CFI.co Winter 2016-2017 by CFI.co

Capital Finance International

Winter 2016 - 2017

GBP 9.95 // EUR 14.95 // USD 15.95

AS WORLD ECONOMIES CONVERGE

Gavin Wilson, CEO, IFC Asset Management Company:

MOBILISING PRIVATE CAPITAL FOR SUSTAINABLE DEVELOPMENT ALSO IN THIS ISSUE // WORLD BANK: GLOBAL IMBALANCES ON THE RISE // NASDAQ: EXPERT OUTLOOK ON 2017 OECD: ESCAPING THE LOW-GROWTH TRAP // MIGA: INNOVATIVE PROJECT BOND IN TURKEY IFC: INVESTMENT OPPORTUNITIES IN EMERGING MARKETS // UNCTAD: UNLOCKING FDI FLOWS

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Winter 2016 - 2017 Issue

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Winter 2016 - 2017 Issue

WELCOME TO MY WORLD

CHRONOMAT 44

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Editor’s Column 2017: All Systems Go global growth. Of particular interest are the noises emanating from Washington regarding some form of tax holiday that would allow US corporations to repatriate the huge stockpiles of cash now hoarded in fiscally friendly jurisdictions. The idea is that the approximately $1.7 trillion stash of US corporates – 93% of which is held overseas – can somehow be rallied to underwrite part of the Trump Administration’s ambitious plans.

This new year promises to deliver the results of choices made in 2016. Donald Trump has now been sworn in as the 45th president of the United States of America while in the United Kingdom, Prime Minister Theresa May prepares to serve formal notice of her country’s intent to part ways with the European Union. The voter revolt that marked political life in both the US and the UK may spread this year to France and The Netherlands where populist politicians stand ready to cash in on general discontent. Germans also head to the polls but may not yet be ready to impose major upheaval – though dissatisfaction is on the rise here as well. The upsets at the polls of 2016 arrived with a delay. The global economy is on the mend, doing reasonably well. Growth rates have picked up in Europe and in December Greece was saved the embarrassment of yet another showdown with its creditor nations. Portugal and Spain have been pulled back from the brink and Italy found a way to stop one of its major banks from toppling over.

Editor’s Column

Though perusing the headlines still produces feelings of unease, the perception is actually worse than reality. In its World Economic Outlook, the International Monetary Fund has adjusted the baseline global growth forecast to 3.4% for 2017 – a rate similar to the one obtained last year. The impending Brexit is cause for some concern and caused the IMF to review its forecast and subtract 0.1% off an earlier forecast. Continental Europe is deemed well-able to absorb the shock without much, if any, disruption. While the UK economy seems headed for a marked slowdown with GDP to expand by 1.1% in 2017, the Eurozone is expected to do significantly better with Spain and The Netherlands as its star performers. The latter is riding high on remarkably strong external accounts as is Germany which last year posted a near-record $296bn surplus on its current account. Interestingly, even Italy, France, and Spain posted solid c/a surpluses – signalling strong fundamentals upon which sustainable growth may now be erected. The era of austerity seems to draw to a long-awaited close. In the United States, the Trump Administration readies a large-scale spending programme to upgrade the country’s much-depleted infrastructure. As it does so, the US is set to once again become the driver of 8

Though Trump-bashing has become the favoured pastime of progressives and moderates alike the world over, we may be underestimating the man. Though his business practices have raised eyebrows and his posturing – often on Twitter – raises concerns, there is a precedent that offers hope. When, in 1981, Ronald Reagan moved into the White House, the world was aghast as its fate was put into the hands of a rather less successful Hollywood B-movie actor. Just like Donald Trump today, Ronald Reagan did not have time for details and subtleties. His worldview was a simple one of us versus them. Things, people, and countries were either good or bad with precious little room for ambiguities or doubts. Yet for all his shortcomings, Ronald Reagan went on to become one of the United States’ most successful president, unleashing not just his country’s military power, but also its phenomenal economic drive. By tinkering with exchange and interest rates, the US soon drew in massive amounts of overseas capital that spurred growth, lifted millions out of poverty, and brought in an era of almost unbound prosperity. Whilst at it, President Reagan almost singlehandedly faced down his communist foes, using both bluff and raw firepower to force an end to the Cold War – as it turned out, he was not such a bad actor after all. There is nothing to stop Donald Trump from repeating this stellar performance: he’s got the guts and the swagger to pull it off. Moreover, he’s quite unburdened by details. A less complex worldview may be a distinct advantage for a US president asked to solve the world’s many problems amid pressure from all sides – environmentalists, major foreign powers, concerned corporates, and many others. Thus, the outlook for 2017 is not at all dim or dark. The US will reassert its global leadership, lost thanks to Mr Obama’s rather bungling performance on the diplomatic front, and the UK will try – and most likely fail – to find a new role for itself. If it happens at all – and that remains a big if – Brexit is unlikely to derail the EU27’s path to growth. Nor will it disturb world markets beyond a small and fast-fading blip on the screen of currency traders. The only possible risk currently looming is that of an electoral upset in France – a prospect that, for now, seems unlikely. Then again…

Wim Romeijn Editor, CFI.co CFI.co | Capital Finance International

New York

Editor’s Column

> Letters to the Editor

“ “ “ “

Would you not agree that irrespective of the development model chosen, its implementation is more important? It is only when policies are subverted, and shortcuts taken, for political expediency that developments stalls. The inconsistency with which policies are implemented leads to inefficiency and undermines their effectiveness. I honestly do not think it matters which model of development is chosen as long as governments adhere to the recipe and only show flexibility for pragmatic reasons; i.e. those devoid of short-term political considerations. JEAN FRANÇOIS BELMONT (Lyon, France.) Even though we live in an interconnected world, it is surprising how little we know about those on the other side. Your coverage of the Asian Infrastructure Investment Bank and its CEO Jin Liqun show that we in the Atlantic World remain largely unaware of what goes on in China and Southeast Asia. Mr Liqun, however, seems very well informed on global developments and displays a thorough understanding of our side of the world. In order to return the courtesy, we may wish to consider encouraging young people, particularly students, to gain more awareness of China, its history and its defining characteristics. If knowledge is power, Mr Liqun et al seem to have us beat already. MARGOT HILDEBRAND (Toronto, Canada) The rejection, in Colombia, of the peace deal between government and guerrillas by the population emphasises the folly of calling a referendum on whatever question is plaguing the nation. In Colombia, an agreement almost a decade in the making was rejected by the narrowest of majorities. Effectively, only a few thousand voters now hold the country’s future hostage. Far from democratic, referendums allow the political flavour of the day to determine a country’s long-term destiny which is set in stone even though public opinion may have changed (yet again) a few days or weeks later. This is no way to run a country – unless, of course, that country happens to be Switzerland. Sadly, or luckily, there is only one Switzerland in the world. ALVARO FIDES (Medellin, Colombia)

Europe is a mess. It is a continent of hasbeens. Sure, there is some prosperity. But, have a look in Greece, or in next door Bulgaria, and poverty on an almost unimaginable scale is found. It does you no good to picture Europe as the wonder of the world: it is not. Economic growth is anaemic, unemployment rampant, and the demographics scary. No union can fix these problems. Time for Europe to join the 21st century and recognise that it is no longer master of the universe – or of its own destiny for that matter. NORMAN FIELDING (Exeter, UK)

Bern: Federal Palace of Switzerland

Winter 2016 - 2017 Issue

“ “ “

I do enjoy Ross Jackon’s informative rants. He has a point – and it is a good one. When 62 very rich people own more than half the world’s assets, something has gone terribly wrong indeed. However, it requires quite a leap of faith to fault globalisation. As it happens, protectionism shelters local elites that grow excessively rich by serving their home market with shoddy, yet expensive, products. No competition means no incentive to increase efficiency. No matter how you look at it, globalisation has lowered prices for all while upping quality and convenience. Why not focus instead on improving governance and the rule of law. Most of those 62 very rich guys gathered their fortunes thanks to legal loopholes, protectionist rackets, and other business strategies that pushed the boundaries imposed by law. You can’t blame them for doing that. Blame the politicians who stood by and watched passively, waiting, perhaps, for some crumbs. FRANS SCHUURMAN (Vilvoorde, Belgium) How refreshing to read Ann Low’s appeal for simplicity in interactions between governments and people. She has put her finger, metaphorically, on the sore spot: bureaucracy is the bane of businesses and individuals. Judicious officials, no doubt armed with the best of intentions, often stand in the way of progress. People and businesses face red tape whenever they try to improve themselves. Often regulations aim well, but, as Mr Churchill once noted, the road to hell is paved with good intentions. A more pragmatic, and streamlined, approach is necessary to do away with silly rules that discourage investment and, thus, thwart development. JACK HAMLYN (Houston, US) I particularly enjoyed your profile of Zena Exotic Fruits of Senegal. This company not only brings a superior product to markets around the world; it does so with flair, making sure that farmers get paid properly for their labour and that employees are treated fairly. As such, Zena Exotic Fruits shows that business practices, even in this highly competitive world, need not be predatory. I hope the company, and others like it, will continue to prosper. AAGE FRANDSEN (Copenhagen, Denmark)

Editor Wim Romeijn

Assistant Editor Sarah Worthington

COVER STORIES

Executive Editor George Kingsley

Otaviano Canuto, World Bank: Global Imbalances on the Rise

Contributing Editor Darren Parkin

(14 – 18)

Production Editor Jackie Chapman

NASDAQ: A Short-Term Look at Long-Term Growth: The Expert Outlook on 2017

Editorial Tony Lennox Kate Stanton Steve Dyson Hal Williams Emelia Beeson John Marinus Ellen Langford Naomi Majid

(19 - 20)

Summer 2016 Issue

Columnists Otaviano Canuto Evan Harvey Ross Jackson Tor Svensson

(43 – 44)

MIGA:

Distribution Manager Len Collingwood

Innovative Project Bond in Turkey Points the Way for Global Investors

Subscriptions Maggie Arts Commercial Director William Adam Director, Operations Marten Mark Publisher Mark Harrison

(70) Corporate Governance Forum: Organized by IFC and the UMFCCI in Yangon, Myanmar in February. Chris Razook is pictured second from the left.

loans, manage concentrated exposures, and ensure sound credit and collateral procedures are being used. Similarly, while Myanmar’s new stock market is a landmark development that will tap new sources of capital to help fuel the expansion of the country’s private sector, there is a similar public trust element that needs to be safeguarded with sound governance and transparency. Based on IFC and the World Bank Group’s experience in working with capital market authorities in emerging markets globally, creating efficient yet prudent governance rules for listed companies is a continuous process. In Asia alone, there are ongoing or planned efforts to update listed company rules in China, Indonesia, the Philippines, and Vietnam, amongst others. Myanmar should glean much learning from these efforts. Governance will also play a crucial role in the corporatisation of Myanmar’s state-owned entities. State ownership remains high in the country, particularly in the infrastructure sector; without commercially oriented reforms including corporate governance, this can hinder overall market efficiency and drag economic growth.

Capital Finance International Meridien House 69 - 71 Clarendon Road Watford Hertfordshire WD17 1DS United Kingdom

reforms in Myanmar will bring opportunities to many SMEs, including expansion possibilities requiring capital to fuel their growth. Thus, efforts should be made to help SMEs adopt basic standards of governance, which will facilitate their access to finance and improve their chances of survival in the long run.

With such big challenges ahead, IFC and the World Bank Group, with support from the UK and Australian governments, are committed to working with various market actors in Myanmar to continue strengthening corporate governance practices and help it build a vibrant and sustainable private sector. i

Fortunately, Myanmar can learn a lot from its ASEAN neighbours who have made significant progress on harmonising corporate governance practices in preparation for the launch of the ASEAN Economic Community last year. One notable example is the ASEAN Corporate Governance Scorecard Initiative – first introduced with support from the Asian Development Bank and now also backed by IFC – which provides benchmarks for individual companies to rate and improve specific governance practices. In addition, Myanmar can leverage a strong network of governance practitioners, including representatives from ASEAN capital market authorities and institutes of directors, to its advantage as the country continues to reform.

ABOUT THE AUTHOR Chris Razook is IFC’s corporate governance lead for the East Asia Pacific Region. Mr Razook has more than fifteen years of experience in the area of corporate governance and supports IFC investments by working with companies to strengthen their governance frameworks. He has also supported central banks, capital market authorities, and other regulatory bodies in drafting corporate governance laws, codes, and listing rules to help develop stronger investment climates. Mr Razook has an undergraduate degree in Engineering, an MBA in International Finance, and an LLM in Corporate Law.

SMEs At the other end of the spectrum, small and medium-sized enterprises (SMEs) are the backbone of the Myanmar economy and comprise more than 95% of all firms. Continued market

T: +44 203 137 3679 F: +44 203 137 5872 E: info@cfi.co W: www.cfi.co Printed in the UK by The Magazine Printing Company using only paper from FSC/PEFC suppliers www.magprint.co.uk

Cover Story: Mobilising Private Capital for Sustainable Development

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137

OECD: Inclusive Trade Policies to Escape the Low-Growth Trap (118 – 119)

IFC: Investment Opportunities in Emerging Markets (130 – 131)

UNCTAD: Unlocking FDI Flows (186 – 188)

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Winter 2016 - 2017 Issue

FULL CONTENTS 14 – 47

As World Economies Converge

Otaviano Canuto

Evan Harvey

Mohamed A El-Erian

Yasser Al-Saleh

Laura Tyson

Susan Lund

Tor Svensson

Ross Jackson

48 – 55

Winter 2016-2017 Special: The Philosopher Kings and Their Missing Sage

56 – 79

Europe

Savills Investment Management HSBC Germany

OECD

eDreams ODIGEO

Nordea Asset Management

Banque Transatlantique

NAWATechnologies

MIGA

Black Sea Trade & Development Bank

World Bank

Cyprus Development Bank

John Marinus

80 – 103

CFI.co Awards

Rewarding Global Excellence

104 – 121

Africa

MauBank PwC

OECD

122 – 131

Middle East

Arab Investment Company

TANQIA

Afrimax

Economena Analytics

IFC

132 – 139

Editor’s Heroes

Men and Women Who are Making a Real Difference

140 – 153

Latin America

Bancomext

CINDE

Ernst & Young

Tony Lennox

154 – 165

North America

FreeBalance

Park West Gallery

Tobago Orchid

Darren Parkin

166 – 189

Asia Pacific

RCBC

Myanmar Oriental Bank

China Banking Corporation (Philippines)

Max Myanmar

Sakar Healthcare

Red & White Consulting Partners LLP

Leyla Aliyev

Steve Dyson UNCTAD

190

Final Thought CFI.co | Capital Finance International

> Otaviano Canuto, World Bank:

Global Imbalances on the Rise Discussions around large current account imbalances among systemically relevant economies as a direct threat to the stability of the global economy vanished in the aftermath of the global financial crisis. As the crisis originated in the US financial system – followed by a second dip in the Eurozone – and global imbalances diminished in following years, the issue has faded into the background.

ore recently, some signs of a possible resurgence of rising imbalances have returned attention to the issue. We argue here that, while not a threat to global financial stability, the resurgence of these imbalances reveals a subpar performance of the global economy in terms of foregone product and employment, i.e. a post-crisis global economic recovery below its potential. In addition, we approach how the reorientation of the US economic policy already announced by president-elect Trump suggests risks of new bouts of tension around global current account imbalances. For five years now, the International Monetary Fund (IMF) has produced an annual report on the evolution of global external imbalances – current account surpluses and deficits – and the external positions – stocks of foreign assets minus liabilities – of 29 systemically significant economies. Results for 2015 have pointed out a moderate increase of global imbalances, after they had narrowed in the aftermath of the global financial crisis (GFC) and stabilised later (see chart 1).

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The evolution of imbalances in 2015 depicted in chart 1 as explained by the IMF is reflective of three major drivers: First, the recovery among advanced economies proceeded in an asymmetric fashion. Stronger recoveries in the US and the UK relative to the euro area and Japan led to divergence in expected paths for monetary policies and appreciation of the dollar and sterling (preBrexit). The deficits of the US and UK widened, together with increased surpluses in Japan and both debtor and creditor countries of the euro area (see chart 2). Second, the fall of commodity prices – especially oil – transferred income from commodity exporters to importers. Overall however, it made only a moderate contribution to the narrowing of imbalances. 14

“Asset bubbles in the US to a large extent were blown by European banks through their balance sheets, by channelling US money market funds into toxic assets.” Third, prospects of monetary policy normalisation in the US, as well as bouts of fears about the softness of China’s rebalancing, contributed to a slowdown of capital inflows and depreciation pressures in emerging markets. All in all, larger US deficits and augmented surpluses in Japan, the Euro area, and China more than compensated for smaller surpluses in oil exporters and smaller deficits in deficit emerging markets and Euro area debtor countries. Hence, global current account imbalances widened last year, even if only moderately. However, a picture of higher global imbalances emerges if one focuses on the rising surpluses of two systemically relevant groups of economies. Chart 2 exhibits how in the euro area deficits in debtor countries have shrunk in tandem with the maintenance of surpluses in creditor countries (slightly increasing in the case of Germany). While the net foreign asset position (liabilities) of debtors has not diminished as much, their current account adjustment has added to the soaring surpluses the euro area as a whole runs with the rest of the world. Setser (2016) in turn has called attention to how the six major East Asian surplus economies – China, Japan, South Korea, Taiwan (China), Hong Kong (China), and Singapore – have reverted their post-GFC decline of surpluses and are currently topping even the euro area (see chart 3). CFI.co | Capital Finance International

Such double trajectory of rising surpluses gives credence to those who have expressed concerns about a revival of rising current account imbalances as a source of risks to the global economy. While Eichengreen (2014) had declared “the era of global imbalances” to be over, more recently others believe they are back and claim that “rising global imbalances should be ringing alarm bells” (HSBC, according to Verma and Kawa (2016). To address this issue, however, it is worth first reviewing how the profile of current imbalances differs from the one prior to the GFC. GLOBAL IMBALANCES HAVE EVOLVED The “era of global imbalances” up to the GFC (chart 1) had two distinctive-yet-combined processes at its core: On the one hand, credit-driven, asset bubbleled growth in the US, along with wealth effects, intensified the existing trend of domestic absorption (particularly consumption) growing faster than GDP. This resulted in falling personal saving rates and increasing current account deficits (see chart 4). On the other hand, the accelerated structural transformation and rapid growth in China, led to high and rising savings and investments and producing ever larger current account surpluses (see chart 5). Two caveats about these distinctive-yet-combined processes are needed. First, the bilateral US deficit with China in the period decreases by a third when measured in terms of value added, as China became a “hub or a stroke” of value chains with intermediate stages supplied from abroad. The US-China bilateral imbalance therefore constituted outlets for production beyond China. Second, while often linked as mirror images of each other – as in the hypothesis of an Asian savings glut causing low interest rates and asset price hikes in the US (Bernanke, 2005) – the US asset bubbles were more strongly associated

Winter 2016 - 2017 Issue

to the “excess elasticity of the international monetary and financial system”, rather than to Asian current account surpluses. Global current account imbalances cannot be blamed for the US-originated GFC. As stressed by Eichengreen (2014):

“…the flows that mattered were not the net flows of capital from the rest of the world that financed America’s current-account deficit. Rather, they were the gross flows of finance from the US to Europe that allowed European banks to leverage their balance sheets, and the large, matching flows of money from European banks into toxic US subprime-linked securities.” Asset bubbles in the US to a large extent were blown by European banks through their balance sheets, by channelling US money market funds into toxic assets. From the US-Europe balance of payments standpoint, short-term outflows from the latter to the former were netted out by simultaneous long-term flows in the opposite direction. Close-to-zero net capital flows hid a lot of financial intermediation and asset-bubble blowing via banks’ balance sheets. A parallel to that China-US relationship can be traced within the euro area, including its later experience with a second dip of the GFC. The entry of the euro as a common currency was followed by a risk premium convergence toward German levels and to cross-border banking flows at extremely easy conditions. Consequent asset bubbles originated wealth effects and excess domestic absorption – besides inflated financial intermediation – in southern Europe and Ireland, leading to the subsequent debt crisis. The pattern of intra-euro area current account imbalances exhibited in chart 2 was primarily a consequence of the euphoria taking place under conditions of “excess elasticity” of the euro area’s financial system. The commodity super-cycle also helped shape global imbalances in this period seen in chart 1. However, it was to a large extent a consequence of extraordinary global growth prior to the crisis, one in which commodity-intensive emerging market economies maintained growth trends above those of advanced economies.

Regardless of the emphasis of causality one might establish between export-led strategies and saving - glut - cum - safe - asset - scarcity, analysts were split into two camps, as described by Eichengreen (2014). Some analysts feared a CFI.co | Capital Finance International

CFI.co Columnist

While such a pattern of global imbalances was unfolding prior to the GFC, much discussion took place about its potential to spark a crisis on its own when faced with a sudden stop. China’s current account surpluses were boosted by depreciated levels of the exchange rate sustained mainly by a piling up of foreign reserves. The same evolution was interpreted by some as an expression of a savings glut unmatched by enough domestic availability of safe-and-liquid assets like US Treasuries.

possible crisis of confidence in the dollar bringing capital flows to a sudden halt, while others saw imbalances as an exchange of cheap Asian goods for safe and liquid US assets. In the latter case, imbalances might gradually unwind as export-led strategies reached exhaustion and/or the desire for asset accumulation approached satiation. In any case, the GFC happened before that dispute was settled and global imbalances started to unwind in its aftermath. US personal saving rates began to climb, borrowers reduced leverage, the dollar devalued and the US current account deficit shrank from almost 6% of GDP in 2006 to much lower levels from 2009 onwards. At the same time, as shown in chart 5, China initiated its rebalancing from an exports and investment-led growth model towards higher domestic consumption and services, including an appreciation of the RMB and lower growth rate targets. This has not meant a straightforward change of trajectory, as caution against a post-GFC hard landing favoured continued high investment in domestic housing and infrastructure as a component of the transition. As we have already seen, deficits also diminished in the euro area in the aftermath of its debt crisis. The decline in commodity prices also helped global imbalances to shrink.

Chart 1: Current Account Imbalances, 2001-15 (% of world GDP). Source: IMF, 2016 External Sector Report, July 2016.

Note: Surplus AEs: Korea, Hong Kong SAR, Singapore, Sweden, Switzerland, Taiwan POC; AE Commodity Exporters: Australia, Canada, New Zealand; Deficit EMs: Brazil, India, Indonesia, Mexico, South Africa, Turkey; Oil exporters: WEO definition plus Norway.

CFI.co Columnist

So, global imbalances did not spark a crisis and have returned in different configuration. Since current account balances are neither expected nor desired to be zero, how to make an assessment of whether the recent “moderate” uptick detected by the IMF might be a bad omen? Do those who have voiced concern over rising surpluses in East Asia and the euro area have a point? To answer these questions, it will be useful to look at the IMF exercise of judgement on whether global imbalances have been “in excess”, i.e. inconsistent with “fundamentals and desirable policies”. HOW MISALIGNED WITH FUNDAMENTALS HAVE CURRENT ACCOUNT IMBALANCES BEEN? National economies are not expected to exhibit zero current-account balances and stocks of net foreign assets. At any period of time, domestic absorption – consumption and investment – can be larger or smaller than the local GDP, triggering inflows or outflows of capital, due to “fundamental” factors: 1. Differences in intertemporal preferences and age structures of their populations mean different ratios of domestic consumption to GDP; 2. Differences in opportunities for investment also tend to lead to capital flows; 3. Differences in institutional development levels, reserve currency statuses and other idiosyncratic features also generate capital flows and imbalances; 4. Cyclical factors – including fluctuations in commodity prices – may also cause transitory increases and declines in balances; and Countries’ outstanding stocks of net foreign assets also have a counterpart in terms of service payments in their current accounts. 16

Chart 2: Systemic Euro Area, Evolution of External Position, 2001-15 (% of Euro Area GDP). Source: IMF, 2016 External Sector Report,

July 2016. Note: Current Account and REER (left). Net Foreign Asset Position 2 (right).

When global imbalances – and corresponding real effective exchange rates (REERs) – reflect such fundamentals, economies are in a better place than they would be in autarky (isolated with zero balances). There are situations, however, in which such imbalances may be gauged as in excess and countries should reduce them.

private savings due to lack of social insurance or investments being curbed because of a lack of efficient financial intermediation. It is worth noticing that, while excessive deficits eventually face a shortage of external finance, surpluses suffer less automatic pressures to dissipate and can therefore persist for longer.

There is the straightforward case of imbalances being magnified by domestic distortions, the removal of which would directly benefit the economy. For instance, this is the case when deficits are higher because of lax financial regulation fuelling unsustainable credit booms or excessively loose fiscal policies. It is also the case of surpluses that reflect extremely high

Furthermore, as pointed out by Blanchard and Milesi-Ferretti, there are also situations in which the multilateral interdependence of economies calls for restricting current-account deficits or surpluses. Unsustainable deficits of large, financially integrated economies are such a case, as a crisis associated to them may trigger crossborder effects.

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Winter 2016 - 2017 Issue

The report notices that the evolution toward less excess imbalances after the GFC has stopped and recent movements have given cause for concern: First, those economies with external positions considered “substantially stronger” (Germany, South Korea, Singapore) or “stronger” (Malaysia, Netherlands) have remained as such for the last four years. Also noticeable has been the shift toward stronger positions in the cases of Thailand and Japan. Second, at the bottom of the distribution, while some countries reduced – or suppressed – degrees of “weakness” (Russia, Brazil, Indonesia, South Africa, and France), others remained (Spain, Turkey, United Kingdom) – with the addition of Saudi Arabia to this group after the oil price decline.

Chart 3: Current account surplus in East Asia surplus economies versus European surplus economies (US$ billions).

Source: The Return of the East Asian Savings Glut, CFR discussion paper, October 2016.

Chart 4: U.S. Personal Saving Rates and Current Account Balances (% of GDP) – 1960-2009.

Third, on-going trends of current account imbalances are bound to lead to a further widening of some external stock imbalances accumulated since the GFC. While China’s external stock position is expected to stabilise, other large economies are projected to exacerbate their debtor (US, UK) and creditor (Japan, Germany, Netherlands) positions. Furthermore, the net foreign asset position of some euro-crisis countries remain highly negative despite years of flow adjustment with high unemployment and low growth. In our view, although not giving ground to fears of a collapse in major financial flows, global imbalances have not gone away as an issue, as they reveal that the global economic recovery may have been sub-par because of asymmetric excess surpluses in some countries and output below potential in many others. The end of the “era of global imbalances” may have been called too early. Lord Keynes’ argument about the asymmetry of adjustments between deficit and surplus economies remains stronger than ever.

Source: Canuto, O. – “Toward a switchover of locomotives in the global economy”, Economic Premise 33, World Bank, 2010.

The IMF “External Sector Report” aims to gauge to what extent current account balances and corresponding REERs are out of line with “fundamentals and desirable policies”, as well as whether stocks of net foreign assets are evolving within sustainable boundaries. What did the latest issue show? Chart 6 displays its assessment of how intensively individual economies have exhibited current accounts – and REERs – that are out of line with their “fundamentals”, i.e. those features that would normally lead them to feature current account imbalances within certain estimated country-specific ranges. Stronger (weaker) corresponds to REER “undervaluation” (“overvaluation”). Stronger (weaker) also means that a current account balance is actually larger (smaller) than that “consistent with fundamentals and desirable policies”. CFI.co | Capital Finance International

The IMF report has a point in calling for a “recalibration” of macroeconomic policies from demand-diverting to demand-supportive measures. This would be particularly the case for countries – or the Eurozone as a whole – currently able to resort to expansionary fiscal policies that have instead relied mainly on unconventional monetary policy – which has become increasingly ineffective at the margin. On the other hand, one must acknowledge that there are limits to which national fiscal policies can deliver cross-border demand-pull effects. Huge savings flows – like German or US corporate profits – may also not be easy to redeploy. Hence specific priority should be given to countryspecific structural reforms addressing obstacles to growth and rebalancing. Which could be aided by cross-border dislocation of pools of savings currently parked in low-return assets. Paradoxically, global imbalances demand more globalization in a moment when the latter faces hurdles. 17

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Blanchard and Milesi-Ferretti additionally point out two conceivable situations in which surpluses can be deemed as in excess: 1. When current-account surpluses are the result of deliberate strategies of curbing domestic demand and deliberate exchange rate undervaluation, crowding out foreign competitors. On the other hand, given the simultaneous determination of savings and current account balances, it is always hard to disentangle such a strategy from other determinants of the current-account balance. 2. When an increase of one economy’s surplus takes place while others face difficulties to absorb it without suffering adverse, durable effects on their demand and output. This is the case when part of the world is caught in a “liquidity trap”, unable to resort to lowering domestic interest rates as an adjustment policy, or face obstacles to use countervailing fiscal policies.

IMPLICATIONS OF US FUTURE TRADE AND MACROECONOMIC POLICIES FOR GLOBAL IMBALANCES Given the weight of the US economy, global imbalances may undergo new shocks in the coming years as a result of the policy reorientation already announced by president-elect Donald Trump. Although at a preliminary stage, it is possible to devise two possible scenarios, the choice of which will depend on the options assumed by trade policies accompanying the macroeconomic reorientation. President-elect Trump and his team have announced a macroeconomic platform with a likely strong potential impact: a major fiscal boost via infrastructure spending, corporate tax cuts, and a (financial and environmental) deregulation agenda. Such platform underlies the announced goal of raising the US economic growth to 4% a year, well above the potential 2% estimated by the IMF. Important details are yet to be filled out. For example, how much of the $ 1 trillion of infrastructure investment pledged will be borne by the public sector or by public-private partnerships, and therefore how much of it will contribute to public sector deficits and debt. As suggested by different experiences around the world, including the United States, sudden increases in public investment are not easily implemented. The increase in investments in infrastructure will take some time to implement and there will be a lag in their effects, on both the demand and supply side. Similarly, given that US corporations currently display already high liquidity reserve buffers and low levels of acquisition of new fixed assets, the results of corporate tax reduction on their expenditures will depend significantly on the terms of conditions of local investment that may be attached. Such type of conditionality has already been alluded to in the case of profit repatriation.

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There are also doubts as to the extent of the impacts of deregulation. In the case of finance, given the favourable climate in Congress and beyond to reforming the Dodd-Frank regulation, one can expect a relief from the regulatory burden that has been inhibiting bank credit in recent years. Environmental deregulation may also facilitate investment in the energy sector, particularly on shale oil and gas. Assuming that, in fact, aggregate demand is stimulated, there remain doubts as to the current capacity of the response of domestic supply. After all, low rates of involuntary unemployment and upbeat levels of economic activity at the end of the Obama administration will be part of the latter’s legacy. In the event of binding supply limits, the macroeconomic effect will be largely directed to higher inflation and import growth. The frenetic appreciation of the dollar in the weeks following the initial announcements of Mr Trump’s programme reinforces the possibility of 18

Chart 5: China’s Domestic Rebalancing and External Imbalances. Source: IMF, 2016 External Sector Report, July 2016.

Note: Balance of Payments and REER, 2002-15 (percenet of GDP) - left. Saving and Investment, 2002-15 (percenet of GDP) - right.

Chart 6: Evolution of IMF External Assessments for Large Economies. Source: IMF, 2016 External Sector Report, July 2016.

greater demand leaks via foreign purchases of goods and services. In any case, a drastic change in the current regime of fiscal and monetary policies is likely to occur. The normalisation of monetary policy by the Federal Reserve toward higher interest rates and smaller balance sheets tends to accelerate, while fiscal policy will definitely leave the consolidation path forced by Congress to the Obama administration in recent years. In effect, the US is one of those cases in which the IMF – and others – have long advised a shift from monetary easing to expansionary fiscal policies. The appetite in the markets for Treasury bonds has been far from satiated and larger public deficits would be easily absorbed, for which it would suffice to issue signs of future reforms toward some smoothing of the public debt path. It is in trade policy and in dealing with current account imbalances that two scenarios emerge: a soft scenario is the one in which the Trump government limits its campaign promises to occasional arm twists with corporations, like moral suasion and tax concessions in exchange for local investments or import substitution within value chains. The hard scenario would be to establish extraordinary tariffs and other restrictions on imports – China and Mexico were frequent targets of such threats during the election campaign. In the soft scenario, there will be a demand stimulus for the rest of the world, albeit at the cost of greater current US imbalances which would CFI.co | Capital Finance International

not likely face financing difficulties. The hard scenario, in turn, contains high risks of substantial price increases in the domestic basket of goods and services, as well as of having a negative impact on the profitability of US corporations. In addition, if followed by trade wars with countries directly affected, a lose-lose result in the global economy – as in the 1930s – could materialise. After all, the US economy nowadays has levels of trade and financial integration with the rest of the world sufficient to generate significant feedback loops. BOTTOM LINE Current account imbalances in the global economy have returned to the spotlight, albeit with a different configuration from the one that marked the trajectory prior to the global financial crisis. Not as a particular threat to global financial stability, but mainly because they reveal asymmetries in adjustment and post-crisis recovery between surplus and deficit economies and, in the coming years, for the risk of sparking waves of trade protectionism. i ABOUT THE AUTHOR Otaviano Canuto is an executive director at the World Bank. All opinions expressed here are his own and do not represent those of the institution or of those governments he represents at the World Bank board.

The views expressed here are his own and do not necessarily reflect those of his employer or any of the governments he represents.

Winter 2016 - 2017 Issue

> Evan Harvey, Nasdaq:

A Short-Term Look at Long-Term Growth: The Expert Outlook on 2017 Given the rapidly changing state of our global economic and political picture, it can be daunting to integrate sustainability strategies into business practices. This has ever been the case, but perhaps the tension between short-term deliverables and longer-term principles is perilously high. I put this theory to the test by asking a few colleagues to peer into the future with me, hoping to find a common vision for companies, investors, and analysts.

wanted to know, first and foremost, if companies, investors, and other stakeholders are even measuring the right things. So I asked my expert panel about the current state of sustainability reporting and if they expected anything different in 2017. Dr Anthony Miller, economic affairs officer at the UN Conference on Trade and Development – and one of the architects of the Sustainable Stock Exchanges Initiative – was the first to respond. “When I’m asked questions about sustainability,” Dr Miller said, “I try to think of the parallel question for traditional financial issues. Despite a 100-year debate in the accounting and finance community about good performance indicators, every unforeseen major market correction creates controversy about some metric that might have foreshadowed financial troubles, if only we’d paid closer attention. We have to expect the same kind of continuous learning and evolution with sustainability. What we measure now may be rudimentary, but it’s certainly better than what we had twenty years ago. So, we are moving in the right direction and 2017 will bring more focus on material disclosures, especially related to issues of climate change.” Dr Todd Cort is a lecturer in Sustainability at the Yale School of Management and author of numerous papers on sustainability metrics and business impact. He turned my question on its head.

a ways off on the other stakeholder indicators. Here I will point to the intersection of politics and sustainability and note that people are dissatisfied. Companies are still seen as corrupt, evil, etc. Investors are ‘the swamp’. Government is not trusted. Clearly, there is a gap between the indicators that society holds valuable and those measured by companies and investors.” “For the environment, and the measurement of indicators against planetary boundaries and other scientific thresholds, I think we have made little headway, but will point to efforts to integrate natural and social capital as a good sign. For 2017, I see some very sweeping changes afoot which will challenge our preconceptions of sustainability and what matters to society. But at a more practical level, I think 2017 will see substantial changes in our understanding of some key sustainability metrics. Specifically, I think we will move toward a better understanding of social and natural capital, we will improve accounting controls on some sustainability data sets that will allow a move toward integrated reporting, and we will see a movement toward data as a public good which will allow greater access and mobility of ‘responsible’ investments.” CFI.co | Capital Finance International

Robert Dornau, senior manager of Sustainability Services for RobecoSAM, also focused on the audience. “The big topic from an asset manager perspective is impact,” Mr Dornau told me. “Companies are still at different levels when it comes to addressing sustainability. The laggards are stuck at limiting their efforts to compliance, and the more advanced think of it as protecting the company’s reputation and then as risk mitigation. The last big wave was about integration of sustainability issues into the business case. In order to measure sustainability performance, RobecoSAM wants to see that companies link material issues to their business case, publicly report on KPIs and targets, and measure and report their performance against those targets.” Mr Dornau believes that company KPIs (key performance indicators) should be directly linked to executive compensation: targets for pollution, energy use, green product innovation, accident rates, and so on. “Leading companies move beyond their own business and have concrete programmes to address environmental or societal needs,” he said. RobecoSAM now asks about impact measurement and valuation in about one-third of its industry-specific questionnaires and will broaden that approach to more industries in 2017. Impact valuation in particular – identifying and valuing the externalities of company actions – is only done by about 20% of global companies, according to Mr Dornau, but another 8% are working on credible programmes for the future. WILL SUSTAINABILITY METRICS MATURE INTO FULLY ACTIONABLE FINANCIAL DISCLOSURES IN 2017? Anthony Miller: “Depending on the metric and the industry, I think sustainability information is already an actionable financial disclosure today. Indeed, it has been for a few years now. Different companies and industries may 19

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“The key to this question is the audience,” Dr Cort said. “I think companies are the closest followed by investors. We are all honing in on the most material indicators for companies and investors as evidenced by the fairly conclusive correlations between sustainability indicators and financial performance. However, we have a ways to go to get to the metrics level (i.e. we know that indicators such as ‘water use’ are material, but have less idea what metrics should be used to measure water use). However, I think we are

“Companies are still at different levels when it comes to addressing sustainability. The laggards are stuck at limiting their efforts to compliance, and the more advanced think of it as protecting the company’s reputation and then as risk mitigation.”

have very different sustainability footprints, but investors are focused on climate risk. For example, understanding how a company can disconnect earnings growth from emissions growth is a vital, forward-looking metric that many investors want. We can also unpack the term ‘sustainability metrics’ to include not just information produced by a company, but information produced by other sources that affects a company or industry. For example, if you are an investor in a company that produces road salt for municipal customers to de-ice roads, then warmer winters with fewer days of snow cover are today having a material impact on revenues.” Todd Cort: “I think the answer to this question is dependent on the investor. Some investors might argue that they have fully actionable metrics already. More mainstream investors and hedge fund managers may be the last holdouts, but even there we will see a handful of sustainability metrics integrated into a buy/ sell dashboard. Greenhouse gas emissions, for example, may impact correlation coefficients, beta, risk adjusted cash flow, and so on. I think many of the large asset managers are already testing some of these metrics.”

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Robert Dornau: “Some parameters – GHG data, male/female remuneration, CEOto median-compensation – have already become mandatory disclosure items in certain jurisdictions. However, the standardisation of broader metrics into financial disclosures is not to be expected in the short term. RobecoSAM has twenty years of experience in translating intangible sustainability data into a comparable score, allowing us to evaluate the investment universe and rank companies, but not everyone can do so effectively.” IN TERMS OF TURNING SUSTAINABILITY PERFORMANCE AND MEASUREMENT INTO FINANCIAL INSTRUMENTATION, WHERE ARE THE INNOVATIONS LIKELY TO BE IN 2017? Anthony Miller: “The exponential growth of green bonds seems set to continue for the next few years. Though slightly less prominent, equity indices and products based on them will remain the most popular sustainability financial instrument. We should expect integration of ESG strategies to deepen into other financial products both on and off the publicly traded markets. Yield-cos and REITs, while not explicit sustainability instruments, have certainly been growing in popularity as well.” Todd Cort: “We’re at an interesting decision point on green bonds. The movement towards standards is good, but I also think there will be more publicly available data and proxy data to bring the cost of labelling down. So the green bond market may rise yet again, but at a more moderate pace than many of our original expectations. Green Banks offer an interesting new financial model for green (and soon social) investments. I would also look at the micro20

generation of renewables (solar and renewable thermal technologies) since the infrastructure for sales and delivery is already developed.” Robert Dornau: “There is clearly a trend away from active into passive investment. We see growing interest in the combination of Quant and ESG analysis. More investors are focused on long-term company growth. A longer-term focus looks at KPIs like variable compensation – and not just at the top, but also below senior management level. S&P Dow Jones Indices uses our economic score in combination with a financial quality score to select companies for its Long-term Value Creation Index, which has attracted a lot of capital from pension funds and interest from other investors, too.” AS WE MOVE INTO 2017, DO YOU THINK MOST COMPANIES DOING SUSTAINABILITY WORK ARE MOTIVATED BY RISK MITIGATION OR REVENUE POTENTIAL? IS ONE APPROACH ANY MORE “AUTHENTIC” THAN THE OTHER? Anthony Miller: “Risk mitigation and revenue potential are, to some extent, two sides of the same coin. Many start-ups and young companies are innovating sustainability solutions, so we might be tempted to say they focus on revenue while larger, more mature firms focus on risk. But many large firms now have one or more divisions that look very much like sustainability start-ups. They are driving revenue by solving 21st century sustainability challenges. Whether one approach is more ‘authentic’ than the other is an interesting question. The key issue is how committed and financially invested the firm is in the particular sustainability work they do. If it’s seen as a necessary evil, then it will always be at risk. If it’s seen as core business, then it will go from strength to strength.” Todd Cort: “I have no scientific evidence to back this up, but my strong sense is that risk management predominates sustainability metrics. One look at GRI, or SASB, or any other similar enterprise shows that impacts and risk mitigation are the predominant metrics – with opportunity a distant second. But I would also argue that more corporate activity focused on doing good sits just below the radar. Some companies (Tesla, Natura) can generate a lot of attention, but the bulk of the activity is in the long tail of distribution. Smaller companies tend to have a very small influence on politics, so we may continue to see an uneven playing field: More sustainable companies will have to fight both the market and the regulatory environment for their share.” WHICH SUSTAINABILITY METRIC IS THE BEST DRIVER OF CHANGE RIGHT NOW? Anthony Miller: While some sustainability metrics are material for everyone, the key drivers of change are often industry-specific. Particulate emissions for diesel was a breakout sustainability metric following the emissions testing scandals in recent years. CFI.co | Capital Finance International

This is something that many in the automotive industry will be keeping a keen eye on as more data comes in on the negative health impacts of localised urban pollution. We should expect similar metrics to emerge in other industries that face acute sustainability challenges. Beyond risk mitigation metrics, when we think of companies that are producing solutions to sustainability challenges, then the key sustainability metric is really a financial metric, i.e. how fast these companies are able to grow revenues, expand margins, bring down costs. When we look at a clean energy company or an electric car company, we’re not asking what their emissions are, but what their financial growth is.” Todd Cort: “It’s difficult to say, but I think a robust and simple dollar figure on natural capital could be a wake-up call for states and nations on the rate of their capital depletion and the limitation on growth. My second vote would be a threshold metric on income inequality or the GINI coefficient. We have been pushing companies to measure environmental impacts against planetary boundaries, and I think there will be enormous pressure on companies to start thinking about their impact against global social boundaries. Income inequality seems globally relevant to me right now and something we might ask companies to start measuring and addressing.” Robert Dornau: “While we would like to see companies ready themselves to evaluate real impact, it is still too early to say. As the numbers show, only about a quarter of the companies have some idea on how to do this in terms of qualitative or quantitative valuation. But clearly this is emerging and will be separating the leaders from the followers in the years to come.” i ABOUT THE AUTHOR Evan Harvey is the Director of Corporate Responsibility for Nasdaq. He also serves on the Board of Directors for the UNGC US Network and chairs the Sustainability Working Group at the World Federation of Exchanges.

> Mohamed A El-Erian:

The International Barriers to Trump’s Economic Plan

S President-elect Donald Trump should have a relatively clear road ahead at home for the implementation of his economic programme: with Republicans holding majorities in both houses of Congress, he seems likely to benefit from a break in the political gridlock that has paralysed the body for the last six years. But 22

the United States economy does not exist in a vacuum. If President Trump is to succeed in delivering the high growth and genuine financial stability that he has promised, he will need some help from abroad.

central components of his strategy to boost the US economy’s actual and potential growth. Confident that his plan can unfold as intended, he has set ambitious targets, including GDP growth approaching 4% per year.

Trump has established infrastructure investment, tax reform, and deregulation as

For now, investors seem to be pretty much sold. Under the assumption that the incoming

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Winter 2016 - 2017 Issue

Trump Administration will ultimately refrain from triggering a trade war, they moved fast to price in optimistic prospects for higher real growth, higher inflation, and more money entering the financial markets. This has enabled the US Federal Reserve to begin to normalise its monetary-policy stance; in addition to a 25-basis-point interestrate hike on December 14, the Fed has indicated that the pace of such hikes will accelerate in 2017. As a result, markets seem convinced that the US will gradually exit its prolonged period of excessive reliance on unconventional monetary policy, replacing it with a mix of looser fiscal policy and pro-growth structural reforms – an approach much like that pursued by former US President Ronald Reagan. President Barack Obama sought to purse a similar approach, but was frustrated by a highly polarised Congress. The expectation that Trump will have better luck on this front has produced a textbook asset-price response. Stock prices have climbed, led by financials and industrials; interest rates on US government bonds have risen, both on a standalone basis and relative to those in other advanced economies; and the dollar has surged to levels not seen since 2003. Here is where the rest of the world comes in. Other major economies – namely in Europe and Asia – may have a much harder time than the US rebalancing their policy mix (which continues to be characterised by excessively loose monetary policy, inadequate structural reforms, and, in some cases, excessively tight fiscal policy). But if they do not, the Fed’s continued interest-rate hikes would stimulate investors to trade their German and Japanese bonds, in particular – which are now bringing low and even negative returns – for higheryielding US varieties. The resultant wave of capital flows into the US would push up the value of the dollar even further.

“Trump has established infrastructure investment, tax reform, and deregulation as central components of his strategy to boost the US economy’s actual and potential growth.”

Though the US economy is doing much better than most of the other advanced economies, it is not yet on sound enough footing to withstand a prolonged period of a substantially stronger dollar, which would undermine its international competitiveness – and thus its broader economic prospects. Augmenting the risk is the prospect that such a development could spur the Trump Administration to follow through on protectionist rhetoric, potentially undermining market and business confidence and, if things went far

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enough, even triggering a response from major trade partners. If Trumponomics is to deliver on its promise, key countries – in particular, Germany (the largest and most influential European economy) and China and Japan (the world’s second- and thirdlargest economies, respectively) – must promote their own pro-growth policy adjustments. They should implement quickly growth-enhancing structural reforms to support monetary stimulus. Germany, in particular, would also need to pursue a looser fiscal policy, while adopting a more conciliatory attitude toward outright debt reduction for beleaguered Greece. Unfortunately for President Trump, the rest of the world does not seem prepared at this stage to pursue such a comprehensive policy shift. That is why, beyond advancing President Trump’s pro-growth economic agenda at home, the newly appointed members of his economic team should be establishing direct contact with their German, Chinese, and Japanese counterparts, with a view to improving international policy coordination. Germany, China, and Japan have good reasons to embrace such an approach. They are not getting enough out of monetary expansion at this point; the risk of collateral damage and unintended consequences is rising; and pro-growth structural reforms are overdue. Furthermore, helping the US to achieve healthy and sustainable growth would bring about an indirect boost to their own economies. And it would help to avoid a scenario in which a Trump Administration, under political pressure, would threaten protectionist measures, increasing the risk of a trade war that would hurt nearly everyone. Despite the uncertainty surrounding the Trump presidency, one thing is certain, at least on paper: he is in a strong position to boost US economic growth. He and his team must, however, take the time to dismantle potential international barriers to success. i ABOUT THE AUTHOR Mohamed A El-Erian, chief economic adviser at Allianz, is chairman of US President Barack Obama’s Global Development Council and author of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

> Yasser Al-Saleh:

The Secret of Dubai’s Success

s governments across the Middle East try to wean themselves off natural resources and build diversified, resilient economies, they should take some lessons from Dubai. It’s a remarkable story. In less than a generation, Dubai has transformed itself into a major centre for investment, commerce, and high-end culture. Although the 2008 global financial crisis hit the city-state 24

hard (owing to its exposure to inflated real-estate assets), it recovered quickly, as evidenced by its bids for events such as the World Expo 2020.

with government officials and business elites, and fleshed out my findings with secondary data sources.

How Dubai managed not only to survive, but to thrive, in the wake of the crisis warrants closer scrutiny. So, this past summer, I began investigating the so-called Dubai model of resilient growth, and the challenges that may lie ahead for it. As part of my research, I conducted more than forty in-depth interviews

Dubai’s growth and resilience is attributable to its “ABS model” of attraction, branding, and state-led development. Just as a car’s anti-lock braking system prevents it from skidding out of control in dangerous situations, Dubai’s threeprong strategy keeps its development agenda on track, even during economic crises.

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Winter 2016 - 2017 Issue

With respect to state-led development, Dubai’s approach is typical of Gulf states. Its society adheres to tribal traditions that afford its ruling elite, headed by the royal family, a paternal and omnipotent role in determining the direction and form of economic development. This means that “Dubai, Inc.” can quickly and seamlessly adapt to changing economic circumstances. Dubai is sometimes called the Singapore of the Desert, because, like Singapore, it has experienced enormous state-directed economic growth, and benefits from proactive, visionary leadership that has turned a small city-state with limited natural resources into an important international entrepôt. Moreover, Dubai has done a good job of branding itself to attract the foreign investment and labour needed to achieve its growth ambitions. Like New York, Shanghai, and Las Vegas, which have all enhanced their images through architecture, Dubai conveys its innovation-oriented identity through its cityscape and skyline, which has around 150 skyscrapers, more than any other city except New York and Hong Kong. Dubai also has the first 3D-printed office building, stunning manmade islands, the world’s only (self-proclaimed) “seven-star hotel,” shopping malls combined with aquariums, indoor skiing, and skydiving facilities, and an array of iconic buildings and amusement parks. It also hosts the world’s most expensive horseraces and other lavish sporting events. Dubai’s brand is further strengthened by its political stability, safety, tolerance, cultural diversity, and high standard of living, which are a draw for skilled expatriates from around the world. Moreover, the emirate appeals to foreign investors with special economic zones that few other states can match.

“Dubai’s growth and resilience is attributable to its ‘ABS model’ of attraction, branding, and state-led development.”

