, the window remains a key security feature on polymer banknotes. It is highly secure and easily recognisable by the public.

Polymer substrate now has thirty years’ proven market performance, and Guardian™ has been at the forefront of polymer development throughout this period. The unique bi-axially oriented polypropylene (BOPP) Clarity™C produced by CCL Secure’s sister company Innovia Films gives Guardian™ its distinctive balanced tensile properties. These are not only exclusive to the polymer banknote market; they also provide superior printing and handling properties across all banknote-printing platforms. Clarity™ C film – in combination with CCL Secure’s opacification process, which includes printing and embedding security features on the film – creates Guardian™ substrate. GUARDIAN™ SUBSTRATE IN COMBINATION WITH SECURITY FEATURES The Guardian™ platform allows CCL Secure to include not only a wide range of proprietary features but also third-party features, such as optically variable inks (OVI) and optical variable devices (OVD) applied in windows. These can be integrated within the Clarity™C base film or applied directly onto Guardian™ substrate. The multiple opacification layers that make up Guardian™ allow CCL Secure’s proprietary features to be applied at various stages of manufacture: within a clear window, under one or multiple layers of opacification, on top of opacification, or a combination of all three. This increases feature integration, complexity and security. Examples of features that can be applied in a clear window and viewed from both sides of the substrate are: • CAMEO™: a rich, tonal image printed within the transparent window; • LATITUDE™: an optically variable device providing colour shifts and movement within the image when tilted, with the added security of being see-through in transmission; • ECLIPSE™: an optically variable device that reveals a hidden message when looking through the transparent window at a point light source; • AURORA™: a combination of two OVIs that match in reflection but are different in transmission.

Bank of Canada's 150 Commemorative Banknote Featuring METALIX™ and a Complex Window™ with Spot Colour™ and foil.

This image is a copy that is reproduced with the permission of the Bank of Canada.

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Other features, such as Shadow Image™, Shadow Image Thread™, Micro Lettered Thread™ and MAGread™, can be applied under

Summer 2018 Issue

Reserve Bank of Australia's New Generation $10 Banknote Featuring a positive Shadow™ and a

The new Bank of England's £10 Note. Featuring a Complex Window™ and Half Window™

top-to-bottom Complex Window™ with Vignette™, Spot Colour™ and foil.

combination with CAMEO™, Vignette™, GSwitch™ ink and foil.

one or multiple levels of opacification, allowing designers to hide them beneath banknote printed features, or create tonal effects with different layers. METALIX™, IRIswitch™, and Spot Colour™ are printed on the surface opacification layers for a more obvious effect. Opacification layers also allow features such as AURORA™ and GSwitch™ to be printed in a Half Window™, creating a switching effect on the window side and a tinted substrate on the reverse. The combination of layers means the design possibilities for Guardian™ are limitless. A banknote designer can allow their imagination to transcend multiple layers, rather than being restricted by the flat surface of a paper substrate. DRIVERS OF SWITCH FROM PAPER TO GUARDIAN™ POLYMER Security is just one of the many benefits of

Guardian™. There are a number of drivers behind a central bank’s decision to switch a single denomination or a full series to Guardian™. These include: • Increased security – The use of the Clarity™C film, combined with clear windows and the integration of Guardian™ features, reduces counterfeit rates by a factor of ten when compared to existing paper banknotes. • Cost savings – Cost savings arise mainly from the increased lifespan of the banknote, which is typically three to five times that of paper banknotes. Improved lifespan also has a knockon effect on cash cycle savings, with a reduction in the movement of banknotes, sorting and handling playing a significant role. • Reduced environmental impact – By adopting a 100% recyclable Guardian™ product, central banks not only reduce their impact on their local environment, they also save costs by selling used polymer for recycling rather than sending it to landfill. • Improved hygiene – Independent studies have CFI.co | Capital Finance International

shown that Guardian™ contains significantly less bacteria than paper banknotes, which can help reduce the spread of disease. • Customer perception – A full Guardian™ series adds consistency and reduces confusion for the general public, especially in the areas of touch and feel. The suite of Guardian™ features allows for a coherent theme throughout a series, allowing for faster identification. • Cash handling – A full Guardian™ series creates less complexity at cash processing machines, and gives central banks better purchasing power by providing a cleaner note handling experience for the public. While paper is a flat two-dimensional structure, polymer substrate is effectively a threedimensional space. As CCL Secure’s R&D scientists work from the microscopic to the nano-level, this space is getting larger and larger. These spatial characteristics are the key reason that Guardian™ will continue to stay ahead of counterfeit technology far into the future. i 207