Two billion people live within a four-hour flight radius of Dubai, so it is unsurprising that it has emerged as a compelling location for visitors and investors alike. As one businesswoman I interviewed put it, “Dubai has all the ingredients of an extremely popular attraction for investors and tourists from around the world,” with “a substantial number of Arab youth aspiring to come and live the Dubai Dream.” Dubai has complemented its competitive advantage in attracting high-skill workers and investment with labour policies that also bring in lower-skill foreign workers to power its growth engine. But reliance on foreign workers could run into structural problems down the road. While firms can quickly shed workers during hard times, this then results in labour shortages when conditions improve. CFI.co | Capital Finance International

Higher-skill workers, in particular, take much longer to attract than to let go. Another risk is that, while the emirate has enjoyed a long period of political and economic stability, a significant regional upheaval could cause foreign workers, whatever their skill level, to take flight, regardless of the promise of high salaries and an attractive lifestyle. Dubai’s reliance on foreign labour thus threatens its longterm economic capacity to withstand future shocks. Aware of these potential risks, Dubai’s leadership has just approved a comprehensive plan to overhaul education aimed at developing indigenous human capital. Dubai’s ruler, Sheikh Mohammed Bin Rashid, said that, “We look forward to developing a new generation of students that is equipped to use the tools of the future.” Educational reforms will likely require a generation or more to bear fruit. Singapore eventually managed to develop a highly skilled base of indigenous talent by making large investments in education and setting completion of post-secondary study as a national priority. The city-state now scores near the top in science and math on international tests. The ABS model explains Dubai’s economic resilience and its quick recovery after the global financial crisis. But it also helps the emirate adjust its strategy to account for new challenges. Just as a car’s ABS makes it easier for a driver to slow down or change course to avoid dangerous obstacles, Dubai’s state-led development apparatus can realign its attraction and branding activities in accordance with its growth goals and changing circumstances in the Middle East and beyond. On the other hand, if the government fails to fix its structural problem – under-developed indigenous human capital – it will essentially be driving a more dangerous car, one in which it will become difficult or impossible to avoid obstacles without the wheels locking up. i

ABOUT THE AUTHOR Yasser Al-Saleh is a faculty member at the MBRSG (formerly the Dubai School of Government). He has published several books and academic papers on the Middle East, and is the author of The Prospects for Sustainable Energy Innovation within OilRich Gulf Cooperation Council and the coeditor of Economic Diversification Policies in Natural Resource-Rich Countries.

> Laura Tyson and Susan Lund:

The Promise of Digital Finance

n economic development revolution lies literally in the palm of a single hand. As mobile phones and digital technologies rapidly spread around the world, their implications for economic development, and particularly finance, have yet to be fully realised. The sooner that changes, the better for people worldwide. In emerging economies today, two billion people – 45% of all adults – do not have a formal account at a bank, financial institution, or with 26

a mobile-money provider. The unbanked rate is even higher for women, the poor, and people living in rural areas. Moreover, at least 200 million small- and medium-size enterprises lack sufficient credit, or have no access to credit at all. Entrepreneurship, investment, and economic growth suffer when savings are stored outside the financial system, and credit is scarce and expensive. Fortunately, according to a recent report by the McKinsey Global Institute (MGI), CFI.co | Capital Finance International

digital technologies – starting with mobile phones – can rapidly fix this problem and foster faster, more inclusive growth. Mobile phones and the Internet can reduce the need for cash and bypass traditional brickand-mortar channels. This dramatically reduces financial-service providers’ costs, and makes their services more convenient and accessible for users – especially low-income users in remote locations. MGI estimates that if digital finance is widely adopted, it could add $3.7

Winter 2016 - 2017 Issue

government organisations would be able to operate much more efficiently if they did not have to rely on cash and paper recordkeeping. Another one-third would come from increased investment throughout the economy, as personal and business savings were moved into the formal financial system, and then mobilised to provide more credit. The remaining gains would come from people working more hours – the time they would have spent traveling to bank branches and waiting in queues. As for financial inclusion, digital finance has two positive effects. First, it expands access. In emerging markets in 2014, only about 55% of adults had a bank or financial-services account, but nearly 80% had a mobile phone. That 25-percentage-point gap could be closed by making mobile banking and digital wallets a reality. But a gender gap will also have to be closed: worldwide, about 200 million fewer women than men have mobile phones or Internet access. Second, digital finance reduces costs: MGI estimates that it would cost financial-service providers 80-90% less – about $10 per year, compared to the $100 per year it costs today – to offer customers digital accounts than accounts through traditional bank branches. Using purely digital channels thus makes it feasible to meet the needs of low-income customers. Financial inclusion becomes profitable for providers even when account balances and transactions are small. With digital finance, as many as 1.6 billion unbanked people – more than half of whom are women – could gain access to financial services, shifting about $4.2 trillion in cash and savings currently held in informal vehicles into the formal financial system. This would allow for an additional $2.1 trillion to be extended as credit to individuals and small businesses. Businesses could also save on labour costs, to the tune of 25 billion hours annually, by swapping cash transactions for digital payments. And governments could take in an additional $110 billion every year – to invest in growth-enhancing public goods like education – because digital channels make tax collection cheaper and more reliable.

trillion to emerging countries’ GDP by 2025. That amounts to a 6% increase above business as usual. In low-income countries with very low financial inclusion rates, such as Nigeria, Ethiopia, and India, GDP could increase by as much as 12%. Digital finance can boost GDP in several ways. Nearly two-thirds of the expected growth would come from increased productivity, because businesses, financial-service providers, and

New mobile-money services are already demonstrating digital finance’s potential. In Kenya, M-Pesa – which transforms one’s phone into a mobile wallet – has leveraged powerful network effects to bring about a vast expansion in the share of adults using digital financial services. That share grew from zero to 40% in just three years, and had risen to 68% by the end of last year. Traditional financial-services accounts tend to grow at the pace of national income, but M-Pesa’s adoption rate has been dramatically faster, demonstrating that digital finance can achieve significant market penetration rapidly even in the world’s poorest countries. CFI.co | Capital Finance International

But such success stories do not happen in a vacuum. For starters, everyone needs a mobile phone with an affordable data plan. While businesses can help, it is incumbent upon governments and non-governmental organisations to extend mobile networks to low-return areas and remote populations. Governments must also ensure that networks between banks and telecommunications companies are interoperable; otherwise, widespread use of mobile phones for financial services and payments would be impossible. Governments must establish universally accepted forms of identity as well, so that service providers can control fraud. In emerging economies, one in five people are unregistered, compared to only one in ten in advanced economies. Nearly 20% of unbanked women in emerging countries do not have the documentation necessary to open a bank account. Even when people have recognized IDs, they must be amenable to digital authentication. Digital IDs that use microchips, fingerprints, or iris scans could prove useful – and are already gaining popularity – in emerging economies. Finally, governments must implement regulations that strike a balance between protecting investors and consumers, and giving banks, retailers, and financial-technology and telecommunications companies room to compete and innovate. Because regulations often shut out non-bank competitors, governments should consider a tiered approach, whereby businesses without a full banking license can provide basic financial products to customers with smaller accounts. A good model for this is the United Kingdom’s “regulatory sandbox” for financial-technology companies, which imposes lower regulatory requirements on emerging players until they reach a certain size. Financial inclusion is vital for inclusive economic growth and gender equality, and it has assumed a prominent role in global development efforts, with the World Bank aiming for universal financial inclusion by 2020. With billions of people in emerging economies already using mobile phones, digital finance makes this goal achievable. i

ABOUT THE AUTHORS Laura Tyson, a former chair of the US President’s Council of Economic Advisers, is a professor at the Haas School of Business at the University of California, Berkeley, and a senior adviser at the Rock Creek Group. Susan Lund is a partner with the McKinsey Global Institute.

> Tor Svensson:

Innovation Energising Economics

CFI.co Columnist

ord Keynes has been resurrected following the abysmal failure of the neoliberal experiment. Printing money in an economic environment that encourages a race to the bottom via cutthroat competition and an excessively large pool of reserve labour produces little to no inflation. Inflation in today’s world primarily occurs through the scarcity of labour. As such, it no longer bears relation to the amount of money in circulation. Quantitative easing has done little to spur inflation in the western world. It hasn’t done much for employment either. However, the owners of assets such as stocks, bonds, real estate, fine art, etc. have received a further boost to their already considerable wealth – with a resulting surge in inequality. The United States is no stranger to loose fiscal 28

policy to foster growth and increase employment levels. The country is some $20 trillion in debt. Now Trumponomics will cut taxes on labour and profits while boosting infrastructure investment at the same time. The US is overdue for a structural tax reform. The nation has high payroll taxes, including social security and federal, state, and municipal taxes. Corporate taxes in the US, at 39%, are excessive by international standards. For example, in the UK corporations are taxed at a 20% rate which is likely to be reduced further. Trumponomics will likely boost growth and employment rates – and purchasing power with it. All the while, Europe is still stuck in austerity mode whilst maintaining a loose monetary policy that has the European Central Bank purchasing bonds left, right, and centre. CFI.co | Capital Finance International

Meanwhile, the Germans insist on misreading their own history. They think the depression and the Second World War that followed in its wake were caused by inflation and the Deutsche Mark losing its value. However, it was the scarcity of goods and the deteriorating purchasing power – in particular high unemployment – that helped push the Germans towards war. So the wrong analysis has now lead to the wrong policies being implemented: austerity is driving up unemployment levels everywhere in Europe but Germany and The Netherlands. Even family life has been disturbed by austerity with young couples unable to afford housing and postponing the arrival of kids. Germany in particular has a demographic problem. Some estimates point to a shortage of fifteen to twenty million working people over the next

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billionaire businessmen with a collective worth of some $170bn to fund research into alternative energy projects that can help fight climate change. First unveiled last year, the initiative has already received firm commitments to the tune of one billion dollars which is to fund breakthrough energy ventures. The billionaires are ready to underwrite science-based research and start-ups that provide clean energy, corban dioxide capture and storage, and energy-efficient buildings. Unlike classic venture capital funds, the Bill gates initiative has a much longer time horizon and plans to invest in select early and later stage companies that refine and deploy technologies over a twenty-year or longer period. The group rallied by Mr Gates include well-known venture capitalists from Silicon Valley such as cleantech veterans John Doerr and Vinod Khosla, Amazon CEO and founder Jeff Bezos, LinkedIn founder Reid Hoffman, Virgin CEO and founder Richard Branson, former New York mayor Michael Bloomberg, Alibaba founder Jack Ma, and many others. Though the fund eyes solid returns, its stretched time horizon and financial firepower set it apart from all other initiatives to help underwrite cleantech. The fund’s contributors implicitly recognise that some of the ventures supported will likely fail. Breakthrough Energy Ventures includes big names that have learned from past failures. Messrs Gates, Doerr, and Khosla said the fund doubles down on experience and has been set up as a bespoke operation tailored to the uniqueness of the opportunity at hand.

transitionary periods for hard-hit groups and regions. Both Hilary Clinton and David Cameron urbanites did not really understand, nor care much for, what happened in the periphery. Unfortunately for both, the marginalised now have enjoyed their revenge at the polls.

The promotion of excessive savings – to hedge against a new 1930s-style depression – exacerbates the shock of future labour shortages. Economic policies, including asset inflation and the low taxation of the rich, have created a new über class. Excessive inequality calls for new policies of redistribution. However, this need not entail more welfare hand-outs paid for by higher taxes. Redistribution also means cushioning workers, families, and small and medium-sized businesses from the disruptive impact of new global forces. Austerity has the exact opposite effect by not supporting employment during

It would seem, the times call – and are ripe – for change, radical or otherwise. Whilst voters in the US, the UK, and elsewhere have indicated a certain nostalgia, smart politicians may reap rewards by suggesting a leap forward, as opposed to harking back to solutions that did well in the past but may prove woefully inadequate in today’s world. Innovation – a driver of disruption and, thus, of change – is considered unstoppable and may offer the answers voters are waiting for. Tired, perhaps, of waiting for politicians to move, Bill Gates has brought together a group of CFI.co | Capital Finance International

Mr Khosla emphasised that the billionaires’ fund has the ability to muster patience and take larger risk than usual. Initiatives such as these show the power for good that may be rallied when supremely successful businessmen step out of their gilded cage and decide to tackle the world’s problems. It holds a promise for a much better future. As such, the Breakthrough Energy Ventures fund is an initiative with a value that transcends the merely financial and offers a well-defined strategy towards a cleantech future. i ABOUT THE AUTHOR Tor Svensson is the Chairman of Capital Finance International. 29

CFI.co Columnist

decades. The arrival of a million refugees from the Middle East does not plug that hole. Chancellor Angela Merkel is not just a humanitarian. She has also woken up to the looming problem and realised that her policies of squeezing household consumption may not be the right one.

Mr Doerr in particular, is gung-ho and said that one of the lessons learned is that cleantech breakthroughs need to be revolutionary in nature rather than evolutionary. Also, industry expertise is a must – no dreamers need apply – and research needs to be underpinned by clear market views and commercial considerations. Companies that offer the right mix may expect Breakthrough Energy Ventures to provide up to five times more capital ratio than classic venture capital funds.

> Ross Jackson:

The Era of Disruption CFI.co Columnist

think the Trump election win – which took pretty much everybody by surprise – can best be understood as a milestone of a much larger historical process. We are entering a very turbulent period where old systems break down and new ones arise. We have already entered the period of breakdown with its characteristic multiple disruptions. There are four disruptions about to hit us over the coming years. We can classify them briefly as: • Climate change, • Technological change, • Political change, and • Economical change. 30

Any single one of these is sufficiently profound to cause major societal disruptions. They are occurring simultaneously and are interdependent. Thus, the effects will be much greater and unpredictable. The four changes afoot will play off each other, both positively and negatively. CLIMATE DISRUPTION This is the disruption that is by far the most widely acknowledged. While it is potentially the most violent and destructive of the four, its effects are felt over the longer term. The early waves will hit with enormous destruction in particular sectors of civilisation. Further on, more slowly moving climate waves, ten times CFI.co | Capital Finance International

the size of the early ones, are set to arrive, threatening our very survival. The threat is widely acknowledged among climate experts. However, note that our political leadership has not yet taken it seriously because an effective response would require unacceptable changes to their currently favoured economic and political systems; changes which will eventually come about whether they like it or not. Even the Paris Agreement, which is not sufficiently ambitious to avoid irreversible warming, will be torpedoed by president Trump – or so he says. If he does so, and other countries follow suit, then the gigantic climate waves will hit us sooner and harder than would otherwise have been the case. We

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are then looking at a catastrophic four degree centigrade increase in temperature, far above the target agreed in Paris. TECHNOLOGICAL DISRUPTION A recent example of technological disruption is the way three separate 1990s technologies – the mobile phone, personal computer, the Internet – created marketplace synergies, resulting in a tightly integrated telecoms services universe. In his ground-breaking book Clean Disruption of Energy and Transportation, Tony Seba points out that the technological disruption sent many established businesses to their graves. Now, an even more significant disruption of comparable magnitude is on the way. This time, the technologies that are merging and accelerating each other’s growth are solar energy, electric vehicles, and self-driving cars. To these, I would add artificial intelligence. This time, the industries that will decline or disappear are the oil-based automobile industry and all forms of fossil fuel energy and nuclear energy. The major driver is the rapidly declining price of solar energy, which is now below the price of fossil fuel and nuclear energy. Photovoltaic solar energy has improved its cost basis relative to oil by five thousand times since 1970, according to Mr Seba. Prices are now in a downward positive feedback spiral, as costs decrease faster and faster as investments in larger facilities and research in local energy storage systems increase efficiency and spur increased demand.

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We are also in the middle of a transportation evolution as electrical cars take over the automobile market from gas guzzlers. The reasons are becoming obvious to everyone: the electrical motor is five times more energy efficient; the structure is cheaper to build and maintain; the drive is smoother and quieter; batteries may soon be recharged wirelessly with induction (already implemented in Italy for electric busses charging at each bus stop), making range potentially unlimited. 31

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“Now, an even more significant disruption of comparable magnitude is on the way. This time, the technologies that are merging and accelerating each other’s growth are solar energy, electric vehicles, and self-driving cars. To these, I would add artificial intelligence.”

The major disruption coming is due to the decentralised nature of solar energy, and it is going to happen far more quickly than you can imagine. Solar cells are now popping up everywhere: on the roofs of private homes and large warehouses and industrial facilities, such as Apple, Walmart, Ikea and many others, not to mention the many regional solar power plants which are rapidly coming on-stream. Walmart alone has the potential rooftop solar capacity of nine nuclear power plants, and they are well on their way to achieving that end. Together, these private and industrial trends are undercutting the big centralised energy business model. The dinosaurs will fight to stay alive with tax subsidies, political support, and monopoly price increases, but in the long run they cannot compete with decentralised solar. The political/ economic consequences will be literally earthshaking.

A little further out, but not much, the self-driving car is going to reduce the size of the national car park by something like 90 %, particularly in the cities. Did you know that over 90 % of the time, the average car is parked somewhere? In the future, you will order a self-driving taxi with your smart phone. It will take you to your destination and proceed to its next customer without delay. This will totally disrupt how cities function; freeing up one third of the built-up area. Autonomous cars will cut highway accidents by a factor of at least twenty, reduce hospitalisation costs, reduce pollution, and increase the quality of life significantly. Artificial intelligence (AI) is progressing at exponential rates these years, and will enable many applications of robotics in all walks of life, beginning with simple chores, like mechanical weeding of organic farms. But just as significant as robots, which will replace many manual functions, is the “soft” application of artificial intelligence. AI can optimise very complex problems such as corporate strategies, national economies, regional planning, agriculture, international political/economic orders and much more, not based on abstract economic theories like neoliberal economics, but on “big data” analysis that builds on how things actually interact. AI is going to put a lot of middle management and traditional consultants and economists out of work.

CFI.co Columnist

The most important disruptions, however, are going to be in the political/economic sphere, as we are likely to see a period of dramatically increasing unemployment. How will we deal with that? How will robotics and artificial intelligence affect the necessary transition to sustainability and the restructuring of our society? These are the kinds of questions that future political leaders will have to deal with. POLITICAL DISRUPTION The democratic Western societies are already in the middle of a cultural disruption, but there is much more to come when the above-mentioned technological disruptions start to kick in. The visible source of disruption at this time in Europe is the pressure from migrants and refugees from Africa, the Middle East, and Afghanistan, while in the USA it is primarily from Mexico. People who feel threatened by the cultural shocks and the competition for jobs turn to right wing demagogues, who appeal to their primitive instinct to “kick down” on those who would take their jobs, can’t speak the language properly, and who upset their image of how things used to be when society was more homogeneous and you could make a decent living from a job. President Trump is an example of this xenophobic reaction along with Brexit, Front National in France, Geert Wilders in The Netherlands, Golden Dawn in Greece, the Danish People’s Party, and right wing movements in Hungary and Poland. They are all part of the inevitable reaction to a failed economic ideology. But the disruption is not limited to the right. On the left, we see new parties gaining ground, not 32

due to xenophobia, but due to dissatisfaction with neoliberal economics, which is now seen for what it is – a failed “post factual” concept of benefit only to its promoters – denoted by the Occupy Movement as the 1 %. We see this in the Bernie Sanders phenomenon in the USA and in a number of new European parties like Syriza in Greece, Podemos in Spain, and The Alternative in Denmark. Rather than “kicking down”, the new left wing “kicks up” at the very system that has created the intolerable conditions. In this respect, the left’s reaction is aimed directly at the primary cause, while the right wing reaction is dealing only with the symptoms. The establishment, as represented in the old parties, is under pressure from both sides as their voter base shrinks and they risk losing the power that they thought was their birth right. ECONOMIC DISRUPTION The primary cause of all of these disruptions is an economic model that has outlived its usefulness. The concept of economics as the overriding ideology that should drive development of our civilisation conflicts with the wishes of ordinary citizens who wish to have a greater say over their everyday lives – to “take their countries back” as many have put it. Homo economicus has mutated into an extreme form that benefits a very small wealthy minority while it destroys the environment that is the very foundation of life. But the concentration of capital has also made possible the technological advances that will disrupt society as we know it and that will hopefully lead us into a more sustainable future, so it has not been entirely negative. This failure of the economic ideology is becoming clearer to just about everyone, with the EU leadership as a glaring exception. The EU will soon have to decide on which side of history it will stand – as the last holdouts of a despised and failed economic philosophy serving the interests of a wealthy minority, or as leaders in the transition to a more humane, more decentralised, sustainable future in keeping with citizens’ interests. The alarm bells are ringing: will the EU change course or disintegrate? The new structures arising to replace the old will to a great extent be driven by the decentralisation of solar energy, reduced average working hours and a new kind of economics – ecological economics. This will open up the possibility for a new political/ economic world order along the lines of what I described in Occupy World Street. In this world, it will be necessary for nation states to cede sovereignty to a global authority in just two areas, environmental policy (for survival) and human rights. Everything else can be decentralised to member states that can determine their cultural and economic priorities by democratic means without outside interference. i ABOUT THE AUTHOR Ross Jackson, PhD in Operations Research, is Chairman of the Board of HOXOH Group, Denmark, leading-edge consultants in artificial intelligence and self-driving vehicles. CFI.co | Capital Finance International

Winter 2016 - 2017 Issue

CFI.co | Capital Finance International

> Book Review - Path Between the Seas

Lessons in Leadership from the Canal Builders By Wim Romeijn

Each year, US publishers release around 11,000 new business books. Thankfully, most titles fail to make it beyond their first print run. Those that do escape the discount bin and pulp factory aim to give corporate managers, entrepreneurs, and other chasers of profit valuable tools with which to up efficiencies. Self-help and business books are the bread and butter of most publishers. The two partially overlapping genres allow for the maintenance of deep back catalogues that usually contain more timeless literary works of both fiction and non-fiction classics.

uthors too benefit from the strong demand for guidance by mostly selfappointed gurus. At times, it seems that almost everybody who is somebody gets in on the act: writers feel the need to explain the intricacies of their craft with the wider public and celebrities share their insights on obtaining success from just being and getting money for nothing. Even comedians such as Bill Connolly, a former Clydeside boilermaker, put their tuppence in showing how best to pursue profit. Mr Connolly’s Funny Business proposes comedy as a way of building “soft skills” that help increase communication, networking, and leadership expertise. If only Ricky Gervais could have been made to read Funny Business. On its website, the World Economic Forum (WEF) maintains a list of twelve books every leader should read compiled by Professor in Management Sciences Bob Sutton of Stanford University, a researcher in evidence-based management and himself writer of a number of best-selling business books. The reading list for the powerful contains mostly researched-based works alongside two quick reads. Prof Sutton explains that his choices provide useful guidance to those called upon to lead the rest of us. Reassuringly, Prof Sutton fails to acknowledge the maxim that business people, pressed for time and wary of detail, only read short and simple books. One book included in Prof Sutton’s list, however, towers above the how-to-influence-

“Instead of cutting a straight ditch through a flat desert, the Panama Canal required engineers to battle mountainous terrain, covered by dense jungles, and crisscrossed by rivers that turned into raging torrents during the wet season – eight months out of the year.” people average: Path Between the Seas – David McCullough’s now classic tome on the building of the Panama Canal. Though not a business book, but a captivating chronicle of the largest construction project undertaken by mankind, Path Between the Seas details the dreams of visionaries and the lives of bold men for whom no challenge was too daunting. Set in a time when big meant better and frontiers still beckoned pioneers, Mr McCullough’s book shows that some projects are simply too large – and important – for private enterprise to undertake. It is one thing for Elon Musk to dabble in rocketry and suborbital space flight, his brave attempts will not get humanity to Mars or anywhere else in the Solar System. To do that requires the limitless wherewithal and collective engineering

prowess of entire nations. Likewise, the building of a waterway linking two oceans bankrupted the company set up by the man who had managed to pull off the Suez Canal – linking the Mediterranean and Red Sea at sea level. That last detail proved Ferdinand de Lesseps’ undoing. Instead of cutting a straight ditch through a flat desert, the Panama Canal required engineers to battle mountainous terrain, covered by dense jungles, and crisscrossed by rivers that turned into raging torrents during the wet season – eight months out of the year. Soon after the first spade was driven into the ground on New Year’s Day 1881, workers started to succumb to malaria and yellow fever. By 1884, the death rate had climbed to over 200 per month. In order not to hamper recruitment efforts, the grim news from Panama was supressed. Mudslides slowed down, and eventually stopped, progress. The infamous Culebra Cut that straddles the continental divide, and scene of repeated avalanche-like mudslides, defeated the French Société Internationale du Canal Interocéanique which went bankrupt in 1889 after spending an astonishing $235 million (well over $6bn in today’s money), wiping out the savings of around 800,000 shareholders, and resulting in a major scandal after it was discovered that 104 members of parliament had accepted bribes from the company in return for legislative favours and subsidies. According to the most optimistic of assessments, work on the canal had been 40% completed. The fatal Culebra Cut had its

“Setting to work with admirable efficiency, the Americans for the first few years carefully avoided digging the canal, preferring instead to put into place infrastructure required for a project of this magnitude.” 34

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Winter 2016 - 2017 Issue

“Contrary to the official story, the first ship to navigate the canal was not the stately SS Ancon, but the Alexandre La Valley, a decrepit French crane boat which made the historic 77-kilometre journey under its own power on January 7, 1914.”

summit lowered from 64 to 59 metres above level to 59 metres with the removal of some 14 million cubic metres of rock and soil. The Americans, who had been mulling a bioceanic canal in Nicaragua, arrived in Panama fully fifteen years after the French had left. In fact, at the time no such country existed. It was created in 1903 after the Colombian senate refused to ratify the transfer of the canal concession to the Americans. Gunboats were duly dispatched and an up to then inexistent independence movement created, egged on by generous payments from Washington. The now notionally independent country proved much less reluctant to allow the Americans to finish the French trench. Three years later, Panama was the first-ever country to welcome a sitting US president when Theodore Roosevelt arrived for an official visit on November 6, 1906, to inspect the site om his empire-building project. Setting to work with admirable efficiency, the Americans for the first few years carefully avoided digging the canal, preferring instead to put into place infrastructure required for a project of this magnitude. Much attention was paid to the improvement of sanitary conditions for the workers in order to minimise the incidence of deadly tropical diseases. Once the isthmus was properly prepared, the digging resumed with 2.3 million cubic metres of material excavated per month by 1908 – the equivalent of around four Channel Tunnels every year. The Culebra Cut was attacked with a fervour, its summit lowered from 59 metres where the French had left it, to 12 metres above sea level with the help of 27,000 tonnes of dynamite. By 1913, just before outbreak of the Great War signalling the definitive end of the old world order, the Panama Canal opened to traffic as the Gamboa Dam, which had kept the waters of Gatun Lake out of the Culebra Cut, was blasted by telegraphic signal from President Woodrow Wilson in Washington. Contrary to the official story, the first ship to navigate the canal was not the stately SS Ancon, but the Alexandre La Valley, a decrepit French crane boat which made the historic 77-kilometre journey under its own power on January 7, 1914. Offering proof that governments can successfully run great projects, if there is a national will backed up by fearless leaders (a big if), the US effort to complete the Panama Canal came in $23 million under budget and was completed ahead of time. Path Between the Seas also emphasises that disruptive and innovative thinking need not be exclusive domains of start-ups. The American experience building the canal moreover showcases the importance of preparation and the proper care of workers. Examples of leadership abound, but – and here’s the kicker – this was provided by engineers whose boots were stuck in the Panamanian mud; not by suits in an office pouring over business books. i

CFI.co | Capital Finance International

> Obituary:

Fidel Castro: An Antagonist Remembered By Wim Romeijn

he last Marxist-Leninist to hold a place on the world stage has left, signalling the end to an era that saw revolutionists taunt empires and topple autocratic regimes. A charismatic romantic to the very end, Fidel Castro died on November 25 leaving his nation in mourning as Cuban exiles in Miami celebrated the passing of their nemesis, banging pots, honking horns, and setting off fireworks. Always firmly in charge of his own destiny, Fidel Castro escaped convention from an early age. He was born in 1926 to Ángel Castro Argiz, a former soldier in the army of Spain, and his maid Lina Ruz González, also of Spanish descent. Though illiterate for most of his life, Mr Castro Argiz managed to acquire and run a 12,000 hectare plantation just outside Birán, a hamlet on what was then Cuba’s Wild East frontier. Recognised as the most prodigious of his eight children, Mr Castro Argiz dispatched Fidel to a school maintained by the Lasallian Order in Santiago de Cuba in 1934. Five years on, Fidel was duly enrolled at a Jesuit college. Sent to Havana in 1942 to pursue further studies, Fidel – now sixteen – soon experienced his political awakening. He rarely bothered to attend lectures, yet somehow always managed to ace his studies in between many other, more exciting, endeavours. Dabbling in student politics and speaking out against Caribbean dictators with the fervour of youth, Fidel in 1947 joined the ragtag army assembled by Juan Bosch – an exiled writer from the Dominican Republic – on Confites Key in the Sabana-Camagüey Archipelago along Cuba’s northern shoreline. Here, an expeditionary force of some 1,200 fighters, including veterans from the Spanish Civil War, had been amassed for an invasion of the Dominican Republic and the removal of its dictator Rafael Trujillo. However, while waiting for supporting airplanes and ships to arrive, the plot was discovered and foiled after intervention by the US ambassador. Whilst most conspirators were disarmed, arrested, and jailed, Fidel Castro managed to evade capture by swimming to a deserted nearby key and from there to the mainland. Back in Havana, he promptly got married. While on honeymoon in New York, Fidel applied for a spot at Harvard Law School but was rejected, returning home to obtain his law degree in Havana instead. Standing for a seat in congress on the ticket of the Orthodox Party, Fidel Castro’s brush with parliamentary democracy was cut short in 1952 36

“Whenever an American president would start to lecture him on democracy and human rights, Fidel Castro listened attentively. His answer, invariably, would be to remind his opponent that he had “literally” survived five, six, or seven of his predecessors and would still be around when the present one had departed.”

Holed up in a camp high up in the Sierra Madre during the final months of the guerrilla campaign, Fidel Castro wrote to a confidant: “The Americans will pay dearly for their actions. When this war is over, a much longer and greater war will begin for me: the war I am going to wage against them. I realise this is my true destiny.” In his prophetic letter, Commander Fidel was not only referring to the US support for Fulgencio Batista, but also to the media-fuelled Spanish American War of 1898 (“Remember the Maine!”) which firmly established the United States as an imperial power and saw Spain lose its most prized overseas possessions – Cuba, Puerto Rico, the Philippines, and Guam.

by the coup that brought General Fulgencio Batista to power. With the elections cancelled, Fidel decided to fight the military takeover in court, fulminating from the stand that no judge could sentence any citizen on charges of sedition as long as General Batista’s “treacherous and illegal” power grab was allowed to go unpunished. Predictably, the court ruled against him. Fidel Castro, not unreasonably, interpreted the outcome of the trial as a clear sign that the constitutional order had broken down and concluded that armed rebellion was now fully justified.

Fidel Castro had always been particularly upset over the 1901 Platt Amendment which established Cuba as a US protectorate, only notionally independent, with severe restrictions placed on the country’s ability to conduct foreign policy, maintain commercial relations, or sign treaties with other nations. The US also demanded that Cuba sell or lease it such lands as were deemed necessary for the establishment of coaling and naval stations. The 1903 agreement on Guantanamo Bay Naval Station, to which the US holds an open-ended lease, was based on the provisions of the Platt Amendment.

Together with his brother Raúl, who had joined him in Havana, Fidel latched on to a group of conspirators who were plotting an assault on the Moncada army barracks in Santiago de Cuba to instigate an uprising against Batista or, failing that, obtain weapons for a guerrilla army. The attack failed miserably. Whilst most of the 95 men he led were arrested, tortured, and executed, Fidel Castro again managed to escape, retreating with a small band of plotters into the nearby jungle-clad mountains.

Just as Ho Chi Minh and other revolutionary leaders before him, Fidel Castro became a communist by default rather than conviction. In need of a discourse to distance his nation from its American overlords, and a development model to yield instant results, Fidel Castro became a Marxist-Leninist. At the time, it was the thing to do.

Giving in to appeals from the archbishop of Santiago de Cuba, the renegades surrendered on the prelate’s promise of a fair trial. Sentenced to fifteen years for his part in the failed uprising, Fidel Castro served only 22 months behind bars and was freed in the general amnesty of 1955. He immediately left the island for exile in the United States, ending up in Mexico to join, and take command of, yet another plot. The rest is, indeed, history. Third time lucky, Fidel Castro re-entered Havana at the head of a victorious rebel army on January 8, 1959. That same day, during his (long) victory speech, a white dove released by one of the onlookers landed on Fidel’s shoulder, lending the revolutionary leader a mythic aura that never quite faded away. CFI.co | Capital Finance International

In the immediate aftermath of the revolution, Fidel Castro did try, however, to keep things civilised with the island’s uncomfortably big neighbour. During his famous two week sojourn in New York between April 15 and 27 of 1959, touted as an unofficial goodwill visit, Fidel Castro is received by Vice-President Richard Nixon (President Eisenhower was unavailable because of an engagement on the golf course), pays tribute at the Tomb of the Unknowns at Arlington National Cemetery, admires the national monuments to George Washington, Thomas Jefferson, and Abraham Lincoln, and accepts invitations to speak at Harvard and Princeton universities. Castro also finds time for a chat with UN Secretary-General Dag Hammarskjöld and to address a large crowd gathered in Central Park to watch, awestruck, this most romantic of heroes – a revolutionary heartthrob if there ever was one – deliver a fiery speech.

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Fidel Castro. Picture: Getty Images

It was New York that showed Fidel Castro the power of charisma on which he would draw for the rest of his life. Not overly interested in the economic aspects of his new Marxist-Leninist ideology, or the nuts and bolts of running a country, Fidel Castro had more eye for the broad overall picture which he expertly shaped after his own image: bold, decisive, idealistic, and uprooting. Under Castro, Cuba became all of that and more: it stoked the fires of revolution in Latin America and Africa, championing the cause of anti-imperialism the world over. Whenever dissatisfaction at home threatened to get out of hand, Fidel Castro would temporarily open the floodgates and allow disgruntled Cubans to cross the Florida Straits on whatever floatation device they could find. While he was devising plots and revolutions in faraway lands, Fidel Castro’s Cuba was, of course, kept afloat by the generosity of the Soviet Union and its satellite states, leading to charges that the island had merely changed one overlord for another. That, however, short changes Castro’s revolution. As he deployed his charisma, Cubans rallied behind their strongman and his tropical-flavoured brand of communism which knocked dissidents about a good bit but never quite descended into gulag-style barbarism. Meanwhile, national pride ran high as Fidel was credited with teasing and provoking the United States and showing the world how a small island nation could get away with it. Fidel Castro knew how to play a global audience

and caused much delight with touché moments such as when he invited the firefighter heroes of the 9/11 terrorist attack on the Twin Towers in New York to Cuba for the medical treatment they had been denied at home. During regional summit meetings, Fidel Castro could always be counted upon to spook the US president du jour, sneaking up on the world’s most powerful man, causing Secret Service agents visible stress during the stealthy approach, only to jovially pump his hand, slap his shoulder, and shout “hombre!” It never failed to instantly cause presidents to lose their composure. Fidel Castro’s antics, the much anticipated highlight of every summit, were well-known amongst his Latin American counterparts who never quite managed to supress their admiration for the gutsy Cuban. Whenever an American president would start to lecture him on democracy and human rights, Fidel Castro listened attentively. His answer, invariably, would be to remind his opponent that he had “literally” survived five, six, or seven of his predecessors and would still be around when the present one had departed. Fidel Castro quite enjoyed stealing the Americans’ thunder and did so whenever given a chance. During the 1992 Earth Summit in Rio de Janeiro, he managed to fly in under the radar and upset the carefully choreographed security protocol the American Secret Service had put in place for the arrival of President Bush (The Elder) whose Air Force One touched down minutes after CFI.co | Capital Finance International

the Cubana de Aviación plane had landed to the astonishment of all present. A day after pulling this stunt, Castro showed up at the convention centre on the outskirts of the city where the Earth Summit was taking place, timing his grand entrance only moments after the arrival of President Bush who promptly found his charisma severely lacking as he was left standing nearly alone, and much bewildered by the electrifying buzz suddenly palpable in the hall, while gathered dignitaries and officials rushed off to catch a glimpse of the Cuban. A rebel rouser mostly underwhelmed by the global powers-that-be, Fidel Castro may not have managed to provide his people with anything but the most basic necessities of life, he did give his nation back its pride. Supremely headstrong and with an almost Nietzschean arrogance (Ecce Homo: Why I Am So Wise/Clever), Fidel Castro was absolutely convinced that his truth was the only one that mattered. Extremely well-read and able to instantly, and without skipping a beat, embark on a reasoned and informed monologue on any topic – from fish farming to neuroscience – Castro was a remarkable polymath of formidable intellectual power. Kept away from the public eye as his health deteriorated, not unlike Ronald Reagan after the onset of Alzheimer’s, Fidel Castro – hero even to those who didn’t share his worldview – passed away November 25, 2016, aged 90, in Havana, Cuba. i 37

WEF:

Connecting with

Reality By Wim Romeijn

While the Fourth Industrial Revolution rolls on, and the lines between the digital, biological, and physical spheres blur, responsive and responsible leadership is required to halt the advance of protectionism, nativism, and populism. This is the World Economic Forum’s (WEF) way of sounding the alarm over the backlash against globalism – the good “ism” – as evidenced by recent “events”, forumspeak for the election of Donald Trump to the US presidency, Britain’s rejection of the European Union, and Italy’s refusal to sanction an update to the country’s constitution.

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hilst waiting for Oxfam to divulge how few people have amassed assets equal to those accumulated against the odds by the less fortunate half of the world’s population – 68 in 2016 – the WEF celebrates its 47th annual meeting in Davos-Klosters, Switzerland. This edition of the event is centred on providing corporate, civic, and political leaders with the intellectual armour needed to stem the rising tide of populism – the bad “ism” – that now menaces to undo the benevolent globalism that forms the bedrock of the forum – and, indeed, of Western civilisation. In its pre-summit brief, the WEF recognises the need to shape more inclusive forms of 38

development through “enhanced international collaboration” and “multicultural dialogue” that advance innovations and impact societies. The forum’s organisers fear their mission – to improve the state of the world – is being progressively undermined by those that feel left behind by economic progress. The voter revolt brewing in Europe, and already brought to a boil in the US and Great Britain, is perceived as a much more serious threat to the onward march of globalisation than the already half-forgotten Occupy Movement ever was. With the silent majority awoken from its long slumber only to find a world changed to beyond recognition, answers are needed to put the

genie back into the bottle. Offering more of the same, perhaps augmented by an intercultural dimension, is most decidedly not a response that is likely to pull Brexiteers, Trumpists, and other assorted malcontents back from the brink. If anything, the suggestion lays bare a colossal, and quite possibly lethal, misunderstanding of the dynamics of modern political life. As the election of Mr Trump illustrates, the eleventh hour has struck and midnight is fast approaching. The WEF admits that the global system set up in the mid-1940s no longer seems fit for purpose. The forum notes that the now outdated structure needs replacement and impresses on the leaders travelling to

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Switzerland the importance of driving new initiatives that prove a better fit for a world beset by uncertainties. FLAWED The WEF’s noble efforts to stave off disaster suffer from a major flaw. Few, if any, of the thousands of luminaries flocking to Davos for their annual winter pilgrimage would recognise a discontented citizen even if he/she tripped over one. Politicians courting the disaffected are either not invited to the event or decline to partake in its proceedings. Thus, the annual WEF meeting mostly preaches to the converted and promotes a dialogue between the likeminded. There is no discernible engagement with the protest voters or their representatives.

Listen to what economist Ann Pettifor has to say: “We now live in a rentier economy whereby money is created in Central Banks by strokes on a keyboard. As such, money has become

Speaking on the gross market distortions introduced by the European Central Bank’s (ECB) massive quantitative easing (QE) programme, which injects up to €80bn monthly into the continent’s financial system in the hopes of reviving its moribund economy, Mrs Pettifor cites the recent example of a 30year bond issued by the Dutch government. Whilst the notes offers a risible 1.5% annual interest rate, its popularity amongst investors – attracted by The Netherlands’ solid AAA credit rating – and the QE cash glut, has boosted the bond’s price to beyond 160% of its face value. In under ten months, holders of these gold-standard notes increased the value of their investment by two-thirds without any exposure to risk whatsoever. “Why would anyone still work for money,” asks Mrs Pettiford, reiterating the point. Han de Jong, chief economist at Dutch ABN bank, shakes his head in disbelief at the size

and scope of the ECB’s efforts to underpin markets: “We are witnessing the unfolding of the largest monetary policy experiment ever undertaken in the history of mankind. If you had asked me a decade ago what would happen to a central banker unleashing this much new money onto the market, I would have wagered that such a banker would instantly lose his job to end up in prison or, at the very least, a closed institution of sorts.” Mr de Jong is afraid that, over time, the ECB’s whatever-it-takes policy may undermine society’s confidence in money. ON BEATNIKS AND PEACENIKS That is precisely Mrs Pettifor’s argument. As the haves progressively increase their share of global wealth, and manage to do so without expending any visible effort, the have-nots grow restless. Young people blame the greed displayed by the baby boomer generation – the same one that celebrated the Summer of Love and dodged the draft singing Hell No, We Won’t Go – for leaving behind a toxic legacy. Bill Clinton, baby boomer par excellence and former peacenik, may not have inhaled; he did trip and removed the remaining legal barriers that enabled Wall Street bankers to hold economy hostage to their disruptive financial innovations – a more neutral way of describing creative bookkeeping and creating money for nothing. 39

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Whereas the Occupy Movement and similar fringe expressions of popular discontent could be either contained or dismissed as the work of a few smartphone toting idlers, the re-emergence of the skilled demagogue cannot be ignored. Business as usual has stopped. The world has changed. What is a global forum to do?

detached from labour, productive investment, and entrepreneurship. Why would anyone produce anything, when a great return may be obtained from renting out a property in Central London or placing safe bets on failproof government bonds?” This is not just a rhetorical question.

Meanwhile, Tony Blair’s New Labour in the UK continued and finished the work set in motion by Margaret Thatcher, dismantling the last vestiges of the post war welfare state while bridging the political divide, readily embracing the values espoused by his Tory antagonists. After all, in Francis Fukuyama’s world without history, ideology is last century’s news. As the world’s leaders congregate in Davos, it becomes clear that the ultimate triumph of Western liberal democracy as the highest stage of capitalist development – to paraphrase Lenin – was celebrated prematurely by Mr Fukuyama et al. The thought leadership the forum now aims to instil, requires participants to shape a political universe that actually excites voters and offers meaningful choices between two or more sets of values that share a common appeal to reason, as opposed to gut feelings. In order to halt the populist counterrevolution now underway, the primacy of politics needs to be re-established – pronto. Whilst entrepreneurs and corporates have important roles to play, their interests can no longer trump all else. Corporate social responsibility and adherence to environmental, social, and governance (ESG) parameters are no doubt valuable, and may even produce a few tangible results; they emphatically do not cater to the world view of the angry white men and women who voted Trump into office, cast the British Isles adrift, plunged Italy into chaos, and threaten to hand power to Marine le Pen in France and Geert Wilders in The Netherlands.

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If the corporates wish to redeem themselves in the eyes of the public, and do something that stretches beyond window dressing, they could consider the adoption of less predatory business practices such as repatriating jobs, offering workers the security now denied, and paying their fair share of taxes – to name but a few of the things that apparently cause more irritation than has been apparent so far. Though this may make no sense whatsoever to the executive with an MBA from Harvard Business School, it is nonetheless what society expects of them. That same society offers corporates the robust legal framework, and an untold number of other facilities, that enables businesses to prosper and strike out into the wide world riding the wave of globalisation. PUBLIC DISTRUST What unites angry voters is their distrust of anything novel, big, and powerful. The European Union, too large for its own good and struggling with a perceived democratic deficit, is as easy a target for populist politicians as big government is in the United States. The Fourth Industrial Revolution identified by the WEF as the irreversible destiny of the planet – powered by robotics, artificial intelligence, and machine learning amongst others – is widely considered not as an exhilarating prospect heralding the arrival of a bright future for all, but rather as the 40

next assault on the dignity of workers and their ability to earn a living. While there may indeed be countless arguments to waylay these mostly irrational fears, there is nobody left to deliver them. The ESG-conscious CEOs, billionaires, and entrepreneurs who fly into Switzerland aboard 1,700 or so private jets to improve the state of the world are, perhaps, not the ideal candidates for delivering a soothing message that restores calm and allows sanity to prevail. Regrettably, most politicians also run low on credibility since they for decades on end sacrificed established rights on the altar of economic efficiency in pursuit of pleasing the markets. Voter anger is fuelled to a large extent by the reality of the retreating state, no longer able, or willing, to provide the universal services – healthcare, education, care for the elderly, etc. – people had come to expect in return for paying their taxes and generally toeing the line. Coupled to increased unease over immigration – the timeless fear of the stranger that globalisation chose to ignore for political correctness’ sake – and the shortcomings of multiculturalism, which long could not be discussed for the same reason, the retreat of the state from public life has produced a potent and potentially noxious atmosphere that infects public debate and steers it away from the middle ground toward the less illuminated fringes. Add to all of that the perception that the state, whilst failing to properly care for its citizens, now also has the means to invade the private sphere via all sorts of high-tech snooping mechanisms, which are eagerly deployed to promote collective security, and the general feeling of dissatisfaction of “the man/woman on the street” may be understood in its proper context. Meaningful thought leadership aims to address these mundane, yet crucially important, issues by seizing the moment, and re-imposing politics for the common good as the ulterior leitmotif of public discourse without giving in to the temptation of catering to the base instincts already well served by the latest cohort of populist politicians. The trick is not only to find a reasonable discourse, but to have it fire the public’s imagination. Again, promoting a multicultural dialogue is probably not it. Whilst the WEF’s role in furthering publicprivate cooperation is of truly inestimable value, politicians must lead and must be seen to do so in order to command respect for their office. Faced with seemingly insurmountable odds, and with few means at his disposal, wartime British Prime Minister Winston Churchill did not seek to establish public-private partnerships: instead he took the lead, rallied the nation, imposed his vision, and delivered Britain’s finest hour. In a word, Mr Churchill inspired people. This, then, constitutes a plea for less faffing and more doing. In its pre-summit brief, the WEF CFI.co | Capital Finance International

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asks leaders “from all walks of life” to be ready to react credibly and responsibly to societal and global concerns that have been neglected for too long. SWIFT ACTION Stephan Mergenthaler, head of Knowledge Networks and Analysis at WEF headquarters in Geneva, advocates for a stronger narrative of progress in order to manage expectations and assess innovation. He convincingly argues that public discourse needs to resist the temptation to manage pressing issues by looking to the past for solutions. Instead, Mr Mergenthaler suggests more attention be paid to the social dimension of both present-day and future challenges. A proponent of smart government, Mr Mergenthaler cites the findings of the 2015 WEF Global Agenda Councils meeting in Abu Dhabi that called for governance to shift to an “outcome-oriented approach that can respond to changing dynamics”. The premise is that governments have trouble overcoming their inertia and are held back by vested interests. Thus, the councils argue, “managing from the future requires an agile governance process that allows for swift action and meaningful participation”. Soon, Ms Le Pen may be expected to take up residence in the Élysée Palace. Agile governance processes that allow for swift action is what angry voters, pining for an opportunity to deliver a blow to the establishment, are most tired of. The disruption swift action causes to the predictability of life is not universally appreciated. The Council on Global Governance finds the answer in an “all-of-society” approach, comprised of partnerships between different stakeholder groups. The council’s members are concerned that the rapid change set in motion by the Fourth Industrial Revolution will have a detrimental effect on nations’ capacity to govern themselves which may be offset by the creation of a vast number of interconnected networks that produce organic solutions as problems arise.

Switzerland: Davos

In the general excitement – or revolutionary zeal – over the limitless possibilities that open up with the onset of the Fourth Industrial Revolution, 41

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Interestingly, the WEF Council on Values discovered three common denominators shared by all cultures, religions, and philosophies that may be used as benchmarks against which to measure policy initiatives: the dignity of the human person; the importance of a common good that transcends individual interest; and the need for stewardship of the planet. The Council on Values points out that a pro-active approach to search for, and provide, long-term solutions carries more potential than problem solving alone. “It creates a space for human agency to imagine radically different ways in which our societies, governments, corporations can work”.

“The Fourth Industrial Revolution, driven forwards by the unavoidable convergence of human knowledge and resourcefulness, is set to deliver a bounty of yet unimaginable proportions, carrying within it the potential to provide for all.” most WEF councils insist on emphasising the disruptive nature of the change that is afoot. Debate about collective aspirations is focused on ways to combat the reactionary reductionism detected in contemporary political discourse. Thus, a plea is entered for a “renewed sense of progressive holism” that may help societies create the future they desire. This is also why a series of Global Future Councils were set up; platforms that gather ideas, encourage debate, and help societies adjust to new dynamics. THE ROAD TO HELL Whilst the intentions are good – which, according to Mr Churchill, is not necessarily encouraging news – input is lacking from the very people whose lives and livelihoods are likely to be most affected by the Fourth Industrial Revolution. In Davos, only a faint echo is heard of the voices, otherwise pretty loud, of the angry voters who beg to disagree and unashamedly hark back to reactionary reductionism in the hope of finding handles to hold onto as the world around them changes. In fact, very few academics, politicians, and other thought leaders have actually asked for – much less listened to – what John and Jane Doe have to say. Unless democracy is to be confined to the scrapheap of history, Mr and Mrs Doe ultimately hold the power and have the final say.

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On his return from a recent visit to Austria, British historian Ian Kershaw, of the structuralist persuasion and author of a recently published two-volume biography of Adolf Hitler, noted that for democracy to wither and disappear as it did in the 1930s, four conditions need to be present: territorial conflict, class upheaval, nationalism with racist undertones, and a malfunctioning economic system. Speaking to Financial Times correspondent Philipp Blom, Mr Kershaw’s description of the circumstances that caused the emergence of fascism fits the present uncomfortably well. “Things that would have been impossible only ten years ago are now considered acceptable. A politician can boast of inappropriately groping dozens of women only to get promptly elected into office.” Mr Kershaw is reluctant to draw parallels between present-day Europe and the illfated Weimar Republic, but warns that another major crisis such as the one that erupted in 2008 may well see the continent’s strong institutions give way: “So far, liberalism has proved remarkably resilient. However, its ability to adapt and respond to crises is being tested to the limit. Hence, we should be extremely careful and 42

stop repeating the that-can-never-happen-again refrain. It can and it will unless we start taking the concerns of common people seriously.” WHAT’S NEXT True to its founding mission, the World Economic Forum offers a platform for policymakers of all stripes to debate the state of the world and how to improve it. Over close to half a century, the WEF has accumulated an impressive number of accomplishments, contributing in a meaningful way to global peace and prosperity. It was the birthplace of a slew of initiatives that saw hunger and disease reduced; access to education, fresh water, electric power, and telecoms improved; and environmental issues mapped. The WEF also furthers the cause of good governance, at both corporate and national level, encouraging the powers-that-be to reap the benefits of sensible policies that take into account the interests of all stakeholders. As the 47th annual meeting gets underway and responsive and responsible leadership is debated, participants may want to spare a thought for the common man/woman who is not very likely to ever engage in a discussion outside the pub, but whose opinions, bizarre as they may seem at times, do count for something. The future may be unstoppable by its very definition; this does not imply that progress is unstoppable. Whilst breaking up free trade agreements or taking a nation marred by a lack of competitiveness out of the world’s largest consumer market may seem utterly irrational to the learned and considerate; these absurdities make perfect sense in the netherworld of disappearing jobs, zero-hour contracts, capped social services, and stagnating incomes inhabited by the rest of us. In a universe where the wealth of 68 people equals that of the 3.5 billion poorest earthlings, something has gone seriously wrong. In fact, it is nothing short of a miracle that the pitch forks have stayed thus far in the shed – a testament, perhaps, to the resilience of the present model of governance and its institutions. The Fourth Industrial Revolution, driven forwards by the unavoidable convergence of human knowledge and resourcefulness, is set to deliver a bounty of yet unimaginable proportions, carrying within it the potential to provide for all. If leadership is to mean anything, it must find ways to explain the wholly-justified excitement to those who, equally justified, fear change. Lest a counterrevolution be unleashed, make sure that whatever marvels the revolution produces benefit those thus far left behind by progress. Piece of cake. Just don’t eat it too. i CFI.co | Capital Finance International

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Gavin Wilson, CEO IFC Asset Management Company

Mobilising Private Capital for Sustainable Development Building and upgrading the infrastructure to underpin sustainable development in emerging markets and elsewhere requires additional investments estimated at around one trillion dollars annually. To support expected economic growth rates, and meet the UN’s Sustainable Development Goals (SDGs), the McKinsey Global Institute calculated in 2013 that at least 60% of infrastructure spending needs to be directed towards emerging markets. Since then, the gap between actual and required spending on ports, roads, power stations and other drivers of growth has only widened. The need to proactively address climate change adds urgency with another $100 billion at least needed annually to offset global warming.

sixty years of experience in spotting opportunities and managing risk in developing countries and we benefit enormously from having investment professionals based all around the world. The combination of sector expertise in our global industry teams and our up-close understanding of local business conditions helps us assess, mitigate and manage risk. Sometimes it is simply a question of risk perception, other times we need to reduce risk meaningfully, often by blending public with private expertise and capital.” A wholly-owned subsidiary of the IFC and member of the World Bank Group, IFC AMC is a fund

manager that offers investors an opportunity to invest in companies and projects that are off the beaten track but have passed IFC’s high diligence standards. “Infrastructure equity investors have tended to define their asset class, in comparison to private equity, as lower-risk lower-return and almost exclusively in developed countries. Yet the opportunities in emerging markets infrastructure cannot be categorised so easily. At IFC we see a diversified mix of excellent investment opportunities that range across the risk-return spectrum and, viewed as a portfolio, look particularly attractive in a zero interest rate environment.” 43

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he conundrum now faced is how to engage – and mobilise – private capital. It is estimated that of the approximately $80 trillion administered by pension funds and insurance companies worldwide, only about one percent is invested in infrastructure, and very little of that in developing countries. This is where the International Finance Corporation’s Asset Management Company (IFC AMC) may help. IFC AMC chief executive Gavin E.R. Wilson points to a mismatch between real and perceived risk as one of the main reasons for the reluctance of private investors to engage with emerging markets: “At IFC, we now have more than

Describing IFC AMC as a conduit to help global investors gain more exposure to private investment opportunities in markets where capital markets are often undeveloped and private transactions provide the capital that is fuelling growth, Mr Wilson emphasises that the terms of trade favour the capital provider: “There is a shortage of intelligent capital ready to invest in private enterprises that meet all the usual requirements of portfolio managers but happen to be located outside their immediate field of vision or comfort zone.” Capital committed via AMC invests alongside IFC and benefits from its global footprint and local presence, including its network of government and business connections, which offers institutional investors an added layer of security. The default rate on private sector infrastructure loans in emerging market is in fact broadly the same as that of comparable transactions in the developed world. “But the ever-present problem, which we are well placed to mitigate, is a trust deficit between the private and public sectors, especially in long-term infrastructure projects.”

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The investment funds that AMC manages have the right, but not the obligation, to participate in IFC-funded projects. This allows investors to tap into IFC’s unique pipeline of investment projects, but with a selective approach to portfolio construction. AMC runs a separate investment decision-making process, owing its fiduciary duty to its investors and aiming to build fund portfolios with a diversified mix of investments and good risk-adjusted returns. “An important feature of our approach concerns IFC’s well-established reputation for investing only in projects that fully meet current ESG [environmental, social, and governance] standards. This is not only important in itself, but in our view is a key way to reduce risk. We consider ESG awareness an important indicator of a management team’s quality and capabilities, and therefore a predictor of its ability to deliver on its growth plans.” Amidst the interplay of global goals, development needs and investment models, Mr Wilson sees three converging trends that are likely to shape how growth capital is mobilised in emerging markets: investors will venture farther afield in search of yield (1), resulting in private capital becoming increasingly critical for delivering growth and development impact in emerging markets (2), while efforts to achieve the development and climate change goals merge (3) into a single push towards sustainable development. With its track-record of mobilising private capital and its understanding of the challenges involved in trying to transform “billions into trillions”, the IFC is well-placed to lead this redefinition of what development and climate finance means.

external capital, invested in its private equity, private credit and fund-of-fund products. An example of the latter is its Catalyst Fund, launched in 2012 with a focus on the cleantech and renewable energy sectors. The Asset Management Company enjoys access to the full range of expertise and on-theground presence of the International Finance Corporation and is thus able to select the most promising projects for inclusion in its funds. Additionally, the AMC offers investors the full scope of risk mitigation facilities – including compliance with ESG (environmental, social, and governance) standards – that the IFC attaches to its undertakings.

CEO, IFC Asset Management Company: Gavin Wilson

wouldn’t typically see, with the risk mitigation they seek as they look for yield in riskier locations. Profitability and development are not in contradiction: they are in fact mutually reinforcing.” i

“We bring our investors into opportunities they wouldn’t typically see, with the risk mitigation they seek as they look for yield in riskier locations.” ABOUT IFC ASSET MANAGEMENT COMPANY IFC Asset Management Company (IFC AMC) was set up in 2009 as a wholly-owned subsidiary of the International Finance Corporation, the private sector investment arm of the World Bank Group. The company, headquartered in Washington DC, manages IFC and third-party capital - mostly from investors with long-term time horizons that are interested in participating in IFC’s approach to investing in developing countries. Whilst part of the IFC, the Asset Management Company makes independent investment decisions in the interests of the funds it manages. AMC manages a portfolio of thirteen funds, divided according to geography, sector and/ or asset class. To date, AMC funds have made investments of over $5 billion in about 90 companies and funds in emerging and frontier countries. The company has raised a total of $9.8 billion including about $7.5 billion of

As a result, institutional investors not normally committing funds to emerging markets may gain exposure to the strong returns offered in these markets whilst reducing the associated risks. The IFC Asset Management Company is an essential part of the World Bank Group’s efforts to turn “billions into trillions” by facilitating emerging market access to large pools of private capital. ABOUT THE CEO Leading the IFC Asset Management Company since its founding in 2009, Gavin Wilson brought a wealth of experience to the start-up. Mr Wilson earned his spurs in London where he started his career at McKinsey and Company – the global management consultant firm. He joined the World Bank Group in 1988 under its Young Professionals Programme and worked on a number of assignments in Africa for the World Bank and in several regions for the International Finance Corporation’s investment and advisory businesses. He also served a term as the IFC’s resident representative in Poland and as a special advisor to the Bank of England. In 1996, Mr Wilson started work at Goldman Sachs in London where he became a Managing Director in the Investment Banking Division. Here, he also co-headed the bank’s EMEA (Europe, Middle East, and Africa) Industrials Group after first leading Goldman’s New Markets investment banking execution team which focused on emerging markets across EMEA. Mr Wilson is a British citizen and holds a BA degree from Oxford University. Mr Wilson obtained his MBA at Stanford University where he was a Arjay Miller Scholar. He serves on the Business and Sustainable Development Commission and on the WEF’s Global Future Council on International Governance & PublicPrivate Cooperation.

“We provide growth capital for growing companies in economies that need that growth. We bring our investors into opportunities they 44

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> WEF Global Future Councils:

Mars Anyone? This is what the world will look like in 2030: a permanent colony on Mars; steak-free menus; renting the new buying; privacy scrapped; and Western liberal values gone – fondly, if vaguely, remembered as a foolhardy attempt to enshrine the individual as the be all, end all of political and societal life.

his is what the world was supposed to look like in 2010: reliable thirty-day weather forecasts; a manned base on the moon; hydrogen a cheap source of energy; effective weight and appetite control; lab-created life forms; and a preventative cure for cancer. Just as thirty-odd years ago, nobody saw the Internet coming, today’s futurists surely miss a major development that thoroughly disrupts their vision of tomorrow’s world. However, that does not stop them from trying to extrapolate current trends into the future. The World Economic Forum (WEF) is at the forefront of the movement that aims to detect and shape the future by applying contemporary reality. The forum has set up no less than 35 Global Future Councils (GFCs) to create an interdisciplinary network of thought leaders from academia, government, business, and civil society dedicated to challenge conventional thinking and wisdom, and gain new insights on “key global systems.” One of the GFCs’ missions is to break down ivory towers – which WEF-speak defines as silos – and focus on long-term solutions as opposed to the election-cycle and quarterly reporting horizons that determine the policies of government and business. Global Future Councils are also charged with finding ways towards a more sustainable and equitable future. GFCs meet annually in the United Arab Emirates to develop a set of recommendations which are then presented at the WEF flagship summit in Davos.

AN ANDROID ALTER EGO Professor Hiroshi Ishiguro of the Intelligent Robotics Laboratory of Osaka University was

present to talk about the doppelganger he designed and built. Mr Ishiguro’s android self has repeatedly been mobilised to teach students in its master’s absence. Chief-Scientist Ellen Stofan of NASA, principal advisor to the agency’s administrator Charles Bolden, talked about the prospects for space exploration. Dr Stofan sits on the WEF Future of Space Technologies Council. Admitting that since Mr Trump’s unexpected election to the US presidency, the art of predicting the future has taken a severe hit, the experts from the Global Future Councils even so wager a bet on the future, detecting eight medium-term trends that may give a fresh perspective on the general direction of global trends. Danish member of parliament Ida Auken predicts a rather dreary new world in which city dwellers will no longer own things, but rent whatever they need – from appliances to clothes. Ms Auken paints a lovely picture of bike rides, free communication, driverless vehicles, and flying cars (…) which is suddenly shattered when it comes to living arrangements. Ms Auken sees the inhabitants of future cities living rent-free – home ownership being such an outdated notion – with costs being recouped via an ingenious scheme that makes free and temporarily unused space – such as a the living room or a bedroom – available to others, no doubt via an app. So, whenever Ms Auken is not home, strangers will take over her lounge for meetings. Ms Auken predicts that in the future, whenever she feels the urge to prepare a meal at home, the necessary appliances will magically appear in her kitchen along with the required ingredients – all ordered by app and delivered via a non-polluting

free public transport system – undoubtedly by a Deliveroo worker on a zero-hour contract? THE PUBLIC SELF EXPOSED By 2030, Ms Auken says she expects to own nothing and enjoy no privacy at all. She does worry, though, about the fate of the folks left behind by progress: the luddites living in selfsupporting 19th century country villages for whom technology has become simply too much and who now harbour deep feelings of resentment against the robots that took over their livelihoods. Ms Auken suspects these people may turn against the political system that deprived them of work. She is also a bit concerned about her lack of privacy, unable to go anywhere without being registered, monitored, and assessed: “I know that, somewhere, everything I do, think, and dream of is recorded. I just hope that nobody will use it against me.” Amazingly, Ms Auken – in her noble pursuit of a holier-than-thou life – seems none too concerned and wonders why the good life took such a long time in coming. After all, the complete and utter lack of privacy is such a small price to pay for addressing global warming, environmental degradation, water and air pollution, and the refugee crisis, amongst many other societal ills. And yet, Ms Auken also wonders why people are upset and vote Mr Trump into office or flirt with Marine Le Pen. The luddites are, it would seem, getting restless already. Her dystopian Brave New World in which freedom-starved people are deprived of their property, reduced to a mere number, spied upon, and assessed by an algorithm is not something anyone should aspire to. Hers is an Orwellian world on steroids. Perish the thought, lest humanity should succumb to a rigid and rather mindless subsistence under the diktat of deep ecology. Were the people of New Hampshire that prescient? HUNGER CHALLENGE RECEDES Thankfully, most of the other predictions proffered by Global Future Council experts add to human well-being and are a much better fit to the peculiarities and requirements of both life and soul. Professor of Population Ecology Tim Benton 45

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The GFCs first-ever meeting took place on November 13-14 of last year in Dubai. Over 700 council members – each an expert in a specific field – gathered for two days of panel discussions and informal gettogethers. Participants report on their progress on existing WEF initiatives such as closing the gender gap and the fight against global warming, and present their own independently-developed ideas.

“Just as thirty-odd years ago, nobody saw the Internet coming, today’s futurists surely miss a major development that thoroughly disrupts their vision of tomorrow’s world.”

Cover Story

Sunset on Mars

of the University of Leeds reports that the hunger challenge is slowly receding as malnourishment shifts it focus to those that suffer from excessive weight and obesity.

usual checks and balances that keep governmental power constrained by rights and the rule of law, constitutes “perhaps the greatest danger to the future of Western democracies.”

Prof Benton argues that a reduction in the amount of greenhouse-intensive food produced globally – meat in particular – is a sure-fire way to decarbonise the food system. Setting up a production and distribution model that reduces waste is another way to diminish the emission of greenhouse gases. A study by the World resources Group shows that carbon-footprint of lost and wasted food represents almost twice the amount of food consumed by Russia alone.

MULTIPOLAR WORLD Those Western democracies, writes Robert Muggah of the Brazilian Igarapé Institute – a think tank on development models – are about to lose their dominance as China, Russia, and India rise to the top and share their power with regional blocs and increasingly assertive conurbations of megacities. Mr Muggah cannot visualise the end of history quite yet and predict a return of the nation state as globalisation retreats. This adds to global instability. Mr Muggah points out that global defence spending has been on the rise since the 1990s and now exceeds $1.6 trillion annually with significant further increases expected as China’s economy expands, and its military budget with it.

Global reality is also set to undergo significant political change, an possibly upheaval. Human Rights Watch Executive Director Kenneth Roth foresees a multipolar world in which the values of western-style democracy are no longer universally accepted as the norm or ideal. Mr Roth detects a progressive erosion of the wellestablished principle that rule by majority is no excuse for trampling the rights of minorities. Instead, majorities, often rallying around assorted demagogues, increasingly demand their will be respected and implemented even to the detriment of others: “We forget at our peril the demagogues of yesteryear – the fascists, communists, and their ilk – who claimed to act for the majority but ended up crushing the individual.” Mr Kenneth concludes that unfettered majority rule without the 46

Mr Muggah thinks soft power is overrated and will see its influence decline as nation states shore up their military capabilities and globalisation stagnates. So, it seems that both Francis Fukayama and Friedrich Engels were wrong: the former predicting the end of history and the latter the withering away of the state. WRITING HISTORY This only serves to underscore the supreme difficulty of tracing human development into the future. Quite literally anything can – and

probably will – happen: Brexit, Trump and all the other surprises expected in 2017 make sure that trend-watchers can have only one near-certainty to contend with – they will get it wrong. The Global Future Councils are, however, extremely valuable forums in which the state of the present is analysed and new developments – perhaps even trend-setting ones – are put on display and debated. The rather absurd world sketched by Ms Auke from Denmark will not come to pass. However, some aspects of her vision are feasible and already being put in practice. Even her privacy-deprived future is taking shape as Nordic governments mull doing away with paper money and tying up other loose ends to ensure full compliance with legislation. The value of Ms Auke’s vision resides in the fact that it allows others – likewise concerned people who may have read a book or two on philosophy, distrust absolute power, and display a slightly better, and perhaps more realistic, understanding of human nature and what drives it – to offer an alternative, less dystopian, view of the future in which there is plenty of room for messiness, debate, error, tension, and – above all – endearing, contrarian, and recalcitrant luddites – those nonconformist wingnuts who simply refuse to toe the line: the precise sort of people who really will do the actual shaping of our common future for history is written by them. i

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> Considerations:

Dealing With Change Change is seldom easy to digest; it requires adaptation and accommodation which, in turn, often signal a departure from the familiar and comfortable – a break, of sorts, with the past. As the first Internet generation comes of age, young people weaned on social media discover that many of today’s global challenges cannot (yet?) be met by an app. Adding to their dismay, political discourse and its nuances cannot be distilled into binary choices.

he entire digital domain is, of course, ruled by such yes or no answers. Artificial intelligence, up to and including machine learning, is little more than an attempt to break down highly complex issues into ever smaller bits that are either true or false. Whilst the results of this gargantuan effort in calculus look impressive, there are no subtle thought processes at play. Researchers have found, time and again, that human beings are by their very nature irrational and cannot be entrusted to make choices that produce desirable outcomes. Essentially, whenever presented with a binary choice, the subtleties of the mind – its curious twists and turns – ensure that more often than not the wrong option is selected to the detriment of the individual’s best interest. Thus, humans must, as per the force of logic, not be depended upon to plot a future that is sustainable – to use a word much in vogue. Not burdened by emotions – the spice of life – machines that process vast amounts of circumstantial data at the speed of light will invariably produce sensible choices. Some people concerned about the deplorable state of global affairs argue that humanity should become more machine-like in order to ensure its long-term survival. Practices that threaten the future of the planet are to be banned outright and individuals need to conform to rational decisions arrived at via a process of iron logic. The first victim of this drive towards collective sanity usually is privacy. Since all should

“Researchers have found, time and again, that human beings are by their very nature irrational and cannot be entrusted to make choices that produce desirable outcomes.” conform to the diktat of logic, nobody should fear the absence of a private sphere – a dark space that only serves to hide mischief from the public eye. Being irrational for harbouring potentially harmful behaviour to both individual and collective interests, privacy is deemed undesirable – a throwback, if you will, to an era characterised by an illogical reverence of the self. Whilst it is hard to argue with a machine, the tendency to pay tribute to logic in the management of global affairs denies the existence of an emotional dimension in human behaviour. That is a fatal flaw. People are not binary entities and mostly resent being guided by logic which rejects the validity of intangibles such as culture, custom, and – most important of all – gut feeling. This helps explain the recent backlash against the experts who are now almost universally distrusted for bursting the bubbles of popular imagination. Mr Trump may be a misogynist, a serial abuser of bankruptcy law, and a tax avoider, his boisterous irrationality got him elected to the White House all the same. Likewise, the British full well

realise that life outside of the EU is no bed of roses, they even so voted to leave. Similarly, the oft-repeated cry that the end is nigh on global warming does not sit well with those who feel left out by progress – a largely silent majority and the very people that vote politicians into office who are dismissed by others as nutcases. It simply won’t do to ignore the very mundane concerns of common folk – the ones UK Prime Minister Theresa May labelled the jams: just about managing. Jams do not necessarily want to break with the past; they just want to get by and have their government address healthcare, schooling, and housing concerns. Sure, they worry a little bit about the forces of globalisation and climate change – if for no other reason than that experts keep mentioning them – but it doesn’t keep them up at night. If the annual summit in Davos is to have some meaning for “most people”, as opposed to the 0.1 percenters, it must try to steer away from the esoteric and embrace the common. The World Economic Forum aims to make the world a better place for all and has indeed done and accomplished much towards this end. As the premier platform of thought leadership, the WEF must recognise that evolution is to be preferred over revolution. This global community is not well-served by radical ideas that aim to usher in a brave new world based on iron logic. Allow some room for the politically incorrect: voices that speak from the heart rather than the mind. Davos needs an infusion of emotion – a Deus ex Machina that shatters established convention with original non-binary thought – flaws and all. i

Cover Story

“The World Economic Forum aims to make the world a better place for all and has indeed done and accomplished much towards this end. As the premier platform of thought leadership, the WEF must recognise that evolution is to be preferred over revolution.”

> Winter 2016-2017 Special:

The Philosopher Kings and Their Missing Sage

t is quite easy to dismiss The Davos Men / Women who congregate annually in a Swiss resort town as the chattering delegates of the established order. In fact, their annual pilgrimage to Davos is merely an attempt, probably doomed to fail, to find a way to square democracy with order. Alas, there is no sage to be found on the mountaintop.

future threats to humanity – someone has to, after all – the remaining 99.99% are much more interested in knowing if their job will still exist tomorrow. Having lost its primacy to the vagaries of intangible markets, politics now is at the mercy of demagogues. They are the ones proffering innovation, albeit not in ways that are either promising or politically correct.

Still, the event – let’s not call it a media circus – serves a purpose: the gathered luminaries shine their light on the world’s problems and challenges. They also identify, and discuss at length, the trends that are likely to shape the future. That is the interesting bit: being in constant flux (a good thing), the world needs to adapt constantly to progress (a scary thing).

Though former British prime minister Tony Blair has promised to fight Brexit, his might is not what it used to be. A Davos habitué, Mr Blair is one of those responsible for the sorry state of today’s politics. His New Labour blurred ideological fault lines which was supposed to signal the end of history but, instead, handed his nation to his conservative rivals. Why settle on pseudo Tories if you can vote for the real thing? In fairness to Mr Blair, he was not the only one committing this mistake; he’s just the most gratifying target.

Perhaps taking a cue from the advent of artificial intelligence, the Davos Men are, however, becoming rather robotic, if not stale. Political correctness reigns supreme even amongst the 0.01% that move global events, and thus the course of history. Development needs to be inclusive and sustainable, of course, and should take into consideration the best interests of all stakeholders. Pining, perhaps, after a world that no longer is – and thus stuck in history – the people of the valley just want their bread buttered and way of life preserved. Brexit, Trumpism, and the rebirth of a Joan of Arc in France, are set to grab the headlines and provide the Davos Men with plenty fodder for debate. Regrettably, original thought is in short supply. Events unfold with a speed not matched by collective thought processes. Whilst very few people are denying the importance of global warming, the topic – alarming as it is – loses out to more mundane concerns over day-to-day life. It is all well and good for jet-setting billionaires and their hangers-on to debate

Back to Davos. If this conclave of the high and mighty is to serve its purpose, debate should shy away from the esoteric and concentrate on addressing real issues. The strength of Davos resides in its ability, well documented, to urge for better governance – bot governmental and corporate. This does not necessarily imply less governance – the retreat of the state is another reason why many people have lost faith in the ability of politics to address their concerns. Modern technology, such as the fourth industrial revolution the World Economic Forum identified as the next big thing, can perhaps help improve societal engagement. Much more than merely an exponent of the chattering upper classes, The Davos Man (Woman) carries responsibilities not unlike those that burdened Plato’s philosopher kings. It may not be entirely democratic, but he/she is entrusted with the job of ensuring that the future is met in an orderly fashion. i

Switzerland: Davos

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> AL GORE A Mixed Blessing for Climate Change

A Davos regular since the mid-2000s, Al Gore leaves no stone unturned to remind the world that the end is nigh. Unless, of course, bold action is taken to stop climate change in its tracks. Mr Gore is a man of big ideas and even bigger solutions. A climate change fighter – or doomsayer as the case may be – Al Gore rose to global prominence reminding audiences of the inconvenient truth: global temperatures will rise, as will sea levels, and mayhem on a truly epic scale awaits us. Winner of the Nobel Peace Prize of 2007, awarded at a time when the Norwegian Nobel Committee chose to reinvigorate US liberalism, Al Gore has repeatedly ascended to Davos in order to create awareness amongst world leaders of the impending catastrophe that results from a warmer world. In 2015, Mr Gore attributed the “warmest year on record” to the burning of fossil fuels. Throwing about numbers and statistics at an impressive rate, he warned about the dangers of not embracing clean energy solutions. Mr Gore piqued the interest of business leaders 50

with his message that a carbon neutral future is also one awash in opportunity. He called upon the corporate world to take the lead in the move away from harmful fossil fuels and cash in on the new era. The elder statesman who never was – thanks to Florida’s malfunctioning voting machines – Al Gore commands much respect but sometimes goes off the rails. He caused quite a sensation at last year’s Davos summit by suggesting that “fertility management” was part of the solution. Mr Gore argued that fertility management – birth control to the rest of the world – is urgently needed if the growth of the world population, and thus human pressure on the environment, is to be contained. His suggestion, whilst not unreasonable at face value, was condemned as a form of eco-imperialism by, amongst others, Myron Ebell, director of Global Warming and Environmental Policy at the Competitive Free Enterprise Institute – another Davos habitué. It is not so much the message as the messiahlike behaviour of the messenger that causes people to tune out whenever Mr Gore broaches CFI.co | Capital Finance International

his favourite topic. The former US vicepresident is also considered firmly embedded in the establishment he aims to steer away from predatory practices. In the decade since leaving office in 2001, Mr Gore multiplied his net worth a hundred-fold to well over $200 million. Famously, his multiple large mansions consume vast amounts of energy. Mr Gore’s flagship twenty-room residence in Nashville, Tennessee, was found to use in excess of 190 MWh of electric power annually – about twelve times the US national average. In a peculiar twist, the Associated Press revealed that former president George W Bush’s 800m2 Texas retreat, heated by geothermal pumps and equipped with a waste water recycling system, uses about a quarter of the energy Mr Gore needs to power a single of his dwellings. Though he has an exceedingly important message to deliver, Mr Gore’s high-flying presence in Davos does not serve his cause all that well. As n Davos Man of great standing, Mr Gore would be well advised to carry big data but speak softly. Perhaps the world would listen.

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> BONO The Billionaire Activist He is a singer on a mission. Leveraging his rock star status, Bono wants to make the world a better place and lends his name and fame to any politically correct cause he can find. His music has suffered some as a result and U2, his band, is no stranger to the practices its leader regularly condemns. Following a path trodden by other mega acts such as The Rolling Stones, Rod Stewart, and the late David Bowie, U2 moved its complete song catalogue offshore to The Netherlands where performing artists are largely tax exempt. Cosying up to the rich and powerful, and prodding them to behave nicely, brings Bono to Davos each winter. There is no place quite like it to spread the word and preach to the global powers that be. While at it, Bono likes to shake things up a bit. In 2014, he startled attendants by stating that “some criminals here” do not wear ski masks, just skis. Bono also declared capitalism “amoral” and appealed to the business community to raise ethical standards and engage in the fight against global poverty. However, far from an enfant terrible, Bono has a keen sense of public relations. He readily admits that the mainstream media do not want to hear him talk about politics. In search of a podium, and a slot on primetime television, the singer turned to politicians. Climbing on their soapbox allowed Bono to reclaim the limelight, delivering his message to all and sundry. Sharing the stage with then-British Prime Minister David Cameron during a panel discussion on corporate and governmental transparency, Bono called on private businesses to tackle “the evil twins” of opacity in the extractive industry and the sheltering of assets in tax havens. He did, however, have a kind word for Mr Cameron who maintained Great Britain’s budget for development aid throughout the financial crisis. At last year’s Davos meeting, Bono partnered with Microsoft founder and philanthropist Bill Gates to continue the fight against AIDS. A Red Fund set up in 2006 by Bono and Bobby Shriver, an activist attorney and member of the extended Kennedy family, to help poor countries deal with the disease has so far raised $350 million and touched the lives of almost sixty million people. Bono has been exceptionally successful at raising money amongst the world’s billionaires. He also managed to cow or otherwise convince western governments and agencies to write down debts owed by poor countries. His Drop the Debt campaign, unleashed in the late

1990s, managed to put debt relief on the global agenda. So far, 36 highly-indebted poor countries (HIPCs) have qualified for a total of $75 billion in debt cancellations. Currently, Bono is putting his efforts towards the promotion of the Product Red brand, a Red Fund spinoff, which lends its name to companies that donate part of their profits to the Global Fund to Fight AIDS, Tuberculosis, and Malaria. The initiative has already CFI.co | Capital Finance International

attracted big name brands such as American Express, Apple, Motorola, Microsoft, and The Gap, amongst others. As an investor, Bono owns a €200 million stake in the Forbes Media Group. He also acquired a 1.5% stake in Facebook for a similar amount. His shares in the social network are currently valued at around €900 million. As such, Bono the billionaire should feel quite at home in Davos. 51

> SHARMEEN OBAID-CHINOY A Lens for Change

While at the 2016 Davos summit, Pakistan filmmaker and double Oscar winner Sharmeen Obaid-Chinoy took her country’s prime minister Nawaz Sharif aside to ask him about the disconcerting spike in honour killings and his government’s response. Each year, hundreds of women accused of immoral behaviour are murdered by relatives bent on restoring their family’s tarnished honour. While the exact number of victims remains unknown, police statistics indicate that as many as 1,100 women may have been killed for this reason alone in 2015. Data compiled by human rights groups show that these killings are on the rise and have almost doubled over the past five years. In Davos, Prime Minister Sharif vowed that his government will eradicate the phenomenon which he called “particularly evil”. In 2012, Mrs Obaid-Chinoy was awarded an Oscar – Pakistan’s first – for her documentary Saving Face is which she portrays the lives of women who survived acid attacks. Saving Face follows two women who were disfigured after their husbands doused them in acid. The documentary also showcases 52

the work of the British-Pakistani plastic surgeon Mohammad Jawad who helps restore the women’s shattered faces. Notwithstanding Prime Minister Sharif’s assurances, Pakistan was rocked by the death of social media celebrity Fouzia Azeem in July 2016. Better known by her handle Qandeel Baloch, Mrs Azeem was asphyxiated while asleep by her brother Waseem who admitted to the murder and said his sister had brought “disrepute” to the family. A women’s rights advocate and model, Mrs Azeem had told police she feared for her life after meeting with a senior Islamic cleric to talk about her faith. Mufti Abdul Qaqi was promptly suspended from his duties while Mrs Azeem received numerous death threats and had decided to move abroad. She was only days from leaving when her killer struck. Filmmaker Sharmeen Obaid-Chinoy readily admits that she aims to change government policy with her documentaries. Weeks after Saving Face was released the government of the Punjab province declared acid attacks a heinous CFI.co | Capital Finance International

crime on par with terrorism. Mrs Obaid-Chinoy’s 2015 short documentary A Girl in the River: The Price of Forgiveness, for which she also received an Oscar, has already led to a rethink of a legal loophole that allows criminals to escape punishment by offering family members money or retribution in exchange for a pardon. A Girl in the River film follows the life of an eighteen-year-old girl who survived an attempted honour killing perpetrated by her father and an uncle. Under pressure from the media and her surroundings to forgive the assailants, she finally gives in and allows both men to escape punishment. On Prime Minister Sharif’s instructions the state prosecutor has now become a co-claimant in the murder case of Fouzia Azeem which prevents her family from offering the murderers a pardon. The Pakistani senate has also approved an antihonour killing amendment which closes the loophole. However, the legislation has still to be passed into law. The job Mrs Obaid-Chinoy has taken on is not yet finished.

Winter 2016 - 2017 Issue

> ROBERT ZOELLICK A Vulcan Who Escapes Convention If there is but one must-have on the guest list of the Davos summit, it is the president of the World Bank – the do-good bank par excellence and a key to whatever development strategy under consideration. Former Wold Bank Chief Robert Zoellick, in the early 2000s part of the inner circle of foreign policy advisers to President George W Bush known as The Vulcans, is widely recognised as the voice of reason – often a lone one. He strongly advised the then-US president against military adventurism in Iraq but was overruled – or out-shouted – by Condoleezza Rice. In Davos, where he used to be a muchappreciated participant, Mr Zoellick tirelessly promoted sustainable development. He did so long before the phrase became a fashionable catch-all for corporate environmentalism. At the helm of the World Bank, Mr Zoellick steered the institution towards the implementation of differentiated models of development that emphasise the need for regional cooperation and integration whilst addressing the specific needs of weak states. Under his aegis, the World Bank capital increased significantly which allowed the institution to help countries deal with the fallout of the financial crisis of 2008/9. Mr Zoellick also helped update his bank’s governance structure in order to give emerging countries a greater say in its policy making processes. In both Davos and Washington Mr Zoellick caused a measure of consternation with his insistence on equating authoritarian rule and war to “evils” that beset the world: “people driven by enmity or a need to dominate will not respond to reason or goodwill.” Whilst a reasonable assertion, and one hard to discredit, Mr Zoellick’s frankness was often not appreciated in the politically correct community of multilateral entities where value judgments are discouraged and euphemisms reign. At a now rather lively panel meeting that took place during the 2012 Davos summit, Mr Zoellick prophesied that the financial crisis which then affected Europe would enter the history books as a watershed moment heralding a shift of economic power from west to east. Mr Zoellick, however, disputed the assertion made by Nouriel Roubini, professor of Economics at New York University’s Stern School of Business and known for his rather pessimistic views on the future of Europe, that long-suffering Greece would have to be ejected from the Eurozone in order to climb out of its depression. At the time, Prof Roubini called the Eurozone a slow-motion train wreck.

An optimist grounded in reason, if there be such a thing, Mr Zoellick bridged two rather distinct worlds: those of US conservatism and international development politics. In Davos, he managed to engage with both, smooth the rough edges, and get a dialogue going by applying a measure of pragmatism often found CFI.co | Capital Finance International

lacking. As such, Mr Zoellick – now sadly absent from the proceedings in the Alpine town – is the ultimate Davos Man: unwilling to grandstand, eschewing dogmas, and able to bring actors from diverse backgrounds together and bundle their efforts for the benefit of a common good. 53

> TONY BLAIR Points for Perseverance And, he’s back. This time, Tony Blair wants to save Great Britain from shooting itself in the foot. The man who almost singlehandedly steered his country onto the warpath, now pleads for a national moment of reflection on its decision to steer clear of the European Union. Mr Blair thinks it foolish for the UK to exit the world’s largest trading bloc and has taken up the defence of the “political homeless” who feel neither comfortable with the hard Brexit pursued by Prime Minister Theresa May nor with the hard socialism espoused by the Labour Party under the leadership of Jeremy Corbyn. Used to having a firm grip on the national and global narrative, Mr Blair is not comfortable being invisible. Patron of the Africa Governance Initiative and a regular participant of WEF meetings around the world, Mr Blair seldom misses the annual meeting in Davos. However, since leaving Number 10 in 2007, he no longer sets the tone. If only someone would remind him of that. Still Mr Blair gains points for perseverance. He has set up a number of foundations to carry his legacy: the Tony Blair Sports Foundation aims to get children from disadvantaged communities interested in sports while the larger Tony Blair Faith Foundation promotes understanding and respect between religions and hopes to tackle world poverty at the same time. The latter of the two entities is based on the premise that faith is a powerful force for good. However, sometimes that vision becomes slightly obfuscated. In March 2016, Mr Blair unexpectedly vented his anger at Muslim complacency in the face of terror. In an essay published in The Sunday Times, the former prime minister wrote that the teachings of hate that millions condone, perverts the Muslim faith. He concluded that peaceful coexistence with religious radicals is impossible: “They need to be defeated.” In Africa, Mr Blair has partnered with the Howard G Buffett Foundation – set up by the son of the well-known philanthropist from Omaha – to help improve the quality of governance. The poster child of the Africa Governance Initiative is President Paul Kagame of Rwanda who in May last year played host to the World Economic Forum on Africa. President Kagame has received lavish praise for turning his country from a failed state into a regional powerhouse and an engine of growth. According to the WEF, Rwanda now ranks third on the ease-of-doing-business list in Africa. While in Kigali, Mr Blair seemed to endorse President Kagame’s highly controversial bid for a 54

third term in office which required tinkering with the country’s constitution. Confirming lingering suspicions that the Kagame Administration is ready to ignore legal niceties, parliament announced that its own exhaustive polling could only find ten voters opposed to a third term for the sitting president. Legislators duly amended the constitution which now allows President Kagame to stand for a third seven-year term, CFI.co | Capital Finance International

followed by two five-year stints in office, enabling him to stay in power until 2034. Messrs Blair and Buffett, both on hand at the WEF event in Kigali, remained unfazed with the former prime minister declaring that Rwandans seemed very content to continue on the present path to which Mr Buffett added that losing Kagame was not a risk he is prepared to take. His wish was granted.

Winter 2016 - 2017 Issue

> PAULO COELHO Sustaining a Dialogue Brazilian writer Paulo Coelho, a UN ambassador for peace and former EU ambassador for culture, is concerned with the at times difficult dialogue between peoples. A special adviser to the UNESCO Programme on Spiritual Convergence and Intercultural Dialogue, Mr Coelho dwells at the crossroads of a global community plagued by misunderstanding. Notwithstanding the world’s much-increased interconnectivity, an exchange of ideas and experiences between cultures has barely started. In Davos, where he is a regular guest, Mr Coelho advocates for more originality of thought. He also rallies, modestly of course, for an easing up on intellectual property laws and regulations. Mr Coelho does not think artists and their work suffer from copying. To the contrary, increased exposure, he argues, offers benefits not otherwise available to the creators of original content. A long-time fan of The Pirate Bay, Mr Coelho has made his own work freely available on The Pirate Bay – the resilient torrent sharing website that is being hunted the world over, but refuses deletion. A most welcome participant of the annual Davos summit, Mr Coelho has much to say about the way traditional industries respond to disruption. He is critical of publishers who see piracy as a threat to their business model. Mr Coelho, whose books have been translated into more than eighty languages, begs to disagree and says that piracy is a form of flattery that writers and other artists should embrace. Copying allows millions of people to be reached who cannot afford the price of a book at the suggested retail price. As such, sales are not lost for they would never have taken place. As the all-time bestselling author of the Lusophone community, Mr Coelho puts considerable effort into promoting reading as a way to bridge divides and unite people of diverse backgrounds. He writes about the essence of life – including, to the horror of puritans, its more esoteric sides such as sex and craziness – in a way deliberately calculated to provoke readers into thought. As an all-round happy Davos Man, Mr Coelho looks forward to attending the proceedings: “Davos is a fantastic idea. It brings together powerbrokers on neutral territory where they can engage in dialogue. This is where the magic of Davos lies. I have found that decision makers battle the same issues as everybody else.” Crucially, some talk more than others while listeners remain scarce. This perhaps explains why the author is sparse with words. Mr Coelho is the first to recognise that the power of the written word is vastly overestimated.

Essentially, nobody listens to the author. The proof he produces are the ongoing wars in the Middle East: “Just before the US invasion of Iraq, I wrote an essay on the dangers of the undertaking. It was read by an estimated 500 million people, yet failed to delay the war for even a second.” The dialogue of the deaf does cause Mr Coelho CFI.co | Capital Finance International

to lose his normally impeccable cool. He remembers meeting some of the world’s most important leaders in Davos and being surprised that they were rather full of themselves: “they behave as if they own the ultimate truth and display an almost missionary zeal to propagate its marvels. That is no way to begin, or sustain, a dialogue.” 55

> Europe:

None of the Above By Wim Romeijn

Early last year, former Swedish prime minister Carl Bildt shone his light on Europe’s future. Writing in a report on the topic commissioned by the World Economic Forum’s Global Agenda Council on Europe, Mr Bildt spells out two possible scenarios – one in which all turns out quite well and another that reads like a comedy of errors. A more probable one, the snafu option, was not discussed.

France: Flags in front of the European Parliament, Strasbourg, Alsace

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verall, WEF thinkers are not an upbeat lot when it comes to Europe’s future. Mr Bildt’s optimistic outlook became unhinged as the UK unexpectedly voted to turn its collective backs on the world’s most ambitious nation-building project. Another assumption, the quick and painless approval and ratification of the Transatlantic Trade and Investment Partnership (TTIP), went awry with the election of Donald Trump as US president, potentially saving Europe the embarrassment of having the treaty blocked by recalcitrant Walloons and others.

“The British are about to discover the true cost of the extraunion existence they clamoured for.”

With the upbeat part of his essay now firmly trashed by events, including the bit about a democratic Turkey becoming a genuine partner of the union, the menacing contours of Mr Bildt’s doom scenario are beginning to show. This entails, amongst others, a collapse of the Schengen passport-free travel area and the election in France of Marine Le Pen to that country’s presidency. Mr Bildt also foresees Scotland and Catalunya splitting off, The Netherlands departing the EU, and rising tensions between France and Germany. With Russia on the move along the union’s (and NATO’s) eastern flank and the single currency yet again undermined by a debt crisis – this time courtesy of Italy – the entire EU project fails and the stage is set for a return to conflict on a scale that transcends the epic.

riches only because some people have no clue which side their bread is buttered on.

The trouble with Mr Bildt’s essay is that he – of all people – should know that Europe always finds a way to muddle along. The good news is that the European Union will survive. It was deliberately set up, in the late 1940s, to create interdependencies between nations to such a degree that withdrawing from the structure would equate to economic suicide. At the time, this tight embrace was seen as the only way in which to prevent the former foes from exacting revenge for whatever injustice may have been inflicted in the past.

France, with or without Marine Le Pen, is no different. Famous for taking to the streets at the slightest inconvenience suffered, the French are not likely to accept any exit tax passively. Mr Bildt’s scenario in which all things European fall apart is as improbable as the one in which reason and common sense prevail.

Take Mr Bildt’s dim view on The Netherlands: whilst a few demagogues may tap into general disgruntlement and gain a following of malcontents, the country sends fully three quarters of its exports to fellow EU member states. A trading nation par excellence, The Netherlands fares exceedingly well by open borders with international trade flows representing well over 110% of its GDP. Even if the nation were to suffer a momentary lapse of reason, which is entirely possible, no government will follow through on a – constitutionally nonbinding – vote to squander the country’s vast

The British are about to discover the true cost of the extra-union existence they clamoured for. Asked in a YouGov poll if they were willing to pay up to one percent of their income in order to reduce the influx of EU migrants, fully thirty percent of voters who opted for Brexit on June 23 declined. With an exit bill potentially dwarfing the inflated savings promised by the leavers, voters are yet to feel the pinch. It is good and well to swag a pint and dispense wisdom in a pub; it is quite another thing to actually pay for such flights of fancy. There is a reason why Prime Minister Theresa May drags her heels and it has nothing to do with the courts: she is trying to insert a square peg in a round hole.

The European Union, with all its deep interdependencies and set up as Hotel California, is not about to leave the world stage. It will, however, need to deal with its many crises and – even more importantly – engage full on in reputation management. It is no good for commission president Jean-Claude Juncker to lay down the law, or for European Parliament president Martin Schultz to rant and rave: Europe has problems that need to be dealt with. Some lateral thinking is urgently required. The politically correct no longer suffices. As was exhaustively discussed at last year’s WEF annual meeting in Davos, Europe risks becoming fractured. The Global Agenda Council on Europe has, in fact, identified four distinct blocs within the union, each with distinct interests and

aspirations: Nordic Europe, Western Europe plus Estonia, Southern and Eastern Europe, and South East Europe comprising Greece, Romania, and Bulgaria. In its Europe 2020 Competitiveness Report, the WEF notes that, far from homogeneous, the union is a collective of nations with rather large disparities in economic performance. Of the newcomers, only Estonia has managed to sustain progress and join the ranks of highly competitive economies. The WEF report recommends improvements on three fronts: “smart” policies to leverage Europe’s edge in knowledge and innovation, inclusive development to ensure low unemployment, and sustainable growth to minimise the impact on the environment and help the cause of global warming. Its first draft written in 2012, the report is, alas, hopelessly out of date. Smart, inclusive, and sustainable are not concepts that appeal to voters or cause excitement. Most people are, in fact, wondering why a bank that just posted a €600m profit needs to let go of close to 1,400 employees, as the state-owned Dutch ABN Amro announced in November. Others will want to know why tens of thousands of economic refugees are ferried across the Mediterranean by Europe’s navies. Some express bewilderment at the self-serving behaviour of politicians such as former European Commission president José Manuel Barroso who landed a plush job at New York investment bank Goldman Sachs, the same one that helped Greece fudge its deplorable economic performance for years on end causing that country – and the EU – much harm. Regrettably, Mr Barroso’s career trajectory is far from unique: of the 26 commissioners that stepped down in 2014, nine have since taken up jobs with big business though happily none were quite as blatant as Dutch former commissioner for the Digital Agenda Neelie Smit Kroes who eagerly took a seat on the public policy board of Uber, a company she had vocally supported while in office. If the European Union is to flourish – survive it will anyhow – governance must be improved. Smart technology, inclusiveness, and sustainability may all be valuable and needed to ensure a better future, none of these lofty goals stand a chance when governments remain short on trust and long on conventional wisdom. Brexit, Trump, and all that is still to follow show only one thing: people do not want to be talked to, they wish to be heard. i

“Some express bewilderment at the self-serving behaviour of politicians such as former European Commission president José Manuel Barroso who landed a plush job at New York investment bank Goldman Sachs, the same one that helped Greece fudge its deplorable economic performance for years on end causing that country – and the EU – much harm.” 58

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> Savills Investment Management:

Excellence in Real Estate

avills Investment Management is an international real estate investment manager providing: • On-the-Ground capability with offices worldwide to give detailed understanding of the markets the company invests in; • A full service offering, ranging from transactions and originating debt to asset and portfolio management; and • Access to and the backing of Savills, a leading international real estate services group, providing in depth and real time knowledge of the cities the company invests in on a street-by-street basis. Savills Investment Management’s 25+ year track record of successfully investing on behalf of its clients is based on adhering to a core set of principles: buying well in stock selection, delivering target returns with asset management, and maximising performance through deal structuring. The firm’s senior team is well respected for its industry knowledge and experience across all facets of investment. ACHIEVEMENTS Savills Investment Management continues to create a wide range of products ranging from core Pan-European or Asian funds to opportunistic single market or single sector mandates. The firm has decades of experience in sectors such as retail, office, and logistic and have 18 funds and 16 separate accounts. Launches in 2016 included the €300m Mercury Fund, one of the largest Italian investment funds ever to be dedicated to the retail sector. CEO: Justin O’Connor

Two of Savills Investment Management’s most successful funds include the Charities Property Fund (CPF) and the European Commercial Fund (ECF). The former is the largest charity-specific property fund in the UK with over £1 billion under management. Key to its rapid growth has been its ability to generate a consistently high level of income while continuing to outperform its benchmark. It has won a number of awards and has the best performance of any charityspecific fund over the last five years. ECF, with over €1 billion under management, offers broad sector and regional diversification with a focus on retail and office investments in western European core markets. 2016 also saw the successful sale of the Potsdamer Platz portfolio in Berlin, the largest German transaction of the year and one of the largest transactions in Europe. Savills IM also secured the first ever joint venture between an international real estate investment manager and a private Chinese investment company when

it signed an agreement with China Minsheng Investment Capital Co. The agreement was to develop and promote a series of funds and investment vehicles to invest in global real estate markets and it underlined the strength of Savills IM’s reputation. STRATEGIC LEADERSHIP Under the stewardship of Justin O’Connor,

its chief executive officer, Savills IM is fast establishing itself as a global real estate player. The company’s AUM has grown from €3 billion in 2011 to its current level of €17 billion, while the volume of transactions is set to be a record €4.5 billion in 2016. This demonstration of strong growth is testament to the continued strategy of expanding Savills IM’s market coverage and critical mass. i

London: Vue Cinema, Leicester Square

Copenhagen: Ostergade 33-35

CFI.co | Capital Finance International

> HSBC Germany:

Leading Global Debt House

SBC Germany is the leading debt house for all issuances in Germany, Austria, and Switzerland. Thanks to its strong domestic roots and the group’s unrivalled global distribution expertise, HSBC offers an extremely competitive mix of granular private placements in all formats, 60

local currencies, and sizeable benchmark issuances in all currencies, combined with the entire spectrum of derivative and liability management solutions. Global markets are changing rapidly today at a yet unwitnessed pace. Stricter regulations CFI.co | Capital Finance International

and tighter margins lead to higher demands in terms of credit story, structure, or innovation for both issuers and global investors. Emerging geopolitical risks have also developed into intense volatility drivers – in the new normal, windows of opportunities open and close within hours. It is therefore absolutely vital to identify

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and capitalise the right opportunities given these circumstances. HSBC is strongly positioned to help identify those opportunities and to advise on the right capital solution based on local and global expertise to serve its clients individual needs. The right funding strategy is becoming more and more important in order to avoid risks and achieve the efficiency required. Entering growing markets remains as important as ever. HSBC offers the right strategic partnership for exploring and realising opportunities for growth in the right direction. ISSUERS AND INVESTORS BECOMING MORE INTERNATIONAL It is therefore no coincidence that international bond investors are raising their asset allocations in Asia, increasing their credit exposure to the region and preparing to augment their portfolios with bank capital issues, green bonds, and infrastructure financing. At the same time, Asian investors have become a powerful counterparty that no issuer is willing to neglect. Asian investors are fully established as important stakeholders seeking appealing credit stories globally, but in particular for German corporates. Concurrently, it is crucial for borrowers to broaden their investor group in order to have access to different markets. The bond market has become significant also for its internationality. It has developed into a real institutional market driven by institutional investors. Allianz, for example, made use of the favourable market conditions and went ahead with a $1.5bn Perpetual NC5.5 hybrid issue in August 2016, achieving the lowest ever coupon (3.875%) for a fixedfor-life perpetual insurance instrument. The final order book consisted of more than 450 investors, with 60% allocated to Asia and 48% to fund managers, underlining the trend towards greater internationalisation. We would expect this trend to continue given the fact that interest rates are at historic lows and investors are willing to put cash to work in an ongoing hunt for yield. SUSTAINABLE FINANCING NO LONGER A NICHE With the evolution of the sustainable markets from niche to mainstream, investments and issuances in green bonds have become a vivid option to consider. HSBC is recognised as one of the market leaders in sustainable financing. This growth has been driven by new developments in low-carbon projects including buildings, transportation, and renewable energy infrastructure.

“HSBC is strongly positioned to advise on the right capital solution based on local and global expertise.”