> From Infrastructure to Biodiversity:

Expanding Blended Finance Beyond its Comfort Zone By Irene Basile, Policy Analyst, OECD and Simona Santoro, Policy Specialist, UNCDF

Prompted by the adoption of milestone agreements such as the 2030 Agenda for Sustainable Development and the Paris Agreement, todayâ&#x20AC;&#x2122;s development finance architecture is rapidly evolving. Public and private finance are increasingly seen as complementary and mutually reinforcing in sustainable development.

hile Official Development Assistance (ODA) will remain indispensable for addressing crucial development challenges and providing key public services, the critical role played by responsible business can no longer be overlooked: private investment supports infrastructure development, job creation, skills transfer, and innovation. Blended finance has the potential to enhance the catalytic aspect of ODA for sustainable development. Blending means leveraging development finance to attract private and commercial investors by addressing the risk/ return profile of their operations in developing contries. So far blended finance has been deployed mainly in middle income countries and in a limited range of sectors. According to the OECD, of the US$81 billion in private resources mobilized by ODA and other official flows between 2012-15, only 7% went to the least developed countries (LDCs), which have SDGrelated investment needs in the tune of $120 billion per year, but face difficulties in attracting private finance because of risk perceptions, poor business climate, and the small size of their economies.

"Blended finance tends to converge towards those sectors where the business case is clearer and the potential for revenue streams stronger." The SDGs most targeted by these collective blending vehicles concern economic growth and jobs, infrastructure and climate change. In contrast, the least targeted SDGs were related to biodiversity and natural resources.

The banking, enegy, and industrial sector absorb over 80% of the private capital mobilised across all developing countries. The picture is slightly more diversified for LDCs, where significant infrastructural and productivity gaps prompt more investment in water supply and sanitation, communications, agriculture, forestry and fishing. Blended finance thus tends to converge towards those sectors where the business case is clearer and the potential for revenue streams stronger. This finding is partially counterbalanced by another important actor in the blending space, i.e. foundations working for development. Indeed, philanthropic giving is strongly skewed towards health and education. However, foundations are just as risk averse as other private actors, as their resources are mainly destined to middle income countries - LDCs received only 28% of the 23.9 USD billion disbursed over 2013-15.

The practice of blending still needs to address concerns regarding potential crowding out and market distortion, but also alignment with national priorities, local ownership being critical to long-term sustainability. UNCDF and the OECD have joined forces to investigate the role and potential implications of blended finance in the LDCs, including risks and possible unintended impacts. One of the questions emerging in this forthcoming report is whether blended finance can be applied to a wider range of public good and social sector investments, such as conservation, education, and health which are typically the domain of public policies and finance. WHAT THE DATA TELL US The 2018 OECD report â&#x20AC;&#x153;Making Blended Finance work for the SDGsâ&#x20AC;? offers an insight on how blended finance funds and facilitiesare targeting the different SDGs. 208

Figure 1: How blended finance funds and facilities target the SDGs.

Source: OECD (2018), Making Blended Finance Work for the Sustainable Development Goals, OECD Publishing, Paris.

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UNCDF for example has established a partnership with Commonland, a foundation which is seeking to restore degraded ecosystems through economically viable solutions. UNCDF is looking to use blended finance to adapt Commonlandâ&#x20AC;&#x2122;s approach to a number of projects in LDCs. Careful consideration should be given however to potential side effects related to social equity such as land rights and tenures and local population needs. Education and health are also increasingly looked at as possible areas of intervention for blended finance. These are key sectors to foster human development and productive capacities, where LDCs are facing serious challenges also due to the lack of education facilities and equipment. These are also sensitive areas, where private sector involvement requires adequate consultation processes and strong institutions as well as buy-in from local communities. In a few cases, impact investors have used blending to incubate local businesses in the area of secondary education and vocational training. Convergence and IFC have recently launched a platform with the ambitious objective of raising $500 million for investment and advisory support in health and education, especially for small service providers struggling to get access to credit in lowest income countries. CONCLUSION While there is an urgency to increase the financing available for LDCs, we need more careful understanding of how blending could work across the SDGs spectrum. Blended finance offers space for experimentation, testing, and learning new business approaches, even in the less conventional sectors. It may also support developing countries in their long-term transition out of aid dependency, by creating local capital markets and linking them to global value chains.