The ongoing creation of new standards, such as the industry’s development of green reporting guidelines, and the new regulations and frameworks deployed by governments globally, have helped to create a platform CFI.co | Capital Finance International

that is constantly becoming more attractive, regionally and internationally. HSBC is already a major participant in its capacity as an underwriter, helping to bring new and repeat issuers to the market. Considering the benefits, issuers want to issue green bonds in order to diversify their investor base and demonstrate sustainable strategies and investments carried out or in the pipeline. In addition to that, investors want to demonstrate their commitment to the low carbon economy. Many corporates are expanding the portion of their budget that can be dedicated to these activities globally. When it comes to sustainable financing via green bonds, the additional costs are marginal and in some cases issuers can achieve more competitive pricing. There are examples where the new issue premium can be slightly lower when compared to a conventional bond. 2016 has been an exciting year. Issuance volume almost doubled up until end of November 2016 compared to 2015, to $90 billion. HSBC’s research suggests that Asia will continue to be the key driver given the significant increase in volume from 2015 to 2016. But despite the prospering developments in China, Europe is becoming aware of the green advantages. In March 2016, the leading German wind turbines manufacturer Nordex was able to price its €550m debut Schuldschein transaction, which was also the first ever green Schuldschein in the market. On the back of strong investor interest, also from China with 12%, the volume was upsized and all tranches were priced at the tight end of the credit spread ranges initially announced. WHY THE SCHULDSCHEIN HAS BECOME A SIGNIFICANT PRODUCT Speaking of the Schuldschein - more investors and issuers are falling for the charms of this funding vehicle that has become so fashionable in recent years. As investors are focusing predominantly on issuers’ credit stories, the Schuldschein has turned into a sought-after issuance internationally. 2016 will most likely be the most successful year with over €20bn in issuance. We identify strong investor liquidity due to the ECB and BoE measures as well as increasing budgets of international investors and issuers. HSBC is a leading bank in the origination of innovative products, such as the green Schuldschein, and in bringing US entities of European corporates to the market, as reflected in its consistent Top 5 position in the league tables with increasing market shares in Austria, the UK, and the Benelux. HSBC is furthermore highly regarded for bringing the German SSD format to international issuers with over 10 SSD deals for non-German/ Austrian clients since 2014. i 61

> Interview with Alain de Serres and Hildegunn Kyvik Nordås:

OECD Contributions to the Global Growth Agenda Mr De Serres and Ms Nordås speak to CFI.co about the work of the OECD and how the organisation helps countries assess and adjust economic policy. HOW DOES THE OECD HELP STIMULATE ECONOMIC GROWTH AS A MULTILATERAL ORGANISATION? Helping policy makers in OECD countries to identify policy settings to promote strong, inclusive and sustainable growth is at the heart of the OECD mission. This objective is pursued with a view that growth is a means to an end, which is to improve the well-being of citizens. The power and credibility of policy recommendations to lift growth rest on the extent to which they can be supported with evidence. In order to persuade their constituencies about the merit of pro-growth reforms, policymakers need to know about the size and nature of the gains they can expect. But the capacity to measure the gains depends on the availability of adequate tools. And, one of the major contributions of the OECD to the global growth agenda is the continuous development and refinement of quantitative instruments to assess outcomes and policies over a broad range of areas in a way that is comparable across countries. Over the years, the work of the OECD has led to the development of tools that measure and compare outcomes and policy settings in most areas that are fundamental to growth such as product market competition, education, innovation, trade, financial development – all known to be important for productivity – and job creation. The result is a broad set of quantitative indicators that can be used to demonstrate how certain policy settings can be reformed to improve economic performance. More importantly, the amount of detailed information collected to build the indicators turns out to be very helpful for policymakers to have a look at the more specific aspects of a policy setting that could hinder performance in a specific area and see what other countries are doing to achieve better outcomes.

“The expansion of trade agreements into policy areas previously exclusively under the jurisdiction of national governments has also raised concerns that they may undermine local democracy.” The OECD Going for Growth publication is one example of a programme through which the OECD combines quantitative analysis with judgment and knowledge of local experts to help governments reflect on how policy reforms might affect their citizens’ well-being, taking into account country-specific circumstances – including income levels, institutional capacity, and the stance of macro policies – to avoid a one-size-fits-all policy prescription. The report, published annually, identifies key reform priorities to boost real incomes and employment in advanced and major emerging-market countries and proposes policy packages to overcome the key growth challenges. The Going for Growth framework has been instrumental in helping G20 countries develop growth strategies to raise their combined gross domestic product (GDP) by 2%, one of the main policy objectives set by the G20 in 2014 to achieve sustained and balanced growth. This type of exercise builds on the various structural surveillance processes that are part of the regular work of the OECD. These include general surveillance on a country-by-country basis that is reported in the Economic Surveys

as well as cross-country surveillance focused on more specific fields that is reported in a variety of OECD publications such as the Employment Outlook, the Science, Technology and Industry Scoreboard, Education at a Glance, the PISA Programme, the Reviews of Regulatory Reforms, and many more. WHAT HAS THE TRADE AGREEMENTS AND TRADE SERVICES CONTRIBUTED IN TERMS OF SOCIOECONOMIC IMPACT? Trade in goods and services defines our daily lives. The variety of food on our tables, the medicine that helps us stay healthy, the clothes that we wear, the cars and other means of transport that we depend on have all become within reach of ordinary people thanks to trade. Logging on to the Internet would not be possible without the global value chains that produce computers, tablets, and smartphones; the software developers around the world; and the interconnected telecommunications networks that reach almost every village. Trade agreements provide the legal framework that ensures a stable and predictable environment for those that engage in international trade and investment, underpinning these global markets. Everything of value has costs, and this applies to trade as well. As consumers we all gain, and both workers and consumers in developing countries have largely benefited from freer trade, lifting hundreds of millions out of poverty. But employees and owners of firms that find their products no longer in demand because of cheaper or better imports lose. Particularly regions in rich countries that used to have thriving manufacturing enterprises offering wellpaying jobs to prime age men have suffered as competition from imports and job-saving technology have taken its toll. The expansion of trade agreements into policy areas previously

“Everything of value has costs, and this applies to trade as well. As consumers we all gain, and both workers and consumers in developing countries have largely benefited from freer trade, lifting hundreds of millions out of poverty. “ 62

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exclusively under the jurisdiction of national governments has also raised concerns that they may undermine local democracy. IS TRADE COOPERATION STILL RELEVANT? International cooperation is more relevant than ever because the major policy challenges facing governments have international dimensions. The fourth industrial revolution has already led to an interconnected world with tremendous opportunities for growth and prosperity. But there are also global challenges such as market volatility, inequality, security and privacy related to international flows of data, market concentration, and lack of sufficient competition and entrepreneurship to mention some of the pressing issues vexing the global economy. Seizing the opportunities while containing the problems require international cooperation on trade and regulation that ideally should involve all countries in the world. DO YOU FORESEE A BACKLASH AGAINST GLOBALISATION? The backlash is already happening with rising opposition in Europe and the US to new trade agreements such as TPP, TTIP, and even CETA. It is also clear that creeping protectionism is on the rise. Legally binding trade agreements have helped avoid a reversal of the continual opening of markets over the past couple of decades, but many countries have used the policy space left in existing agreements to introduce discriminatory measures. With the current sentiment, particularly in Europe and the United States, further steps towards more open markets in the near future may prove elusive. The OECD stands ready to assist governments find ways to distribute and consolidate the gains from the agreements currently in force and to prepare the ground for future agreements and complementary polices that lift all boats. i

ALAIN DE SERRES Alain de Serres is the head of the Structural Policies Surveillance Division at the Economics Department of the Organisation for Economic Co-operation and Development (OECD). In this capacity he supervises the publication of the annual Going for Growth report which provides the main policy priorities and recommendations for boosting growth in all OECD countries. He has recently worked on the policy determinants of investment in knowledge-based capital. Prior to that Mr Serres has contributed to the development a framework for the analysis of green growth policies as well as to an OECD report on the economics of climate change mitigation. Part of this work has been published in journals such as Economic Policy, European Economic Review, and the Journal of Economic Geography.

services. This work has resulted in a number of OECD publications, workshops and presentations. Before joining the OECD in 2005 Nordås worked as a senior research fellow and research director at Chr. Michelsen Institute (CMI) in Norway where she did research on trade and development, policy analysis, and policy advice to governments and aid agencies. In addition she held a part time position as associate professor at the Department of Economics, University of Bergen where she taught international trade, macroeconomics and development economics at the master level. Work experience also includes two years as a counsellor at the research department in the World Trade Organization. She has been a visiting scholar to Stanford University, USA, University of Durban Westville, South Africa, and University of Western Cape, South Africa. She has published extensively in journals and books.

Alain de Serres

Hildegunn Kyvik Nordås

HILDEGUNN KYVIK NORDÅS Hildegunn Kyvik Nordås is a senior trade policy analyst at the Trade and Agriculture Directorate at the OECD, where she leads work on trade in CFI.co | Capital Finance International

> Changing the Way We Travel:

eDreams ODIGEO Puts Consumers in Charge A talented team using ground-breaking technology propels eDreams ODIGEO to the top of the travel agency rankings for the second year in a row.

Dreams ODIGEO CEO Dana Dunne is on a mission; to make travel easier, more accessible, and better value for consumers. Not content with simply searching out the best fares or providing discounts for packaged offerings, Mr Dunne is harnessing the power of eDreams ODIGEO’s technology to change the way consumers think about booking travel. “For too many years, consumers have had to rely on the limited selection of airlines and tour operators,” says Dunne, “which limited their options and forced them to make travel plans based on the times and places that suited those companies.” “But today’s consumers are more demanding and eDreams ODIGEO gives them the tools to create a bespoke travel experience that puts the power in their hands. Our consumers are experts – they know what they want – our job is to help them get it by providing them the tools to search further and faster than anywhere else online. Our sites can compare millions of options in a matter of seconds.” Little surprise then that eDreams ODIGEO is Europe’s largest flight retailer, serving more than 17 million customers in the last year and supporting over 750 million monthly searches on their websites. Through its five brands – Opodo, eDreams, Go Voyages, Travellink, and Liligo – the company has a presence in 44 markets, making it one of the world’s largest online travel agencies. The growth of the travel and tourism sector is outpacing that of the global economy and online travel is the largest e-commerce sector in Europe. Online travel agents are projected to grow by 13% (between 2013 to 2017) whereas direct suppliers, such as airlines, are only projected to grow by 8%. Unsurprisingly, airlines are recognising the benefits of partnering with online travel agencies to fill seats and drive growth. eDreams ODIGEO currently has partnerships with 95 airlines. 64

“Over 70% of Europeans have flown to their destination on one airline and returned home with a different airline to get the best and most convenient flight booking for their personal needs.” The company’s success is based on three key areas: data driven consumer insights, technology, and the talent and expertise of its team. With such a large number of customers booking online, eDreams ODIGEO has access to a huge wealth of consumer insight and data, providing the company’s user experience experts with the right insights to develop products that directly benefit customers. One trend that the data illustrates is that consumers have become less brand loyal and are more concerned with creating a personalised travel experience. In fact, the company’s customer data shows that only 2% of travellers are determined to fly with the same airline consistently. Instead, over 70% of Europeans have flown to their destination on one airline and returned home with a different airline to get the best and most convenient flight booking for their personal needs. In response, eDreams ODIGEO developers use the very latest technological expertise to compare and deliver more combinations of tailored flights than any other site. They can create 3,000 travel plans in 10 seconds – faster than the time it takes to tie your shoes. Like all online companies, technology is critical to eDreams ODIGEO’s success. From designing new mobile features to safer ways of CFI.co | Capital Finance International

booking online, the customer-centric approach is applied in all that they do, and all that they create. In the online world, speed of response is critical and the company’s Barcelona based development team currently perform over 1,000 releases per year to keep pace with the innovations that are needed to stay at the top of the online travel agency sector. eDreams ODIGEO is focused on developing its mobile offering so that customers have maximum ease and flexibility when booking their holidays. They were among the first travel agencies to launch an Apple Watch app and recently introduced free flight delay notifications across their mobile apps to enhance traveller experience. eDreams ODIGEO’s mobile apps are amongst the highest rated with an average of 4.5 out of 5 stars and 29% of bookings now made via mobile. Apps are also a rich source of data for companies and an opportunity to drive retention. eDreams ODIGEO’s ambitious journey is able to become a reality thanks to a team of committed and talented professionals, who prioritise customer satisfaction and who are passionate about travel. Cementing its position as a data-driven leader in the sector, eDreams ODIGEO recently released its inaugural European Traveller Insights Report which revealed some surprising predictions for 2017 – including new top travel destinations like Kazakhstan and India replacing perennial favourites Tunisia and Turkey. With changing consumer demands and a seemingly unlimited desire to innovate, there seems plenty of opportunity for eDreams ODIGEO to continue on its journey to success. MEET DANA DUNNE New trends in the online travel industry? In our technology driven world, consumers increasingly expect to be able to set their own agenda and travel is no different. For example, customers booking online do so 24/7 and they expect to be able to get support as and

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“But today’s consumers are more demanding and eDreams ODIGEO gives them the tools to create a bespoke travel experience that puts the power in their hands. Our consumers are experts – they know what they want – our job is to help them get it by providing them the tools to search further and faster than anywhere else online. Our sites can compare millions of options in a matter of seconds.” when they need it. So we’re investing in 24/7 customer service, as well as an online help centre, to meet those expectations. Mobile booking is also an area of significant growth. Right now around 30% of our customers book through mobile devices, so it’s critical for us that we can offer them the same level of experience and service whether they’re on a phone, tablet, or computer.

How does eDreams ODIGEO see its future growth – organic or acquisitions? Ultimately it’s a mixture of both. We are currently focusing on organic top-line growth and have seen solid increase in bookings and revenue margin over the past year. Having said that, we always keep a close eye on the market and have said we will look at every opportunity to acquire relevant businesses CFI.co | Capital Finance International

that fit with our overall business strategy. How to deal with move towards platform integration? Over the past year we’ve made significant progress in shifting from multiple platforms that cause inefficient development, to unified platforms. That means that we only need to develop new ideas once, and then roll it out to 65

“In online travel, customers increasingly want a one-stop shop where they can book their flights, hotels, cars etc. all in one place but each tailored to an individual need and not as a one size fits all package.” 44 countries, in 20 languages, 30 currencies and on all devices. Our scale and significant in-house development teams means we’ve already developed 93 new features this year and have reduced our time to release by over 70%. Package integration – combined bookings? In online travel, customers increasingly want a one-stop shop where they can book their flights, hotels, cars etc. all in one place but each tailored to an individual need and not as a one size fits all package. That’s what we intend to be for travellers using our sites across the world. We’re continuing to expand our offer in this area, so that we can offer consumers an even greater range of services and additional products like insurance or ground transportation. We definitely see this as an area of growth for the future. How to remain a leading edge in a highly competitive industry? We continue to invest in the customer experience and in ensuring that we carry on creating services and experiences that customers really value. We will retain our competitive edge by delivering what customers want. At eDreams ODIGEO we save customers money, give them the best choice, make it easy to book and customise their trip, and we offer excellent customer service. That’s a winning formula and one that will serve us well for the future. i

CEO: Dana Dunne

“At eDreams ODIGEO we save customers money, give them the best choice, make it easy to book and customise their trip, and we offer excellent customer service. That’s a winning formula and one that will serve us well for the future.” 66

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> Nordea Asset Management:

Active Ownership Expanded

hareholder activism – or active ownership, a perhaps less antagonistic term – can make a difference. “We have had success in getting shareholder resolutions approved at AGMs for better climate disclosure”, says senior analyst Hetal Damani of Nordea Asset Management. “More and more companies understand the importance of transparency and investors are demanding it.” One of the largest asset managing companies in the Nordics with over €215bn in its portfolios, Nordea Asset Management concentrates its active ownership policy on four specific areas: climate change, water, corruption, and human rights. The firm is also a member of the Aiming for A Coalition – an Pan-European investor platform for climate action that aims to coordinate and expand the active ownership approach to support corporate resilience in a low-carbon universe. Nordea Asset Management is considered a pioneer of responsible investing and was one of the first to introduce the full scope of ESG (environment, social, and governance) data into its investment platform. The firm’s ESG-enhanced products include its Star Funds, split according to geography, and a newly-launched Global Stars Fund which leverages the proprietary research of a large industry-leading team of analysts.

Senior Analyst: Hetal Damani

Ms Damani reveals that all of Nordea’s STARS portfolio managers are required to take ESG performance into consideration – and even those portfolio managers who oversee “traditional” investment funds are increasingly taking this type information into account. “We wish to create more awareness of ESG as a gauge of future corporate performance. Portfolio managers need good reasons to take positions in companies that are ESG laggards.” Last year, Nordea Asset Management also joined the Corporate Human Rights Benchmark, the first-ever ranking of the world’s largest publicly listed companies on their human rights performance. The ranking offers investors a valuable additional tool for the evaluation and engagement of businesses. In the area of water, Ms Damani explains Nordea Asset Management lived one of its “proudest moments” when it was able to increase awareness of and trigger action in the pharma industry to clean up their supply chains. “We found that a number of suppliers of active product ingredients released toxic effluents which impacted the surrounding community and degraded local water supplies. We managed to bring this to the attention of pharmaceutical industry CEOs and

encourage the Pharmaceutical Supply Chain Initiative to address this.” The recent political lurch away from environmentally sound politics is not seen as particularly worrisome: “Whilst at times the rhetoric is disconcerting, we must remain aware of the difference between talk and action. We are, in fact, a bit more optimistic and consider that it is highly unlikely that the current trend towards more environmental and social awareness CFI.co | Capital Finance International

will revert. Regulatory entities and the wider public will most certainly insist on continual improvements to address the issues at hand.” Nordea Asset Management is the largest Nordic retail fund provider with a 16% market share and around 1.7 million unitholders. The firm also serves more than 600 institutional investors. It also maintains a global distribution franchise which some 300 international fund distributors, including 25 wealth managers. i 67

> Banque Transatlantique:

True to Tradition Granted to Banque Transatlantique, the CFI.co Best Private Bank in France 2016 Award is a recognition of its long standing tradition in private banking, combined with the continuous expansion of its international network and improvement of its services.

anque Transatlantique has been a trusted adviser to international families since 1881. As part of this role, the bank has provided its clients with solutions for the management, preservation, and transmission of their wealth, continuously trying to offer bespoke solutions. Banque Transatlantique is part of the Credit Mutuel – CIC group, one of the most important European banking groups recognised for the strength of its balance sheet, its rating and its advanced technology in payment systems and mobile banking. Historically catering for the needs of French diplomats, Banque Transatlantique has become a reference in dealing with expatriates thanks to its presence in eleven large international cities spread across the globe. Over the years, the bank has also successfully expanded its clientele to high-net-worth individuals such as entrepreneurs, financiers, and senior executives as well as to not-for-profit institutions, while developing strong asset management capabilities. It is also a leader in providing employee share ownership services to listed companies granting stock options and free shares to their executives. This distinction as Best Private Bank in France

“Over the years, the bank has also successfully expanded its clientele to high-net-worth individuals such as entrepreneurs, financiers, and senior executives as well as to notfor-profit institutions, while developing strong asset management capabilities.” coincides with two majors expansions of Banque Transatlantique outside France. Indeed, 2016 marked the launch of UK banking services from its London office, the bank being convinced that the British capital will maintain its international stature. Its strong franchise of clients residing in the UK will be able to rely on local bankers to guide them in a more complex environment and to provide them with wealth management services both in the UK and abroad in the other

locations where the bank operates. In addition, the bank is currently expanding its investment advisory services in the USA where it opens a new office in San Francisco, adding to its successful presence in New York. These developments do not come without many challenges. One of them is to maintain the values that the bank has preserved since its beginning. In this context, the bank actively develops advisory and other services to notfor-profit institutions and philanthropists and is an active sponsor to the French cultural and educational institutions in the world, in particular the famous networks of Alliances Françaises and Lycées Français who provide high standard education services widely open to foreigners worldwide. Another challenge is to meet the evolving needs of clients, who live in a fast-paced world where time has become a scarcity. Mindful of these expectations, Banque Transatlantique has undertaken an important strategic review of its use of technology. Finally, the bank would not be where it is without the talent, integrity, and commitment of its staff. Therefore, another challenge has been and always will be nurturing, training and increasing the competences of its human capital. i

“Its strong franchise of clients residing in the UK will be able to rely on local bankers to guide them in a more complex environment and to provide them with wealth management services both in the UK and abroad in the other locations where the bank operates.” 68

CFI.co | Capital Finance International

Winter 2016 - 2017 Issue

> NAWATechnologies:

Revolutionising the Use of Electricity Storage

ncreasing the speed and frequency with which electricity storage devices can be charged is the main challenge tackled by NAWATechnologies. The founders’ vision, the one that motivated Pascal Boulanger and Ludovic Eveillard, is to marry nano and cleantechnologies. This resulted in the development of a new generation of ultra-fast carbon batteries that can be recharged in a few seconds, for up to a million cycles. On top of being more efficient, these batteries are also cheaper, safer, and more eco-friendly to manufacture. But overall, NAWA is changing the way people relate to electricity: not consuming too much, but consuming better in a more virtuous way – just what you need, whenever you need, wherever you need. Ambitious? No, just necessary.

rapid carbon cells that incorporate aligned nanostructures and vastly improve storage capacity while reducing charging times. For specialists, targeted performance set NAWA’s ultra-fast batteries at the same energy level of a lead-acid battery but with all advantages of ultracapacitors. The company already received strong

This new generation of batteries overtook two obstacles: used alone, they enable the fast charging of electricity and, combined with existing batteries or hydrogen fuel cells, they can provide power and extend their lifetime. Initial markets include mobility starting from toys, bicycles, forklifts up to cars and public transportation busses or ferries and short-term storage of power in the electrical grid. Such batteries could indeed secure the Uninterrupted Power Supply system for sensitive facilities such as hospitals, factories, and airports in case of network failure. This new technology can also lead to a better integration of renewable energies into the grid by making them more predictable. In the long run, their potential for improvement is very promising, particularly in the field of mobile applications. NAWATechnologies is a spin-off of the French Alternative Energies and Atomic Energy Commission. Founded in 2013 and located in the south of France, the company has become a leading player in the technological side of sustainable development. NAWATechnologies aims to leverage the power of nanotechnology to reduce the power consumption of electronic components, moving towards electric mobility and helping with the integration of renewable energy into the smart grids currently being developed. The company has woven a network comprised of high-tech businesses and organisations in order to benefit from synergies. Year 2017 starts under outstanding auspices with the CFI.co recognition as the winner of the 2016 Best Nanostructure CleanTech Innovation Team Europe Award. NAWATechnologies recently opened its scale ½ pilot production line to produce ultra-

traction from the battery applications players. NAWATechnologies is currently seeking strategic alliances in automotive, marine, and consumer markets to help the company industrialise the technology and reduce time-to-market. The company is also looking for financial partners to share the adventure. i

The NAWATeam: 25 passionate and experienced people for R&D and Industry.

NAWA’s Facility located in Rousset, south of France, at ST Microelectronics factory.

FEATURES

• 10 patents portfolio • 3 to 5 times greater than current ultracapacitors, 1000 times faster than Lithium batteries • EUR 30M revenues target for NAWATechnologies of in 2020 and €100M in 2025 • 50 job creations by 2020 • EUR 5B of global market from 2020 CFI.co | Capital Finance International

> MIGA:

Innovative Project Bond in Turkey Points the Way for Global Investors

ringing in financing for development projects on commercially viable terms is something like the holy grail for those of us working in development circles. Investors and lenders seeking returns frequently look to opportunities in emerging and frontier economies but get spooked by uncertainty. Reducing this uncertainty is critically important and at the heart of what MIGA, part of the World Bank Group, brings by way of its political risk insurance. MIGA recently played a critical role in the structuring of a bond that raised financing for a healthcare project in Turkey, paving the way for institutional investors to provide long-term funding for emerging market infrastructure projects. With MIGA insurance and a liquidity facility from the European Bank for Reconstruction and Development (EBRD) the bond achieved an investment grade credit rating, opening up the pool of capital market investors who would otherwise stay on the side lines. Most importantly, there is potential for this approach to be replicated across multiple sectors and countries. Here follows an explanation of the project and how MIGA coverage helped shape this unique bond structure. Turkey is embarking on a highly ambitious effort to modernise its healthcare system. As in other emerging economies, the demand in Turkey for healthcare has accelerated over the last decade, driven by rising incomes, demographic growth, an aging population, and an increase in noncommunicable diseases. In anticipation of an even further rise over the next two decades, the Ministry of Health has developed a massive $15bn public-private partnership programme to build around thirty integrated health campuses across the country. The programme is focused on upgrading infrastructure, increasing service quality and efficiency, and consolidating individual public hospitals into larger campuses. One of the proposed hospital campuses is in Elazig, Eastern Anatolia. The hospital will replace older facilities that currently serve 1.6 million people, and include a general hospital, a women and children’s hospital, psychiatric services, and dental care. As per the PPP model, the Ministry of Health will provide medical services at the hospital, while the design, construction, 70

“Naturally, attracting financing for such a large programme is a major challenge.” equipment, maintenance, financing, and medical support services are provided by private companies that are awarded the publicly-bid government concessions. These private-sector partners are compensated by the Ministry of Health through payments over the life of the concession. Naturally, attracting financing for such a large programme is a major challenge. This hospital, with a total cost of €407 million, will be financed through an 80/20 mix of debt and equity. The equity sponsors are a consortium consisting of infrastructure investment firm Meridiam and three Turkish companies which together have established a new project company to own and operate the venture. As many lenders already had loans on their books in support of other hospitals in the Turkish Health PPP Programme, the Meridiam team looked for new structures and sources of debt capital to finance the Elazig hospital. A project bond provided an elegant solution, but standing on its own, it would be unlikely to receive an investment grade rating given the outlook on Turkey, which has recently seen downgrades to its sovereign rating. And selling a sub-investment grade project bond to investors would perhaps be a bridge too far. To achieve a higher credit rating, Meridiam turned to MIGA and EBRD. MIGA has supported Meridiam on two other hospital projects in the Health PPP Programme, offering its political risk insurance on its equity and shareholder loan investments, and to commercial lenders providing loans to the projects. MIGA’s guarantees covered the risks of transfer restrictions, expropriation and breach of contract, and were offered for a 20-year period (which is hard to find in the private market). EBRD, meanwhile, provided technical assistance as well as loans to other hospital projects in the Health PPP Programme. CFI.co | Capital Finance International

Together, MIGA, EBRD, and Meridiam created a package that combines MIGA political risk insurance with a liquidity facility from EBRD. This credit-enhancement package is designed such that, in the event of interruption in payments from the Ministry of Health to the project company, the liquidity facility would cover the missing payments. And in case of a protracted default on payments that forces the project company to terminate the project agreements, MIGA’s insurance would compensate the bondholders. However, there are important caveats that make this credit-enhancement package less than bulletproof. MIGA’s breach of contract insurance covers the “non-payment of an arbitral award” against the government. In the Health PPP Programme, project companies are entitled to a termination payment from the Ministry of Health if project agreements are cancelled because payments are not made. This could lead to a lengthy arbitration process, which may or may not favour the project company. If the project company is given an award through arbitration that the government refuses to pay, only then does MIGA pay a claim under breach of contract insurance. Meanwhile, the EBRD facility would cover principal and interest payments while arbitration takes place. As a result of this first-of-its-kind structure, and keeping in mind both the strengths and weaknesses of this “liquidity-backed political risk insurance,” Moody’s, the credit rating agency, assigned an investment grade rating of Baa2 to the bond, a two-notch upgrade over Turkey’s sovereign rating. This meant Meridiam could offer a lower interest rate for the bond and attract investors that would be hesitant or unable to invest in sub-investment grade bonds. A group of commercial banks and development finance institutions have subscribed to the bond, and an uninsured tranche has been purchased by the IFC, also a member of the World Bank Group. This complicated financial structure that underlies the Elazig hospital project serves as proof of concept for using a combination of political risk insurance and extra liquidity to enhance the credit rating of a project bond. The effort will pay off when this structure is replicated to finance infrastructure projects in emerging markets by providing an attractive balance of risk and return to a broader pool of potential institutional investors. i

Winter 2016 - 2017 Issue

> Black Sea Trade & Development Bank:

Keen on Supporting the Black Sea Region By Ihsan Ugur Delikanli, BSTDB president

The member states that comprise the Black Sea Region share many common values and the Black Sea Trade and Development Bank (BSTDB) represents one manifestation of their commitment to strengthen regional cooperation. As a result, we feel a great responsibility to add value for enhanced cooperation and the economic development of the region. BSTDB can contribute to boost growth in our region which, on the strength of rising domestic consumption and export demand, we expect to post moderate positive GDP growth in 2016.

he bank strives to assist our region to become an attractive investment destination. In May 2016, the bank issued its first benchmark $500m bond – a significant step in raising BSTDB’s profile in the international capital markets. The resulting increased familiarity of the bank amongst international investors will facilitate future market access, even in challenging times, and enable the bank to fulfil its counter-cyclical role better. In addition, political stability and democracy are important prerequisites for economic growth, employment, and regional cooperation. This is why I am glad that the coup attempt of FETO on July 15 in Turkey resulted in a failure with the immediate reaction of Turkish people protecting their destiny and democracy. Otherwise, the coup could have had negative impact not only on the Turkish economy, the second biggest economy amongst the bank’s member countries, but also on the entire Black Sea Region. In this respect we are pleased that geopolitical difficulties in the region subsided during 2016 and political turmoil ended up strengthening political institutions and consolidating stability. The BSTDB has expanded both the range of its guarantees and the scope of trade finance products that we offer in order to promote regional trade and exports to global markets. We have found a niche in the area of support to SMEs since they are key engines of innovation and development and account for the majority of employment growth across our region. We have extended loans for microfinance and the support of women entrepreneurs. We have also continued local currency operations – most importantly local currency lending financed through local currency bond issuance – in 2016.

“The BSTDB has expanded both the range of its guarantees and the scope of trade finance products that we offer in order to promote regional trade and exports to global markets.” Newly introduced innovative products have enabled us to consistently achieve portfolio growth rates that have exceeded our annual average portfolio growth targets while achieving a better balanced portfolio by country and sector as targeted in the medium term strategy covering the 2015-18 period. We have substantially improved the portfolio quality, with only two non-performing loans comprising 1.2% of the outstanding loan portfolio, as at the end 2015 and we have preserved our position of being the best-rated financial institution located in the Black Sea Region and one of the highest rated in Central and Eastern Europe, despite political, economic, and market adversities faced by our countries of operation. Currently, the bank puts a special emphasis on supporting “real” sector operations, such as manufacturing, energy, public utilities, and other non-financial services. We also seek to expand our participation in public sector CFI.co | Capital Finance International

President: Ihsan Ugur Delikanli

operations with high development impact, including public-private partnerships. By 2020, the BSTDB intends to be recognised as a prominent development finance institution for the Black Sea Region providing well-focused development assistance and solutions and, as such, to serve as a model for promoting sustainable development, high environmental standards, and transparency. i 71

Enjoy electric. The new EQC. Join us in the fully electric era. With the first member of the Mercedes-Benz EQ family. www.mercedes-benz.ch/EQC

A B C D E F G

EQC, 408 HP (300 kW), 26,3 kWh/100 km (fuel equivalent: 2,4 l/100 km), 0 g CO /km (average of all new models sold: 174 g CO2/km), CO2 emissions fro CFI.co | Capital Finance International 2

om fuel and/or electricity consumption: 34 g/km, energy efficiency category: A. CFI.co | Capital Finance International

Winter 2016 - 2017 Issue

> Cyprus Development Bank:

Small Is Strong

rowing stronger on experience accumulated over more than fifty years in the corporate finance sector, the Cyprus Development Bank, known as cdbbank, remains true to its founding principles of operating as a small and flexible organisation. Its main focus throughout has been to provide comprehensive services suited to clients’ needs allowing it to earn a reputation for reliability and high quality services. Indicative of this are accolades such as from Capital Finance International (CFI.co) which named cdbbank as 2016 Best Corporate Bank in Cyprus recognising, not only its undeterred focus on clients’ needs but also its efficiency and flexibility.

“cdbbank will continue to give its clients the best customised financial support possible. This has always been the cornerstone of our success” small institution by offering innovative products and customised services that add value to its international and domestic clients alike.

HISTORY Founded in 1963 by the Cyprus government, cdbbank has enjoyed an enduring presence in the banking sector and played a major role in the country’s economic development. It is the first bank in Cyprus to deal with project financing and has advised the government on numerous infrastructure projects which have contributed to economic growth. In 1999, cdbbank founded the Investment Bank of Kuban (IBK) in Russia’s Krasnodar Region which was set up jointly with the European Bank for Reconstruction and Development. In order to remain a flexible and efficient organisation, the bank was successfully privatised in 2008, further developing its professional culture and applying a more market-oriented approach. Commenting on the CFI.co award, Network Business and Communications Manager Ms Liza Philipou said: “This award is a true reflection of our commitment to provide high-quality support to our clients and demonstrates that the small size of a bank can be a considerable advantage in its operations and the provision of customised solutions to our clients’ needs, which is pivotal. In addition, the judging panel praised cdbbank on its dedication to excellence in corporate and commercial banking, as well as its use of proficient knowledge in assisting clients make the most of opportunities.” TODAY AND THE FUTURE Last year was an important one for cdbbank as it has expanded its operations in international business. The bank has established two fullyfledged international business units in Nicosia and Limassol which are aptly organised, offering up-to-date technological support to clients, inhouse expertise while ensuring compliance with the relevant legislation and regulation. The bank aims to capitalise on the flexibility of being a 74

Despite the changes it has undergone, cdbbank always remained a flexible and reliable organisation focused on customer support and committed to supporting the local economy. Recently, the bank expanded its cooperation with the European Investment Bank (EIB), with the recent granting of a €15 million facility to support local businesses. The loan has enabled the bank to increase its role in boosting the local economy by offering enterprises lower interest rates for new business ventures and incentives CFI.co | Capital Finance International

for enterprises that employ young people, enabling the bank to play a role in alleviating the serious problem of youth unemployment. Nothing is set in stone, but cdbbank’s prudent management and client-centric approach will carry the bank to a bright future. Asked about the bank’s future goals, acting CEO Mr George Spyrides said that “cdbbank will continue to give its clients the best customised financial support possible. This has always been the cornerstone of our success”. i

Winter 2016 - 2017 Issue

CFI.co | Capital Finance International

> World Bank:

Will Sovereign Wealth Funds Go Green? By Håvard Halland, Michel Noël, Jacob Owens, and Silvana Tordo

Sovereign Wealth Funds (SWFs) currently have a very limited role in climate finance and green investment. According to preliminary estimates by the World Bank Group, SWFs’ green investments in 2015 represented less than 1% percent of the total value of reported deals. SWFs’ performance in climate finance is reportedly below the average for institutional investors. According to the Asset Owners Disclosure Project (AODP), which evaluates institutional investors on the basis of their low-carbon performance, five of the 10 lowest-rated large investment funds were SWFs.

owever, the more progressive SWFs are currently divesting from assets with high climate-related risks, and some countries are pondering whether their SWF should take a more proactive role in green finance. What lies ahead for SWFs in this rapidly changing landscape? SWFS’ IMPACT ON CLIMATE FINANCE The sheer amount of capital managed by SWFs means that their impact on green finance, while historically marginal, has the potential to become significant. According to the Sovereign Wealth Fund Institute (SWFI), SWFs hold assets worth approximately $7.4 trillion, and the total capital of SWFs has more than tripled over the last decade. But SWFs’ mandate does not typically include green finance. To the extent that they have been active in this area, it has been to reduce climate-related risk to their portfolios – including exposure to fossil fuels. For example, last October the $22.6 billion New Zealand Superannuation Fund (NZSF) announced a strategy to address climate-change risks that represent a “material” issue for long-term investors, and to “intensify its efforts” in areas including alternative energy, energy efficiency and “transformational” infrastructure. Norway’s giant Government Pension Fund Global ($873 billion) has adopted similar policies to reduce climate-related risk. The 2016 annual meeting of the International Forum of Sovereign Wealth Funds (IFSWF), which was held last November, focused on the long-term impact of climate change on SWF portfolios, as well as on new investment opportunities that may arise from the transition to a low-carbon economy.

“SWFs differ widely in terms of investment strategy, transparency and disclosure of information. As the global green investment agenda gains further traction, and as pressure builds on investors to green their portfolios, the more transparent and climate-conscious funds could help build initial momentum.” HOW GREEN ARE SWFS NOW? Current reporting on SWFs’ investments does not allow for a precise analysis of these funds’ role in green finance, but some preliminary numbers can be established. According to preliminary estimates contributed by the World Bank Group to a recent OECD report, only 118 of 30,080 transactions between 2006 and 2016 can be classified as green. This is equivalent to 0.7% of the value of all reported deals during the period, or 3.6% of infrastructure, energy, and utility investments. According to the same estimates, in 2015 green investments represented 0.9% ($1.2 billion) of the value of all reported deals – up from zero in 2006. The share for 2016 may be higher, at 3.5% – equivalent to 13.4% of infrastructure, energy and utility investments. However, this recent uptick is driven by a small number of large deals, and it could be just a temporary CFI.co | Capital Finance International

blip. Overall, SWFs’ involvement in green finance remains very low. STRONGER CLASSIFICATION AND REPORTING SYSTEMS NEEDED Although some of the more progressive SWFs have recently shown more willingness to take climate change into account, a broader engagement is likely to require a strengthening of SWFs’ classification and reporting systems for green investments. Several international standards and classification systems are used to assess investor performance in green finance, including the Climate Strategies and Metrics; the Climate Change Investment Solutions; as well as the AODP Global Climate Index, which provides a standard for assessing how large global investors conduct climate-risk management. However, existing standards allow only for an approximate analysis of SWFs’ impact. None of them is comprehensive, and most focus on policy and management rather than transaction-level criteria for green investment. A unified global standard would allow for the aggregate reporting, assessment and analysis of SWFs’ involvement in green finance. It would also promote market efficiency through improved transparency. The successful implementation of a robust classification system depends on the disclosure and thorough reporting of participating SWFs. Ideally, green finance reporting standards for SWFs would build on existing frameworks and guides. The Low Carbon Investment Registry (LCIR) – a database compiled by the Global Investor Coalition on Climate Change – relies on self-reporting by institutional investors. It could become a useful tool for SWFs. However, as of now, SWFs have minimal presence in this database.

Winter 2016 - 2017 Issue

ROAD AHEAD FOR SWFs Is the role of SWFs as commercial, returnoptimising investment vehicles compatible with a more pro-active stance on green finance? Some think so, though this is a subject of debate. According to a recent paper by Andersson, Bolton, and Samama, long-term passive investors such as SWFs may hedge climate risk without sacrificing financial returns. This can be done by investing in a decarbonised index based on a standard benchmark, such as the S&P 500, while minimising the tracking error with respect to the underlying benchmark. The authors note that decarbonised indices have so far matched or even outperformed benchmark indices, as financial markets still tend to under-price carbon risk. Oil-rich countries with SWFs could use their funds’ capital to help diversify their economies away from oil while also contributing to national saving – for example, by investing in renewable energy. This would require strong and specific institutional, governance, and legal arrangements to ensure that investments are made on commercial terms, and that they crowd in rather than crowd out private investors to domestic green finance. In light of the large amount of capital managed by SWFs, and thus their potentially significant role in green finance, it is important to strengthen the information available on these funds’ green investments. The results of the work now being conducted by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures could be of great relevance to SWFs. The task force, chaired by former New York Mayor Michael Bloomberg, aims to develop “voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers and other stakeholders.” SWFs differ widely in terms of investment strategy,

transparency and disclosure of information. As the global green investment agenda gains further traction, and as pressure builds on investors to green their portfolios, the more transparent and climate-conscious funds could help build initial momentum. In time, traditionally less transparent SWFs might find it in their interest to join them. i

This article is based on the authors’ contribution, on behalf of the World Bank Group, to the recent OECD Progress Report on Approaches to Mobilizing Institutional Investment for Green Infrastructure. Interested readers can find the details on methodology and estimation within that report. The paper referred to above is Hedging Climate Risk, by Mats Andersson, Patrick Bolton, and Frédéric Samama, Financial Analyst’s Journal Vol. 72, Number 3, 2016. ABOUT THE AUTHORS Håvard Halland is a senior economist at the World Bank’s Finance & Markets Global Practice, Investment Funds Group. His research and advisory work focus on sovereign wealth funds and strategic investment funds. His main interests include fund mandates, governance and operational frameworks, as well as the economic and policy implications of sovereign funds’ domestic investment. Recently, he has worked on the role of strategic investment funds in mobilizing private capital for green finance. He is an editor, lead author, or joint author of several books published by the World Bank; has published academic and policy research papers, book chapters, magazine articles and blogs; and regularly presents at international conferences and seminars. He earned a PhD in Economics from the University of Cambridge. Michel Noel is currently head of Investment Funds in the Finance and Markets Global Practice, Equitable Finance and Institutions Vice-Presidency CFI.co | Capital Finance International

of the World Bank. Previously, Mr Noel was practice manager for non-bank financial institutions in the Finance and Markets Global Practice and lead financial sector specialist in the Africa Region and in the Europe and Central Asia Regions of the bank. He was on secondment to Dexia Asset Management in Geneva and London from 2000 to 2003 working on local infrastructure private equity funds. Previously, Mr Noel held a number of positions in the Africa and Europe and Central Asia Regions of the bank. He also consulted for the OECD Development Research Centre in Paris. Mr Noel holds a MA in Economics and Social Sciences from the University of Namur, Belgium. Silvana Tordo is a lead energy economist at the World Bank’s Energy and Extractives Global Practice, Extractives Group. She focuses on extractive sector legal and contractual frameworks, taxation, and sovereign wealth funds. Her advisory work, research, and publications include value creation by national oil companies, auction design in oil and gas, extractives-led productive policies, petroleum taxation, resource revenue frameworks, and sovereign wealth management, with particular focus on governance arrangements and policies for domestic investment. Prior to joining the World Bank in 2003, Ms Tordo held various senior management positions in new ventures, negotiations, legal affairs, finance, and mergers and acquisitions. Jacob Owens is a Presidential Management Fellow - Management and Risk Analyst at the ExportImport Bank (EXIM) of the U.S. Government. Prior to joining EXIM, he served on the World Bank’s Investment Funds Group, Finance & Markets Global Practice, where he researched and authored material for the OECD report that underlies this article. Jacob has a master’s degree in international finance and economics from Georgetown’s Graduate School of Foreign Service. 77

> Bob Dylan:

Things Have Not Changed By John Marinus

n 1963, The National Emergency Civil Liberties Committee handed its annual Tom Paine Award to Bob Dylan for his contribution to the fight for civil liberties. The 22-year old Dylan did in fact show up to its Bill of Rights dinner to receive the award in person. In a rambling acceptance speech he admonished the committee members and their patrons for being old, dismissed the million-man march for being too polite and too proper, and somehow managed to round off his address by expressing empathy for 78

the man who shot dead President Kennedy not three weeks prior. At that point the progressively– minded dinner guests realised that polite silence to hear what the younger generation had to say would amount to tacit approval and took the nervous and slightly drunk singer out of his misery and booed him off the podium. Mr Dylan’s subsequent relationship with ceremonies isn’t any less awkward. At best gracious but vaguely aloof (cocking an eyebrow CFI.co | Capital Finance International

behind aviator glasses as President Barack Obama placed the presidential Medal of Freedom around his neck), and at worst openly dismissive (describing an honorary degree from Princeton as a loss of credibility). So maybe the members of the Swedish Academy considered it somewhat of a relief as Ambassador Azita Raji approached the lectern during their banquet last December. Controversy isn’t entirely novel to the world’s most prestigious literary prize. Following the

Winter 2016 - 2017 Issue

those stupefied by the news, each backed up by their team’s high profile tweets. For team jubilant: Salman Rushdie, whose history with the Swedish Academy is an uneasy one to say the least, seemed to have preempted some of the criticism when he tweeted: “From Orpheus to Faiz, song & poetry have been closely linked. Dylan is the brilliant inheritor of the bardic tradition. Great choice. #Nobel” And for team stupefied Irvine Welsh offered an undeniably eloquent assessment with: “I’m a Dylan fan, but this is an ill-conceived nostalgia award wrenched from the rancid prostates of senile, gibbering hippies.” Seemingly the only one not weighing in was Dylan himself. Granted, his isn’t exactly the most lively of twitter feeds, consisting usually of just promotional material (though recently a baffling premature message of condolence for pop star Britney Spears), but the full two weeks it reportedly took for someone at the Academy to get Mr Dylan on the phone did leave some accusing the songwriter of arrogance, and some detractors of the academy’s decision cautiously optimistic that the man himself was in fact an ally and would ‘pull a Sartre’ and decline the award. The subsequent news that the artist would not be attending the ceremony in Stockholm exacerbated the accusations of arrogance. In his place, singer songwriter Patti Smith accepted the award during the ceremony with a rendition of A Hard Rain’s A-Gonna Fall during which she charmingly fumbled the second verse, with the aforementioned Ambassador Azita Raji delivering a warm, considered, and genuinely gracious acceptance speech prepared by Dylan. Gracious, to a point. He did in no uncertain terms compare himself to Shakespeare. Then again, if that’s ever one’s prerogative, it’s while accepting the Nobel Prize for Literature.

delayed announcement last October, however, the accusations weren’t of the academy’s choice being too obscure, too politically disagreeable, or too European. Rather the supposed disqualifying factor was one more fundamental: the work just isn’t literature. For many, Bob Dylan being awarded the Nobel Prize for Literature was a long time coming; for others it was a pathetic or even cynical pandering to popular culture. Within hours, the world’s news outlets had had op-eds posted on their websites, often both those jubilant and

The Nobel Prize for Literature is not awarded on the basis of any single work that is considered great literature, rather it is in recognition of a person who has, as per the wording of Alfred Nobel’s will, produced in the field of literature the most outstanding work in an ideal direction. This is rather vague language, the interpretation of which is left to the 18 members of the Swedish Academy. Those 18 members named Bob Dylan for having created new poetic expressions within the great American song tradition. He is the first singer songwriter to be awarded the prize. Dylan is something more than all other popular singer songwriters. He is an indispensable node of the American canon without which one cannot understand western culture of the 20th century. His musical style and subject matter initially drawn from the progressive folk music revival, American traditional ballads, gospel, and blues; his language and form were also informed by romantic, modernist, and beat poetry, and a CFI.co | Capital Finance International

decent amount of eisegesis. He is defined by his time as much as he defined it, but you don’t get thrust upon you the moniker voice of a generation without finding new modes with which to express some universals. There is a Dylan line for almost every shade of melancholy, of righteous anger, of optimism, of tempered self-doubt, of amusement. Yes, and is as much impoverished when removed from its guitar melody and harmonica, as is Shakespeare when read quietly to oneself complete with stage directions. That does not make them any the less literature. Dylan references the Tom Paine award incident in As I Went Out One Morning, on his eighth studio album John Wesley Harding which was released in 1967. In it the character Tom Paine apologises to the protagonist as a chained woman (who in an admittedly ad hoc interpretation could be read to represent recognition) insistent on him taking her with him. While in his first four albums he defined and repeatedly reinvented the protest song and the story ballad for his time, and his subsequent three albums Bringing It All Back Home, Highway 61 Revisited, and Blonde on Blonde consisted mostly of mad vivid evocative ballads seemingly written by a man not so much inspired as possessed, resisting interpretation through sheer sensory overload, John Wesley Harding, and most notably its eliotian masterpiece, All Around The Watchtower, are far more restrained pieces with greater reliance on poetic device. This is Bob Dylan developing in a way that can categorically be described as literary. Recognition is not chiefly meant to serve the recipient but rather society as a whole (which seems pretty obvious when stated like that). Making it all the more bizarre how many serious articles argue that Bob Dylan doesn’t need the recognition or the prize, and that the academy squandered an opportunity to shine a spotlight on a lesser known author. Bringing to the global foreground the many deserving literary figures is certainly worthwhile, but that simply isn’t the purpose of the Nobel Prize. Fearing not that I’d become my enemy in the instant that I preach (My Back Pages), I’ll resist ending on a Dylan line. i

Author: John Marinus

ANNOUNCING

AWARDS 2016 WINTER 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 organisation’s performance please visit our award pages at www.cfi.co and nominate.

Winter 2016 - 2017 Issue

> ORACLE: BEST DATABASE SOFTWARE GLOBAL 2016

One of the world’s most widely used open source database applications has found a safe and nurturing home in Oracle – the secondlargest software company in the world. After it acquired Sun Microsystems in 2010, Oracle became the keeper of MySQL – a relational database management system originally developed in Sweden and released as a fullyfunctional free version under the terms of the GNU General Public License. Proprietary commercial versions with added functionality are also marketed. MySQL is a favourite amongst web

designers worldwide and powers more than a quarter of the world’s websites as part of a software stack that also include server and scripting software. MySQL also sits at the heart of countless open source content management systems such as WordPress and Drupal. Easily scalable, MySQL drives websites with large traffic volumes such as Facebook, Twitter, and even Google – though not for its searches. Oracle’s acquisition of MySQL, albeit indirect, initially caused considerable concern for the database’s future as open source software. However, Oracle has

not only maintained support for MySQL but increased the frequency of updated releases as well – thus proving that a large corporation can be an excellent guardian of open source software. Oracle also supports, maintains, and updates JavaScript – one of the web’s most popular programming languages. The CFI.co judging panel commends Oracle on its support of MySQL and a series of other essential open source projects. The judges are pleased to offer Oracle the 2016 Best Database Software Global Award.

> EDREAMS ODIGEO: BEST ONLINE TRAVEL PARTNER GLOBAL 2016

One of Europe’s largest and mostrecognisable e-businesses, eDreams ODIGEO manages a number of premier brands that set the pace of the buoyant online travel industry. The company’s portfolio comprises five brands – each a market leader in their geography – that offer clients a growing palette of travel-related services such as bookings on charter, low-cost, and regular airlines in addition to hotel, cruise, and car rental reservations. eDreams ODIGEO also sells complete packages to clients looking to streamline their travel plans. Present in 44 markets on six

continents, and with a staff of over 1,700 dedicated professionals, eDreams ODIGEO maintains a network of fifteen offices that serve over 17 million clients. The company registers in excess of 750 million monthly searches across its 143 websites. Listed on the Madrid Stock Exchange, eDreams was set up in 2000 with help from US and European venture capital funds. Growing into a conglomerate that helped shape the online travel industry, the company absorbed a number of competitors via mergers and acquisitions. In 2013, eDreams CFI.co | Capital Finance International

ODIGEO bought Liligo – a search engine that enables visitors to compare the pricing of travel products. Liligo pioneered a multi-modal search facility to allows users to search for the best price across a range of travel options including air, rail, and road. For the second year running, the CFI. co judging panel agrees that the company is a worthy winner. The judges are pleased to offer eDreams ODIGEO the 2016 Best Online Travel Partner Award.

> NORDEA ASSET MANAGEMENT: BEST ESG INVESTMENT PROCESS EUROPE 2016

The largest retail fund provider of the Nordic countries, Nordea Asset Management has over €215 billion in assets under management. As part of the Wealth Management business area within the Nordea Group – the leading financial services provider in the Nordic area with over ten million clients – Nordea Asset Management offers its services in Asia, Europe, and the Americas. Its global business model assures clients access to asset classes across the investment spectrum. Nordea Asset Management (NAM) is an early adopter of responsible investment and

they deliver on the mandate given to them by their clients – to generate the highest possible return with the lowest possible risk by managing and investing their assets in a responsible way. Nordea Asset Management is an active owner and engages with companies on environmental, social and corporate governance practices (ESG). By combining financial performance with responsibility, Nordea Asset Management strives to offer clients responsible solutions. They add value to their clients by actively considering environmental, social and governance issues

(ESG) in their analysis and investment decisions – particularly through their investment research, asset allocation and performance monitoring. Nordea Asset Management works to integrate ESG research into the investment processes of their investment units and also develops and run specialized ESG products. The CFI.co judging panel therefore offers Nordea Asset Management the 2016 Best ESG Investment Process Europe Award for the third year in a row.

> RED & WHITE CONSULTING PARTNERS:

BEST BUSINESS TRANSFORMATION CONSULTANCY BOUTIQUE SINGAPORE 2016

Cutting through the clutter, armed with vast amounts of data and a wide array of analytical tools, Red & White Consulting Partners of Singapore offers a holistic approach to address any issue – from the most mundane to the wildly esoteric – faced by business. Established by two experienced bankers in 2013, the firm quickly gained a global reach via alliances forged with premier consultancies in Great Britain, the United States, and elsewhere. With over twenty years of corporate experience in one of the world’s most competitive markets, Red & White Consulting 82

Partners offers pinpoint accurate human, financial, manufacturing, and business analytics in addition to data-driven advice on business transformation. Corporates aiming for the next level up, have engaged the firm to plot a course to success. Deriving inspiration from the maxim that failing to plan is planning to fail, the firm attaches great importance to establish carefully choreographed strategic vectors, extrapolated from data-based fact, along which businesses may expect to prosper. Wishful thinking is banned from all equations by a strict adherence CFI.co | Capital Finance International

to diagnostic processes that deconstruct the present in order to shape the future. The CFI.co judging panel applauds that thorough approach pioneered by the Singapore firm and is in no doubt that its active pursuit of data-driven business solutions significantly adds to overall efficiencies and sustainable growth. The judges are pleased to offer Red & White Consulting Partners the 2016 Best Business Transformation Consultancy Boutique Singapore Award.

Winter 2016 - 2017 Issue

> PARK WEST GALLERY: BEST INDEPENDENT FINE ART AUCTION HOUSE GLOBAL 2016

It’s all about the artists. Park West Gallery has helped more than two million customers around the world add to their collections of fine art. The firm represents some of today’s most celebrated artists such as Peter Max (79), a pop art master whose bright colours immortalised the 1967 Summer of Love, and Yaacov Agam, a leading pioneer of kinetic art. Park West Gallery was the first to bring fine art auctions to cruise ships, allowing passengers ample time and opportunity to become acquainted with the works offered.

It still is the largest business in shipboard auctions, selling more than 300,000 pieces annually. The gallery also organises fine art auctions at select Ritz-Carlton hotels. Uniquely, the company is not merely focused on selling art, but also seeks to further enhance public awareness and knowledge of the art world. To that end, Park West Gallery invites critics and artists for talks at large events. This way, the company aims to make art more accessible to the public.

The largest privately-owned art dealer in the world by volume of sales, Park West Gallery maintains two facilities: its classical Greco-Roman headquarters in Michigan with no less than 23 exhibition spaces and a sprawling distribution centre in Florida. Park West Gallery employs well over 1,200 people. The CFI.co judging panel wishes to recognise Park West Gallery’s superior performance and declares the company winner of the 2016 Best Independent Fine Art Auction House Global Award.

> BREMONT WATCH COMPANY: BEST HERITAGE TECHNOLOGY INNOVATOR UK 2016

Britannia may no longer rule the waves, Great Britain remains master of the precision mechanical engineering domain: a pursuit that delivered, amongst others, the world’s first precision chronometer, manufactured, largely from wood, by John Harrison in 1735 – the first “sea clock” that helped solve the longitude conundrum. Carrying on the tradition of exquisitely fine mechanical engineering, the Bremont Watch Company of Henley-on-Thames in Oxfordshire manufactures quartz-free timepieces of exceptional quality. The company was founded in 2002 as a specialist watch

purveyor to pilots on vintage aircrafts and others with an appreciation of vintage technology. Built with passion, Bremont wristwatches are prized not just for their accuracy, but for being marvels of craftsmanship wrapped in elegant enclosures that stand at the epitome of contemporary design – tasteful homages to the art and skill of horology. A thriving business, Bremont produces around 10,000 timepieces annually, all assembled by hand and tested to withstand the most extreme of environments. Bremont watches are a favourite amongst RAF pilots CFI.co | Capital Finance International

who have access to special edition versions that celebrate particular aircraft flown in the line of duty. Committed to delivering uncompromising performance now and far into the future, Bremont maintains a large apprentice scheme to train tomorrow’s watchmakers, ensuring the fine art of horology is kept alive. The CFI.co judging panel congratulates the company on its sizable contribution to British precision engineering and is pleased to offer Bremont Watch Company the 2016 Best Heritage Technology Innovator UK Award. 83

> PYRAMIDAL TECHNOLOGIES: BEST FORENSIC TECHNOLOGY GLOBAL 2016

Deploying the power of innovation and mathematics, Pyramidal Technologies has revolutionised forensics by taking opinion out of the equation. The company has produced a breakthrough technology that transformed forensic ballistics from a subjective art into a fact-based science, enhancing criminal evidence provided in courts of law. Pyramidal Technologies has developed an open architecture for forensic ballistics capable of communicating with other systems such as those that process and analyse DNA, fingerprints, facial recognition systems, etc. in order to generate investigative leads and assist law enforcement officials with criminal investigations. The company’s hardware-light, software-heavy applications offer the flexibility that allows users – law enforcement agencies,

justice officials, the military, and other government entities – to fully customise their solution and, hence, their experience. The resulting bespoke systems are also significantly less expensive than competing products. Pyramidal Technologies’ flagship Advanced Ballistics Analysis System (ALIAS) allows forensic ballistics technicians to analyse expended cartridges and bullets faster and with much more accuracy than before – setting a new industry standard. ALIAS renders true 3D high-resolution “digital clones” of crime scene evidence and offers both correlation and confirmation capabilities that vastly enhance examiners’ ability to reach definite conclusions. ALIAS produces scans of casings or bullets at better than two microns laterally and two hundred nanometres vertically creating detailed

images unavailable with any other system. ALIAS empowers law enforcement officials to create their own secure, scalable, hierarchical relational database that allows them to quickly search for mathematically close matches to the specific case under investigation, extending the capabilities of the investigator. The system also simplifies the work of ballistics analysts by giving them access to an intuitive solution that significantly reduces their workload when investigating violent firearms crimes. The CFI.co judging panel commends Pyramidal Technologies for its string of achievements in advancing forensic science and providing new tools that increase both accuracy and user convenience. The judges are pleased to declare Pyramidal Technologies winner of the 2016 Best Forensic Technology Global Award.

> NAWATechnologies: BEST NANOSTRUCTURE CLEANTECH INNOVATION TEAM EUROPE 2016

With businesses globally striving to minimise their environmental footprint and embracing sustainable practice, NAWATechnologies – home to fifteen years of research and development results in nanomaterials – is well-poised to reap the rewards of sustained efforts to help reduce the world’s dependency on fossil fuel. The company thrives on imagination. It is one of only a select few businesses that have managed to integrate nanotechnology and greentech. NAWATechnologies recently opened its first pilot production line to produce ultrarapid carbon batteries that incorporate aligned 84

nanostructures that vastly improve storage capacity while reducing charging times. The company has also developed three specific thermal interface materials – thin films of nanotubes that help manage the thermal properties of power components. NAWATechnologies is a spin-off of the French Alternative Energies and Atomic Energy Commission. Founded in 2013 and located in the south of France, the company has become a leading player in the technological side of sustainable development. NAWATechnologies aims to leverage the power of nanotechnology to reduce the power consumption of electronic CFI.co | Capital Finance International

components, move towards electric mobility and help the integration of renewable energy into the smart grids currently being developed. The company has woven a network comprised of high-tech businesses and organisations in order to benefit from synergies. The CFI.co judging panel is awed by the practical applications NAWATechnologies has found for the results of its extended research. The company presents tomorrow, today. As such, NAWATechnology is declared winner of the 2016 Best Nanostructure CleanTech Innovation Team Europe Award.

Winter 2016 - 2017 Issue

> BARCLAYS AFRICA GROUP: BEST SME PARTNER BANK AFRICA 2016

Small and often tiny businesses are responsible for generating around a third of Africa’s GDP. Include medium-sized businesses, and fully half of the continent’s economy is accounted for. SMEs create more jobs than any other sector and employ over half of the continent’s workforce. Finally, SMEs are recognised for pushing economic diversification and strengthening their markets’ resilience to external shocks. Barclays Africa Group has long assumed a leadership role in championing the cause of small businesses, providing support and helping improve both efficiencies and

economies of scale. The group maintains a range of initiatives that aim to empower business owners via learning programmes and networks that facilitate access to markets, amongst others. Barclays Africa Group offers a range of financial products and services tailored to the needs of SMEs. The bank is actively engaged in the promotion of business development and provides entrepreneurs with the tools that enable them to start and grow their businesses. The group’s Enterprise Development Centres complement incubator, accelerator, and supply

chain development programmes designed to help entrepreneurs aim for, and attain, success. Via its innovative online procurement portal, Barclays Africa Group helps SMEs connect with opportunities offered by corporate and government buyers. The CFI.co judging panel commends the group on its proactive approach to helping small businesses succeed and prosper. The judges wish to recognise the sustained efforts of Barclays Africa Group, a repeat winner, by offering it the 2016 Best SME Partner Bank Africa Award.

> AHLI UNITED BANK: BEST REGIONAL BANK GCC 2016

Established in 2000 and with a reach now extending to Bahrain, Kuwait, Oman, UAE, Egypt, Iraq, Libya and the United Kingdom, Bahrain headquartered Ahli United Bank has become one of the region’s top financial services providers. The bank offers a full range of products and services across all segments of the business from retail and corporate banking to private banking, wealth management and bancassurance. Additionally, Ahli United Bank offers its clients access to a full range of Sharia-compliant financial services. AUB achieved a record net profit of $537.2 million in 2015, representing an 11.3% growth over the net profit of US$ 482.5 million in 2014. The strong financial performance of the Bank is driven by AUB’s well-managed business

model based on diversification and cross border flows and on the success of its selective growth initiatives to increase operating income, manage costs and mitigate risk challenges in its target markets. Despite tighter fiscal policy and weaker private sector activity resulting in lower liquidity in the banking system and moderate regional economic growth, AUB sustained its positive core performance trend in the first nine months of 2016 as it reported a net profit of $442.1 million, an increase of 5.5% as compared to $419.2 million in YTD Sep-2015. Since its establishment in 2000, Ahli United Bank has adopted and adhered to a strict corporate governance framework, in line with the

CFI.co | Capital Finance International

international best practices. Its solid embrace of prudent and balanced approach to banking has enabled Ahli United Bank to drive corporate, retail and private banking growth and to achieve additional momentum through targeted acquisitions. The bank’s corporate social responsibility initiatives have been recognised, amongst others, for their contribution towards enhancing micro finance in Bahrain through its shareholding in Family Bank. The CFI.co judging panel commends Ahli United Bank on its continued progress. After an earlier win in 2014, the judges have agreed to affirm and recognise Ahli United Bank as the winner of the 2016 Best Regional Bank GCC Award.

> PHARNEXT: BEST LIFE-SCIENCES IPO FRANCE 2016

Pushing the boundaries of medical research, French biopharmaceutical company Pharnext specialises in the development of drugs that help treat neurodegenerative diseases. The firm was formed by a group of renowned scientists led by Professor Daniel Cohen, a widely recognised pioneer in modern genomics. Pharnext has received the green light for a Phase 3 international trial of a product for the treatment of Charcot-Marie-Tooth Type 1A, a designated orphan disease in the United States and Europe for which drugs may gain final approval via a much abbreviated procedure. The

company has already obtained positive results for the Phase 2 trial of its PXT864 drug for the treatment of Alzheimer’s Disease. Pharnext is a global leader in the development of PLEODRUG© which simultaneously target multiple disease pathways. The company has identified a number of synergic combinations of already existing drugs, effectively repurposing their use. This offers key advantages to patients and investors alike: PLEODRUG© are deemed effective, safe, and – crucially – enjoy protection under international intellectual property law.

In June 2016, Pharnext successfully debuted on the Paris Euronext Alternext stock exchange raising in excess of €30 million from mostly Tier-1 institutional investors. The initial public offering was significantly oversubscribed. The proceeds of the IPO will be invested in Pharnext’s already formidable research effort and provide liquidity for future undertakings. The CFI.co judging panel congratulates the company on its flawlessly executed IPO and wishes to recognise this accomplishment by offering Pharnext the 2016 Best Life-Sciences IPO France Award.

> MAX MYANMAR GROUP: BEST ESG TRANSPARENCY MYANMAR 2016

Max Myanmar Group is one of the largest conglomerates in the Southeast Asian country with interests spanning almost the full range of Myanmar’s buoyant economy, including the energy, hospitality, manufacturing, and logistics sectors amongst others. A fixture of the local corporate universe since 1993, the Max Myanmar Group is widely recognised for managing to sustain strong growth under all market conditions. The business group comprises seven independently operating companies. Synergies are obtained from a shared adherence to the 86

highest ethical and operational standards. Max Myanmar Group was one of the first Myanmar businesses to derive value from its embrace of corporate social responsibility and the adoption of comprehensive environmental, social, and governance (ESG) standards that align with international best practices. Taking the long-term view on the creation of value for all stakeholders, Max Myanmar group has benefitted, and profited, from its progressive stance on ESG. The group employs more than seven thousand people and has repeatedly scored high CFI.co | Capital Finance International

marks on employee satisfaction. The company is dedicated to ensuring the welfare of its workers and maintain a large number of initiatives that enable both personal and professional growth. The group also insists on not undertaking any business venture that fails to benefit the communities in which it operates. For its turn, the CFI.co judging panel recognises Max Myanmar Group’s unwavering commitment to help underpin the development of Myanmar. A repeat winner, Max Myanmar Group is granted the 2016 Best ESG Transparency Myanmar Award.

Winter 2016 - 2017 Issue

> BANCO ECONÓMICO: BEST BANK GOVERNANCE ANGOLA 2016

A Commercial and Investment bank charged with financially underpinning development projects in Angola, Banco Económico squarely aims to become the bank of choice for all Angolans. It does so by offering a client-centric approach to the provision of financial services and pursuing excellence in corporate governance. Both internal and external processes have been updated to allow for greater transparency and compliance with international best practices and regulations. After a successfully concluded rebranding exercise, and a revamping of the

shareholder structure, Banco Económico has been thoroughly reinvigorated. The bank draws on its vast operational expertise to offer clients an exceptionally broad array of financial products and services. In Angola, Banco Económico is recognised as an early adopter of corporate social responsibility, supporting a number of programmes set up to broaden access to education, healthcare, and culture. The bank has also put its considerable weight behind initiatives that promote financial inclusion and the overall development of the economy. Maintaining a number of

specialised divisions, Banco Económico offers differentiated lines of products and services that dovetail with the specific needs of the oil and gas industry, traders, smaller businesses, and other sectors of vital importance to the country. The CFI.co judging panel is pleased to note that Banco Económico emphasises the need to adhere to the strictest standards of corporate governance and, indeed, has placed compliance at the core of its business model. The judges declare Banco Económico winner of the 2016 Best Bank Governance Angola Award.

> MAUBANK: BEST SME BANK MAURITIUS 2016

Formed after a merger between two of Mauritius’ financial services providers, MauBank has revitalised and shaken up the banking sector, gaining wide and almost instant recognition as one of the nation’s most dynamic banks – and generating healthy profits within 6 months of the merger. The MauBank brand has been positioned as one promoting entrepreneurship, underwriting the efforts of small and mediumsized businesses and empowering microenterprises and sole traders to scale up their undertakings. Straddling the divide between a

commercial bank and a development bank, the institution squarely aims to provide a boost to the local business community. Over a quarter of MauBank’s assets are committed to support SMEs. MauBank’s experienced management team works closely together with clients to seize business opportunities via a suite of fully scalable and flexible products and services, tailored to meet – and exceed – their specific requirements. Thus, MauBank often acts more as a partner to business than a mere financier. The bank also boasts a number of facilities that CFI.co | Capital Finance International

enables businesspeople to hone their skills and tap into yet unexplored markets or niches. After the merger that created the institution, MauBank recruited the best and brightest professionals to shape its operations. The bank has progressively streamlined internal and external processes in order to better and quicker respond to the needs of its clients. The CFI.co judging panel congratulates the bank on its many accomplishments since the merger and declares MauBank winner of the 2016 Best SME Bank Mauritius Award. 87

> SEDCO HOLDING: BEST SHARIA-COMPLIANT GROUP CORPORATE GOVERNANCE GCC 2016

Of modest origin and carefully nurtured to become one of Saudi Arabia’s leading wealth management company, SEDCO Holding adheres to time-honoured Sharia principles in the allocation of its clients assets. A family business characterised by its embrace of the highest ethical standards, SEDCO Holding can trace its roots to a trading and contracting company set up in 1976 to pursue diversified long-term investment opportunities both in the kingdom and abroad. Today, SEDCO Holding has a presence in the most dynamic sectors of the

Saudi economy and manages a number of funds that help underwrite major projects and corporations. From its early days, the company has maintained a strict separation between its owners and the highly skilled management team put in place to ensure consistent returns. SEDCO Holding is praised and recognised for providing leadership in corporate governance, setting an industry-wide benchmark against which others may gauge their performance. Its support for the financial education for young people has blossomed into a vast national programme that is close

to reaching two million young Saudis, helping them attain financial independence. Over the last few years, SEDCO Holding has made a grand move into the buoyant hospitality sector with two hotel openings in Makkah. The CFI.co judging panel entertains no doubt that SEDCO Holding’s successful twin-pronged approach to investing – fully Sharia-compliant and pursuing excellence in corporate governance – merit recognition. The company is declared winner of the 2016 Best Sharia-Compliant Group Corporate Governance Award GCC.

> SAKAR HEALTHCARE: BEST SME GROWTH IPO INDIA 2016

Sakar Healthcare of India manufactures a growing range of pharmaceutical formulations for both domestic and international markets. SAKAR has already proven a decadelong operational success in supplying diversified range of pharmaceutical products for premier multinational corporations for their domestic and overseas operations. Sakar Healthcare maintains a global network of distributors and has obtained brand in most major markets. It is currently in the process of expanding globally, foraying into regulated markets including European Union, looking out for overseas Strategic Joint ventures and Market acquisitions. Seizing the moment, Sakar Healthcare debuted on the small and medium88

sized enterprise (SME) board of India’s National Stock Exchange (NSE) in September. The IPO raised funds to build a new lyophilisation facility, bolster working capital reserves, and finance registration processes abroad, amongst others. The company is also working on plans to market pharmaceuticals under its own brand name, potentially lifting the business bottom line. Sakar Healthcare has established an enviable reputation for quality control enabling the company to broach new markets and quickly gain regulatory approval for its products. With state-of-the-art and fullyautomated manufacturing facilities equipped with machines imported from Germany, Italy, CFI.co | Capital Finance International

Switzerland and a comprehensive product line, Sakar Healthcare is poised for sustained organic growth, leveraging its core competency. The CFI.co judging panel notes that the company has expended considerable efforts at providing world-class pharmaceutical formulations and maintaining benchmarksetting quality levels attained by the continuous monitoring of its output. The judges also remarked that the company has timed its IPO to coincide with strong investor demand for shares in tech-heavy medium-sized businesses that are set for a breakout. The judges are pleased to offer Sakar Healthcare the 2016 Best SME Growth IPO India Award.

Winter 2016 - 2017 Issue

> CATOCA: BEST ESG MINING OPERATIONS ANGOLA 2016

Working one of the world’s richest kimberlite pipes, Angola’s Catoca Mining Company extracts close to seven million carats in high-grade diamonds annually – representing, by value, over three-quarters of the country’s production. The Catoca mine in northeast Angola is well-known for yielding almost double the world’s average of gem-quality diamonds. As a pioneer of corporate social responsibility in Angola, Catoca maintains an exceptionally broad range of initiatives that aim to underpin the nation’s sustainable development. Amongst others, the company helps underwrite projects that deliver potable water to isolated

communities, provide schooling to children from underprivileged families, offer skills development opportunities to workers, and finance healthcare initiatives. Catoca also runs its mine in an ecologically conscious manner, balancing economic needs with those of the environment. The company has actively pushed for legislation that promotes sustainable development models and was one of the first to establish a dedicated department to design and implement corporate policies with a view to reducing the environmental footprint and impact of operations. The company has adopted strategies

to reconstitute exhausted parts of the mine, monitor and control effluents, properly manage solid waste, and educate both staff and surrounding communities on the importance of greening all forms of economic activity. The CFI.co judging panel commends Catoca on its proactive and ground-breaking approach to managing the company’s environmental impact, reaching out to all stakeholders, and adhering to transparent governance practices. Catoca is declared winner of the 2016 Best ESG Mining Operations Angola Award.

> AGTHIA GROUP: BEST CORPORATE GOVERNANCE UAE 2016

Excellence in corporate governance is a key to success. Abu Dhabi-based Agthia Group, a leading food and beverage company, has deployed its solid governance record to drive growth and expansion. In order to gain, and maintain, its competitive edge Agthia Group follows a holistic approach to corporate affairs that includes proactive stakeholder engagement and seeks to produce lasting value. Keeping a vigilant eye on its business fundamentals, Agthia Group considers transparency, accountability, and environmental stewardship essential to its success and

part of its risk mitigation strategy. Processes and procedures have been put into place to continuously monitor performance on key nonfinancial corporate parameters in order to assure that goals are met and remedial action may be taken long before issues detected escalate. Agthia Group’s board of directors is recognised for its prudent, yet dynamic, approach to its oversight of the company’s operations. The management framework adopted by the company is designed to ensure appropriate business objectives are consistently met or exceeded and the interests of all stakeholders CFI.co | Capital Finance International

are represented throughout the organisation. Additionally, Agthia Group maintains a rigorously applied code of conduct that imposes corporate best practices, adherence to the highest ethical standards, and full compliance with all relevant legal requirements. The CFI.co judging panel is happy to note that Agthia Group, a previous winner, has expanded on its already formidable reputation for excellence in corporate governance. The judges are therefore delighted to offer Agthia Group the 2016 Best Corporate Governance UAE Award. 89

> SAVILLS INVESTMENT MANAGEMENT: BEST GLOBAL REAL ESTATE PORTFOLIO MANAGER UNITED KINGDOM 2016

With its roots in fund management, Savills Investment Management was set up in late 2003 as a platform for actively administered real estate investments in Europe and – more recently – Asia. Aiming to generate higher risk-adjusted returns, the firm’s portfolio was designed with a view to securing increased income streams from rentals. Savills Investment Management actively pursues properties that require major refurbishment or additional development that offset an initially higher exposure to short-term risk with improved long-term rates of return. Following a hands-on approach

to the investment process, the company’s board is heavily involved at all stages in order review opportunities, ensure risk mitigation, and monitor adherence to client and in-house guidelines. Savills Investment Management has gained industry-wide recognition for its thorough research which covers both the macro and micro aspects of the real estate market. The resulting data allow the firm to assess the overall market and identify, early-on, opportunity. Savills Investment Management’s team of experts are able to match investors

to tailor-made portfolios that dovetail with individual requirements and tolerance to risk. The strategy is fully data driven and augmented by on-the-ground monitoring by the firm’s experienced officers. The CFI.co judging panel agrees that successful real estate investment necessitates access to a wealth of reliable data which, in turn, requires both specific expertise and experience. The judges are pleased to confirm Savills Investment Management’s win of the 2016 Best Global Real Estate Portfolio Manager United Kingdom Award.

> BLACK SEA TRADE AND DEVELOPMENT BANK: BEST REGIONAL DEVELOPMENT BANK GLOBAL 2016

Offering unparalleled flexibility in the structuring of its clients financing requirements, the Black Sea Trade and Development Bank (BSTDB) meets the needs of businesses and stateowned entities in one of the world’s most dynamic – and fastest growing – regions. Headquartered in Thessaloniki, Greece – and set up in 1999 by the governments of Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey, and Ukraine – the bank aims to support economic development and trade throughout the Black Sea Region. 90

The BSTDB maintains a number of facilities geared towards micro, small and medium-sized enterprises (MSMEs), recognising their importance as engines of growth. The bank often works in conjunction with organisations that support SMEs such as Albania’s Fondi Besa which recently accessed a $5m credit facility to supply working capital to rural MSMEs. In Georgia the BSTDB helped a local bank set up a MSME financing programme. The bank is also heavily involved in underwriting regional trade by offering a number CFI.co | Capital Finance International

of instruments that address the funding needs of exporters and trading companies. Trade financing options run from short-term – typically less than one year – to medium/long-term with tenors of up to ten years. The CFI.co judging panel is pleased to see the BSTDB take an active role in the promotion of both international trade and regional development. The judges reaffirm last year’s win and declare the Black Sea Trade and Development Bank winner of the 2016 Best Regional Development Bank Award.

Winter 2016 - 2017 Issue

> FreeBalance: MOST INNOVATIVE PUBLIC SECTOR MANAGEMENT SOLUTIONS GLOBAL 2016

FreeBalance helps governments around the world manage their resources with public financial management solutions that enhance transparency and accountability. The firm offers a unified governance platform that allows public officials to place financial management and resource planning at the core of their smart government decision-making processes. FreeBalance works closely with its customers through the FreeBalance International Steering Committee (FISC) to ensure that its solutions evolve in tandem with global governance standards and customer expectations. To date, the governments of

25 countries are leveraging public financial management solutions from FreeBalance as the foundation for smart government. Aware of its far-reaching responsibilities, FreeBalance adheres to the highest ethical standards and partners with local professionals to develop strong and lasting ties with clients. With a mission to make the world a better place through smart technology, the firm believes it is possible to accelerate development by applying robust financial management techniques that combat waste and increase efficiency. The unified governance platform

from FreeBalance improves the performance of smart government by providing a single view of data from government priorities (budget) through execution and results. FreeBalance customers include national, state or provincial, and local governments trying to improve country prosperity, well-being and the stewardship of public funds through digital transformation. The CFI.co judging panel applauds the firm’s hand-on global approach to the management of government resources and is pleased to offer FreeBalance the 2016 Most Innovative Public Sector Management Solutions Global Award.

> KPMG: BEST TAX TEAM GERMANY 2016

Known as one of the Big Four auditing firms, KPMG is a professional services company specialising in audit, tax, consulting, and deal advisory. In Germany alone, the company boasts 9,800 employees in over twenty locations and its tax advisory team includes interdisciplinary specialists with access to KPMG’s top-of-therange data-management system. Each specialist operates within his/her own key industry group in order to fully understand specific tax issues within each industry. Germany’s tax transformation is

set to take the country by storm, thanks to the Organization for Economic Cooperation and Development’s global action plan on base erosion and profit shifting (BEPS). This plan includes fifteen action points to ensure international tax rules are fit for today’s globalised world; adequately taxing multinational companies and closing tax avoidance loopholes. With a verbal commitment to BEPS, as well as a first draft law to implement the action plan, Germany is well on the way to changing its corporate taxation matrices – and KPMG is well prepared for this. The firm CFI.co | Capital Finance International

is already advising clients on how to meet their compliance responsibilities and act on planning opportunities. The German team not only has access to dedicated resources across the global network, but can also draw from the deep knowledge base of the global offices for multinational tax queries. The firm’s industry-orientated organisation and depth of resources only adds to the fantastic wealth of knowledge and experience of its employees. The CFI.co judging panel is pleased to offer KPMG the 2016 Best Tax Team Germany Award. 91

> WAFACASH: BEST MONEY TRANSFER SERVICES MOROCCO 2016

There is more to transferring money than meets the eye. Speed is of the essence, as are products that meet client requirements at a price point that sustains business profitability. In a cash-intensive society, an effective mechanism to transfer money anywhere anytime provides the economic lifeblood without which business would crumble. Morocco’s Wafacash not only understands the supreme importance of its services; the company has designed a business model on the premise that both private and business clients need to move their funds quickly and cheaply.

Finely attuned to the markets shifting demands, Wafacash offers simplicity and flexibility. The company has managed to streamline customer transactions to a process that rarely takes more than three minutes. The largest money transfer platform in Morocco, Wafacash processes around five billion transactions annually through a nationwide network of over 1,500 branches. Wafacash’ operations are backed up by a state-of-the art IT backbone that ensures the swift execution of transfers. Moroccan businesses have come to depend on the

company’s services to pay invoices and settle receivables. Launched in 1991, Wafacash partnered with Western Union four years later and thus offered the American company its first toehold in Africa. Wafacash has since established close relationships with specialist branches of the UN to improve access to financial services throughout West Africa. The CFI.co judging panel recognise the company as a pioneer in its field. The judges have declared Wafacash winner of the 2016 Best Money Transfer Services Morocco Award.

> KUWAIT INTERNATIONAL BANK:

FASTEST-GROWING ISLAMIC BANK MENA 2016 & BEST SHARIA-COMPLIANT BANK MENA 2016

Recipient of a dual award, Kuwait International Bank (KIB) has a significant impact on the financial services industry of the country. KIB gained wide recognition as a pioneer of Islamic banking, conducting its business, and adjusting all internal operations and processes, in accordance to Sharia Law. With a domestic network of 26 branches, KIB maintains a prominent presence in Kuwait and offers both corporate and individual clients a wealth of products and services ranging from financing transactions and treasury management to property 92

administration and lease-to-own facilities. KIB has pursued operational excellence and full compliance with Sharia Law since its foundation in 2007. Since then, KIB has accumulated a vast reservoir of experience that is leveraged to maintain a competitive edge and offer clients tailored palettes of services that suit their individual interests. Deposited funds are deployed in investments with proceeds split between depositors and the bank according to mudharabah principles as determined by a specially constituted board of Sharia scholars in CFI.co | Capital Finance International

charge of oversight. KIB has proved beyond any doubt that Sharia-compliant banking offers all the services expected of a modern financial services provider and does so with a remarkable agility and flexibility. The CFI.co judging panel commends KIB on its strong performance. The bank is a repeat winner and is now recognised again. Kuwait International bank is declared winner of the 2016 Fastest-Growing Islamic Bank MENA Award and the 2016 Best Sharia-Compliant Bank MENA Award.

Winter 2016 - 2017 Issue

> BANCOMEXT: BEST TRADE FINANCE BANK MEXICO 2016

Mexico’s Banco Nacional de Comercio Exterior (Bancomext), founded in 1937, is one of the country’s principal trade facilitators. The bank finances trade and foreign currency generating industries and has a wealth of experience in the efficient delivery of products and services tailored to meet the needs of businesses that venture beyond Mexico’s borders. At heart, Bancomext is a development bank, partnering with private business to tap into global markets, seizing opportunities, and driving the expansion of the country’s export sector. The bank is particularly focused on financing investment projects geared towards

international trade. Bancomext has been a long-time financier of Mexico’s buoyant tourism industry and also offered support to projects in the industrial, logistics, and energy sectors. Bancomext works closely with a number of carefully selected commercial banks to add to its reach and roster of services, offering clients a holistic approach to the provision of financial services. The bank is known for establishing long-term relationships with its corporate clients. Thus, Bancomext aims to gain a better understanding of their businesses with a view to offering optimised services. More than 65% of Bancomext’s loan

portfolio is in foreign currency, as it finances its clients export activities and investment needs. In August 2016 Bancomext became the first development bank to issue Tier 2 subordinated debt, which boosted its capital base and strengthened its balance sheet. The bank supports international trade with a full array of products, including factoring facilities available to both importers and exporters. Bancomext also partners with commercial banks to offer support to small and medium-sized business with cross-border interests. The CFI.co judging panel is pleased to offer Bancomext the 2016 Best Trade Finance Bank Mexico Award.

> TANQIA: BEST WASTEWATER UTILITY MANAGEMENT TEAM MIDDLE EAST 2017

Designed to maximise efficiency and throughput, Tanqia is the only privately-owned wastewater collection and treatment facility in the Middle East. Processing up to 16,000 cubic metres of wastewater every day, the UAE-plant covers an area of some sixteen hectares just south of Qidfaa. The state-ofthe-art facility started operations in 2008 and currently consists of two modules and may be easily expanded to meet increased demand. A doubling of capacity is already being planned. Tanqia maintains a vast primary and secondary network for the collection of

wastewater that stretches over 300 linear kilometres and includes thirty pumping stations. An expansion of the network with another thirty kilometres of mains and eight additional pumping stations is being implemented. A public-private partnership between Elwan, a boutique infrastructure development company, and Mubadala – the private-sector investment vehicle of the Abu Dhabi government, Tanqia is globally recognised for its efficiency, setting benchmarks for the entire industry. Producing high quality effluent thanks to its technology-driven approach to CFI.co | Capital Finance International

wastewater management, Tanqia helps preserve the emirate’s valuable water resources. The effluent is used for the irrigation of golf courses and public parks and by a number of industries such as construction and mining amongst others. The CFI.co judging panel notes that Tanqia helps protect the environment by treating wastewater that was previously disposed of in marshlands at significant risk to public health. The judging panel is pleased to offer Tanqia the 2017 Best Wastewater Utility Management Team Middle East Award. 93

> RAFFLES DUBAI: BEST LUXURY HOSPITALITY LEADERSHIP MIDDLE EAST 2016

Standing, proudly, at the apex of splendour and perpetuating the grandeur of a time almost lost, Raffles welcomes its overnight guests to a painstakingly crafted world of unhurried luxury. The original Raffles Hotel in Singapore, birthplace of the legendary Singapore Sling and a home away from home to nearly all of the world’s greats, remains a celebrated landmark – and a national monument – in the city state at the crossroads of civilisations. From its founding in 1887 as a ten-room guest lodge overlooking the South China Sea, Raffles has been synonymous with

style and elegance, a magnet for the wealthy and powerful craving for a respite from their hectic surroundings. Offering a veritable oasis of tranquillity, and its fabled Long Bar where Ernest Hemingway and Somerset Maughan found inspiration, Raffles left no detail to chance and soon set the benchmark for luxury hotels the world over. That legacy remains alive today as Raffles expands overseas. In addition to the original in Singapore, eleven Raffles Hotels have been opened across Asia, Europe, and the Middle East. Instead of pursuing uniformity,

Raffles has awarded each of its hotels a set of unique characteristics whilst remaining true to the brand’s hallmark of unsurpassed quality. Raffles Dubai lends its surroundings a touch of class with an understated, yet everpresent, refinement – an art acquired through heritage rather than by learning. The CFI.co judging panel cannot help but offer Raffles Dubai an ode to its accomplishments: successfully replicating that what is unique by its very definition. Thus, Raffles Dubai is offered the 2016 Best Luxury Hospitality Leadership Middle East Award.

> BANQUE LEONARDO: BEST BOUTIQUE PRIVATE BANK FRANCE 2016

Banque Leonardo is the French subsidiary of the banking group Banca Leonardo, founded in Milan in October 1999. In April 2006, a group of leading European investors coordinated by Gerardo Braggiotti acquired and recapitalised Banca Leonardo with the purpose of creating the first private and independent investment bank in Italy and becoming the market leader through highly developed consulting services, a differentiated and long-term individual approach, valueadded services, professionalism and expertise. As of today, thanks to several key investments and financial transactions aimed 94

at strengthening its core business, Banca Leonardo operates, directly and through its subsidiaries, in Italy, France and Switzerland. Banque Leonardo, the French arm of the group, offers, with a one-stop-shop approach, wealth management and asset management services able to analyse and satisfy clients’ investment needs, even the most complex ones. Banque Leonardo’s mission is to protect clients’ assets, preserve their purchasing power, and maintain and improve their life style over time. Over time the group Banca Leonardo has developed a unique approach to managing CFI.co | Capital Finance International

family wealth that taps into dynamic global markets whilst honouring the timeless traditions of private banking – discretion, prudence, and agility. Offering a central vault for all asset classes, Banque Leonardo pursues a single contact point model that offers its clients added convenience and allows for short lines of communications which, in turn, enables the bank to seize the moment – and the opportunity. The CFI.co judging panel is pleased to confirm Banque Leonardo’s win of the 2016 Best Boutique Private Bank France Award.

Winter 2016 - 2017 Issue

> BIDV SECURITIES COMPANY: BEST SECURITIES BROKER VIETNAM 2016

Home to a roaring economy, Vietnam is not only open for business but adding dimensions and layers to its corporate universe with the development of strong indigenous capital markets. The Hanoi-government has repeatedly called for the accelerated equitisation of stateowned businesses in order to prime them for world markets. The push has opened a wealth of opportunities for savvy early investors aiming to hitch their fortune to one of the world’s most dynamic markets. The BIDV Securities Company

(BSC), a subsidiary of the Bank for Investment and Development of Vietnam, is one of the country’s first full-service brokerages. BSC enjoys wide recognition for its local market expertise and privileged access to both data and opportunity. BSC has played a leading role in the shaping of the two major Vietnam stock exchanges in Ho Chi Minh City and Hanoi. Leveraging the countrywide footprint of its BIDV parent, BSC has a unique overview of both national and local corporate trends and developments that allow the brokerage

to identify exceptional opportunities for their clients’ benefit. BSC maintains a state-of-theart IT backbone and offers investors all the advantages of dealing with a highly trained and experienced team of professionals. The CFI.co judging panel notes that BSC aims to establish long-term relationships with investors and adheres to a fully scalable business model that allows the firm to offer services precisely tailored to individual investor needs. BSC is declared winner of the 2016 Best Securities Broker Vietnam Award.

> MIDDLE EAST CAPITAL GROUP (MECG): BEST CLIENT-TAILORED FINANCIAL SOLUTIONS MENA 2016

One of the leading financial services providers in the Middle East and North Africa (MENA), the Middle East Capital Group (MECG) derives its success from its adherence to a clientcentric approach. The firm – headquartered in Beirut and 98.5% owned by the First National Bank of Lebanon – has been widely recognised for the outstanding level of its services. MECG is a full member of the Beirut Stock Exchange and offers its clients maximum exposure to the many opportunities available throughout the economically buoyant region.

Focused on delivering results today, rather than in the distant future, MECG builds long-term relationships with its clients in order to understand their needs and tolerance for risk. MECG couples the highest operational standards to an equally elevated ethical code that puts the interests of client centre stage. The firm maintains a number of investment funds that have consistently outperformed local benchmarks and the overall market. This year MECG launches a real estate fund to tap into one of the most dynamic of regional markets.

CFI.co | Capital Finance International

Regardless the size of their portfolio, MECG clients are assured of personal attention and have a team of highly trained and experienced professionals at hand to help guide their decisions. The CFI.co judging panel commends MECG on its hand-on personalised approach to investment and recognises the value of bespoke solutions. The judges are happy to confirm Middle East Capital Group as winner of the 2016 Best Client-Tailored Financial Solutions MENA Award.

> COSTA RICAN INVESTMENT & DEVELOPMENT BOARD (CINDE):

BEST INTERNATIONAL HIGH-TECH INVESTMENT PROMOTION TEAM LATIN AMERICA 2016

Costa Rica is one of those countries that seldom grab the global headlines. This is, however, a good thing. A stable democracy for over 120 years, with unmatched economic stability in the region, Costa Rica is making waves in a different way: the country is home to a growing number of international corporations that have found a business-friendly haven and an environment that rewards innovation. Costa Rica is fast on its way to become a hub of hightech manufacturing and research. The Costa Rican Investment

Promotion Agency (CINDE) helps businesses considering a move to the country navigate its streamlined regulatory environment. The agency assists businesses plug into local society which is characterised, amongst others, by the excellence of the education system that, according to data compiled by the World Economic Forum delivers results superior to those obtained in countries such as the US, India, Brazil, and China. Costa Rica has established a close working relationship between industry and academia which helps

match curriculums to the needs of employers. CINDE has accumulated a wealth of up-to-date data that enables investors to maximise exposure to the benefits Costa Rica can deliver. The country also maintains a free trade zone regime that offers incentives to corporate newcomers. The CFI.co judging panel commends Costa Rica on its hands-on approach and is pleased to declare CINDE winner of the 2016 Best International HighTech Investment Promotion Team Latin America Award.

> INVERSIS BANCO: BEST BANKING TECHNOLOGY INNOVATOR SPAIN 2016

Widely recognised as representing the gold standard of institutional investment banking in Spain, Inversis Banco offers its knowledge and experience to financial services providers throughout the country and abroad. The bank is sharply focused on delivering the highest quality when it comes to the execution, custody, and liquidation of equity trades. Inversis Banco also acts as an intermediary between investors and some of the world’s most prominent fund managers. With a client centric approach built in to its corporate DNA and a team of exceptionally experienced professional, Inversis 96

Banco is known for crafting innovative solutions that fit seamlessly with client requirements. The bank leverages the full power of its high-tech infrastructure to produce tailormade offerings that consistently raise the bar. Inversis Banco maintains a state-of-the-art technological platform that is continually updated to drive growth. Committed to outperforming its peers, Inversis Banco has accumulated a roster of clients that is the envy of the industry. Its market analysis department has gained a reputation for excellence thanks to its holistic approach to research and regularly produces CFI.co | Capital Finance International

technical analysis reports that enable investors to access opportunities not available elsewhere. The bank also offers deep analysis of existing investment portfolios that allows for the early identification of risk. Inversis Banco’s macroeconomic research, compiled into regular market watch reports, keep clients abreast of trends as they unfold. The CFI.co judging panel is pleased to note that the bank kept its leading edge and wishes to recognise this with an award for the second year running. The judges therefore declare Inversis Banco winner of the 2016 Best Banking Technology Innovator Spain Award.

Winter 2016 - 2017 Issue

> ARAB INVESTMENT COMPANY: BEST CORPORATE FINANCE ADVISORY TEAM KUWAIT 2016

A boutique investment firm with a comprehensive array of services, Arab Investment Company (AIC) operates as a classic merchant bank focused on quality and skills honed to perfection over time. Tapping into Kuwait’s heritage as a centre of financial expertise, AIC has established a strong reputation in corporate finance. The firm is one of the leading merger and acquisition facilitators in the country and has helped major multinational companies structure investment projects both domestically and abroad. Part of the Bukhamseen Group

of companies, one of Kuwait’s largest conglomerates, AIC has the reach and executorial power usually associated with larger firms whilst retaining the operational nimbleness of a boutique bank. The company is one of only a handful of firms that is already fully compliant with Kuwait’s broadened capital market regulatory framework which aims to allow local financial services providers to easily adapt to, and embrace, global standards. Recognised as a trendsetter, AIC helped shape the new framework by providing the market regulator

with significant input throughout the drafting process. In a market that not only requires expertise to navigate but also a degree of whoyou-are and who-you-know confidence, AIC towers well above the crowd. The CFI.co judging panel notes that the big boys of global corporate finance and asset management regularly call upon AIC to help structure and seal complex deals. The judges are indeed pleased to offer the Arab Investment Company the 2016 Best Corporate Finance Advisory Team Kuwait Award.

> NORNICKEL: BEST MINING CORPORATE GOVERNANCE RUSSIA 2016

Working the richest nickel, copper, and palladium deposits found anywhere, Russian mining giant Nornickel is the world’s largest producer of refined nickel and palladium. The company was established in 1935 and privatised in 1995. With mining operations in Russia, Nornickel’s bedrock remains centred on the Taymir Peninsula, home to Norilsk, the northernmost city in the world and scene of one of the largest volcanic events in the earth’s geological history which some 250 million years ago produced the Siberian Traps and with them the exceptionally rich mineral veins mined by

Nornickel. Aware that mining operations in Russia’s far north have not always been conducted in a sustainable fashion, Nornickel has now implemented a programme that aims to vastly reduce the environmental footprint of its smelters. With a view to appropriate all relevant environmental, social, and governance (ESG) standards Nornickel placed its entire operation on a sustainable footing. The company also adopted a thoroughly revised corporate policy that safeguards the interests of all stakeholders. CFI.co | Capital Finance International

Thus, Nornickel aims to strengthen its position as the world’s leading producer of nickel and palladium, and other base and precious metals. The CFI.co judging panel recognises that demand for nickel and palladium are set to rise dramatically as low and zero emissions vehicles are developed. The judges are pleased to note that Nornickel has moved into the pole position as a premier supplier of the critical materials required by the automotive industry. Nornickel is declared winner of the 2016 Best Mining Corporate Governance Russia Award.

> FundCalibre: BEST INVESTMENT FUND RESEARCH UNITED KINGDOM 2016

In a universe of more than 3,000 funds available to UK investors, FundCalibre gives its Elite Rating to only around 150. With an in-house research team that boasts more than 50 years of expertise, the ratings house meets hundreds of managers each year to filter the list down to only those they believe truly stand out. At the heart of FundCalibre’s evaluation process is the firm’s proprietary AlphaQuest tool, which not only analyses past performance, but finds the funds most likely to outperform based on their managers’ track records. A fund must achieve a certain AlphaQuest score before the team will even consider further qualitative research.

FundCalibre’s research analysts will then interview the managers face-to-face to better understand their investment process and style, and what gives them an edge. Finally, both quantitative and qualitative analysis is subjected to peer group review before deciding whether to award an Elite Rating. FundCalibre enables experienced investors to help validate decisions and find hidden gems, while newcomers may benefit from its simple, easy-to-understand ratings system; straightforward, jargon-free research notes; and weekly editorial email to highlight and explain major financial news. Due to investor demand, the Elite

Rating now also includes a ‘Responsible Investing’ category, which looks at funds that set out to make a difference through both avoiding various sectors and trends, as well as actively seeking out companies that are leading the way in terms of environmental action and social responsibility. Taking the guesswork out of the investment process, FundCalibre provides a valuable service to the independent investor. The CFI.co judging panel is pleased to offer FundCalibre the 2016 Best Investment Fund Research United Kingdom Award.

> KLCCP STAPLED GROUP: BEST SHARIAH-COMPLIANT REIT MALAYSIA 2016 PANTONE 376C PANTONE 376U

PANTONE 288C PANTONE 288U

PANTONE 7543C PANTONE 7543U

An Islamic REIT (Real Estate Investment Trust) with a fully Shariah-compliant property portfolio, KLCCP Stapled Group offers investors optimal exposure to buoyant real estate markets in Malaysia. KLCCP Stapled Group is actively managed and tilted towards office and retail properties. KLCCP Stapled Group has an active acquisition strategy designed to ensure capital growth and provide unitholders regular and stable distributions. Adhering to a policy framework characterised by prudence and risk mitigation, the trust as a rule leverages up to 50% of its total asset value. The KLCCP Stapled Group is focused 98

on underpinning the long-term viability of its property portfolios by integrating sustainability principles into the decision-making process, thus ensuring that investment positions and development projects reflect and anticipate changing market conditions. Additionally, the group maintains a number of corporate social responsibility initiatives and fully embraces up-to-date environmental, social, and governance (ESG) standards with a view to ensuring the business’ sustainability and long-term profitability. KLCCP Stapled Group has, in fact, established benchmarks for corporate transparency CFI.co | Capital Finance International

as grounded in the PETRONAS Corporate Sustainability Framework, thus ensuring the highest standards of governance, business ethics, and integrity are maintained whilst the interests of all stakeholders are taken into consideration. The CFI.co judging panel recognises the value of the sustainability principles and their ability to optimise corporate performance. The judges are pleased to offer KLCCP Stapled Group the 2016 Best Shariah-Compliant REIT Malaysia Award.

Winter 2016 - 2017 Issue

> COOPERATIVE CENTRAL BANK: BEST SOCIAL IMPACT BANK CYPRUS 2016

Operating since 1937 and being a cornerstone of society, the Cooperative Central Bank (CCB) in Cyprus promotes an inclusive and socially-inspired approach to financial services. The Bank’s mission is to provide I innovative and easily accessible services to all citizens and support entrepreneurs. As a cooperative bank, the Bank remains true to its founding principles based on the Raiffeisen co-op societies that emerged in the late 1800s. Today, Cooperative Central Bank is found at the leading edge of the financial services industry in Cyprus offering a wide range

of products and services through its member societies. CCB boasts a nationwide reach ensuring all Cypriots are able to avail themselves of the Bank’s services. CCB is a member of the Genevabased International Cooperative Alliance, the largest non-governmental organisation in the world, which supports the global cooperative movement. CCB adheres to a strict code of corporate governance and is characterised by its commitment to transparency. Since the recapitalisation of the Cooperative Credit Sector in 2014 the state

owned CCB was able to build up its buffers and successfully passing pass a number of stress tests. The CFI.co judging panel recognises the value of cooperative banking as a promoter of financial inclusion and social progress. The judges also acknowledge CCB’s contribution to the global cooperative movement and applaud its adherence to cooperative values. The Cooperative Central Bank is declared winner of the 2016 Best Social Impact Bank Cyprus Award.