INSIGHTS FROM PRACTICE There is growing interest by donors in testing blending opportunities in alternative sectors, such as conservation, education, and health, where private-sector engagement could potentially create new markets that benefit poor people. As the effects of climate change are expected to accelerate, conservation can help local communities reduce their vulnerability to environmetal shocks in LDCs. Alongside public support, private investment in this sector is growing but often projects do not generate enough

sizable revenues in the short to medium term to be considered attractive by private investors. Grants play an important role in the design phase to improve transparency on the expected risks and returns, identify the conservation impact in collaboration with NGOs and local governments, and mitigate operational risks. Concessional debt or equity can provide the long term outlook needed to demonstrate the projectâ&#x20AC;&#x2122;s impact and business case. Biodiversity business incubators and enterprise funds can offer this kind of patient capital. CFI.co | Capital Finance International

Still, not all finance is suitable for all purposes: ODA might be more appropriate in social sectors, where the most immediate opportunities for private investors lie on infrastructure development, rather than service provision. Donors and partner governments should jointly consider when is the right time to bring private investors in, depending on the local and sector market maturity and context. This assessment should be dynamic and adjusted on an ongoing basis to keep pace with rapidly changing market conditions and technologies. Ultimately, it should be up to the LDCs themselves to assess the opportunity for blending, based on the evolving financing mix and on their institutional and regulatory capacity, which is typically dependent on the more traditional development approach. The Addis Ababa Action Agenda promotes appropriate use of both blended finance and public-private partnerships agreed by all UN Member States. The OECD Blended Finance Principles for Unlocking Commercial Capital represent a further commitment by the international donor community to uphold 209

Figure 2: Private finance mobilised by Official Development Finance (2012-2015).

Source: Benn, J., C. Sangare and T. Hos (2017), "Amounts mobilised from the private sector by Official Development Finance interventions: Guarantees, syndicated loans, shares in collective investment vehicles, direct investment in companies, credit lines", OECD Development Co-operation Working Papers, No. 36, OECD Publishing, Paris.

and pursue the development objectives in all blending operations. More evidence is required on the successes and failures of blended finance, particularly in its less frequent settings. Monitoring and evaluation, coupled with strong knowledge capture and sharing, can play a key role in identifying what works and what doesn’t work for sustainable development. In order to decode the complex interplay between private investment and actual support delivered to the poorest and most marginalized people, a collaborative learning culture must emerge amongst development and commercial partners. i References online at CFI.co.

Irene holds a double Masters degree from Bocconi Business School in Economics and Management of Government and International Organisations and from Paris School of International Affairs (PSIA) in International Economic Policy. Simona Santoro is a Policy Specialist at UNCDF focusing on finance solutions to promote inclusion, reduce poverty, and support local economic development in the least developed countries. She has over fifteen years of experience in multilateral organizations. Before

joining UNCDF she worked at the Italian Ministry of Foreign Affairs supporting the European Common Foreign and Security Policy and at the Organization for Security and Cooperation in Europe (OSCE) implementing human rights and democratization programmes in South-Eastern Europe, the Caucasus, and Central Asia. She was also a lecturer at the University of Florence and established the first course on theory of international negotiation and mediation. Simona holds a PhD in Social and Political Sciences from the European University Institute.

Author: Irene Basile

Author: Simona Santoro

ABOUT THE AUTHORS Irene Basile is a policy analyst at the OECD Development Cooperation Directorate, in the Financing Sustainable Development Division. Her work is focused on the role of private finance for sustainable development, in particular through approaches like blended finance and social impact investing. She recently authored a chapter on the monitoring and evaluation practices in the 2018 OECD report “Making Blended Finance Work for the Sustainable Development Goals”. She is currently investigating the role of blended finance in specific contexts, such as LDCs and Fragile and Conflict-Afflicted States, in partnership with the UN Capital Development Fund (UNCDF) and the International Network on Conflict and Fragility (INCAF) respectively. Before joining the OECD, she has worked for 10 years as external evaluator and auditor on European and bilateral development cooperation programmes, including as a manger in the EY Public Advisory practice. 210