> DORSUM INVESTMENT SOFTWARE: MOST INNOVATIVE FINANCIAL SOFTWARE PROVIDER CEE 2016

Just like retail brokerage and professional trading before, wealth management is now moving online. Increasingly, high-net-worth individuals demand a safe online environment in which to manage their assets and plan the future. Offering improved yields and tax advantages, online wealth managers leverage the power of precision tools to obtain results previously available only to large teams of dedicated specialists and seasoned analysts. Dorsum Investment Software, established in 1996 and now a market leader in Central and Eastern Europe, is at the forefront of this trend, if not driving the move. With leading-

edge solutions that now include Virtual Advice, a unique mobile that combine the strengths of human and automated advisory, Dorsum helps its clients provide a modern user experience that can go head to head with robo advisors and engage the younger generation. With a fully-featured wealth management platform, Dorsum is committed to help digitize the wealth management industry. With a broad product portfolio, Dorsum is widely recognised – and lauded – for its innovative approach to the software that underpins the financial services industry. Wealth managers are offered a client acquisition tool that produces client-specific CFI.co | Capital Finance International

solutions and showcases the power of Dorsum’s software. The company’s Wealth Management Platform is, essentially, a wealth management business in the proverbial box: the package features next-generation functionality and allows managers to strongly engage with customers and ensure regulatory compliance. The CFI.co judging panel congratulates the company on its novel, yet well-grounded, approach to software for the financial services industry. The judges declare Dorsum Investment Software winner of the 2016 Most Innovative Financial Software Provider CEE Award.

> BANQUE TRANSATLANTIQUE: BEST PRIVATE BANK FRANCE 2016

A trusted and longstanding partner to the wealthy, Banque Transatlantique adheres to old world values whilst serving its select clients with present-day panache in the pursuit of perfection. Founded in 1881, the bank has handled the pecuniary affairs of the French foreign service personnel with notable distinction and helped entrepreneurs as they struck out globally in search of opportunity. Though firmly attached to its heritage, over time Banque Transatlantique changed in tandem with its environment to become a private bank with a worldwide reach offering bespoke and innovative solutions to

their clients’ requirements and aspirations. Taking a holistic long-term approach to financial management, Banque Transatlantique has developed a fully scalable suite of products and services that extends well beyond the standard fare of private banking and incorporates the key aspects of its well-known multidisciplinary style of wealth management. Maintaining a delicate equilibrium between prudence and diversification in the allocation of client funds, Banque Transatlantique ensures a coherent asset management policy prevails regardless of market conditions.

With a branch network that includes the world’s premier financial centres, Banque Transatlantique emphasises its corporate creed that proximity to clients and markets is of paramount importance for the proper management of investment portfolios. The bank also offers segmented services tailored to suit the needs of real estate investors, family offices, art collectors, and others requiring highly specialised assistance. The CFI.co judging panel is pleased to recognise Banque Transatlantique as the winner of the 2016 Best Private Bank France Award.

> NABEEL LAW OFFICES: BEST PRIVATISATION TEAM JORDAN 2016

Nabeel Law Offices, established in 1952, is one of Jordan’s premier full-service legal firms, offering its clients access to a vast reservoir of knowledge and experience. Recognised for its holistic approach to any legal matter entrusted to the firm, Nabeel Law Offices seeks solutions via innovation and a stalwart dedication to best practices and solid research. The firm has established a number of specialised branches in underserved fields of the legal profession such as translations. Considering that essential arguments and thought processes often get lost in translation, 100

Nabeel Law Offices in 2012 set up a dedicated business unit to transpose documents and briefs between Arabic and English, applying a mixture of art, skill, and technical expertise to the process with a view to carefully preserving the original intent. Nabeel Law offices has accumulated a sizeable body of experience in helping the Jordanian government offload some of its businesses such as the fibre optic line unit of the state-owned power company. Nabeel Law Offices also helped OTE, the Hellenic Telecommunication Organisation, benefit CFI.co | Capital Finance International

from the partial privatisation of the Jordanian Telecom. The firm is regularly consulted on privatisation issues and offers its expertise to both selling state entities and potential buyers. The CFI.co judging panel applauds Nabeel Law Offices for the broad array of services offered and its continued dedication to excellence in all aspects of the legal field. The judges are very pleased to declare Nabeel Law Offices winner of the 2016 Best Privatisation Team Jordan Award.

Winter 2016 - 2017 Issue

> WAHA CAPITAL: BEST EMERGING MARKETS INVESTMENT MANAGER MENA 2016

Pursuing optimal exposure to diversified asset classes, Abu Dhabi-based Waha Capital offers investors ample opportunity to benefit from buoyant emerging markets. The company, founded in 1997, manages asset portfolios that include sizeable stakes in the logistics and infrastructure, property, financial services, and healthcare sectors, amongst many others. Waha Capital has established a solid track record with the deployment of capital in markets and segments that display strong fundamentals and have been earmarked for accelerated development by governments in the Middle East and North Africa. The firm also

manages both global and regional credit and equity portfolios. This ensures high levels of liquidity while enhancing the company’s drive towards diversification. Deploying its capital efficiently, and with a view to strong appreciation, has allowed Waha Capital to offer above-market sustainable returns to both shareholders and investment partners. Starting out as a leasing company, Waha Capital evolved into an investment company as a logical progression from its expertise in the management of high-value assets. The firm has driven its expansion by

organic growth and by establishing several strategic investment partnerships. The company’s capital markets team has been particularly successful in global credit markets. Encouraged by the exceptional results, Waha Capital is expanding its scope to include portfolio management services to third-party investors. The CFI.co judging panel applauds the company’s dedication to operational excellence and client service, and wishes to recognise Waha Capital as winner of the 2016 Best Emerging Markets Investment Manager MENA Award.

> CYPRUS DEVELOPMENT BANK: BEST CORPORATE BANK CYPRUS 2016

Established in 1963 as a public entity to help further economic progress, the Cyprus Development Bank (cdbbank) – privatised in 2008 – has become a major driver of private enterprise in its domestic market and abroad. Fully geared towards servicing the diverse needs of corporations with up-to-date and innovative products, the bank also helps private and institutional investors manage their portfolios. Since its privatisation, cdbbank has carved out a significant niche by focusing on the local business community, catering to the needs of corporate and institutional clients. Widely recognised for its operational excellence and client-centric approach, cdbbank aims to respond flexibly and efficiently to customer

requirements, leveraging its deep reservoir of in-house expertise as one of the country’s most venerable financial institutions. In 1999, cdbbank established the Investment Bank of Kuban (IBK) in Russia’s Krasnodar Region on the northeast shore of the Black Sea. The bank was set up jointly with the European Bank for Reconstruction and Development. cdbbank also helped with the transformation of the Palestinian Development Fund into a bank. cdbbank continues its dynamic growth by investing in and expanding its business operations and services. The bank has recently developed further in the International Banking sector and has invested in human CFI.co | Capital Finance International

resources, new premises as well as cuttingedge digital systems to continue providing high quality client service. In addition, cdbbank has also expanded its scope to include services to sectors earmarked by the government for accelerated development such as alternative energy and technology. The CFI.co judging panel commends cdbbank on its dedication to excellence in corporate and commercial banking, staying on top of technological developments, and applying its expertise to offer clients comprehensive, specialised services suited to their specific needs. The judges are pleased to offer Cyprus Development Bank the 2016 Best Corporate Bank Cyprus Award.

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> AKERTON PARTNERS: BEST CORPORATE FINANCE ADVISORY TEAM SPAIN 2016

Spain has become an engine of economic growth in Europe. The country’s economy is set to expand by well over 3% in 2017. Emerging from a long recession, opportunity beckons with the value of corporate assets still lagging as the rather lacklustre performance of the IBEX35 indicates. However, investors are tuning in to the news from Madrid. Interest in Spain is markedly up and so are deals. Akerton Partners, an independent consultancy specialised in the structuring of financial deals for corporates and their investors,

stakeholders, and financiers, was founded in 2008 by a group of professionals who had earned their spurs in the financial and business worlds. The firm aims to create and sustain value for its clients by investigating every angle of a proposed deal, minimising exposure to risk, and implementing innovative solutions. Akerton Partners enjoys a wellestablished reputation for effective out-of-the box thinking that yields consistent results. The firm is widely recognised as a formidable repository of knowledge on Spanish corporate

finance. Its financial experts act as true partners to their clients’ businesses, offering insights rarely available elsewhere. As an independent advisory, Akerton Partners stands at the very apex of its sector in Spain. The CFI.co judging panel is well aware of its formidable reputation. For a second consecutive year the judges have decided to award the firm a win. Thus, Akerton Partners is the recipient of the 2016 Best Corporate Finance Advisory Team Spain Award.

> ECONOMENA ANALYTICS: BEST DATA PROVIDER MIDDLE EAST 2016

Every investor or stakeholder in the Middle East and North Africa (MENA) grapples with the same challenge: finding consistently reliable data. A region of buoyant economies and exciting emerging and pioneer markets, MENA’s continued progress depends to a large extent on improving access to analytical data and other research-driven business tools that gauge corporate and macroeconomic performance and plot ways towards increased efficiency. Beirut-based Economena Analytics is a well-established trailblazer in the provision of business research and analytical tools, plus ancillary services, that cover the entire MENA 102

Region. With a staff of seasoned analysts, the firm produces a vast stream of data collected from hundreds of reliable sources and intelligently compiled for easy digestion. Economena Analytics offers clients a wide range of multilingual turnkey systems that offer both snapshots and in-depth analysis of economies, industry sectors, markets and individual companies. The Lebanese firm is plugged into a vast network of primary data providers which ensures that information is continuously updated. Clients enjoy instant real-time access to hundreds of thousands of indicators which may be combined, sorted, and visualised CFI.co | Capital Finance International

to detect trends and pinpoint opportunity. Economena Analytics clients include risk and investment analysts, economists, policymakers, business writers, academic researchers and others who need reliable data to keep abreast of fast-paced developments. The CFI.co judging panel understands that solid data underpins both business and governments. The judges recognise the value of the services provided by Economena Analytics and declare the firm winner of the 2016 Best Data Provider Middle East Award.

Winter 2016 - 2017 Issue

> GAINDE 2000: BEST DIGITAL SECURITY SOLUTIONS WEST AFRICA 2016

Considered as a reference in digital services industry in Africa, GAINDE 2000 is a pioneer in several fields in term of paperless procedures and a key contributor in the Senegalese leadership in several aspects of the digital economy. GAINDE 2000 is recognized internationally since 2007 as the first prizewinner of the TIGA’s first edition (Technology in Government in Africa) of the United Nations Economic Commission for Africa, doubled in 2012 with the prestigious 1st world place of the United Nations Public Service Award (UNPSA) in the category of improving the quality of public service. A fresh look at GAINDE 2000’s initiatives showed a keen will to master appropriate information technologies to bring solutions to genuine problems while taking into account possible situations on the ground. This entitled GAINDE 2000 an acknowledged know how in Africa leading to the assistance of several

governments in its domain of expertise. Linked to other African companies, GAINDE 2000 initiated the African Alliance for Electronic Trade, an organization gathering 17 countries and working to facilitate E-commerce within the continent, in 2009. However what has drawn the attention of the jury is works achieved by GAINDE 2000 over the two last years. Two core initiatives have particularly attracted the jury’s attention. First of all on the digital security plan, GAINDE 2000 set up one of the first public key infrastructures in sub-Saharan Africa enabling the issuance of secure certificates necessary for digital signature. A fact making Senegal one of the rare African countries where 100% digital documents are used to carry out valid public formalities. That requirement of security and quality has been confirmed by very demanding ISO certifications such as the 27001 and the

9001 both obtained by GAINDE 2000. At the same time, GAINDE 2000 has also innovated by setting up on electronic payment means not to add an extra alternative among many other solutions already existing in Senegal, but developing a very secure federating platform that has as main purpose to aggregate all means of payment thus allowing a simplified and secure process to all payers and billers. That innovative approach is a sign of pragmatism from GAINDE 2000 which is a key stakeholder in digital development in Africa. The CFI.co judging panel is excited that GAINDE 2000 actively helps streamline all sorts of procedures with its software. By doing so, the company significantly adds to the dynamic of the Senegalese economy. The judges are pleased to offer GAINDE 2000 the 2016 Best Digital Security Solutions West Africa Award.

> PHILIPS: MOST INNOVATIVE HEALTHCARE TECHNOLOGY GLOBAL 2016

At the forefront of innovation in healthcare technology, Royal Philips recently announced the launch of its high-performance IntelliSpace Universal Data Manager which offers healthcare providers a fully scalable and secure way to gather, store, and move large volumes of medical data, including high resolution scans and other heavy files. The data manager collects input from multiple sources which allows clinicians spread across different facilities and companies to access, share, and collaborate in a single seamless process. The IntelliSpace Universal Data Manager complements a comprehensive

suite of healthcare informatics products including radiology workflow applications and the IntelliSpace Portal which offers medical professionals an advanced visualisation and quantification platform. The IntelliSpace suite succeeded in establishing an integrated healthcare management system that meets providers current and future need and enables a more holistic form of patient care. In addition to its already formidable core functionality, IntelliSpace Portal may be enhanced by more than seventy add-on applications. The portal is available throughout the medical facility and was designed to CFI.co | Capital Finance International

improve collaboration between clinicians and departments and make data widely available within the organisation in order to reduce error margins and mitigate risk. In addition to cutting-edge applications, Philips also sustains a full range of high-end medical equipment from advanced molecular imaging to fluoroscopy, respiratory care, and interventional x-ray, amongst many others. Recognising the company as one of the world’s premier provider of healthcare technology, the CFI.co judging panel is pleased to offer Royal Philips the 2016 Most Innovative Healthcare Technology Global Award. 103

> Africa:

On Its Own By Wim Romeijn

Nothing is so bad that it couldn’t be worse. With an unapologetic isolationist in the White House, Europe mired in self-reflection, and China on a less hectic growth path, Africa is about to be left to its own devices. As was noted during last year’s WEF regional summit in Kigali, Rwanda, the end of the resources boom, currency devaluations, and debt sustainability concerns conspire against accelerated growth. These negatives are only partially offset by increases in foreign direct investment (FDI) flows.

Durban, South Africa: Umhlanga Pier

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n Kigali, the adverse global outlook led to renewed calls for structural transformation. Economic diversification and measures to strengthen regional trade corridors and value chains are urgently needed if the continent is to decisively tackle its own issues. Whilst the African Union for years on end has urged member states to slash the red tape that inhibits the movement of people, goods, and services, few countries paid attention. Even though no less than fourteen trade blocs dot the continent, governments have been reluctant to empower these institutions beyond grand, yet meaningless, political statements. In the most optimistic of statistical assessments, intra-regional trade only accounts for 12% of Africa’s total cross border dealings. Comparable figures hover around 40% for North America and 60% for Europe. Contrary to perception, intraregional trade in Africa is not just hampered by bureaucratic proliferation and deficient infrastructure; the continent also produces what it doesn’t consume, and consumes what it doesn’t produce. Intra-African trade has remained stable at its depressingly modest level over the last decade. Judi Hartzenberg of the Trade Law Centre for Southern Africa suspects many governments fail to appreciate the importance of implementing trade agreements: “obligations under international treaties are simply not taken seriously.” Ms Hartzenberg admits that a lack of administrative capacity to follow up on trade deals also plays a role. The African Development Bank (AfDB) agrees and imputed the slow pace of progress to “a complex architecture of regional economic communities.” The Southern African Development Community (SADC) is a case in point. The fifteen-member organisation was set up in 1980 as a successor to the informal Frontline States Group that coordinated efforts to end white-minority rule in South Africa and Rhodesia. The SADC aims to promote socio-economic cooperation and integration amongst its members. The free trade area it launched in 2008 has been a fiasco, if not an unmitigated disaster. “Despite SADC’s decision to remove trade restrictions, most countries have not eliminated tariffs as stipulated by the agreement. Worse still, in some cases member states that removed the tariffs have since reinstated them,” says Ms Hartzenberg who suspects that some governments only belatedly realised the implications of the agreement and now, on second thought, wish to decouple from the undertaking.

“The World Economic Forum’s 2017 meeting on Africa, scheduled for the first week of May in Durban, South Africa, aims to highlight the challenges faced by the continent as economies diverge with some countries sustaining GDP growth rates in excess of 7%.” The World Economic Forum’s 2017 meeting on Africa, scheduled for the first week of May in Durban, South Africa, aims to highlight the challenges faced by the continent as economies diverge with some countries sustaining GDP growth rates in excess of 7% - notably Tanzania, Rwanda, Mozambique, Ghana, Ethiopia, Ivory Coast, and the DRC – whilst others such as Angola, Botswana, Sierra Leone, Zimbabwe, and South Africa struggle to attain 3%. Participants of the WEF on Africa event are also expected to look for possible solutions to youth unemployment as, according to World Bank estimates, the continent’s population rises to almost three billion over the next forty years, up from around 1.1 billion today. Africa’s coming demographic boom may be a boon or a hindrance to development. In a word: nobody knows. Oxfam International Executive Director Winnie Byanyima, one of the meeting’s agenda contributors, argues that a good place to start is with addressing inequality. “When a country like Zambia registers rapid economic growth but also sees increased levels of poverty, the added wealth is not trickling down. The encouraging GDP statistic just hides the poverty within.” Ms Byanyima advocates for a “human economy” as opposed to one that merely serves the interests of the upper one percent: “Oxfam proposes an economy in which governments act on behalf of the majority, and not in the interests of a tiny but powerful elite. It is one that lives within the boundaries of our planet. It is one that tackles the scourge of economic inequality as well as barriers to women’s participation.” Ms Byanyima thinks businesses would thrive in a human economy that works for all stakeholders. Such a system would also be able to absorb the enlarged demographic footprint of Africa and allow it to pay a dividend. Meanwhile, pressing issues need policies that produce near-instant solutions. This is what brought the WEF to Kigali last year.

Rwanda is Africa’s success story and, as such, a posterchild for the continent’s vitality and its capacity to overcome – in no time flat – adversity. Coming from behind and burdened by the scars of an almost unprecedented genocide that in the space of four long months in 1994 cut short the lives of anywhere from half a million to a million people, Rwanda emerged Phoenix-like from its national trauma to become a budding knowledge economy growing at an average pace of well over eight percent since 2006. Now considered a safe destination, tourists have returned in significant numbers to the “land of a thousand hills” (and of the late Dian Fossey’s mountain gorillas), boosting the hospitality sector to become the most important one of the economy, contributing almost 44% to Rwanda’s GDP. Interestingly, the country’s external trade takes place mostly within Africa with Kenya, Uganda, and the DRC as Rwanda’s most important commercial partners. The administration of President Paul Kagame, a veteran of the Ugandan Bush War and both Congo Wars and a fixture of Rwanda politics since the mid-1990s, was assembled around a single notion of overriding importance: good governance. While President Kagame does not receive points for adhering to democratic principles, regularly placing dissidents behind bars, he did manage to unify the fractured nation and set it to work. Since 2000, per capita incomes (PPP) has almost tripled while cumbersome regulation was progressively scrapped, propelling Rwanda to the very top on the World Bank’s ease of doing business index for Africa. President Kagame has repeatedly said that he sees no reason for Rwanda failing to emulate Singapore as it develops into a business hub for the continent. Contrary to most of his peers in the region, President Kagame backs up his grandstanding with solid policy initiatives, allocating over 17% of his government’s budget to education. Where there was but a single university in the country before he took power seventeen years ago, there are now 29 centres for tertiary education. Literacy rates have shot up as enrolment ratios increased. What Rwanda proves beyond any doubt is that Africa’s potential can be released almost at will and does not necessarily require an esoteric approach thought up by armchair intellectuals: a few sensible initiatives – taming the bureaucrats, stripping away regulation, and investing in education – carried through and implemented not as a passing fad but as immovable policy markers can both liberate a society and empower it to forge ahead. i

“Since 2000, per capita incomes (PPP) has almost tripled while cumbersome regulation was progressively scrapped, propelling Rwanda to the very top on the World Bank’s ease of doing business index for Africa.” 106

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> CFI.co Meets the CEO of MauBank:

Sridhar Nagarajan

ridhar Nagarajan is an engineering graduate with a Master’s in Business Administration. He has over twenty years of banking experience, of which sixteen years were with Standard Chartered Bank in various businesses, franchise building, and governance roles. In this capacity, since 2008, he had been overseeing the formulation and successful implementation of the bank’s Mauritius strategy, which included leveraging Mauritius as a hub for Africa and unlocking the franchise’s potential as a global financial centre. Under his stewardship, SCB Mauritius became the third largest bank in Mauritius in 2013 and added new business segments viz., regional custody for Africa, regional treasury centre, domestic corporate lending, Asia-Africa trade corridor, etc. The staff strength quadrupled over the same period. For several years, Mr Nagarajan held the posts of vice-chairman of the Mauritius Bankers Association (MBA) and chairman of the International Banking Sub-Committee of the MBA. He has also been the vice-chairman of Global Finance Mauritius, (GFM), an industry body representing banks, institutional investors, law firms, accounting firms, and management companies in Mauritius. He played a crucial role in establishing this industry body in 2010, which has currently emerged as a panindustry organisation representing the sector domestically and internationally. Mr Nagarajan presently sits on the boards of the Small and Medium Enterprises Development Authority (SMEDA) and NRF Equity Investment. He is also chairman of the MBA sub-committee on SME development. Mr Nagarajan is a member of the Financial Services Consultative Council (FSCC), chaired by the Minister of Financial Services, Good Governance, and Institutional Reforms. FSCC is the think tank of the government for the financial services sector. In September 2015, Mr Nagarajan joined Mauritius Post and Cooperative Bank (MPCB) as its CEO. In January 2016, he successfully oversaw the merger of National Commercial Bank with MPCB to form MauBank with over 650 employees. MauBank is now the third largest domestic bank in Mauritius with a significant distribution network of 27 branches, 50 ATMs, and 86 post office counters offering banking facilities. The bank also has the unique mandate to activate the SME sector in Mauritius to realise the vision of the government to create a nation of entrepreneurs.

CEO: Sridhar Nagarajan

Mr Nagarajan lives in Mauritius with his wife and their two daughters. He is a keen golfer and a CFI.co | Capital Finance International

long distance runner. His other hobbies include reading on diverse topics, gardening, and chess. i 107

> PwC:

Can Nigeria Maintain Its Dominance as a West African Investment Hub? By Taiwo Oyedele and Kenneth Erikume

With a GDP in market exchange rate terms at $490 billion in 2015 (according to IMF’s World Economic Outlook), Nigeria ranked as Africa’s largest economy and could be the 9th largest global economy by 2050 according to PwC estimates. Prior to the recent decline in the price of crude oil, Nigeria enjoyed strong economic growth at a compound annual growth rate of 5.3%, post-rebasing.

espite the drop in price of crude, the economy continued to grow significantly but went officially into recession in 2016. Before the recession, Nigeria was considered a destination of choice for investments and an important African market. Many investors and businesses in Europe and other developed jurisdictions seeking for opportunities for significant growth considered Nigeria to be a critical market. Foreign direct investments was above $3 billion in Q4 of 2012 but has slowly declined. The reason for the decline can be linked to economic uncertainty and loss of confidence by the investors in the ability of the country to preserve their initial investment or to guarantee them of being able to repatriate or exit their investments. A lot of businesses have been experiencing difficulties in being able to repatriate funds through the official foreign currency exchange channels and this has also impacted on investor confidence. ARE THERE STILL OPPORTUNITIES? Nigeria’s sheer market size will always be an attraction. A population estimated at 180 million provides a huge consumer market for goods and services. However, the ability to purchase goods and services has also declined leading to declining sales for businesses operating in the country. This is largely due to reduction in the purchasing power of a large portion of the population. If the government is able to change the course of the economy with improvement in purchasing power, the investors that remain will be rewarded for their patience. With Nigeria’s population projected to become the third largest globally by 2050, it has become an inclusive responsibility by the government and citizens (including corporates) to invest 108

“A lot of businesses have been experiencing difficulties in being able to repatriate funds through the official foreign currency exchange channels.” in genuine economic diversification to keep the demographic advantage as a long-term opportunity. Sub-Saharan Africa is split up into three main economic market hubs. Associated with these hubs are some countries that come to mind when investors are thinking about penetration into those specific markets: • Kenya, for East Africa; • Nigeria, for West Africa; and • South Africa, for the Southern Africa Region. 6.21

6.54

6.23

Due to the uncertainty in Nigeria, some investors and businesses may consider other West African countries to access the Nigeria market going forward. Currently Nigeria has to compete with Ivory Coast for Francophone investors and with Ghana for Anglophone. The ranking of these West African countries compared to Nigeria on key metrics like ease of doing business, availability of electrical power, Internet penetration and other important infrastructure, makes them competitive as a hub for doing business. The possibility of the full implementation of the Economic Community of West African States (ECOWAS) trade block with free movement of people and goods without imposition of import duty creates an opportunity for exploring some of these alternatives. The first phase of Common External Tariff (CET) in ECOWAS is currently being implemented by member countries. It covers a period from 2015 to 2019 before the scheme enters a more advanced phase. The CET, at the advance phase, would establish a system where the tariff

5.94

3.96 2.35

2.84 2.11

-0.36 -2.06

-2.24

Q1 2014Q2 2014Q3 2014Q4 2014Q1 2015Q2 2015Q3 2015Q4 2015Q1 2016Q2 2016Q3 2016 Real GDP Growth Rate (%). Sources: Central Bank of Nigeria; NBS; PwC Analysis.

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3,500

withholding tax rate of 5% (reduced from 15%) and those profits can be redistributed free of tax.

3,000 2,500

In Nigeria however, the opposite seems to be the case. Nigerian holding companies suffer higher tax burden both for indigenous groups and for multinationals. A concept called “excess dividend tax” means that a Nigerian holding company is subject to tax of 30% when it redistributes dividends to its shareholders. While this has been challenged in the courts, a recent judgment at the Federal High Court, delivered in September 2016, reinforces the principle that having a Nigerian holding company within a group structure will always lead to multiple taxation arising from excess dividend tax.

2,000 1,500 1,000 500 (500) (1,000) Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Foreign Direct Investment (US$'MIll)

Foreign Portfolio Investment (US$' Mill)

Foreign Direct Investment and Foreign Private Investment. Sources: Central Bank of Nigeria; NBS; PwC Analysis.

paid at the point of entry in any of the ECOWAS countries would be sufficient, even if the goods is subsequently moved to another ECOWAS country. No additional tariff will be required. Similarly, the Francophone countries in West Africa have already reached an advanced stage of market integration. They have formed West African Economic and Monetary Union (UEMOA). UEMOA member countries are working toward greater regional integration with unified external tariffs. UEMOA has established a common accounting system, periodic reviews of member countries’ macroeconomic policies based on convergence criteria, a regional stock exchange, and the legal and regulatory framework for a regional banking system. Nigeria may therefore need to offer more than just its consumer market size to maintain its dominance as a West African hub. The following are some key issues that Nigeria needs to address going forward and what the country is doing to reposition itself along those lines. EASE OF DOING BUSINESS Nigeria has the worst ranking on Ease of Doing Business ranking in the sub-region as published by the World Bank for 2016.

Economy Botswana South Africa Kenya Ghana Namibia Cote d'Ivoire Senegal Nigeria

Ranking 71 74 92 108 108 142 147 169

Region Southern Africa Southern Africa East Africa West Africa Southern Africa West Africa West Africa West Africa

The ease of doing business in West Africa is generally poor and therefore any positive steps taken by Nigeria to make doing business easier (such as simplifying registrations, reducing bureaucracy, fast tracking government approvals, and improving ease of paying taxes) would significantly improve its attractiveness as the preferred hub.

WHAT THE GOVERNMENT IS DOING The Nigerian government has set up an executive committee headed by the vice-president to address Nigeria’s poor performance on Ease of Doing Business. However, there has not been much visible activity or specific initiatives being undertaken to improve Nigeria’s ranking. It is expected that on full roll out, there will be robust engagement with the private sector and specific issues around industrialisation, cross-border trade, and investment climate generally will be addressed. HOLDING COMPANY REGIME The importance of having a favourable holding company legislation is increasingly becoming important from an African perspective. There is a lot of fiscal competition among countries, either intentional or otherwise. For example, in Southern Africa, Botswana has been attractive as a holding company location especially for financial services and manufacturing due to the reduced income tax rate of 15%. However, on 1 January 2011, South Africa responded with its headquarter company regime in order to retain its economic advantage in terms of size, its financial services industry, and its wide treaty network. The regime essentially ensures that South African holding companies that meet the specific criteria are not taxed on their investment income even when redistributed. Similarly, Kenya has positioned itself as a holding company location for other East African companies. The East African treaty ensures that dividends received from other East African countries are subject to a reduced Economy Botswana South Africa Kenya Ghana Namibia Cote d'Ivoire Senegal Nigeria

Income tax treaties 11 20 in Africa, 52 in rest of the world 9 8 11 16 18 12

For foreign investors and multinationals, they can simply revise their structure to hold their Nigerian operating companies directly from outside Nigeria. However, this concept has also led to indigenous Nigerian groups migrating their holding companies to more favourable jurisdictions like the Netherlands, Mauritius, or the UK, with the resultant loss of capital, employment, and other economic benefits for Nigeria. For the moment, the tax authorities are more focused on the short term gain of collecting excess dividend tax from Nigerian holding companies rather than looking for ways to ensure a holding company regime that will attract and retain investment. On this issue, Nigeria is years behind. Investors are hopeful that the issue will be addressed by the National Tax Policy implementation committee which should be constituted in the early part of 2017. TREATY NETWORK Nigeria offers a unique withholding tax rate of not more than 7.5% (instead of 10%) on dividend, interest, rent and royalties for all its treaty partners, irrespective of the rate defined in the treaty. Nigeria has the weakest treaty network of all the potential hub locations in Sub-Sahara Africa. In the table below, the treaty network of various African countries has been analysed. The Nigerian government has been working hard to expand its treaty network with some agreements being signed recently with Qatar and the United Arab Emirates, which still needs to pass through the domestic legislative process to become effective. Recently, a public hearing was held to receive comments on the Double Tax Trade community SADC* SADC EAC* ECOWAS SADC ECOWAS, UEMOA ECOWAS, UEMOA ECOWAS

Separate transport treaty 0 3 2 1 0 0 1 1

*South African Development Community (SADC), East African Community (EAC) Sources: PwC’s worldwide tax summaries, PwC’s Africa Desk summaries, Taxanalysts.

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Treaties Nigeria has signed with Spain, Sweden, and South Korea with the objective of ratifying these treaties by the National Assembly.

predicts that Nigeria needs to improve labour productivity from $3.61/hr in 2015 to $12.05/ hr in 2030.

Based on Central Bank of Nigeria’s data on capital importation for the last five years, only six of the countries with which Nigeria has DTTs are in the Top 50 FDI source countries. Therefore, seeking to establish treaties with significant trading partners will be a sensible step in negotiating future treaties.

PORT INFRASTRUCTURE Nigeria has done quite a lot to improve efficiency at its ports. However, there are still some challenges around corruption as reflected in the statement of the Minister of Finance on probable corruption at the Nigerian Customs Services in terms of under-declaration of import duties. In any event, Nigeria has quite a number of ports and there are plans for a deep sea port at Badagary in Lagos which should attract a lot of investment estimated at $2.6 billion, as well as open up more alternatives for trade.

LABOUR PRODUCTIVITY PwC recently issued a publication titled The Future of Nigeria: Three Critical Levers for Improving Human Development Index. In the report, it was stated that “Nigeria has the advantage of a large workforce of over 70 million but majority are under-skilled. It is imperative to equip workers with skills needed to keep pace with an economy in transition like Nigeria. Average productivity of a worker in Nigeria is very low at $3.61/hr relative to $19.68/hr in South Africa and $29.34/hr in Turkey.” Economic hubs run on a highly skilled and strong services sector to provide and manage group shared services, intellectual property, and other valuable intangibles. In the PwC report, it is stated that “Services, accounts for 59.7% of Nigeria’s GDP, but offers very little value added especially within trade, its largest subsector. This is in sharp contrast to India whose labour productivity growth has been boosted by valueadded, exportable modern services such as business processes, ICT, and health.” PwC 110

On the aviation side, the country has recently recorded the closure of one of its oldest regional private airlines. The aviation industry has been challenged with lack of access to foreign currency, poor management of airlines, and weak policies to support the industry. The international airports are also of lower quality than South Africa’s OR Tambo and Kenya’s Jomo Kenyatta. Also, unlike the proudly African Ethiopian Airways and Kenyan Airways in East Africa and South African Airways that cover various African routes, no Nigerian airline has been able to emerge and provide the required connection for movement of goods and people in sufficient scale comparable to the leading airlines elsewhere in Africa. The government needs to continue the port reforms and the reformation of the Nigerian CFI.co | Capital Finance International

Customs Service as a matter of urgency to address bottlenecks that inhibit trade and promote corruption. In addition, an aviation strategy needs to be adopted as all regional hubs should be able to have the necessary connection to move people around including those who have regional functions. Visas should be easier to get and where possible granted on arrival with as much ease as possible. CONCLUSION Nigeria still remains a major market for investors and apart from the huge population there are still opportunities to explore other areas with potential competitive advantage such as agriculture, entertainment, ICT, and downstream petroleum sector. Notwithstanding the relatively tough business environment, investors can leverage available tax incentives, use treaties to mitigate withholding tax, and explore opportunities to move goods without duty within the ECOWAS region. However, if Nigeria will hope to remain dominant, without merely hoping for crude oil price to bounce back, some critical reforms are required in key areas such as the tax laws around holding companies and improving infrastructure. A huge population is not enough but the country’s ability to develop the people into an innovative workforce that can solve real life problems. Nigeria needs to achieve output growth that exceeds the population growth rate of 2.3% p.a. to ensure a sustained per capita GDP. The question is, can Nigeria achieve this without oil? i

Winter 2016 - 2017 Issue

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> Afrimax:

Vodafone in Zambia Bridging the Digital Divide

he communications sector in Zambia has undergone a significant transition turning it into one driven primarily by the growth of data services. The popularity of social media websites and instant messaging apps such as Facebook Messenger, Viber, WeChat and WhatsApp continues to stimulate data usage across different market segments.

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Against this backdrop, Vodafone entered the Zambian market in June 2016 with the launch of 4G-LTE data services aimed at transforming the communication sector in order to bridge the digital divide, with an initial investment of $40 million. The birth of Vodafone Zambia was a result of Vodafone and Afrimax Group entering a nonCFI.co | Capital Finance International

equity partner market agreement for Zambia with a clear vision of becoming the number one nextgeneration 4G operator in Zambia. Vodafone Zambia CEO Lars Stork confirms that following its successful launch, the organisation has amassed an almost 70,000-strong customer base. “We are extremely proud of the positive response we have received in Zambia. Having

Winter 2016 - 2017 Issue

an active base of close to 70,000 customers has exceeded our expectations of the first six months of our operations. We firmly believe this is testimony of the increasing need that Zambian people have for superior and reliable data services,” said Mr Stork. As part of its strategy, Vodafone Zambia has made significant investment in empowering the youth segment in line with the government’s National Youth Empowerment Agenda which is a shared vision with Vodafone’s global quest to create empowering opportunities for young people in order to leave a lasting legacy for future generations. “We have created more than 120 new jobs of which, 50% were filled by graduates who are some of the best and brightest students from the major universities and colleges in the country and who joined our Graduate Trainee Programme. In addition, an estimated 500 indirect jobs have been created through independent agents. We believe that initiatives such as these, and others that are currently underway, are crucial to driving the agenda of youth empowerment.” Vodafone Zambia has demonstrated that young people are a critical part of its strategy. As proof of its commitment, the company has rolled out a robust university and college programme in partnership with eight major Institutions of higher learning in the country. This has resulted in the establishment of a Brand Ambassador Programme with approximately 300 students who now have an opportunity to get hands-on experience in the corporate world as well as mentorship and coaching sessions. “We are doing a number of revolutionary things with the young people. I do not subscribe to the idea of corporate social responsibility being a stand-alone to the business because I firmly believe that all social investment initiatives must be woven into the daily operations of the company. This is why we have made a significant investment in bridging the digital divide in universities and colleges through our online free e-learning platform JUMP, which gives young people the opportunity to fulfil their academic, career, and entrepreneurial aspirations by providing useful information and knowledge for free. This is a first by any company in Zambia – in any sector.”

“We are doing a number of revolutionary things with the young people. I do not subscribe to the idea of corporate social responsibility being a stand-alone to the business because I firmly believe that all social investment initiatives must be woven into the daily operations of the company.” CFI.co | Capital Finance International

Vodafone Zambia prides itself as being a revolutionary communications company, having introduced a number of new products in the market. These include the My Vodafone App which offers customers the convenience to stay in control of their account whilst on the go with features such as usage history, credit transfer, store locator, and easily topping up with a voucher or a debit or credit card. The company also launched a free home delivery service which allows customers to order devices online and have them delivered at their doorstep. 113

CEO: Lars Stork

Up until its introduction, all home delivery services centred around the fast food sector, making this another first in the African nation. “All these products have been amazing differentiators for us in the market. To date, we have already exported innovative products and services to our operations on the continent and to the Global Vodafone Group. We have subsequently received tremendous response from many of our customers. The feedback pushes us and reinforces our conviction to expand our 4G footprint even further and subsequently bridge the digital divide.” In the last six months Vodafone Zambia has won five local, regional, and global awards for its efforts which demonstrates that the strides that it has taken to create a business by young people for young people will make a positive contribution to the growth of the economy. Vodafone Zambia recently won the CFI.co award for Best Social 114

Impact Telecom Group Sub Saharan Africa 2016. A great deal of the success that Vodafone Zambia has achieved has resulted in the organisation being established as the regional hub for the Afrimax-Vodafone Group to support operations of other African markets such as Cameroon, Uganda, and Ghana. Mr Stork highlights that the establishment of this regional office in Zambia is testimony of the great skill-set that the company’s local team possesses, and provides a unique opportunity for them to share best practice, transfer skills to other markets on the continent, and provide job opportunities both locally and regionally as a way of enhancing talent development. “Zambia is strategically positioned in Southern Africa. With the tremendous pool of young and focused talent here, I genuinely believe it can become a Silicon Valley in the region – a hub for CFI.co | Capital Finance International

technological advancement, driving the region and its people into a bright digital future.” MEET THE CEO Lars Stork is the chief executive officer of Vodafone Zambia and chief operations officer of the Afrimax-Vodafone Group. Mr Stork is a Danish executive who has lived and worked in fifteen countries around the world and established a proven track record of starting up, launching, growing, and transforming businesses. He holds significant management experience from FMCG (Unilever) and telecoms businesses (Celtel). Mr Stork’s achievements within the telecoms industry include building up Vodafone Zambia for the implementation of LTE 4G services as well as setting up an Indian start-up company. Mr Stork has won a global award for the best innovative approach in terms of penetrating rural areas in Africa. He was also named in the GTB Top 100 list of the most influential people in the telecoms industry. i

> MauBank:

Supporting Small Business

auBank launched its business operations on 04 January 2016 with a distribution network of 28 branches and 39 ATMs across the Mauritius and Rodrigues islands, and has since then established itself as one of the leading banks in the country.

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MauBank offers a wide range of financial services which match the needs of its consumer, corporate, private, and international banking customers. The bank goes further in providing value to these segments by offering an innovative banking experience through its different online applications. CFI.co | Capital Finance International

MauBank also fulfils the role of a development financial institution for the SME sector by providing both financial and non-financial solutions to support the day-to-day running of businesses, which is in line with the vision of the government to build a nation of entrepreneurs.

Winter 2016 - 2017 Issue

SME EQUITY FUND WITH CORPUS OF

500 MILLION RUPEES

“Strategically based in Mauritius, its experienced team gives the reliability of trust and global banking network.” MauBank’s SME team at each of its ten Smart SME Branches, in collaboration with the One-Stop-Shop (MyBiz) of the Ministry of Business, Enterprises, and Cooperatives, help customers start their business and accompany them throughout its growth, through the required counselling and financing. Apart from the special schemes promoted by MauBank and government at preferential terms and concessionary rates of interest for businesses, Maubank offers a wide range of banking products and services to SMEs and micro enterprises.

“MauBank offers a wide range of financial services which match the needs of its consumer, corporate, private, and international banking customers.”

International banking caters for the banking needs of international non-resident entities and individuals whose primary economic interests are outside Mauritius. The bank offers a wide range of international products and services for global and large corporate clients, foreign institutional investors such as private equity funds, investment funds, trusts, insurance companies, and high-net-worth individuals. With regional cross-border capabilities, a dedicated and personalised relationship team, MauBank provides tailor-made advice and develops flexible investment solutions, including: opening of accounts for different types of CFI.co | Capital Finance International

structures, cash management, operating account overseas. Strategically based in Mauritius, its experienced team gives the reliability of trust and global a banking network. As a vital link in the Africa – Asia Trade and investment corridor, the bank delivers customised services focusing on: • Global business solutions including cash management and international remittances for companies, funds, and other structures incorporated in Mauritius as well as other jurisdictions. • Corporate and investment banking with the highest quality advisory services, arrangement and execution expertise. • Private banking & wealth management including high yielding deposits and investment products both for personal accounts and fiduciary services. MauBank aims to achieve its vision of being a trusted partner in transforming the lives and businesses of its customers by continuously exceeding expectations of the key stakeholders, namely customers, employees, regulators, community, and shareholders.i 117

> OECD:

Deploy Effective Fiscal Initiatives and Promote Inclusive Trade Policies to Escape the Low-Growth Trap By Catherine L Mann, chief economist of the Paris-based OECD

or the last five years the global economy has been in a low-growth trap, with growth disappointingly low and stuck at around 3% per year. Persistent growth shortfalls have weighed on future output expectations and thereby reduced current spending and potential output gains. Around the world, private investment has been weak, public investment has slowed, and global trade growth has collapsed, all of which have limited the improvements in employment, labour productivity,

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and wages needed to support sustainable gains in living standards. Overall, a slowdown in structural policy ambition and policy incoherence have slowed business dynamism, trapped resources in unproductive firms, weakened financial institutions, and undermined productivity growth. In the face of these limited prospects, the OECD has argued that fiscal, monetary, and structural policies need to be deployed comprehensively and collectively for economies to grow sufficiently to make good on promises to their citizens. CFI.co | Capital Finance International

The OECD’s latest Economic Outlook offers the prospect that fiscal initiatives could catalyse private economic activity and push the global economy to the modestly higher growth rate of around 3.5% by 2018. Durable exit from the low-growth trap depends on policy choices beyond those of the monetary authorities – that is, of fiscal and structural, including trade policies – as well as on concerted and effective implementation. Collective fiscal action undertaken by all countries, including a more

Winter 2016 - 2017 Issue

time to focus on expanding the denominator – GDP growth. The current conjuncture of extraordinarily accommodative monetary policy with very low interest rates actually opens a window of opportunity to deploy fiscal initiatives. Fiscal space has been created by lower interest payments on rolledover debt, which also increases gauges of market access and of debt sustainability. On average, OECD economies could deploy deficit-financed fiscal initiatives for three to four years, while still leaving debt-to-GDP ratios unchanged in the long term. A frontloaded effort could allow deficit finance to taper sooner and put the debt-to-GDP ratio sustainably on a downward path. The key is to deploy the right kind of fiscal initiatives – those that support demand in the short-run and supply in the long-run, and address not just growth challenges but also inequality concerns. These include soft investments in education and R&D, along with hard investment in public infrastructures. Such fiscal initiatives would improve outcomes for demand and supply potential even more for economies suffering from long-term unemployment, when undertaken collectively, and when fiscal initiatives are complemented by countryspecific structural policies put together in a coherent package. The mix will be different for different countries, but there is certainly something for everyone. Against this backdrop of fiscal initiatives, reviving trade growth through better policies would help to push the global economy out of the low-growth trap, as well as support revived productivity growth. Trade growth is projected to be pick-up, but only to a rate on a par with global output growth rather than growing at twice the speed as we have enjoyed over the last few decades. This nonetheless remains far below the multiple of two enjoyed over the last few decades. This sluggish trade growth compared to historical experience shaves some 0.2 percentage point from total factor productivity growth – which may seem minor – but is meaningful given the slow productivity growth of some 0.5% per year during the post-crisis period.

expansionary stance than planned in many countries in Europe, would support domestic and global growth even for those economies, who by virtue of specific circumstances, need to consolidate their fiscal positions or pursue a more neutral stance. Some might argue that there is no space for such fiscal initiatives, given the heavy public debt burden in many economies. In fact, following five years of intense fiscal consolidation, debt-to-GDP ratios in most advanced countries have flattened. It is past

Some argue that slowing globalisation would benefits works and the economy. We disagree. Protectionism and inevitable trade retaliation would more likely offset much of the effects of the ongoing and expected fiscal initiatives on domestic and global growth, raising prices, harming living standards and leaving countries in a worsened fiscal position. Trade protectionism shelters some jobs, but worsens prospects and lowers well-being for many others. In many OECD countries, more than 25% of jobs depend on foreign demand. Because technological change is an even greater job threat than globalisation, policymakers need CFI.co | Capital Finance International

to create an environment where change is an opportunity not a threat and implement the structural policy packages that will create more job opportunities, increase business dynamism, promote successful reallocation, and enhance policies to ensure that gains are better shared. Fortunately, the countryspecific policy packages that make fiscal initiatives more effective in promoting demand growth and supply potential also help to make growth more inclusive. The transition path to a more balanced policy set and higher sustainable growth involves financial risks. But so too does the status quo dependence on extraordinary monetary policy. Pricing distortions in financial markets abound. Yield curves are still fairly flat, with negative interest rates. Pricing of credit risk has narrowed even as issuance of riskier bonds has increased. Real estate prices continue to advance in many markets, even in the face of attempted tempering by macro-prudential measures. Expectations in currency markets are on edge as evidenced by high measures of currency volatility. These financial distortions and risks expose vulnerable balance sheets of firms in emerging markets, and challenge bank profitability and the long-term stability of pension schemes in advanced economies. Fiscal initiatives in conjunction with trade and structural policies, as outlined above, should revive expectations for faster and more inclusive growth, thus allowing monetary policy to move toward a more neutral stance in the United States, and possibly in other countries as well. The risk of a growing divergence in monetary policy stances in the major economies over the next two years could be a new source of financial market tensions even as growth picks up, thus putting a premium on collective action by countries to revive growth in tandem. In sum, policymakers should closely examine fiscal space; low interest rates enable many countries to boost hard and soft infrastructure and other growth-enhancing initiatives. Avoiding trade pitfalls, coupled with social measures to better share the gains from globalization and technological change, are key policy priorities. Using the window of opportunity created by monetary policy and following through on fiscal and structural measures should raise growth expectations and create the necessary momentum for the global economy to escape the low-growth trap. i

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Your Bank More than 190 Branches More than 1,5 million Clients Province of

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in Angola. Cabinda (7 Branches) Soyo

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Bailundo Catumbela Benguela (6 Branches)

Luena Kuito

Lobito Huambo (11 Branches) (4 Branches) Ganda Caála Cubal Caconda

Lubango (8 Branches) Namibe

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> Middle East:

Jordan - Leveraging Tranquility By Wim Romeijn

Next May, over a thousand leaders from governments, businesses, and civil society will gather in Jordan for the annual World Economic Forum (WEF) regional meeting on the Middle East and North Africa. Hosted by the royal family of King Abdullah II and Queen Rania, long-time WEF supporters, the summit aims to highlight the possibilities offered by public-private partnerships in encouraging and accelerating economic development. In typical WEF fashion, the event will offer a collaborative platform for leaders to explore new ideas and swap experiences. WEF founder and executive chairperson Professor Klaus Schwab expressed his hope for the region to find “some kind” of stability over the next few months which, once attained, calls for a “realistic and sustained” effort to shape the peace and promote economic growth – and opportunity.

Amman, Jordan: Rotana Hotel

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n its pre-summit brief, the WEF notes that the countries of the region are pushing for economic reform to underpin shifting investment and trade priorities. During its regional meeting, the WEF expects opportunities to arise for a constructive multi-stakeholder dialogue on the situation in Syria, Iraq, and Libya with a view to bringing an end to the fighting and, with it, to the still ongoing refugee crisis and other humanitarian emergencies. The WEF also notes the need to address the ever-shifting geopolitical realities that add to the region’s volatility. The meeting in Jordan brings together participants from over fifty countries including key international stakeholders from North America, Europe, and Africa in addition to thought leaders from the Gulf Cooperation Council (GCC) states and the Levant. Organised in partnership with the King Abdullah Fund for Development (KAFD), the summit also aims to showcase the host nation as a fountain of resilience and stability in a region plagued by upheaval. According to KAFD chairperson Imad Fakhoury, “the return of the World Economic Forum on the Middle East and North Africa to Jordan during difficult times in the region is a testimony to the country’s strategic regional role, resilience and vast economic potential.” Mr Fakhoury, also Jordan’s minister of Planning and International Cooperation, added that “the forum continues to provide opportunities for partnerships geared towards inclusive development and investing in human talent.” Jordan hosted nine annual regional WEF meetings, and last did so in 2015.

“Rather than a disruptive force, the Fourth Industrial Revolution may be used to act as a catalyst of increased political stability, economic collaboration, and increased levels of prosperity.” and education. The Jordan meeting hopes to find shared drivers for regional development through improved productivity and the leveraging of new technologies. The WEF’s Fourth Industrial Revolution, which is expected to fuse, and derive synergies from, different technological breakthroughs, features high on the agenda. The WEF estimates that the coming decade will see more technological change than the last half century has produced. WEF forecasters predict that the region is wellpoised to seize the opportunities offered by accelerated technological progress to drive both growth and innovation, and reduce unemployment levels significantly. Rather than a disruptive force, the Fourth Industrial Revolution may be used to act as a catalyst of increased political stability, economic collaboration, and increased levels of prosperity.

Participants of this year’s event will review, amongst others, the impact and effects of lower oil prices on the region on the premise that the trend may open up a number of possibilities as countries try to diversify their economies. In particular the ambitious Saudi Vision 2030 reform plan unveiled by Saudi Arabia in April of last year is considered a blue print for lessening the region’s dependency on oil. The plan emphasises the need to improve both education levels and the country’s physical infrastructure in addition to prioritising investments in non-oil related industries.

The meeting in Jordan will also seek to address the humanitarian crisis suffered by countries embroiled in strife. Close to ninety million people are directly affected by the wars raging in Syria, Iraq, Libya, and Yemen which have uprooted around sixteen million people who were forced out of their homes and saw their livelihood destroyed. The WEF meeting will put considerable effort into promoting public-private partnerships and diplomatic dialogue aimed at furthering conflict resolution efforts amongst its multi-stakeholder community.

In its pre-summit brief, the WEF suggests such reform plans need to be designed in a way to promote inclusive development models supported by a framework that ensures good governance and facilitates broad access to essential services such as energy, healthcare,

The WEF meetings in Jordan have historically proved exceptionally productive. During the 2015 regional summit the country managed to sign nineteen investment deals worth $8.5bn. Jordan’s own 2025 Vision blueprint for the future is now well underway and is widely recognised

for setting concrete goals whilst leave plenty of room to incorporate new developments. The programme prioritises support for the clean energy, tourism, logistics, ICT, and education sectors, amongst others. In 2015, the Jordan government announced new investment opportunities totalling close to $20bn and expected to create up to 180,000 new jobs. The 2015 regional meeting launched the Arab Employment Initiative which promotes lifelong learning and aims to equip the region’s youth with marketable skills. The WEF Regional Business Council is fully engaged in the efforts of the initiative’s nine founding partners to bridge the skills gap and develop new programmes, or expand existing ones, to provide job opportunities. This year, the council is expected to announce that the initiative has attained its goal of providing training to 100,000 young people throughout the region. Bucking the trend, Jordan has skilfully managed to absorb a number of severe external shocks to its economy, steadily expanding its GDP at a 3% annual clip over the past years. In a country report released in November 2016, the International Monetary Fund (IMF) praises Jordan for its sustained effort at promoting reform whilst maintaining an exceptionally stable set of policies. Though growth slackened last year, the IMF expects the pace to pick up in 2017 as productivity indicators improve and foreign direct investment volumes increase. The fund also notes that the economy is set to benefit from a recently signed trade agreement with the European Union which relaxes country-of-origin rules for Jordanian exports. The country is particularly well equipped to help Syria rebuild its war-torn infrastructure and economy once peace is re-established. Tapping into its reputation as an oasis of tranquillity, Jordan is also set to benefit from the construction, slated to begin later this year, of a dual natural gas and oil pipeline that is to link Basra in Iraq to the Red Sea port of Aqaba. The project aims to provide an alternative to the 970-kilometrelong pipeline that pumps 500,000 barrels of oil per day from the Kirkuk oil fields to its Turkish terminal at the port of Ceyhan. However, disputes between the central Iraqi government in Baghdad and the Kurdistan Regional Government, and terrorist activity, frequently interrupt the flow of oil. The new pipeline aims to provide Iraq with a more dependable alternative for the export of its oil. i

“Bucking the trend, Jordan has skilfully managed to absorb a number of severe external shocks to its economy, steadily expanding its GDP at a 3% annual clip over the past years. In a country report released in November 2016, the IMF praises Jordan for its sustained effort at promoting reform whilst maintaining an exceptionally stable set of policies.” 124

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Winter 2016 - 2017 Issue

> Arab Investment Company:

Experience and Reach One of only a handful of investment services providers already now fully compliant with Kuwait’s vastly enhanced capital markets regulatory legal framework, the Arab Investment Company (AIC) – part of the Bukhamseen Group – has carved out a sizeable niche as a premier merchant bank, tightly focused on maintaining the superior quality of its deliverables for which the firm has gained wide recognition.

hilst the AIC’s forte remains corporate finance, the company has significantly expanded its asset management and equity transactions business. AIC has helped structure inward and outward-bound investments of large corporations – both domestic and international. Though boutiquesized, Arab Investment Company has become the go-to Kuwaiti facilitator of mergers and acquisitions. Through its parent company, AIC deploys the executory power and wherewithal usually only found at heavy-weights with the added advantage that its short internal lines of communication preserve the operational nimbleness of a boutique merchant bank. AIC Assistant President Steve A Khayat emphasises that the firm has accumulated a deep reservoir of knowledge on the corporate environment in both Kuwait and the wider GCC region: “We have been able to assist large corporates moving into the Gulf Region or seeking to expand elsewhere with a full palette of services up to, and including, access to capital markets and facilitating corporate restructuring, amongst others.” Though drawing, perhaps, less attention than the Emirates, Kuwait remains one of the GCC’s strongest players, having inspired its regional partners to open up to global business and providing the seed capital for much of today’s headline-grabbing businesses and projects. The Kuwait Investment Authority, the country’s sovereign wealth fund and the fifth largest of its kind in the world, manages close to $600 billion in assets.

President & CEO: Mr Raed J Bukhamseen

Holding on to, and expanding, its traditional role as the region’s quiet power broker, Kuwait remains the depository of entrepreneurial experience that unlocks opportunity in a universe where what you know is as essential as who you know. “As part of a large corporate group with deep roots in the country, Arab Investment Company is uniquely poised to help corporates navigate the local economy and leverage our experience in consistently obtaining the best possible deal for our clients.”

Thanks to its solid reputation, AIC partners with premier globally operating merchant banks who seek advice on structuring deals involving corporates in the Middle East. AIC also provides wealth management services in addition to consultancy on matters as diverse as incorporating sustainability principles into corporate operations and the management of investment funds. AIC has set up and maintained a number of funds geared towards maximising investors’ exposure to the upside of economic development across CFI.co | Capital Finance International

the region. The company famously managed to emerge unscathed from the 2008 economic downturn thanks in large part to its balanced approach, diversified portfolio, and the timely reallocation of funds. AIC follows an independent course, based on knowledge and highly results-oriented. Its integrated approach fuses market realities with time-honed strategies based on experience in order to produce optimum results – time and again. i 125

> TANQIA:

Wastewater Management Pioneer Over the past 30 years, the underground water reserves of the United Arab Emirates have decreased and their salinity increased due to excessive pumping, and unless the depleted reserves are recharged with excess desalinated water, the UAE will become one of the Top 10 most water scarce countries in the world. At the current rate of underground water usage, the UAE will deplete its natural freshwater resources in about 50 years – without factoring in population growth and commercial and industrial growth in the region.

he country currently has one of the highest per capita water consumption rates in the world – and while changing consumption habits is clearly half of the battle, optimising the water treatment system and improving the efficiencies and quality of treated wastewater both have a vital role to play in a comprehensive policy for management of the country’s overall water resources. Most importantly, the role of treated wastewater needs to be enhanced by improving its current quality standard to the fourth stage, with a view to producing a suitable substitute for underground and desalinated water in non-potable uses, and even potable water, through micro or ultrafiltration, ultra-violet treatment and, where necessary, by subsequent chlorination. Doing so would effectively reduce investment in desalination and contribute to better overall management of water resources. TANQIA – which means purify in Arabic – encapsulates in one word the mission of the company that has become a reference point in its area of the world – and beyond – for how efficiently and reliably wastewater systems can operate, even in challenging climatic conditions. The privately-owned wastewater treatment specialist was granted a 33-year concession in 2004 by the government of Fujairah for the exclusive rights to design, finance, construct, own, operate, maintain, and expand the wastewater system for a concession area encompassing the city of Fujairah, the towns of Qurayya and Mirbah, and the hamlets between them. As of September 2016, TANQIA’s wastewater collection network (WWCN) had reached 434km, connecting more than 6,500 properties (about 18,330 customers) and servicing a total population of approximately 100,800. TANQIA’s achievements have not gone unnoticed, as evidenced by recent accolades that include Best Infrastructure Utility Service Provider in the UAE 2015, awarded by the Global Banking & Finance 126

“Since commencement of commercial operations, TANQIA has produced 10 billion gallons of effluent, meeting the highest standards for application in industry and agriculture.” Review, and Best Environment, Social, and Governance (ESG) Utility Management Team in the Middle East for 2016, bestowed upon the company at the Capital Finance International Awards this year. Ensuring the lowest feasible tariff, peak volume of wastewater collected and treated by TANQIA has increased at an average annual rate of 11.2% over the past seven years, currently standing at about 21,100 cubic metres per day. “This unprecedented growth in water consumption and generation of wastewater would have required capital investment to increase – by 2014 – the installed treatment capacity of the wastewater treatment plant,” advises the company’s executive chairman Ibrahim I Elwan. “However, TANQIA has been constrained by the need to keep at all time tariffs for its wastewater services below the tariffs for potable water.” Mr Elwan remarks that the prospect of customers paying more for wastewater treatment than for potable water would, at any time, be viewed as “untenable in economic and social terms”. As a result, in order to maintain wastewater tariffs and the pricing of its effluent at pre-agreed fixed levels relative to the tariffs of potable water, increases in tariffs for wastewater services are made only in tandem with the increase in tariffs for potable water. In order to maintain this relative relationship, TANQIA decided to postpone expansion of the installed treatment capacity of its WWTP until the loan from Royal Bank of Scotland (RBS) – secured by TANQIA CFI.co | Capital Finance International

in 2005 under the guarantee of the government of Germany to finance the greenfield wastewater collection and treatment system – is retired in mid-2017. Mr Elwan elaborates on the thinking behind the move: “The objective of TANQIA’s longterm least-cost strategy is to minimise the sum of the capital cost for new capacities or expansions, and the sum of both the O&M [operation & maintenance] costs of existing and new capacities. Fulfilment of this objective ensures the lowest feasible tariffs for wastewater services,” he explains, going on to note that new trains of 8,000 m3/day will be added only when the capacity in place is fully used, including the planned reserve margins. Ramping up capacity TANQIA’s revised investment programme calls for the addition between 2017 and 2029 of four trains of 8,000 m3/day each. This will increase the current capacity of 16,000 m3/day to reach 48,000 m3/day. “The increases will be phased to ensure demand for services is met at least cost,” Mr Elwan advises. “Presently, doubling the installed treatment capacity of the WWTP is set for commercial operation in early 2021,” the chairman informs. This will be accomplished by completing the civil works for two trains each of 8,000 m3/day. The plan is for the electromechanical component for the first train to come into operation in the first quarter of 2018; and for the electromechanical for the second train of 8,000 m3/day by 2021, when the demand materialises. If the demand for wastewater services increases to the point where additional capacity is required, the installation of the electromechanical equipment would be advanced, and the reverse is true by postponing the installation. Until then, TANQIA shall use the tank of the second train for short-term storage of effluent,” Mr Elwan advises. “In the interim, TANQIA shall continue to accommodate the daily peak flow of wastewater, when higher than the installed capacity, as the WWTP was actually designed with a 30% margin of safety.”

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Chairman: Dr Ibrahim I Elwan

This balancing process requires an intensive maintenance programme. It is also a balancing act that requires TANQIA to continuously be thinking years ahead in terms of boosting capacity, provided it is not to the detriment of the consumer in terms of higher on experience worldwide – i.e., that of the World Health Organization (WHO) – alongside the UAE laws, and the experience of existing, wellestablished laws and proven practices on the types and methods of irrigations adopted at specified plants (i.e., those in the State of California, USA). Since commencement of commercial operations, TANQIA has produced 10 billion gallons of effluent, meeting the highest standards for application in industry and agriculture. In addition, TANQIA produced more than 8,800 tons of dry sludge, free of pathogens and odour, and suitable for direct application as a soil enhancer. Further demonstrating its sustainability credentials, the company’s operations have generated 2.15 million cubic metres of biogas, used in the treatment of sludge, by maintaining digester temperature at 37°C. “Then, Stage Two of the EDN would receive the effluent and proceed south to cover the rest of the concession area, including the new Sheikh Mohamed Bin Zayed City (MBZ City),” he reports, adding that construction of the EDN will commence shortly, and that effluent delivered to MBZ City would be used for landscaping the roads and parks. TANQIA is now promoting the extension of the EDN to the planned new residential properties, especially single-family properties, for landscaping with specialised effluent meters. If

approved and financed, it would be the first of its kind in the Emirate of Fujairah. COLLECTION & CONNECTION TANQIA’s wastewater collection network has been expanded considerably over the years, with the company pursuing a “least cost expansion” strategy, according to the executive chairman: from the Greenfield System that moved into commercial operation in 2009 with a 309 km wastewater collection network, to the current 434 km in 30 September 2016 – connecting many new properties and providing wastewater services to a larger number of customers (growing 3.2 per cent annually over the past 6.5 years, to reach 18,331 on 30 September 2016). Over the years, there has been strong growth, particularly in the number of multi-purpose and commercial properties connected in the concession area. As a result, there has been a favourable impact in terms of economies of scale on the cost of extending the network per connection. “The cost per customer connected has decreased in real prices compared to what it was under the Greenfield System, reflecting the increase in utilisation of the existing network and the rise over the years in the number of multi-purpose, large and special-purpose properties that have been connected.” On 30 September 2016, more than 100,000 persons in the concession area were connected to TANQIA’s network, representing 83% of the concession area’s population. The rest of the population largely live in an area of the City of Fujairah designated for future demolition and development of a new commercial city centre. CFI.co | Capital Finance International

Nevertheless, the lateral collection network is installed around the perimeter of the area pending completion of the development, ready for future connection of new commercial and multi-purpose properties. Until redevelopment, this segment of the population is still served by TANQIA, assures Mr Elwan: “Wastewater generated by properties not connected to the network is discharged in soakaway tanks evacuated by tanker trucks, and delivered to the plant for treatment.” FINANCING A NATION’S PROGRESS “As per the Concession Agreement, all expansions following completion of the Greenfield System was financed from TANQIA’s internally generated revenue,” advises Mr Elwan. “Such revenue includes that generated from connection charges – a one-time payment by owners of new properties to receive services,” he explains. “And since 1st February 2009, the total capital cost of extending the network has amounted to AED 85 million (over $23 million).” Mr Elwan points out that the success of TANQIA as a PPP utility financed under a BOT structure would not have been possible without its supportive partners. “The government of Fujairah provided strong support for TANQIA by assuming the sovereign risks, alongside its involvement as a shareholder in the company, with 19% of the paid-in equity; and via Mubadala, the wholly owned investment vehicle of the government of Abu Dhabi, with 30% of the paid-in equity.” Financing of the Greenfield System was provided by RBS, and guaranteed by Euler Hermes of 127

the government of Germany. “Execution of the Greenfield System would not have been possible without the concessionary terms of the length of loan maturity and low interest rate of less than one percent; and not to mention the strength added to the transaction by the trust that Germany’s government placed in the new utility,” he continues. “In addition, the financing by the Abu Dhabi Fund for Development (ADFD) – procured by the government of Fujairah for the execution of the broadened scope of works on the Greenfield Field System – was instrumental in completing that larger scope of project.” SUSTAINABLE ADVANCEMENTS Renewable energy was previously cited as a viable means of reducing energy costs at TANQIA’s WWTP. The company has further explored such sustainable opportunities that could also provide cost saving opportunities for the operation of the wastewater system. “The cost of solar and wind energies was investigated to determine the optimal means for improving energy efficiency within the wastewater system. TANQIA decided on solar energy for reducing consumption of petroleum generated power, and a major initiative is currently underway to change the technology used for Expansion I of the treatment capacity,” Mr Elwan reveals. Technology currently in operation at the plant relies on mammoth rotors to deliver the oxygen required for biological breakdown of the influent. Installed at the surface of the biological tanks, the mammoth rotors rotate to introduce oxygen required for the bio-degradation of solid matter in the influent. However, as they are located at the surface, they require extensive operation to deliver and distribute oxygen throughout the tanks, making them heavy power consumers. In order to reduce the energy efficiency of wastewater treatment, TANQIA has selected a treatment process that involves blowers delivering larger volumes of air throughout the biological tanks – providing a significant improvement of oxygen transfer to the influent, and in turn, reducing the amount of power consumed when compared with the mammoth rotors. Another initiative is the installation of a 10MW solar power plant, which will serve as the primary source of power supply for TANQIA’s facility and shift power from the grid to back-up sources. “Two offers have been received from reputable international firms for the design and installation of the solar power generation system at the plant site, with a view to commencing implementation starting in the second quarter of 2017,” the chairman reveals, adding that in the first quarter of 2017, work will also commence on replacing the conventionally-powered lighting with solarpowered solutions at the WWTP and 30 pumping stations, thus driving a significant reduction in overall power consumption from lighting. Beyond TANQIA’s core operations, the chairman also previously spoke of how the company was 128

exploring potential ventures in the wider MENA region. Since then, TANQIA Environment – a fullyowned subsidiary of Elwan Group – has signed an agreement with a major Egyptian industrial enterprise to manufacture solar-powered autotreatment plants that can be installed in trains to treat Nile water for human consumption in Egypt. “These would be operated by TANQIA for villages across the country, to provide badly-needed drinking water,” Mr Elwan advises. ADVANCING FUTURE WWTP DESIGNS Notably, TANQIA’s WWTP in Fujairah – designed according to 2008’s German Design Standards and equipped by Germany’s most reputable manufacturers – is currently playing a key role in developing technologies for the future advancement of wastewater treatment plant design around the world. In 2012, TANQIA was selected as one of the utility partners for the socalled EXPOVAL project – a €7.5 million Germangovernment-funded project that was awarded to major German utility, Emscher Wassertechnik. The utility enlisted collaboration from seven German universities recognised as leaders in the field of wastewater treatment-related R&D, alongside highly specialised industrial partners (involved in water analytics and sensor technology, for instance), together with international wastewater CFI.co | Capital Finance International

treatment utilities like TANQIA. The purpose was to develop new and extended design algorithms able to reflect actual treatment results at plants running under extreme climatic conditions. TANQIA’s WWTP was selected for the technology transfer-oriented R&D project as it met all requirements – not only in terms of process design and equipment quality, but also in its team’s ability to meet the scientific standards of the R&D work in terms of operation, maintenance, testing and overall quality assurance and control. Towards supporting the validation of the German team’s technology at an industrial-scale operation, TANQIA’s WWTP has, since the end of 2014, provided mostly online influent and effluent data, and substantial additional process-design relevant readings of multiple parameters. This, in turn, provided the necessary input for the process simulation programme being developed in the Ruhr-University in Bochum, Germany. The new algorithm for municipal WWTP design was presented during EXPOVAL Project’s closing conference on 6 October 2016 in Essen and will be incorporated into the current internationally accepted biological WWTP Design Standard A131 – highlighting TANQIA’s important role in advancing future WWTP design. i

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> Economena Analytics:

Empowering Investors with Data Investing is a data-driven pursuit. No large investor will commit funds, his own or someone else’s, without first having access to a clear picture of the asset under consideration, and its surrounding macroeconomic environment. The absence of trustworthy data results, inevitably, in a dearth of investments. Though the buoyant economies of the Middle East produce a veritable wealth of thoroughly dependable data, access to it has suffered from poor dissemination and language barriers: “Information is mostly available in Arabic only and, quite often, not broadcast. Large sections of Economena’s databases are available from national sources by special written request only.”

amim Akiki of Economena Analytics in Beirut, Lebanon, notes that government agencies and private sector associations in the Middle East continue to struggle with the dissemination of their data, despite a clear willingness to increase transparency and promote economic diversification. “As a data provider with teams on the ground in the region compiling statistics on a daily basis, we are often impressed by the quality and nature of the data we receive from official sources, so we take pride in unleashing those data to a global and regional audience of investors.”

deplore the lack of information that allows them to properly assess risk and ensure compliance with international best practice. By contrast, Economena Analytics clients gain access to an unparalleled breadth and depth of benchmark data that help them manage their risk and find small and large business opportunities. Mr Akiki reports that his firm has registered a

strong growth in demand for its services. “We aim to fully leverage the possibilities offered by new technologies to facilitate and broaden access to economic data from across the Middle East and Africa. The moment for investors to broaden their horizon and seize opportunity in this region is, quite frankly, now. After a long wait, the analytical tools to do so are now available.” i

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The Lebanese firm has become a central depository of economic data on markets, sectors, and individual corporates and governments. Economena Analytics has also developed a series of proprietary processes to digest, distil, link, and distribute its information. “The frontend of our platform resembles a social media app that clients can use to tap into a stream of data that is particularly relevant to them and which is continuously updated. Thus, we manage to paint a picture that contains all the details investors need to know. It also allows us to double-check data and ensure its integrity.” Economena Analytics recognises that demand for economic and financial data is set to increase exponentially as the countries of the region open up to outside investors in an attempt to diversify their economies. This is particularly true for Saudi Arabia which recently opened its capital markets to outside investors. But also Egypt, the most populous country in the region, finds that investors are less keen to help underwrite the country’s development as long as reliable data remains scarce. Reliable, accessible statistical data forms part of the critical infrastructure that countries in the Middle East need to promote economic development. In particular, foreign investors often

Middle East data, global tools. Economena Analytics, ideas for great minds. Agriculture

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Summer 2016 Issue

Corporate Governance Forum: Organized by IFC and the UMFCCI in Yangon, Myanmar in February. Chris Razook is pictured second from the left.

loans, manage concentrated exposures, and ensure sound credit and collateral procedures are being used.

Similarly, while Myanmar’s new stock market is a landmark development that will tap new sources of capital to help fuel the expansion of the country’s private sector, there is a similar public trust element that needs to be safeguarded with sound governance and transparency. Based on IFC and the World Bank Group’s experience in working with capital market authorities in emerging markets globally, creating efficient yet prudent governance rules for listed companies is a continuous process. In Asia alone, there are ongoing or planned efforts to update listed company rules in China, Indonesia, the Philippines, and Vietnam, amongst others. Myanmar should glean much learning from these efforts.

IFC:

Addressing Climate Change Can Unlock $23 Trillion Investment Opportunities in Emerging Markets

Governance will also play a crucial role in the corporatisation of Myanmar’s state-owned entities. State ownership remains high in the country, particularly in the infrastructure sector; without commercially oriented reforms including corporate governance, this can hinder overall market efficiency and drag economic growth.

SMEs At the other end of the spectrum, small and medium-sized enterprises (SMEs) are the backbone of the Myanmar economy and comprise more than 95% of all firms. Continued market CFI.co | Capital Finance International

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By Christian Grossmann and Thomas Kerr

he historic Paris climate change agreement entered into force in record speed last November, committing countries to a decarbonised future. This means that new markets for climatesmart investments are set to grow, as governments put in place policies that operationalise their climate commitments. To date, a total of 189 countries have submitted national plans that target aggressive growth in climate solutions – including renewable energy, low-carbon cities, energy efficiency, sustainable forest management, and climate-smart agriculture. These plans offer a clear roadmap for investments that will target climate-resilient infrastructure and offset higher upfront costs through efficiency gains and fuel savings. 130

There has never been a better time to invest in climate solutions and not only because of the international agreement on climate but also the current energy landscape. As a result of massive cost reductions, solar photovoltaic (PV) and wind power are now mainstream. Global investment in clean energy last year – nearly $350 billion – more than doubled the amount invested in coaland gas-fired power generation. At the same time, farmers are investing in more productive, climate-resilient, agricultural practices and the green buildings market has doubled every three years for the past decade. The hundreds of companies in Marrakech at last year’s climate talks represent the sea change that is happening: business is finding profit in climate-friendly investments. Investors CFI.co | Capital Finance International

and businesses need to ask: Where are the best investment opportunities? To understand just how big these opportunities are and help locate the most promising markets, the International Finance Corporation (IFC), a member of the World Bank Group and the world’s largest private sector development bank, analysed the national climate commitments made in Paris by 21 rapidly growing emerging market economies, where we expect to see major investment in infrastructure and climatesmart solutions. If these countries make good on their ambitions to scale up solar and wind energy, increase green buildings and put in place clean transport and implement waste solutions – there is a $23 trillion investment potential to 2030.

Winter 2016 - 2017 Issue

private partnerships to design and finance new urban infrastructure. The good news is Morocco is not starting from scratch: last year, the country attracted $2 billion in investment for solar and wind power. Morocco’s flagship solar project – the Noor Concentrated Solar Thermal Plant – has been referenced as a model for the region’s ability to capture its enormous solar capacity, and has begun changing the country’s status as an energy importer. Morocco is just one example of a country that is seriously focused on getting the policies right so that it can grow in a greener manner, without increasing greenhouse-gas emissions. We have seen similar success stories in a number of emerging markets, including Chile, Jordan, South Africa, and Brazil. The message is clear: if governments make good on the promise of Paris by implementing a set of clear, investmentfriendly policies, business will help to unlock trillions of dollars of investment for sustainable infrastructure. This message came out loud and clear in Marrakech at COP22, where we saw major global businesses announcing targets to purchase 100% of their power from renewables, and China – the world’s clean energy leader – moving to further ramp up investment by greening their financial system and putting a price on carbon by implementing the world’s largest carbon pricing system in 2017. To continue this momentum and unlock the $23 trillion in investment potential, we will need hard work to put in place more of these sorts of policies, including removal of fossil fuel subsidies and carbon pricing to level the playing field for cleaner alternatives; targeted use of public finance to de-risk investments and leverage much larger sums of private finance; and a focus on investorfriendly policies and financial regulation. It will also require more partnership, coordinated action and leadership among government, business and civil society. By working together, we can address climate, while creating profitable new markets for the private sector. i Morocco: Noor Power Station

As one example, Morocco, the host of this year’s climate talks, is already an attractive renewable energy hub, with several wind and solar projects in development. If the government realises its climate targets for renewable energy, energy efficiency, waste, and urban transport operations, there is $83 billion in additional investment potential between now and 2030. To realise this potential, Morocco will need to strengthen its domestic banking sector by building capacity among financial institutions to invest in these new climate-smart opportunities. It can also attract more investment by accelerating the implementation of its renewable energy law by streamlining permitting and approval procedures. Another solution Morocco can use to attract more private investment is the greater use of public-

ABOUT THE AUTHORS Christian Grossmann is IFC’s Director for Climate Change, focusing on supporting the International Finance Corporation’s climate business, a position he holds since 2004. In this role, and in close cooperation with the World Bank Group, he coordinates IFC’s climate change strategy and product development, embedding climate knowledge and capacity in IFC’s operations with focus on clean energy, green buildings, energy efficiency, sustainable agriculture and climate action through financial markets. In 2015, IFC’s climate related investments were $2.3 billion and an additional $ 2.2 billion was mobilized from other investors. Most recently, following IFC’s LAC climate business forum in Bogota, Mr. Grossmann authored an article on climate investment opportunities in Latin America and the Caribbean. Mr. Grossmann has been a Director at IFC, the private sector arm of the World Bank Group, since CFI.co | Capital Finance International

1998. Prior to his current assignment, he served as IFC’s director of Corporate Strategy, where he co-authored the 2013 World Bank Group strategy and a joint report of 31 development institutions on development through the private sector. From 2002-2006, Mr. Grossmann was based in Moscow, Russia, where he managed the Private Enterprise Partnership – IFC’s advisory facility with over 300 staff in the countries of the former Soviet Union. In that position, Mr. Grossmann successfully introduced several new product lines, most notably in energy efficiency, financial markets and investment climate reform. Before joining IFC as its Controller, Mr. Grossmann held senior finance positions within Dresdner Bank Group in Paris, New York and Frankfurt. Earlier in his career, Mr. Grossmann worked as an international management consultant in Europe, the United States and South Africa as well as a civil engineer in France and North Africa. Mr. Grossmann, a German national, holds German and French engineering degrees and a MBA from Insead, Fontainebleau. Thomas Kerr has worked for 20 years designing and implementing public/private efforts that transform markets for resource-efficient climate business solutions. He currently leads the IFC’s private sector climate policy engagement, which involves working with emerging economy governments and major corporations to develop investor- and climate-friendly national strategies; designing coalitions to advance carbon pricing and performance standards; and providing private sector input into international policy processes such as the G20 and the United Nations climate talks. Mr. Kerr was previously the director of climate change initiatives at the World Economic Forum in Geneva, where he worked with international organizations, government leaders, and industry executives to advance practical solutions via platforms such as the G20, the United Nations, and the Forum’s Annual Meeting at Davos. While at the Forum, he designed and led the Green Growth Action Alliance, a public-private coalition launched at the 2012 G20 with over 60 leading companies developing solutions to unlock private investment for sustainable growth. From 2006-10, he worked in Paris for the International Energy Agency, leading the development of global reports, including the Technology Roadmap series, the flagship Energy Technology Perspectives publication, and the Clean Energy Progress Report. Mr. Kerr started his career with the U.S. Environmental Protection Agency in Washington, where he designed and launched a suite of innovative voluntary programs such as Energy STAR, Green Power, and methane programs that today continue to engage thousands of businesses to adopt clean, efficient technologies and practices. 131

THE EDITOR’S HEROES

On the Noble Qualities of Heroes

hero, the dictionary tells us, is a person admired or idealised for courage, achievements, or noble qualities. According to Harris International, a market research company from Rochester in New York, US president Barack Obama is the most admired man in the world and in history. Hillary Clinton takes the top spot on the female side. The most admired non-living woman is Mother Teresa of Calcutta. She twins with Jesus Christ. The Harris Poll on heroes uncovers a number of disconcerting facts: most people seems to suffer from both short memories and narrow views. Originality is also a scarce commodity. Conventional heroes are to be found on home turf. They must be men/ women of the moment. Heroes from history invariably must possess mythical qualities. Whilst JC is better left untouched, Mother Teresa was repeatedly and convincingly shown a rather controversial figure by the late Christopher Hitchens, amongst others of impeccable intellectual standing. Barack Obama and Hillary Clinton are, undoubtedly, capable politicians and competent administrators. However, their courage, achievements, and noble qualities – the defining characteristics of hero status – are hard to ascertain even without political prejudice muddying the water. Fair enough, not all heroes featured in CFI.co rise far above the mundane or are free of controversy. They do possess noble qualities, albeit to varying degrees. The selection process, a quarterly recurring ritual, is rather subjective and does not pretend to reflect anything other than personal preferences. This issue’s cohort of heroes includes at least one man who may not be universally admired: Wolf Schäuble, finance minister of Germany, is rather unpopular in the countries bordering the northern shores of the Mediterranean where his insistence on fiscal frugality is considered inhumane and self-serving. Still, Mr Schäuble possesses a few noble qualities often overlooked by those who prefer to vilify him: a perseverance in staying on-message whilst hammering on the need to prioritise sound fiscal governance

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over more immediate concerns. Learned economists may consider Mr Schäuble a dangerous simpleton, fact remains that austerity has paid off handsomely in Germany and a few other countries that followed a similarly prudent approach to the management of state finances. Good governance is often severely underrated and it is easy to see why: the boring business of administering the common good by the application of common sense is hardly rocket science and does not include grandstanding or the unveiling of exciting plans for a future that – in all likelihood – will fail to arrive. In Tanzania, president John Magufuli has been known to show off a little bit every now and then, but he is mostly busy improving the effectiveness of country’s civil administration by doing away with privilege and wastefulness. President Magufuli is on to something and may yet inspire others in the region to follow suit, particularly Mr Zuma in South Africa whose antics have become quite tiresome. Our other heroes are no less noble in their respective pursuits. Author Bill Bryson’s admiration of all things British is, of course, most endearing, and German filmmaker Werner Herzog’s thoughtful work encourages people to stop and think for a moment on the world they live in. The same may be said for AC Grayling, a philosopher who has vacated his ivory tower to help people deal with the mysteries and challenges of modern life. Finally, Prof Phil Scraton is included for his investigation into the 1989 Hillsborough Disaster when poor crowd management by the police during a soccer match resulted in 96 people being crushed to death. More than 750 fans were injured during the mayhem. A noted criminologist, Prof Scraton sat on the Hillsborough Independent Panel that investigated the incident and produced a report that blamed a lack of police control for the disaster. The findings were based on more than 450,000 pages of material, including maliciously altered police reports. Even though it took authorities 23 years to properly investigate the disaster, the truth ultimately prevailed thanks to Prof Scraton and countless others who simply refused to accept the official explanation. i

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> AC GRAYLING An Appeal to Reason

Hailed as a saviour of the humanities, Professor AC Grayling raised a few eyebrows – and the ire of students – when the undergraduate college he founded in 2011 set tuition fees at £18,000 per annum – double the maximum allowed statefunded universities. Once the shock was absorbed, the New College of the Humanities got off to a promising start. Its professoriate includes wellknown luminaries such as historian Niall Ferguson and molecular biologist Richard Dawkins – perhaps the most prominent of the four horsemen of New Atheism (with Sam Harris, Daniel Dennett, and the late Christopher Hitchens). Though not included, Mr Grayling could well have been the chariot’s driver. Less clinical than Richard Dawkins and not nearly as combative as Christopher Hitchens, the British philosopher nonetheless wrote a secular bible. The Good Book: A Humanist Bible does not rally against faith and offers instead a narrative based on non-religious philosophy drawn from ancient civilisations, including the Greek, Roman, Chinese, and Arab. Extravagantly learned, Prof Grayling hopes he may be forgiven for his presumptuousness in writing a bible. He merely wishes to offers

readers the insights, consolation, hope, and understanding offered by the great non-religious traditions of the world – a manifesto for rational thought. Author of over thirty books on philosophy – and of a literary guide to China – The Good Book is to be his opus magnum, a work decades in the making and condensing in some 600 pages the case for a kinder world devoid of deities. As was to be expected, Prof Grayling sailed into yet another storm. The critics were unkind and called the book nauseating (Evening Standard), baffling (The Spectator), unconvincing (The Telegraph), and – most damaging of all, “a molehill at the foot of Everest” (The Sunday Times). Undaunted, the professor kept his composure only to lose it, momentarily and antipodean, at the Sydney Writers Festival where he called the critics “hysterically hostile”. Prof Grayling has little use for hysteria. He is, however, quite opinionated such as when he recently argued in the News Stateman to award the Brexit referendum the same courtesy as was given to the outcome of a popular vote called to name the new £200m artic research vessel of the Natural Environment Research Council. Whilst the public opted for Boaty McBoatface, the

council ultimately and wisely decided to christen the ship RSS Sir David Attenborough. Prof Grayling urges parliament to moderate the increasingly acerbic public debate by applying its judiciousness and show the nation a bigger picture. Those elected to parliament serve as representatives rather than delegates, he argues, and as such are to apportion proper weight to the arguments presented and gain a thorough understanding of the their implications. There is no question that to entrust the country’s fate to fickle public opinion is to court misfortune. According to Prof Grayling it is precisely to stop mood swings from harming the nation’s interests that parliament was created, although initially it was more concerned with reining in royal caprice than countering public fads. A self-described man of the left and a regular contributor to Prospect Magazine, Prof Grayling has become one of Britain’s most celebrated advocates for humanism, emphasising the need for a rational approach to issues plaguing contemporary society. Concurring with the great analytical philosopher Bertrand Russell who once proclaimed that most people would rather die than think, Prof Grayling likes to add that most do. In the modern world the philosopher’s role, in addition to pondering age-old questions, is to nudge people to think for themselves rather than accept the ideas and notions force-fed them by the media. Taking pleasure in doubt and possibility, and invention and innovation, Prof Grayling invites both his student and readers to contemplate the excitement an inquisitive and open mind can bring. Philosophy, he suggests, is the ongoing conversation of humanity with itself. Instead of battling religiosity with fervour, Prof Grayling theorises that, as the conversation progresses, the gods will leave of their own accord. In what he calls the Nietzschean genealogy of religion, the dryads and nymphs that used to dwell in rivers and trees have evaporated into the wind and sun, only to be confined to mountaintops as humans discovered more about the world in which they live. Later still, deities – now much reduced in number – were banned to the skies and more recently to a dimension beyond space and time. As Prof Grayling sees it, the gods are being chased away bit by bit. While thought can be iconoclastic and even scary – prompting Bertrand Russell to suggest that most people actively avoid contemplation – it may also provide meaning to life instead of mere hope or wishful thinking. It is what the New College of the Humanities imparts: a life without crutches.

“Taking pleasure in doubt and possibility, and invention and innovation, Prof Grayling invites both his student and readers to contemplate the excitement an inquisitive and open mind can bring.” 134

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> WERNER HERZOG Truth Over Facts Nobody better than a committed luddite to ask the experts: Does the Internet dream of itself? In a documentary populated by talking heads, Bavarian filmmaker Werner Herzog explores how the ever morphing virtual realm reflects and affects the human species’ behaviour. The lens is trained on Internet addiction rehab centres, hacker gettogethers, and – in a flash of misplaced originality – Mr Elon Musk’s high-tech office. Lo and Behold: Reveries of the Interconnected World, released in August to near universal acclaim (92% on Rotten Tomatoes), attempts to map the existentialist dimension and impact of the Internet of Things and its offshoots robotics and artificial intelligence. Leave it to Werner Herzog to look for the ghost in the machine. Alas, it proves elusive. A man both troubled and fascinated by mankind’s uneasy relationship with nature – Grizzly Man (2005), Encounters at the End of the World (2007), and Into the Volcano (2016) – Mr Herzog now adds another dimension to his worries: the omnipresence of the Internet. Described, tantalisingly, as the biggest revolution ever to affect humans, Mr Herzog wonders if the net can be imaginative as he strolls the “repulsive” corridors of the University of California where the Internet was conceived. A child of the New German Cinema (Neuer Deutsche Film) Movement of the 1960s, which in turn was inspired by the iconoclastic French New Wave (La Nouvelle Vague), Werner Herzog came of age in the early 1970s alongside arthouse greats such as Wim Wenders, Rainer Fassbinder, and Volker Schlöndorff. In line with an entire generation, the movement questioned the apparent ease with which old structures and their guardians had managed to reclaim prominence in post-war Germany and impose an awkward silence on the country. While the protests of the 68ers soon petered out, the sense of unease remained. This offered young cineastes a unique opportunity to explore and question the collective psyche of a society in flux. The fertile ground spouted an astonishing number of complex and deeply personal movies. Rainer Fassbinder’s Fear Eats the Soul (Angst essen Seele auf), on the improbable relationship between an elderly lady and a Moroccan guest worker, and Alexander Kluge’s Yesterday Girl (Abschied von gestern), the story of a young girl from East Germany finding her way in the Bundesrepublik, set the tone for German cinema and even influenced landmark television shows such as Tatort – a wildly popular detective series

with strong psychological undertones, broadcast weekly since 1970. Whilst Werner Herzog fits comfortably within the newly established tradition of the Neuer Deutsche Film, he also escapes convention by distancing his work from real life, opting instead to espouse much grander settings. The Herzogian fondness of the larger-than-life found its apex in Fitzcarraldo, the story of an Irishman and wouldbe rubber baron driven by ambition and the lure of riches to the far corners of the Amazon rainforest. The script called for the portage of a 320 tonne three deck steamship over the slippery slopes of a steep hillside – an epic feat accomplished under the harshest of conditions, including an open rebellion by lead actor Klaus Kinski. Werner Herzog is an exceptionally prolific filmmaker churning out feature-length movies, documentaries, and assorted shorts in addition to

screenplays, books, and theatre productions. He has something to say and is famously unwilling to compromise. Best known for shoestring budget blockbusters – a genre only he manages to pull off – such as Aguirre, the Wrath of God and Fitzcarraldo, Werner Herzog regularly dons a Wagnerian cloak to drive home the message: truth reigns supreme while facts are (largely) irrelevant. In Herzog productions, man is often depicted as obsessive and insane, devoid of morals, or simply transcending such mundane considerations. Moreover, Mr Herzog seems afflicted by a globalised version of German wanderlust. He is one of the only directors to have shot movies on all seven continents. After all, Herzogian characters vigorously pursue freedom and are willing to trek to the ends of the earth to find it. They, of course, never do.

“A man both troubled and fascinated by mankind’s uneasy relationship with nature – Grizzly Man (2005), Encounters at the End of the World (2007), and Into the Volcano (2016) – Mr Herzog now adds another dimension to his worries: the omnipresence of the Internet.” CFI.co | Capital Finance International

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> JOHN MAGUFULI Technocrat with Flair John Magufuli does not seek to be a great democrat. He shut down irksome newspapers, cancelled live broadcasts of parliamentary proceedings, and allowed a flawed election to stand in Zanzibar and Pemba. He also doesn’t appreciate online criticism all that much and considers constitutional checks and balances a nuisance at best. However, Mr Magufuli, president of Tanzania since late 2015, does have a few redeeming qualities that could yet earn him a place in history. John Magufuli (56) was elected into office with 58% of the popular vote on a promise to end corruption, root out political patronage, and cut wasteful spending. He proved as good as his word. Days after assuming the presidency, Mr Magufuli suspended the usually lavish independence day celebrations and suggested Tanzanians sweep streets and public spaces instead to improve sanitary conditions. President Magufuli was the first to grab a broom and set an example. Indeed, he is not adverse to stage-managing a photo op. A picture released on Twitter showed the president relaxing in an economy class seat aboard one of Air Tanzania’s new Bombardier Q400 jetliners. The shot promptly went viral even though Mr Magufuli had exited the plane long before it left the ground. Still, the president did bar public servants from buying first class air tickets with taxpayer money. Expensive foreign trips with generous per diem allowances are no longer authorised either. Mr Magufuli set the tone by limiting his own travel to short visits in the neighbourhood, dispensing with the protocol that calls for large delegations and considerable pomp. Working his way up in the Chama Cha Mapinduzi (CCM), the rather awkwardly named Party of the Revolution, Mr Magufuli outran an entire herd of political dinosaurs to reach the highest office in the land as a surprise technocrat candidate shoved to the fore only after the party’s leadership, in a momentary stroke of reason, recognised the need for change. Julius Nyerere (1922-1999), Tanzania’s founding father and first president, would probably have identified Mr Magufuli as a kindred spirit; someone with an equally well-developed sense of fiscal probity and clean government. Branded a demagogue, and dismissed as a hopelessly incompetent administrator, by the media in next door Kenya, President Magufuli has yet to visit Nairobi, taking, perhaps, a cue from Julius Nyerere who famously described the country as a man-eat-man society. With John

Magufuli at the helm, Tanzania slowly finds a way back to its roots as the moral high ground of the East African seaboard. Slashing wasteful government expenditure and calling to task CCM officials who grew rich on power has endeared President Magufuli to most Tanzanians. In a sense, he is replicating the policies of the former president of Uruguay, the immensely popular José Pepe Mujica, who remained a normal guy throughout his presidency (2010-2015) and dispensed with the trappings of his office, turning the presidential palace into a shelter for homeless people and quietly tackling corruption and the misuse of power by shunting offending officials to dead end jobs. Recognising that accelerated development is best served by instituting a clean and wellfunctioning state, President Magufuli’s focus on addressing domestic issues seems sensible. Complaints about his administration’s economic mismanagement appear wildly overstated. He inherited an economy growing at close to seven percent annually. Tanzania still bucks the downward trend in Sub-Saharan Africa and is estimated to keep adding six percent or more to its GDP each year for the foreseeable future, according to a World Bank assessment published last September. Alfred Zeufack, chief economist for the Africa Region at the World Bank, said that countries with stronger macroeconomic policy frameworks such as Tanzania may expect increased performance thanks to their improved resilience to adverse global trends. There is, of course, the matter of President Magufuli’s rather heavy-handed attitude to those who stand in his way. Though his nickname

The Bulldozer reflects a fascination with road building and other infrastructure undertakings on a grand scale, it could apply equally well to the president’s tendency to brush aside opposition. Mr Magufuli does make powerful enemies: ex-Prime Minister Edward Lowassa, who long had his eye on the presidency, is one of them, as are the many cronies of public officials sacked for corruption, abuse of power, or incompetence, including the head of Tanzania’s anti-corruption watchdog, senior officials at the country’s revenue authority, and the boss of the telecoms regulator, amongst a host of others. Ranked 117th out of the 168 countries listed on Transparency International’s global corruption index, Tanzania has, indeed, room for improvement. Targeting the notorious lack of accountability, the mismanagement of scarce resources, and political patronage allow President Magufuli to quickly gather low hanging fruit and boost his popularity in a nation clamouring for instant change. The president has delivered on his promise to clean up the state’s act. However, he has now joined regional leaders such as Paul Kagame of Rwanda and Yoweri Museveni of Uganda who also prioritise good governance over democratic niceties. If President John Magufuli is to escape the trap of despotism that ensnared many an African reformist, he must allow political and civil liberties to flourish and thus reaffirm Tanzania’s status as East Africa’s most stable country. In fact, it wouldn’t be hard to do so as the president’s almost unprecedented popularity will thwart any attempt to subvert his administration’s policies. Cleaning up government need not be a one-man show.

“If President John Magufuli is to escape the trap of despotism that ensnared many an African reformist, he must allow political and civil liberties to flourish and thus reaffirm Tanzania’s status as East Africa’s most stable country.” 136

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> WOLFGANG SCHÄUBLE Calling Liberalism to Order He is the anti-Keynes of the hour and visibly cringes each time quantitative easing is mentioned. Germany’s Finance Minister Wolfgang Schäuble is the keeper of both monetary and fiscal probity. As such, Mr Schäuble has little time for the financial shenanigans some countries employ to obtain a competitive edge. Currencies are not to be devalued and budgets must remain balanced under all circumstances. There is no excuse for sloppiness in the management of markets and economies. The recent slide of the British pound, almost universally hailed as a way to shrink the UK’s massive current account deficit, represents a twin evil to the stern German taskmaster: currency depreciation is a cheat that masks inefficiencies while the current account of a fully-developed nation must show a surplus. Vilified for his insistence that Greece conform to his ultra-orthodox approach, Mr Schäuble has made few friends in Europe. He is, however, revered in Germany for his unwavering commitment to thrift and hard work. In a sense, Mr Schäuble stands watch – a modern Wacht am Rhein – to protect Germany’s economy against contagion. However, Mr Schäuble must allow for an enemy within. From Frankfurt, his nemesis Mario Draghi, president of the European Central Bank (ECB), floods Europe with newly-minted money in an attempt to revive its largely moribund economy. If anything proves that Germany does not control the fortunes of the continent, it undoubtedly is Mr Draghi freely distributing untold billions to banks and businesses. The spectacle horrifies the Mr Schäuble. The German is, however, powerless to call the ECB president to order. Whilst John Maynard Keynes was, of course, quite right to suggest countercyclical spending to reduce volatility and limit the impact of recessions, the master has few followers in Germany. Four of the five members of the German Council of Economic Experts (Sachverständigenrat) favour an ordoliberalist approach that differs from the Austrian School of Friedrich Hayek only in that it requires a strong government to impose and maintain order (“ordo” in Latin) on an otherwise too freewheeling market. Peter Bofinger, the lone Keynesian on the influential council, equates ordoliberalism to religion: Thou Shalt Not Fall Into Debt. Both Friedrich Hayek (1899-1992) and Walter Eucken (1891-1950), the founding father of ordoliberalism, rejected deficit spending as a tool for demand management. Instead,

monetary policy should ensure price stability only. Ordoliberalism also requires strong antitrust legislation and punitive insolvency laws to discourage corporate adventurism. The economic school founded by Walter Eucken cannot easily be dismissed as overly simplistic; its tenets provided the policy framework for the Wirtschaftswunder that saw Germany emerge, Phoenix-like, out of the ashes of World War II. Shades of ordoliberalism may be seen in the Maastricht Treaty (1991) that led to the creation of the euro, and in the subsequent Stability and Growth Pact (1998) which allows for the monitoring of EU member states’ fiscal policies and features a dissuasive arm to be called into action whenever deficit spending is deemed excessive – i.e. over 3% of GDP. Former Italian Prime Minister Mario Monto likened ordoliberalism to a branch of moral philosophy. A case in point concerns Germany’s current account surplus, now the world’s largest in absolute terms (+$306bn), though surpassed by The Netherlands in relative terms (+9.2% of GDP). Keynes’ contemporaries in the Anglo-Saxon world consider such a state of affairs a deplorable imbalance of savings over investments which, in turn, produces deficits in other countries. However, to the Germans and Dutch a significant current account surplus merely reflects economic virtue and competitiveness – hardly phenomena in need of corrective policies. It has been noted before: in both German

and Dutch the word for debt (schuld) is the same as for guilt. Mr Monti was quite right in his comment: economic policy in Germany and The Netherlands does contain strong moralistic undertones. It is precisely this what Mr Schäuble’s many critics fail to understand. While JM Keynes may have provided a working key to questions of sustainable development, the lock seems broken. Consider this: most Anglo-Saxon economies – including the United States, the United Kingdom, and Australia – are burdened by heavy debt loads, large current account deficits, depressed savings rates, and falling productivity. These economies derive their growth, such as it is, from borrowed money; they exist and survive, as Bank of England Governor Mike Carney remarked earlier this year, by the kindness of strangers. The BoE governor might have been more specific: thrifty strangers are footing the bill. Ordoliberalism may appear woefully antiquated, dull, and unidimensional; it unfailingly delivers the goods. Mr Schäuble is its latest champion. He reminds Keynesians that the policies they sensibly propose contain a fatal flaw: politicians usually ignore the second part of JM Keynes’ message – to contract spending and increase taxation once the economy is back on track – which undermines the recipe’s long-term effectiveness by increasing government debts to levels that cannot be sustained. Mr Schäuble, ever the realist, would rather not go there.

“He reminds Keynesians that the policies they sensibly propose contain a fatal flaw: politicians usually ignore the second part of JM Keynes’ message – to contract spending and increase taxation once the economy is back on track – which undermines the recipe’s long-term effectiveness by increasing government debts to levels that cannot be sustained.” CFI.co | Capital Finance International

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> BILL BRYSON An American at Loose in the Perfect Garden He hails from Iowa – “someone had to” – and couldn’t wait to get away. In 1972, Bill Bryson, now 65, dropped out of college, packed a rucksack, departed for Europe, and soon found a job at the Holloway Sanatorium, a psychiatric hospital now closed, in Virginia Waters, Surrey, just south of London. Bill Bryson hasn’t looked westward since, save for a few years in the late 1970s when he returned with his British wife Cynthia to Des Moines to obtain a degree from Drake University. Back in Great Britain, Mr Bryson embarked on a career in journalism which eventually landed him at The Times as chief copy editor of the paper’s business section. More a writer than a journalist, and awed by the rich heritage of his adopted land, Mr Bryson penned Notes from a Small Island in 1995 – a sequel of sorts to Notes from a Big Country in which he offered a vivid description of his academic sojourn in Iowa as a stranger in his own land. Notes from a Small Island, voted by BBC Radio 4 listeners as the book that best represents Britain, was an instant bestseller. Since its release, almost a million copies have been printed. Adapted for television by ITV as six-part documentary, Notes from a Small Island tells the story of an old country as seen and experienced by someone from a place that has barely any history of its own. Mr Bryson marvels at the numbers involved: over 445,000 historical buildings, some 600,000 archaeological sites, and close to 12,000 medieval churches. The author almost gleefully observes that the parish of Kirkby Malham in North Yorkshire, population 202, preserves more 17th century buildings than may be found in the whole of North America. As he travelled, by public transport, from Land’s End to John O’Groats, Mr Bryson paints a familiar, yet still surprising, picture of the green and pleasant land he encounters and of its hardy people, including the stiff upper lip with which adversity is faced down time and again. Leave it to James May of Top Gear fame to expertly disassemble Mr Bryson’s travelogue and disturb the idyll: “Bill Bryson. Well, I think that man is a danger, frankly. If there is one thing I can’t stand it’s beardy, sanctimonious, patronising Americans in tartan trousers coming to England and trying to persuade us to turn into a museum.” Surely Mr Bryson, now a British subject, has grown accustomed to the periodic acerbity of public debate in his new homeland. Largely self-taught, his degree notwithstanding, and the proverbial comeback kid, Bill Bryson proved his science teachers, and the discouraging marks they handed down,

wrong with A Short History of Nearly Everything (2003). While admittedly skirting the edges of his scant knowledge, Mr Bryson delivered a tome of substance that since inspired a children’s prize for science communication awarded in his name and propelled the author into the rarefied atmosphere of the Royal Society – the only non-Briton to be elected an honorary fellow of that most venerable of institutions. Over barely thirty years, Bill Bryson wrote no less than 21 book ranging from travelogues to biographies and touching on history, and language. The Road to Little Dribbling: More Notes from a Small island was published in 2015 to mark the twentieth anniversary of the original work. Again, Mr Bryson embarks on a trip across Great Britain, this time along the Bryson Line – an imaginary straight line between Bognor Regis in West Sussex and Cape Wrath, the most north-westerly point of the British mainland, representing the longest distance in the UK that does not cross a sea. Still driven by the encomiastic zest of a tour guide, Mr Bryson sums up Great Britain as “the most sublimely decorated and well-tended 50,318

square miles the world has ever known.” However, as he travels about, Mr Bryson shows himself at times a grumpy, albeit witty, gentleman. The scarcity and misuse of garbage cans (dustbins), the deplorable quality of public discourse, the disconcerting incompetence of service workers, and the many ignominies of the Internet age, amongst other perceived ills, do not fail to rouse the author’s considerable ire. Though no longer an outsider in Great Britain, Mr Bryson remains the inquisitive American, ever ready to shake his head in disbelief while carefully dissecting the quaint habits – the compulsion to spread jam on cake, the relation between class and the brewing of tea, the fascination with voice tone and level – of a nation many centuries in the making and inhabiting “the world’s most perfect accidental garden.” According to reviews of eminent literary critics quoted on the back cover, More Notes from a Small Island is “seriously funny” (Sunday Times), “hilarious” (The Independent), “hugely funny” (Daily Telegraph), “laugh-out-loud” (The Observer). So much for the lost art of understatement. The book is, in fact, quite amusing.