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Power to distribute, excellence to execute. LBBW is Germany’s leading Landesbank for customer-oriented capital markets business. On the back of a strong origination, trading and distribution platform LBBW is bringing together issuers with well-known top tier investors, medium-sized institutional accounts and its captive savings banks network. Capital market solutions

Excellence in Distribution 2017

for banks, corporates, savings banks and institutional investors are LBBW’s core strengths – this way helping clients to achieve their financial targets. Its track record as bookrunner in the EUR SSA, FIG and corporate market gives evidence of how leading issuers and newcomers trust LBBW’s quality advice. www.LBBW.de

Capital Markets Team Germany 2017

Breaking new ground CFI.co | Capital Finance International

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> Asian Development Bank:

High-Tech Revolution Can Create Rather Than Destroy Jobs in Asia By Bambang Susantono

New technologies such as robotics, three-dimensional printing, artificial intelligence, and the Internet-of-things will continue to help drive future prosperity in Asia. Although they pose challenges for workers, there is reason for optimism, according to a new report from ADB.

echnological advances have transformed Asia’s two billion strong Asian labour market over the last quarter century, helping to create thirty million jobs annually in industry and services. These new jobs have been accompanied by increased productivity and earnings, along with significant reductions in poverty. Underlying this progress has been a shift from low-productivity and low-pay sectors (typically subsistence agriculture) to higher-productivity and higher-pay sectors (typically manufacturing, modern industry, and services). In India, Indonesia, and Philippines, for example, recent labour force survey data show that on average, wages in manufacturing are between 1.75 to 2 times higher than in agriculture; those in services such as trade, hotels, and restaurants are between 1.5 to 1.8 times higher. Thus, as workers move from agriculture to these sectors, their earnings typically increase. Such technological advances have brought gains in aggregate productivity and earnings in certain sectors. Examples include high-yielding crop varieties in agriculture, modern machine tools in manufacturing, and information and communication technology (ICT) in services. International trade; foreign direct investment; and investments in education, infrastructure, and research and development have also played key roles in promoting the development and adoption of new technologies. But, the degree of automation made possible by the latest technologies is causing concern. In the apparel and footwear industries, for example, we are seeing experiments with completely automated production. Similarly, it is becoming technically feasible to automate more complex service tasks such as customer support.

"New jobs have been accompanied by increased productivity and earnings, along with significant reductions in poverty." Could such automation lead to widespread job losses, a slowdown in wage growth, and worsening income inequality? Some studies have indicated that more than half of the jobs in Asian economies are at risk. A study by the Asian Development Bank (ADB) published in the Spring 2018 edition of its flagship economic report Asian Development Outlook examines in depth this issue of how technology might affect jobs in Asia. And ADB’s research shows four compelling reasons to be optimistic about the region’s job prospects. First, new technologies usually cannot automate the entire job. Rather, automation targets mainly routine tasks, such as soldering components onto a circuit board repeatedly in an assembly line, or counting and dispensing cash in a bank. While in some cases automating tasks may lead to a job being displaced, in others it merely restructures the job, with machines focused on routine tasks, freeing up workers to focus on others. For example, the introduction of automated teller machines has enabled bank tellers to provide more sophisticated customer relationship management. Second, job automation happens only where it is both technically and economically feasible. In

our report, statistics on nine Asian economies with comparable data on the usage of industrial robots show that the two largest users are capitalintensive electrical/electronics and automotive sectors. In contrast, producers of textiles, apparel, and leather goods and food and beverages together accounted for only 1.4% of robot sales but 31.4% of manufacturing employment. In addition to issues of technical feasibility, the relatively low labour costs in developing countries make it economically difficult to replace jobs with machines, especially in labour-intensive sectors. Third, rising demand offsets job displacement driven by automation. So while automation reduces the number of workers required for a specific task, it also typically reduces the costs of production. Prices then fall, spurring an increase in demand. The latter may be strong enough to even expand the number of jobs in factories that automate part of their production process. More generally, productivity gains from new technology in one industry lower production costs in downstream industries, contributing to increased demand and employment across industries. That rising demand more than compensates for jobs displacement on account of rising productivity is shown in our report, which uses ADB’s multiregional input-output tables and employment data from 2005-2015 in 12 developing Asian economies (accounting for 90% of the region’s total employment). Our analysis shows higher productivity is associated with a notional 66% decrease in employment, equal to 101 million jobs per annum, for a fixed level of output. However, concurrently higher demand for goods and services more than offsets this, with a notional

"Could such automation lead to widespread job losses, a slowdown in wage growth, and worsening income inequality? Some studies have indicated that more than half of the jobs in Asian economies are at risk." 212

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88% increase in employment, equal to 134 million jobs per annum associated with rising incomes. Of course, this is not to deny the possibility that some time in the future technology may become so advanced that most jobs could be carried out more effectively and at lower cost by machines than by humans. But, even if that day arrives sooner than anticipated, the decision to deploy machines will still rest with humans. Fourth, technology creates new occupations and entirely new industries. For instance, at the beginning of the last century, the emergence of the car industry created large amounts of jobs for factory workers as well as technicians and repair and sales persons. Today, the development of ICT has created millions of jobs for software engineers, database managers, and IT support technicians in developing Asia. There is no reason to think that the future will be different. In addition, the greater complexity of the modern workplace and growing demand for new personal services in health care, education, finance, and other areas counter the displacement effect of technology. The ADB report acknowledges that advances in areas such as robotics and artificial intelligence do pose challenges for workers. Jobs that are intensive in “cognitive” tasks, social interactions, and the use of ICT – jobs that tend to be held by the better educated and better paid – expanded 2.6 percentage points faster than total employment annually over the last ten years. Moreover, average real wages for these jobs increased faster than others. These trends are likely to continue. Thus, jobs that require repetitive, routine tasks and workers who do not have the education or training to move easily to other occupations, may face slow growth in wages. This would worsen income inequality in Asia and the Pacific. Foundational skills – those that are best learned as a schoolchild, encompassing not only basic reading, writing, numeracy but also digital literacy and teamwork ability – support transition into jobs that require higher intensity of nonroutine and cognitive tasks. Without adequate skills development or retraining, workers with weaker foundational skills face hurdles in seizing the opportunities that new technologies provide.

Governments can also use new technologies to improve the efficiency, effectiveness, and governance in delivering public services. And government must support technological progress by ensuring adequate investments in supporting infrastructure, ensuring its workforce is techready, providing an environment for innovation and adopting technology, and putting in place an effective regulatory framework that promotes fair competition and protects consumers. Government should also provide incentives to schools to place greater emphasis on developing foundational skills – key to an individual’s ability to learn and relearn – and improving education quality. For the specialised skills needed to work with new technologies, relevant courses at technical and vocational institutions and universities are key. Social protection systems are key for protecting workers from income loss due to unemployment. They are also essential for workers employed in low-paying jobs, such as many of those in the informal sector. To complement social protection in supporting workers’ welfare and tackling widening inequality, governments should also put in place effective minimum wage legislation, allowing minimum wages to grow with labour productivity. Education and skills development, active labour market programmes and social protection will help address worsening inequality. However, funding these requires governments to raise more revenues. Broadening the tax base and improving tax administration are important in this regard, especially given the relatively low share of fiscal revenue to gross domestic product in many Asian countries. In addition, there is room for making income taxes more progressive and increasing the contribution from capital gains tax, inheritance tax, and property tax. These steps will not only raise government revenues, they will also narrow inequality, which is shaping up to be a priority in Asia over the coming decade. i ABOUT THE AUTHOR Bambang Susantono is vice-president for Knowledge Management and Sustainable Development at the Asian Development Bank.

Even some cognitively oriented but routine jobs may be displaced. Transitioning these workers into nonroutine cognitive jobs will require retraining and skills development. Governments will need to respond to the risk of workers being left behind by ensuring that they are protected from the downside of new technologies and able to take advantage of new opportunities. This will require improved coordination on action and policies to promote skills development, labour regulation, social protection, and income redistribution. CFI.co | Capital Finance International

Author: Bambang Susantono

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> Jim O'Neill:

The Global Economy’s Uncertain Future

At this time last year, the global economy was experiencing strong, widespread growth, with even the long-stagnant European Union staging a robust recovery. But with key indicators of trade and investment now weakening, a new crisis – not least a global trade war – could quickly bring the global upturn to a halt.

t the start of 2018, most of the world economy was experiencing a synchronised cyclical recovery that seemed to herald a longer period of sustainable growth and an end to the decade-long hangover from the 2008 slump. Despite the shock of Brexit, storm clouds over the Middle East and Korean Peninsula, and US President Donald Trump’s unpredictable behavior, rising investment and wages, alongside falling rates of unemployment, appeared to be in the offing. Yet, as I warned in January, “the global mood [had] shifted from fear about political risks to obliviousness, even though many such risks still loom large.” Moreover, while my preferred global indicators were all looking up, I worried about whether that would continue after the first half of 2018, given foreseeable complications such as monetary-policy tightening across advanced economies, especially in the US.

Final Thought

Lo and behold, we are now halfway through 2018, and some of those same indicators are no longer looking quite so rosy. While the US Institute for Supply Management’s June Purchasing Managers’ Index (PMI) remains very strong, other comparable surveys around the world are not nearly as robust as they were six months ago. Most important, business activity has slowed in both China and Europe. Another key indicator is South Korea’s trade data, which is published monthly and before that of any other country. On July 1, we learned that South Korean exports had fallen year-on-year in June 2018. Whereas 2017 was a recordsetting year for the country’s nominal export strength, 2018 has ushered in several months of decelerating performance. Ironically, this slump coincides with improved relations with North Korea, while the strong performance last year occurred in spite of nuclear brinkmanship on the Korean Peninsula. 214

"We are now halfway through 2018, and some of those same indicators are no longer looking quite so rosy." The weakening of South Korean exports calls for careful follow-up analysis, both of other major economies’ trade data and of South Korea’s July data, when it is published on August 1. Given the worrying escalation of Trump’s import tariffs and the retaliatory measures being pursued by China, the European Union, and others, one should not be surprised if the weakening of global trade persists. That said, one also should not assume that falling trade numbers are a direct result of tariffs. We do not yet have a full regional breakdown of export performance. But from the data that are available for the first 20 days of June, we can see that South Korean exports to the US and China were actually rather strong; the weakness was in exports to Association of Southeast Asian Nations countries and the Middle East. If this remains the case, there is less reason to worry that the strong global-trade performance over the past 12-18 months is being thrown into reverse. After all, we are in a decade in which the world economy is dominated by activity in the US and China. According to my calculations, 85% of the growth of nominal GDP worldwide since 2010 is due to these two countries, with the US accounting for 35% and China accounting for 50%. So, as long as China and the US are doing fine, the global economy can be expected to sustain annual output growth of around 3.4%. As for the rest of the world, economic indicators from this time last year through early 2018 seemed to suggest that many previously weak CFI.co | Capital Finance International

performers were finally on the mend. In nominal dollar terms, Brazil, the EU, Japan, and Russia all experienced slight declines since 2010, but showed signs of improvement in 2017. For example, at this time last year, the EU looked as though it was on the cusp of a robust, widespread cyclical recovery. But that no longer seems to be the case. Key economies such as France and Germany have experienced a slowdown, perhaps owing to fears of a global trade war. And, of course, the plodding Brexit negotiations, Italy’s new anti-establishment government, and an intra-EU political crisis over immigration have all created more economic uncertainty. The immigration crisis, in particular, could have severe consequences both for German Chancellor Angela Merkel’s government and for EU cohesion. To be sure, Europe’s economic softening could prove temporary, and PMIs for eurozone countries did strengthen somewhat in June, following a couple of months of marked decline. But it would be foolhardy to rule out the worst. Still, as we have seen, the sustainability of global growth depends largely on the US and China. Obviously, if these two economic giants are going to start trading blows with tit-for-tat tariffs, both will lose – and so will the world economy. For the US, where consumption accounts for around 70% of GDP, positive international trade and a stable, friendly investment climate are essential for sustainable growth. One hopes that someone close to Trump can turn him around before his policies derail the world’s long-awaited recovery. i ABOUT THE AUTHOR Jim O'Neill, a former chairman of Goldman Sachs Asset Management and former Commercial Secretary to the UK Treasury, is Honorary Professor of Economics at Manchester University and former Chairman of the Review on Antimicrobial Resistance.

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