“Though no longer an outsider in Great Britain, Mr Bryson remains the inquisitive American, ever ready to shake his head in disbelief while carefully dissecting the quaint habits.” 138

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> PROF PHIL SCRATON In Pursuit of Truth

In recent weeks, Professor Phil Scraton has been on British television a great deal. After many years of research and campaigning, he has been instrumental in the righting of a wrong, but he looks tired rather than triumphant. Professor Scraton’s painstaking academic research into the Hillsborough disaster of April 1989 – when 96 football fans were crushed to death – has finally been vindicated by the verdicts of unlawful killing reached by a jury 27 years on. Professor Scraton was not at the fateful semi-final match but watched events unfold on television. In the immediate aftermath, there was a rush to judgement concerning the cause of the disaster and culpability. It was widely and erroneously reported that Liverpool fans’ behaviour had contributed to, if not caused, the disaster. Outside Liverpool, this became the accepted narrative, supported by the police, judiciary, and much of the media, exacerbating the grief of affected families and survivors. The 1990 Taylor Report concluded the

main cause of the disaster was overcrowding and a failure in police control. The police and other agencies were found wanting at the highest level. However, the subsequent inquest exonerated South Yorkshire Police by returning an accidental death verdict. Professor Scraton applied himself to researching the evidence. After a tip off from an anonymous officer, he tracked down anomalies in the testimony given by police officers on duty at Hillsborough and the versions submitted to official enquiries. He also explored the way official documentation had been altered or suppressed. His book Hillsborough: The Truth, published in 1999, raised serious issues about the management of the match and concluded that there had been a miscarriage of justice. Nonetheless the establishment coverup continued. On Merseyside, the sense of grievance festered. Affected families and survivors maintained their campaign, but the years took their toll and the prospects of justice receded. Almost out of the blue, at the 20th anniversary of the disaster local

MP Andy Burnham, Secretary of State for Culture, Media, and Sport, announced that the government would waive the 30-year rule withholding public records to enable disclosure of all documents relating to the disaster. The Hillsborough Independent Panel was set up under the leadership of the Bishop of Liverpool to manage the process of the disclosure and to produce a report. Professor Scraton led the research team and was the report’s primary author. This paved the way for the quashing of the original verdicts, new inquests, and an investigation by the Independent Police Complaints Authority. The second inquest jury’s verdict laid bare a major cover up by senior officers of South Yorkshire Police. Andy Burnham MP commended the report in Parliament, hailing the “huge service not just to the Hillsborough families but to this country.” Instead of adversarial, the report’s style emphasises the need for full disclosure. It also provides a valuable model for resolving other contested issues.

“Andy Burnham MP commended the report in Parliament, hailing the ‘huge service not just to the Hillsborough families but to this country.’ Instead of adversarial, the report’s style emphasises the need for full disclosure. It also provides a valuable model for resolving other contested issues.” CFI.co | Capital Finance International

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> Latin America:

Waiting to Seize Its Moment By Wim Romeijn

A country eternally pulling back from the brink of self-destruction, Argentina is once again being hailed as tomorrow’s winner. To celebrate its return to economic normality after years of institutionalised mismanagement, Argentina is set to host the World Economic Forum’s Latin America meeting in the first week of April. On the agenda, talks on how Latin America can catch up with the fourth industrial revolution, touted as the fusion of technologies that is set to integrate the physical, virtual, and biological spheres.

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or now, though, most countries of Latin America are trying to cope with the resources glut and the resulting low commodity prices. Copper – an export staple for Chile and Peru – has receded over 50% since 2011, while iron ore, crucial to Brazil, is 20% off its peak. Brazil and Argentina are also hit hard by the vertiginous price drop of soybeans which currently trade at around half the 2012 level. Notwithstanding their worsening terms of trade, Chile, Peru, and Colombia have managed to keep annual growth rates above two percent. Chile owes its steadfast performance to a budgeting mechanism that ties government expenditure to the price of copper and allows for stabilisation fund to smooth out boom and bust cycles. Peru has fared well thanks to strong investment inflows while Colombia is cashing in on both its peace dividend and an overhaul of the country’s fiscal framework. At last years’ annual meeting in Davos, Brazilian Finance Minister Nelson Barbosa, since replaced, admitted that his country is struggling to deal with economic adversity. Mr Barbosa’s successor Henrique Meirelles is expected to attend both the Davos summit and the regional meeting in Buenos Aires. Mr Meirelles, who passed up on job offers from Barclays and Goldman Sachs to join the cabinet of President Michel Temer, sees both events as opportunities to push Brazil back onto the main stage which the country exited as it slipped into its worst recession since the 1930s. Mr Meirelles has slammed the brakes on government expenditure in an attempt to close the fiscal gap which currently hovers around 10% of GDP. Though Brazil’s sovereign debt was demoted to junk status, markets are upbeat at the country’s prospects. As governor of the central bank during both terms of the Lula Administration (2003-2011), Mr Meirelles is credited with managing a sixty-month-long growth spurt while adding to the country’s reserves and keeping inflation in check. The WEF regional meeting is scheduled to highlight the structural reforms taking place across the region, most notably in Argentina where President Mauricio Macri has embarked on a wholesale reorganisation of the state in order to provide for improved governance, a streamlined regulatory environment, and a reworked tax code. He also settled a longrunning dispute with some of the country’s creditors which excluded Argentina from international capital markets. On camera, President Macri enjoys rattling off his country many advantages: the world’s second largest shale-gas and fourth largest shale-oil reserves, the third largest potential for wind energy, and enough farmland to feed well over a billion people. The reforms he enacted were considered long overdue. Argentina has

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“A June 2016 WEF discussion paper found that while 90% of the continent is covered by mobile broadband, only about half the people are actually connected. Bas Burger, the paper’s author and head of BT in the Americas, identified three main causes for the usage gap: a triple lack of locallygenerated content, digital skills, and affordability.” hobbled from one recession to the next and represents a textbook case of a most promising country that never quite managed to make it. Since President Macri took power in December 2015, trade barriers have been lowered and subsidies slashed. The administration is now mulling a tax amnesty to lure back some of the $60 to $400 billion Argentine depositors hold in foreign banks. While investors have returned in hordes, most have only snapped up long-term peso bonds which yield up to 25% annually. The high interest rates are hurting the economic recovery with growth advancing at a glacial pace. Industrial output, a bellwether indicator, was down 7.3% in the twelve months to September 2016. Though he faces a midterm legislative election in October, the weak and divided opposition is unlikely to stage a comeback. Moreover, President Macri expects economic growth to pick up well before the vote, denting unemployment levels, currently around 11%, and delivering a tangible improvement to living standards. Of particular interest to the host, the WEF regional meeting includes workshops, panel discussions, and other events featuring experts from business, academia, and civil society who will discuss the critical importance of latching on to the fourth industrial revolution currently underway in order to ensure sustainable and inclusive growth. Participants are expected to swap ideas and experiences in e-government and debate legislative initiatives aimed at the creation of an enabling business environment. So far, Latin America has failed to derive discernible benefits from the digital era. A June 2016 WEF discussion paper found that while 90% of the continent is covered by mobile broadband, only about half the people are CFI.co | Capital Finance International

actually connected. Bas Burger, the paper’s author and head of BT in the Americas, identified three main causes for the usage gap: a triple lack of locally-generated content, digital skills, and affordability. Mr Burger emphasises that improving connectivity and skills are essential for the region’s development and has called upon WEF participants to deploy initiatives aimed at training both users and content providers. Mr Burger notes that most users, and regulators, see the Internet merely as a provider of entertainment and fail to recognise its ability for self-improvement. Another WEF paper on Internet usage in Latin America argues that, so far, the continent’s digital ecosystem has failed to promote financial inclusion – a requisite for sustainable growth as is amply demonstrated in East Africa. Around 50% of Latin Americans do not have bank accounts and are unable to access basic financial services. While the paper’s author Armando Senra, head of BlackRock for Latin America and the Iberian Peninsula, recognises that financial inclusion has advanced over the last decade, he also notes that further progress is hampered by geography, cost, and, crucially, deficient financial education. Mr Serna notes that, as a region, Latin America barely outpaces Sub-Saharan Africa in the WEF global competitive ranking. Red tape is the main culprit. According to World Bank figures on the ease of doing business, it still takes an entrepreneur 83 days to navigate Brazil’s byzantine bureaucracy to register a company. The same task can be accomplished in 29 days in India, of all places, and takes only six days in Italy. In Canada, a company can start trading within 36 hours while in Venezuela, at the opposite end of the scale, bureaucrats need on average 144 days to process a business application. Another hurdle Latins American start-ups face concerns the dearth of venture capital. With interest rates habitually touching the 30% p.a. mark, few businesses can offer comparable rates of return. While the foundations for accelerated growth remain in place, Latin America struggles to grasp its opportunities. The 2016 WEF Latin America meeting took place in Medellin – a city infamous for paramilitary violence, the drug trade, and guerrilla warfare. The one-time murder capital of the Americas has, however, risen from the ashes and was transformed into a modern business and cultural hub almost overnight. The story of Medellin, which unfolded in under a decade, is one that illustrates the possibilities available once governments and civil society decide to tackle a problem. Coming from far behind and with only gumption to back up its resolve, Medellin reinvented itself and set an example for the continent to follow: the city did not just pull back from the brink, it filled the hole and built a business park on top. i

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> Bancomext:

Priming a Nation for Growth BANCOMEXT has managed to position itself as an important driving force of strategic sectors, such as the automotive, tourism, industrial plants, energy, transportation and logistics, electrical-electronic and mining metallurgy ones.

ancomext showed its prowess by boldly opting to issue Basel III-compliant bonds, a rarity in Latin America, which comes without the write-down and write-off provisions usually insisted upon by investors in the region. In another sign of its strength, Fitch rated the issue just a single step down from the bank’s own investment-grade credit rating in an unusual move. The agency usually downgrades Basel III-compliant notes with a call option before the fixed rate expires a full two notches on account of their higher risk. However, as a state-owned entity, Bancomext boasts an explicit sovereign guarantee, firmly anchored in domestic law.

“Straddling the divide between a development bank and a commercial lender, with extensive trade facilities added to the mix, puts Bancomext firmly centre stage. As such, the bank enjoys a unique position atop Mexico’s buoyant export sector which remains the principle driver of economic progress.”

“Bancomext stands out for its long-term financing schemes offered to foreign trade companies.” In 2016, the bank launched a large programme to help the hospitality industry upgrade facilities and improve operations. The initiative was developed in close cooperation with twelve commercial lenders and offers credit lines of up to three million dollars to participating hoteliers, payable over ten years. Straddling the divide between a development bank and a commercial lender, with extensive trade facilities added to the mix, puts Bancomext firmly centre stage. As such, the bank enjoys a

unique position atop Mexico’s buoyant export sector which remains the principle driver of economic progress. Over time, and leveraging its considerable experience, Bancomext has accumulated an exceptionally wide palette of products and services that can be scaled and tailored to precisely meet its clients’ needs. Winner of the 2016 Best Trade Finance Bank Mexico Award, issued by Capital Finance International (CFI.co) in London, Bancomext looks set to face the future with confidence. The BANCOMEXT Business Strategy is described, which has been aligned with the National Plan for Development, as well as with the National Program for Development Financing Presentation (PRONAFIDE) for 2013-2018, which have as their objective to widen the scope of credit of Development Banking by facilitating the access to financial services in order to achieve a prosperous Mexico and an open economy that promotes worldwide commerce and foreign investment. i

The Banco Nacional de Comercio Exterior (Bancomext) is Mexico’s premier trade bank. It also assumes the roles of export credit agency and, more recently, of a commercial bank geared towards the need of corporates of all sizes pursuing cross border business opportunities. The bank was set up in 1937 and specifically charged with helping small, medium and large enterprises break into foreign markets. As such, Bancomext boasts a long history of underwriting initiatives that aim to sharpen Mexico’s competitive edge. CFI.co | Capital Finance International

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> CINDE:

Costa Rica – A Concentrated Source for Productivity Costa Rica is commonly known for being a beautiful destination that attracts millions of visitors who find peace and tranquillity in luscious rainforests and are welcomed by a warm and welcoming culture. It is less well known that Costa Rica’s natural rainforests blend with high-tech business pursuits such as software development, the manufacture of smart electronics, superfood research, and tier III R&D for the med-tech industry.

n a matter of decades, the country has been transformed from an agricultural economy into a diverse, dynamic, and thriving market that counts advanced medical devices amongst its main exports. Costa Rica exports well over 4,300 products and services to more than 151 countries worldwide. The country enjoys preferential trade access to markets representing two-thirds of world GDP thanks to a network of free trade agreements that include, amongst others, the United States, European Union, Canada, China, and Singapore. Costa Rica’s solid commitment to peace allowed the country to build a safe, healthy, and democratic nation. Costa Rica abolished its army in 1948, becoming the first nation in the world to do so. This was one in a series of key decisions that shaped the country’s history and set the course of national development. In 1869, Costa Rica instituted free universal public education

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“Today, more than 280 hightech corporates, 24% of which are Fortune 100 companies, have successfully established operations in Costa Rica.” and in 1940 it created a public healthcare system. By eliminating military spending, Costa Rica elevated development to the next level, allocating at present 9.9% of GDP to public health and over 7% to education. Today, more than 280 high-tech corporates, 24% of which are Fortune 100 companies, have successfully established operations in Costa Rica. Just in 2015, nearly two-thirds of these companies expanded their activities in the country. These dynamics see FDI inflows growing

Covidien - Costa Rica

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at an annual average of 7.5% since 2005. Costa Rica’s GDP per capita (PPP) now stands at close to $15,500 – the highest in Latin America. Costa Rica offer of a talent pool of highly skilled, productive, and motivated workers. The country ranks first place in innovation in Latin America and in productivity, as recognised by the Word Economic Forum. Considering its population of 4.8 million, here are some key highlights about Costa Rica’s education system: • 218 technical high schools with more than 100,000 students enrolled; • 60 National Training Institute (INA) facilities nationwide; • 61 universities that registered an impressive 546% increase in graduates between 1993 and 2015. Meeting skill demand across all areas, Costa Rica enjoys a constant increase in STEM university

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graduates (+8%) and IT graduates (+7%) annually. CINDE, the Costa Rican Investment Promotion Agency, works closely with corporates to match their needs to academic initiatives. Over the past decade, CINDE has developed 23 technical or specialised programmes tailored to meet industry requirements. CINDE constantly monitors productivity indices and has found that average output per employee grew 57% over the last decade from $35K to $55K in the services sector. The med-tech sector experienced an average output growth of 45% since 1999 going from $76K to $110K per employee in 2015. A robust package of

incentives available to corporate investors that meets WTO standards offers income tax as low as 0%, thus providing a full circle loop to reach true ROI on operations. Costa Rica ranks second amongst Latin American countries in the Enabling Trade Index and made an impressive improvement moving up 25 ranks on the Ease of Doing Business Index between 2015 and 2016, now attaining position #58 amongst the top third of countries evaluated. Multinationals also have their own customs code to complete their export processes on-site and leverage a one-stop shop for exports procedures where all export related documents CFI.co | Capital Finance International

including health permits, agriculture, and such are processed in a single location. PEOPLE, PROFIT, AND PLANET Costa Rica has adopted a model where hightech goes hand in hand with sustainability. The country ranks eleventh on the Global Green Economy Index. Almost all electricity in Costa Rica is generated from renewable sources: a mix of hydroelectric, geothermal, biomass, solar, and wind which satisfies 99.43% of national demand. The focus is not only on clean energy but also on effective design. Costa Rica ranks third in Latin America and thirteenth globally in energy architecture performance. 145

Developers of industrial real estate and office buildings have also joined the green concept. Costa Rica was the first to welcome a LEED certified company in Latin America and to date hosts over 120 LEED certified projects under the Green Building Counsel, including the first LEED Gold Certified Business Centre in Latin America.

development, legal, psychology, journalism, digital marketing, and agricultural engineering amongst others provides assistance to clients in several languages including English, French, and Portuguese.

ABOUT CINDE CINDE stands for Coalición de Iniciativas para el Desarrollo and remains true to its mission: to contribute to the country’s development by attracting foreign direct investment (FDI) and the promotion of enhanced investor-friendly conditions. This private, non-profit, non-political organisation was declared of public interest in 1984 and is the official agency responsible for pulling FDI into Costa Rica. Founded in 1982, it has helped hundreds of companies set up operations and grow in the country. As such, CINDE has provided major benefits to the economy.

In addition to implementing leading IT solutions, such as an on-demand CRM system which allows a 360 degree view of investing companies in the country, as well as implementing continuous improvement processes such as the Net Promoter Score methodology to evaluate the investors’ perceptions of each key interactions; the agency is also one of the few, if not the only organisation of its kind, to have its operations certified as carbon neutral. This effort fits with Costa Rica’s commitment to sustainable development, including the safeguarding of the environment and efficiencies in the responsible use of resources – all of which contribute to meeting the Global Sustainable Development Goals.

CINDE is committed to providing the best service and assistance to investing companies, at no cost. A task that was recently recognised by Capital Finance International awarding CINDE as the Best High-Tech Investment Promotion Agency in Latin America. A highly specialised team of professionals from diverse areas of expertise including economics, IT & software

Some of the key areas CINDE provides help to investors: • Assistance in site selection by providing detailed information on the country and its advantages, and organising customised investment agendas. Centralises, standardises, customises, generates, and analyses crucial, objective information for RFIs regarding FDI statistics, population and

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labour force data, salaries, labour law, operation costs, availability of qualified HR, tax subsidies, multinational companies, amongst others. • Meeting the investor’s needs – Arranging meetings with other investing companies for benchmarking as well as with service providers, government organisations, universities, real estate brokers, attorneys, accountants, industrial parks, and business associations, environmental specialists, telecom providers, and many more key stakeholders in the investment process. • Networking – CINDE facilitates direct contacts and links with potential investors from North America and other countries through CINDE’s office in New York. It acts as a key mediator between public and private sector, with companies leveraging CINDE´s services. It becomes a facilitator between private and public sectors and the government to launch new initiatives in academia and overall investment climate improvement. • Specialised support – Once the company has established itself in the country, CINDE provides specialised support for strategic aspects geared towards new operational expansion projects or promoting product diversification. A very strong and well-established working relationship with multinational companies, ministries, organisations, chambers, government, universities, schools make those efforts possible. i

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> Paradise Found:

Tobago Orchid Ready to Blossom

proposed 250-room luxury hotel and spa by the beach on the south-western tip of Tobago has been given the green light, ready to create hundreds of jobs and boost the island’s economy.

Work is set to begin shortly on The Orchid – an exclusive complex which will boast a wealth of VIP features as well as walk-on access to one of the Caribbean’s most celebrated courses with the Mount Irvine Bay Golf Club. 148

The two-hectare site in the stunning surroundings of the St Patrick District has already been honoured as the Caribbean’s best greenfield premium hotel project 2016, and looks set to bring in many more awards as soon as its doors are opened. Alabaster sands and clear azure waters await guests of The Orchid, which will benefit from sports amenities and lush tropical gardens. The complex’s own spa facilities will be on hand to CFI.co | Capital Finance International

offer a mesmerising collection of treatments for mind, body, and soul. As a tourist destination, Tobago’s star has been rising rapidly over the past decade. Perfectly nestled between Trinidad and Grenada, the autonomous island sits outside the notorious Hurricane Alley which ensures ideal holiday weather all year round. Its proximity to the Equator ensures Tobago’s climate is characterised by long spells of hot tropical

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“Some of the must-see sights on Tobago include the likes of Pigeon Point – a place where a thatched jetty piercing the edge of the Caribbean Sea presents one of the most iconic views of this wonderful tropical island.” weather, interspersed with occasional periods of, mainly, overnight rain. For those guests able to tear themselves away from the relaxing splendour of The Orchid, the wonders of Tobago await, and all are within a short drive of the hotel’s base in the south-west of this small and enchanting paradise. A typical warm and friendly Caribbean welcome is always on hand, whether you’re in the island’s bustling capital Scarborough or if you’re seeking peace and solitude on one of the island’s stunning and secluded beaches. A shopaholics paradise, Scarborough is studded with delightful boutique shops where all manner of local crafts, artworks, designer clothing, and bargains can be found. The capital is also home to some remarkable restaurants where exquisite style comes to life overlooking the tranquil bay. Wander into the backstreets, however, will see you quickly encounter some tremendous little eateries where the locals flock to enjoy some of the finest seafood in the Caribbean. Elsewhere on the island, you’ll find a sumptuous selection of beautiful beaches, breath-taking walks with hidden waterfalls, and activities for everyone – from doing little more than sprawling out on a beach to adrenaline-charged rock climbing.

“Perfectly nestled between Trinidad and Grenada, the autonomous island sits outside the notorious Hurricane Alley which ensures ideal holiday weather all year round.”

Some of the must-see sights on Tobago include the likes of Pigeon Point – a place where a thatched jetty piercing the edge of the Caribbean Sea presents one of the most iconic views of this wonderful tropical island. Here you’ll find a glass-bottomed boat waiting to show you the wonders beneath the gentle waves, or if you fancy getting up close and personal with the aquatic wildlife, this is the perfect spot to enjoy some snorkelling or scuba diving. The coral gardens of Buccoo Reef are also the perfect place to see a rainbow collection of fish and fauna. One of the highlights for any visit to Tobago is Nylon Pool – a natural, metre deep swimming lagoon where relaxation is the order of the day. The golden sandbar beneath the crystal clear water is flanked by the deep ocean on one side, and a palm fringed beach on the other – the very image of a tropical paradise. CFI.co | Capital Finance International

Tobago also boasts some of the region’s finest walks, with mile upon mile of free-roaming territory to explore. The famous Main Ridge Forest Reserve is the most popular, yet always quiet, walking spot. It is also one of the oldest protected rainforests in the world. The island is also home to a jaw-dropping array of wildlife, attracting a worldwide following of bird-spotters keen to enjoy more than 200 species of birds, including the rare white-tailed sabre wing hummingbird and the scarlet ibis. Visit from March to August and you can also experience the treat of turtle watching at the aptly-named Turtle Beach where the young of the giant leatherback turtles make their way out of their nests to take their first steps into the big wide world. For active types, Tobago hosts every kind of water sports imaginable, but is a particular favourite of deep-sea game anglers. Blue Marlin and Sailfish are the most sought-after species with some offshore sport reporting regular Blue Marlin catches in excess of 600lbs on many of the island’s charter boats. Golf is another favourite pastime in the Tobago sun, and you’ll find two championship 18-hole courses (with a nine-hole course currently under construction). At The Orchid, however, the magnificent Mount Irvine Bay Golf Course is a short walk from your hotel room. Once you’ve finished up on the 18th green, you can sooth away the day’s fairway endeavours with a visit to the Orchid’s luxurious spa facilities where you can relax in one of several treatment rooms and let your cares be eased away. It’s the perfect moment for you consider your nest move – heading to the hotel’s magnificent restaurant. Here you’ll discover Caribbean cuisine at its magnificent best, served up by internationally-renowned chefs keen to impress with some worldbeating signature dishes. Your experience at The Orchid is guaranteed to impress. From the moment you step foot on the island, right up until it’s time to return home, nothing short of excellence will be good enough for the highly trained staff waiting to ensure your visit to Tobago is the experience of a lifetime. The Orchid Hotel and Spa on Tobago awaits. i 149

> Ernst & Young:

Investment Opportunities in Argentina By Sergio Caveggia and Jacqueline Reichel

Mauricio Macri, former mayor of Buenos Aires, won the presidential elections and took office in December 2015. As the elected president opposed the government that ruled Argentina for twelve years, new regulations have been expected aimed at promoting the local and foreign investment needed to strengthen employment and improve the country’s infrastructure.

n this scenario of improved conditions and optimistic expectations, some sectors look promising. Argentina has opened up investment opportunities of approximately $240bn across multiple areas.

Meanwhile, 2016 has been a year of adjustment and transition. With the change of government there are sectors that have reactivated before others, such as energy and agribusiness. With respect to the energy sector, the first tender for renewable energy (RenovAr) has been submitted with the objective of adding 1GW of power to the country’s energy supply within two years. This requires an estimated $2bn investment. In addition, a second tender for renewable energy (RenovAr 1.5) has been submitted to add 600 MW of power. Moreover, a tender for traditional energy has been made as well. MORE ABOUT ENERGY With just 295MW of installed wind capacity at the end of 2014 and just 10MW of installed solar PV capacity, and still heavily dependent on home-produced fossil fuels which have been kept artificially cheap by government subsidies, both wind and solar energy production amount to less than 0.5% of Argentina’s power mix. According to research from the US National Renewable Energy Research Laboratory (NREL), Argentina’s gross solar resource could amount to as much as 7853TWh/y, the 11th highest in the world. But the biggest opportunity for Argentina lies in wind power as the country possesses one of the world’s most promising wind resources. In October 2015, the previous administration passed the Renewable Energy Law (27,091) and, in March 2016, its regulatory decree (#531) was published. This decree offers important tax benefits. The law also sets renewable energy production targets: 8% by the end of 2017, rising by 4% every two years to reach 20% by 2025. According to CADER, Argentina’s renewable energy chamber, the country will need 7GW of new installed capacity by 2021. Around 2-3GW will be necessary to meet the 8% target (requiring $5bn in capital investment), and 10GW to meet 150

“Public-private partnerships are a core pillar of the plan, and favourable mechanisms are being set-up to facilitate them.” the 20% target (requiring a total $15-20bn in capital investment). As part of the energy plan 2015-2019, the government has developed preliminary plans for diversifying the country’s energy matrix by 2025. Around 8GW will be necessary to meet the 43% target in thermal power, 1.5GW in nuclear power to reach the target of 10%, and, 3GW in hydro power to meet the 27% target. AGRIBUSINESS Argentina is one of the main suppliers of food globally. The country is: • #1 exporter of soy flour and soy oil; • #2 exporter of sunflower flour and oil; • #3 exporter of corn; • #4 producer of biodiesel; and • #7 exporter of food. Agribusiness is considered a critical engine for the country and to ensure the rebound of this sector, the government eliminated the export taxes on all agricultural, cattle, fishery, and industrial products, with the exception of soybeans, whose tax was reduced by 5 p.p. Export taxes for soybeans are now set at 30%, and taxes for soybeans derivatives at 27%. TRANSPORTATION INFRASTRUCTURE Argentina is implementing the most ambitious plan in the history of the country to enhance productive corridors, develop the domestic air market, create new opportunities, improve the quality of public transport, and diversify logistics matrices. More than $80bn of investments are expected to be made in the following categories: roads and highways ($48bn), freight rail ($15bn), CFI.co | Capital Finance International

passenger rail ($13bn), airports and ports ($3bn), and other ($4bn). The Macri Administration has defined a specific programme in relation to this ambitious plan – the Belgrano Plan. The main target of this plan is to build infrastructure and encourage industrial development in ten of Argentina’s underdeveloped northern provinces. The InterAmerican Development Bank (IADB) is going to finance it and help the government meet its goals of improving infrastructure and reducing poverty. FEDERAL INFRASTRUCTURE AND PUBLIC WORKS The gap between Argentina and its regional peers in water treatment and irrigation is substantial, creating an important whitespace opportunity for investment. The current administration has set ambitious goals to improve on these measures: • Increase access to sewage network for urban populations from 58% to 75%, and • Triple the amount of irrigated land from 2.1 to 6.2 million hectares. Public-private partnerships are a core pillar of the plan, and favourable mechanisms are being setup to facilitate them. Current legislation already allows for private investors to participate in special irrigation trust funds. Argentina has also outlined an ambitious 70 health and 460 education infrastructure projects to improve access and outcomes. More than $60bn of investments are expected in the following categories: water & sanitation, irrigation, education, and health. OIL & GAS Argentina holds the world’s second largest shale gas and fourth largest shale oil technically recoverable reserves (TRR). In addition, there is large unexplored potential in offshore and deep water. MINING Fully three-quarters of Argentina’s mining surface remains unexplored. The current administration eliminated a 5% tax imposed by the previous government on mining exports. There are

Winter 2016 - 2017 Issue

Real Estate and Urban development

Energy Agribusiness

More than USD 240bn investments opportunities across multiple sectors

Telecommunications

Mining Oil & Gas

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750,000km2 of high potential mining areas and 183,000km2 of granted mining rights. In Argentina an investment of around $30bn is needed to develop gold, silver, copper, potash, and lithium mining. TELECOMMUNICATIONS & HIGH-TECH The expansion of cellular and broadband Internet coverage in Argentina represents an investment opportunity of $2bn. REAL ESTATE AND URBAN DEVELOPMENT Argentina’s real estate market is underdeveloped as well: • Home ownership in Buenos Aires City (57%) is the lowest among regional peers (e.g. Mexico City, Bogotá, Santiago, São Paulo); • Office stock is much lower than comparable cities (e.g. Mexico City, São Paulo, Santiago) and has the lowest vacancy rate since 2008; • In retail, gross leasable area is lower than in Chile, Colombia, and Peru, and expected to double by 2025. Finally, after almost a year since the current president took office, some sectors have started to reactivate. Little by little the wheel of economic reactivation is gathering speed but each sector does it at a different pace with its own dynamics. We understand that the decline in inflation will continue, but nowadays most of the committed investments returns are in dollars or adjustable

Transportation Infrastructure

Federal Infrastructure and Public Work’s

in dollars because inflation in Argentinian pesos is still high and makes it difficult to invest and recover that investment in local currency. Therefore, it is important to focus on the control over the macroeconomic variables. As long as the control of these variables continues to be favourable, expectations are going to be high, and the different opportunities that currently exist in the country will attract more and more interest from private equity and investors in general from the region and the world. 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 21 years in international taxation and mergers and acquisition matters. Mr Caveggia is highly experienced in acquisition structures for inbound and outbound investments, buy side, sell side, and restructuring services within the transaction tax area. Jacqueline Reichel is an EY manager in the Argentina Valuation & Business Modelling practice assisting local and international clients in the region. She has over ten years of professional experience and joined the EY Valuation and Business Modelling Group in 2007. Jacqueline has provided local and multinational companies with professional advisory services of business and intangible assets’ valuation and market analysis. CFI.co | Capital Finance International

Author: Sergio Caveggia

Author: Jacqueline Reichel

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> Keith Jarrett:

Pitch Perfect Prima Donna By Tony Lennox

The legendary jazz musician Keith Jarrett had just finished playing JS Bach’s WellTempered Clavier (BWV 846–893), when someone asked him why, as one of the great jazz pianists of the age, he’d played the piece straight? “This music doesn’t need my help,” he answered.

arrett, who’ll be 72 on his next birthday, has a reputation for witty and sometimes terse one-liners, the latter usually in response to impudent journalists – in fact anyone who gets on his wrong side. If you find yourself at one of his live concerts, don’t try to clear your throat – or, worse still, take a picture on your phone. Falling under a ton of bricks would be less painful. In a sold-out concert at the Salle Pleyel, Paris, in the summer of 2014, he walked off, midperformance, after someone coughed just once too often. This led the author Felix Janosa, who was in the audience with his family, to note angrily on his Facebook page: “Even ten minutes of sustained clapping could not convince the shrinking violet to bring the concert to a fitting conclusion. The master then came out again, but only to say to the disappointed fans, ‘I have no more music in me’.” The musician then apparently left the stage to the accompaniment of catcalls from the Parisian concert-goers – never noted for their reluctance to voice their disapproval. Then there was the time a woman sneezed just as Jarrett was settling himself to begin a performance. “Bless you,” he said, before adding: “But you only get one.” While some might describe Jarrett as “prickly” and prone to tantrums, more generous and appreciative lovers of jazz, and music in general, would define his behaviour as a consequence of a dedicated quest for perfection. There’s a personality paradox about Jarrett. From one perspective he could be described as the archetypal prima donna – demanding, selfish, brilliant. But from another angle one can see he has a sympathetic and generous soul. The making of the celebrated Köln Concert, now seen as a musical milestone, is an example of this contradiction. THE KÖLN CONCERT The recording of the concert in the autumn of 1975 was a sensation – it became the best-

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“While some might describe Jarrett as ‘prickly’ and prone to tantrums, more generous and appreciative lovers of jazz, and music in general, would define his behaviour as a consequence of a dedicated quest for perfection.” selling solo album in the history of jazz, and the best-selling piano album of all time, shifting more than 3.5 million copies. But the truth is, it almost didn’t take place. When Jarrett agreed to perform at the Opera House in Cologne, it was a coup for Vera Brandes who, at just 17, was Germany’s youngest concert promoter. Jarrett was already in a cantankerous mood, having driven from Salzburg in the rain with a bad back. When he arrived he discovered that the wrong piano had been delivered. Not only was it too small, it was seriously out of tune, the pedals didn’t work, and the upper register was thin and tinny, while some of the black keys were sticking. In a recent interview Jarrett revealed that his unpleasant memories of the concert began with a bad Italian meal – and got worse from there. He sat in his car, fuming, while a desperate young Vera stood in the rain, pleading with him, for the sake of the 1,400 tickets she’d sold, to go on. Given his reputation for perfection, and the terrible circumstances, the fact that he eventually relented is an indication of his essential compassion. He recalls that as he walked on stage he shook his fist at the team of engineers who were going to record the event. “We almost sent the engineers home — it might never have been recorded, because of everything being wrong,” he said. The piano sounded terrible.” The concert, to Jarrett’s initial amazement, was greeted with enthusiastic applause by the CFI.co | Capital Finance International

German audience. Still puzzled, he drove away from the venue with his long-time producer, Manfred Eicher. “I was in the car driving with Manfred and we had a little cassette in there,” he said. “And we looked at each other and said, ‘Oh, man. This has to come out’.” The Köln Concert fixed Jarrett firmly in the pantheon of the great musical improvisers of contemporary jazz, which is a remarkable achievement, given the limitations of range on the substandard piano. Experts have concluded that the work’s brilliance was due, in part, to the constraints under which Jarrett was forced to improvise – in other words, he was driven to take the jazz in a completely new direction. PERFECT PITCH Keith Jarrett was born in 1945 in Allentown, a nondescript revolutionary-era Pennsylvania town 90 miles west of New York. His parents, Daniel and Irma, soon became aware that the boy possessed what is known as perfect pitch, a rare auditory ability to identify a given musical note – a facility enjoyed by precious few. The eldest of four sons, Keith was something of a child prodigy, giving his first public piano recital at the age of seven. He was classically trained in his teenage years, but lured by the improvisational possibilities of jazz and spontaneous composition. It is said that he was encouraged to experiment after seeing Dave Brubeck perform at a club in New York. He was also influenced by, and drew inspiration from, jazz heroes like Thelonious Monk and Oscar Peterson. He once said: “Jazz is there and gone. It happens. You have to be present for it. That simple.” As a student of classical music at the Berklee College of Music in Boston, he earned pocket money playing piano in the city’s cocktail bars before moving to New York City where he performed in jazz clubs in Greenwich Village. Throughout the sixties and early seventies, he played and toured with some of the most influential jazz bands in the world, including Art Blakey’s Jazz Messengers and The Charles Lloyd Quartet. Towards the end of the sixties, he was

Winter 2016 - 2017 Issue

Keith Jarrett. Photo: Henry Leutwyler

recruited by the legendary Miles Davis. Davis was astounded by Jarrett’s faultless improvisations. Jarrett remained with Davis and his band for another three years. Unusually for a jazz musician, Jarrett never lost touch with his classical roots. Indeed, his success in the field of jazz gave him the time and the opportunity to explore a parallel career as a classical composer and performer, at which he continues to excel. While his interpretations of classical works are impressive, he still won’t interfere with the musical “perfection” of Bach. But for a brief spell in the 1990s, when he was struck down by chronic fatigue syndrome, also known as ME, he has toured and recorded relentlessly. In the last twelve months alone, he performed to sell-out crowds in Florence, Dublin, San Francisco, Naples, Lucerne, Brussels, Carnegie Hall in New York, and London’s Royal Festival Hall. As Jarrett grew in fame, he became much more recognisable, which led to the development of a popular legend – that he was actually black. For a time during the 1970s he sported an Afro hairstyle and a jazzy beard. With his naturally

dark skin, he was assumed by many to be of African-American descent. The website The Root, which celebrates African-American achievement (in a feature entitled “The Blackest White Folk We Know”), recently wrote: “For years, we were convinced that jazz pianist Keith Jarrett was one of us. With that ’fro, he looks just like our uncle did, circa 1975. He’s not. We’re still in shock.” WORKING ON BLACK The jazz saxophonist, Ornette Coleman, who passed away last year, once famously stopped Jarrett backstage and said: “Man, you just got to be black”. Jarrett, living up to his reputation for one-liners, replied: “I’m working on it.” Jarrett is nothing if not forthright in his views. He once said, of fellow jazz legend, the celebrated New Orleans-born trumpeter Wynton Marsalis: “I’ve never heard anything (he) played sound like it meant anything at all. He’s jazzy the same way someone who drives a BMW is sporty”. Jarrett has been described as a man who “never shies away from confronting all slights, real and perceived.” He famously picked a fight with the iconic US rock band Steely Dan in 1980. One Steely Dan fan recalls the moment a friend CFI.co | Capital Finance International

played him Jarrett’s 1974 recording of Long as You Know You’re Living Yours. Hearing a familiar riff, he exploded. “That’s a direct rip-off of Steely Dan’s Gaucho,” he ranted, before his friend drew his attention to the dates of the two recordings. Threatened with a law suit from Jarrett, Steely Dan song writing duo Donald Fagen and Walt Becker owned up. They’d been influenced by Jarrett’s work, they admitted, and reportedly paid out $1 million in compensation. When Keith Jarrett takes to the stage to perform free jazz, he doesn’t know what he’s going to play. His support team often distribute cough sweets to the audience before a performance, because interruption can destroy his flow. He’s been known to encourage a pre-concert “coughin” to ensure silence during the performance. It’s about total immersion and concentration in the music. Fellow artists and fans are left bewildered by his ability to “play from nothing.” Jarrett once said of his work: “The art of the improviser is the art of forgetting” – which is ironic, given that he has produced some of the world’s most memorable music. i 153

> North America:

Pulling Back from the Brink with Realpolitik By Wim Romeijn

Since the days of Theodore Roosevelt, the global agenda has been set in Washington. President Roosevelt – “speak softly and carry a big stick” – understood the basic law of geopolitics: might, and the willingness to deploy it, is right. Cardinal Richelieu, chief minister to King Louis XIII of France, had already concluded in the mid-1600s that “in matters of state, he who has the power often has the right.” However, in 1927 Mao Zedong put it much more succinctly: power grows out of the barrel of a gun – a clear message with no ambiguity.

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s it happens, the US has plenty of guns; in fact more than the next ten great powers combined. During the eight years Barack Obama dwelled in the White House there was lots of speaking softly, but his willingness to wield the power he commanded was much doubted. As a result, Mr Obama proved singularly inept at steering world events. During his two terms in office, initiative slipped from US hands into those of more assertive leaders. Mr Obama’s ingenious plan to balance Shia and Sunni power in the Middle East has allowed Iran to wage proxy wars across the region. Far from a diplomatic coup, the 2015 nuclear deal with Tehran caused traditional Sunni allies to reassess their options and helped fan regional conflict. Washington’s failure to fully engage on the war in Syria enabled Russia to reclaim, with considerable panache, a say in the region’s affairs for the first time since 1973 when Henry Kissinger expertly managed to squeeze the country out of the Middle East. In Europe, Mr Obama’s approach also yielded deplorable results: UK voters ignored his threats and voted to leave the European Union anyway while President Vladimir Putin felt sufficiently emboldened by the US president’s naiveté to annex the Crimea and invade the Ukraine. Washington’s thinly veiled admiration for Angela Merkel saw Germany needlessly prolong the financial crisis and – possibly in an attempt to outdo the do-gooder – open its borders to a million or so migrants – not all of them refugees. Seldom have good intentions caused mayhem on such a scale. It is hard to see how Donald Trump can do worse. In fact, any change in US foreign policy is sure to deliver the new US president a few feathers – at virtually no cost. As a businessman, albeit one with a slightly tarnished reputation, President Trump is expected to embrace realpolitik – a pragmatist policy devoid of ideological content. It explains why Trump-the-candidate scarcely managed to hide his admiration for Vladimir Putin. That other champion of realpolitik, Henry Kissinger, offered a few words of advice in his 2014 book World Order: do not pick a fight with the Chinese, offer Russia the recognition she craves, keep out of European politics, and cantonise nations at war. The foreign policy amateurism displayed by both the GW Bush and Barack Obama administrations horrifies the nonagenarian Kissinger. The mere thought of committing the United States to the establishment of a gender sensitive and fully representative government in Afghanistan beggars belief. In World Order, Mr Kissinger

“Kissinger’s World Order is grounded on the premise that the current one has created an unprecedented level of interdependency – such as globalism and blocs of nations such as the European Union – whilst chaos reigns due to the absence of clear goals, methods, or limits.” wonders if no one took the trouble of reading Winston Churchill on Afghanistan: “except in harvest time, the Pathan [Pashtun] tribes are always engaged in private or public war.” Mr Kissinger is unlikely to have allowed a power vacuum to develop along Russia’s borders and most certainly would not have issued warnings against the use of chemical weapons to the president of Syria without putting in place a deadly response to be triggered in case of the first transgression. The master of realpolitik, and an avid student of the Theodore Roosevelt era, Henry Kissinger stresses the need to build a new world order – the old one was lost when the US squandered its “liberal arc of history” and remained ideologically passive, and militarily overactive, as Islamic and Chinese alternatives filled the void. Just as in nature, geopolitics hates a vacuum. Kissinger’s World Order is grounded on the premise that the current one has created an unprecedented level of interdependency – such as globalism and blocs of nations such as the European Union – whilst chaos reigns due to the absence of clear goals, methods, or limits. Europe, in Kissinger’s view, may have given the world the Westphalian model of the nation state, but is currently too obsessed with forging an impossible union of equals to be of any use on the world stage. Recognising this fact, and using the good offices his new best friend Nigel Farage, president Trump could do worse than ditching Nafta – which he dislikes passionately – and replace it with a North Atlantic Free Trade

Agreement: indeed, Nafta 2.0 uniting the United States, Canada, and the United Kingdom, thus creating an Anglo-Atlantic sphere that fills the vacuum left by the EU’s possible demise as France flirts with Marine Le Pen and a Frexit. Treating the Chinese, meanwhile, to a kabuki performance with plenty of posturing and drama but no actual threats – surely one of President Trump’s fortes – would allow the US to escape Thucydides’ Trap enabling Beijing to develop its aspirations without the need for brinkmanship. Russia, under the spirited guidance of his good pal Vladimir, may be welcomed as an equal partner on the world stage, thus removing the chip from the country’s shoulder. Thus, without doing that much or endangering world peace, President Trump and his administration of hawks can easily reassert their country’s pre-eminence in a multipolar world. Recognising the value of Cardinal Richelieu’s words that “the state has no immortality, its salvation is now or never,” President Trump may throw his weight around quite a bit, or swing the proverbial cat, and not harm anyone in the process – or at least nobody who matters. The losers in this plausible scenario of exalted realpolitik are the Middle East and Europe, more particularly Germany. Undoubtedly decried by liberals as an unholy alliance of populists and autocrats, such a new world order would, however, prove fairly stable as it awards a place and role to all powers that matter – those with the guns. Ambitious secondtier powers such as India, Brazil, and – this is somewhat of a stretch – South Africa may align with whomever they choose, though cannot reasonably expect to set the global agenda. This matters as the World Economic Forum gears up for its annual summit in Davos. In a world ruled by pragmatism, as opposed to one governed by wishful thinking, lofty ideals still have a place. The issues surrounding rising inequality, global warming, new technology are not about to become any less pressing just because the powers-that-be in Washington, Moscow, and Beijing are busy carving up the world between them. If realpolitik is the new game, idealist should, ideally, adapt and frame their concerns in ways that are easier to digest and more practical to implement. With the liberal order beating a full retreat, the politically correct is also losing currency. Going about their business, the chattering classes, even the moneyed ones, can no longer expect to be heard. Shouting harder is not an option when politicians have appropriated the loudhailer. i

“If realpolitik is the new game, idealist should, ideally, adapt and frame their concerns in ways that are easier to digest and more practical to implement.” 156

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> CFI.co Meets the President & CEO of FreeBalance:

Manuel Pietra

reeBalance is a customer-centric company, globally distributed, with integrated processes. The FreeBalance organisation and management structure is arranged in a matrix. This structure encourages a culture of crossfunctional collaboration in support of customers. All internal performance metrics are driven by customer satisfaction.

“Smart government requires improved control, transparency and accountability to be effective. FreeBalance provides a unified governance platform that supports smart government through financial, human resources and performance management.” “Good governance and achieving development goals directly impacts local economies and the lives of each citizen. Social responsibility is integral to what we do. That’s why we operate with a customer-centric approach.”

While many organisations claim to be customercentric, FreeBalance goes a step further and involves its customers in the company’s functioning and future development. In 2007, the company formed the FreeBalance International Steering Committee (FISC). FISC provides an interactive forum for the exchange of knowledge, ideas, and experiences amongst FreeBalance customers.

ABOUT MANUEL PIETRA Manuel Pietra is a global executive and entrepreneur with more than 25 years of successful management experience in companies based in the United States, Canada, Europe, South Africa,nd Latin America. He has a proven track record in building and running companies, from start-ups to well-established private and public organisations. He has consistently demonstrated an ability to build and lead successful teams and businesses in the international arena.

Insights from FISC meetings and discussions provide leadership and vision for FreeBalance solutions for the public sector. These activities, combined with other aspects of the company’s ISO 9001:2008 certified customer-centric processes, ensures FreeBalance products meet changing international needs in a financially sustainable fashion.

As president & CEO of FreeBalance, Mr Pietra leads global growth strategies focused on advancing the company’s objectives and promoting revenue, profitability, and growth. Mr Pietra has transformed the firm into a customer-centric and socially responsible company increasing its footprint to 25 countries worldwide. He is responsible for ensuring that FreeBalance fulfils its mission to help governments across the world leverage robust financial management technology to accelerate country growth.

“FISC provides us with visibility into current and future customer needs,” says Manuel Pietra, president & CEO of FreeBalance. “Our customers have a unique opportunity to work collaboratively with our team and with their peers to provide an in-depth look in to public financial management trends.” Customers at FISC participate directly in the FreeBalance product development process by voting for roadmap changes over the course of a two-year window. FreeBalance also engages directly with ministers of finance through its bi-annual Ministers’ Roundtable. This event brings together ministers from customer countries to explore how governments can better plan and execute to achieve sustainable economic growth through digital transformation. The FreeBalance management team leads a group of professionals committed to making a difference in the world. Social responsibility is core to what FreeBalance does because of the impact its software and services have on country prosperity. FreeBalance is a for-profit enterprise that does good and does well. The FreeBalance team understands that broad and inclusive economic development can overcome the instability and poverty that plagues the modern world. Improving governance, particularly in the

President & CEO: Manuel Pietra

public sector, is the most effective enabler of country growth.

Mr Pietra has held executive positions on the boards of several international companies and actively participated in the venture capital space. He has participated in several successful IPO’s in North America, Europe, and South Africa.

Mr Pietra adds: “We believe that people should be at the heart of smart government. Technology plays an important role but our efforts should be focused on how to leverage that technology to improve the lives of citizens through good governance.”

Mr Pietra has served in several international positions including president of the International Consortium on Governmental Financial Management (ICGFM) in Washington, DC. As president, Mr Pietra was also chair of the executive committee providing vision and leadership to support the continued growth of the ICGFM as the world’s foremost community of PFM practitioners.

“Our mission is to help governments around the world leverage sustainable and smart solutions to support good governance, accountability and transparency.”

Mr Pietra is multilingual and often speaks at high profile investment seminars and technology conferences across the world in English, Portuguese, Spanish, and French. i

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> FreeBalance:

The Smart in Smart Government

s smart government a paradigm shift: new, exciting and disruptive, or incremental – a rebranding of traditional technology? With so many late 20th century giants, like industrial manufacturers and legacy ERP vendors hopping on the “smart” bandwagon, it is hard not to be a touch cynical. You cannot help but think smart government is yet another underwhelming government digital trend such as e-government, government 2.0, or open government. Technologists tend to focus on the digital and less on the transformation. More specifically, looking at transformation as a traditional change management exercise. There is a school of thought that realises that the transformation in digital is more profound. The lack of government digital adoption has come from analogue thinking – the notion of making existing processes more efficient or less expensive. A digital mindset requires a citizencentric approach to radically improve government service delivery and public investments. There will be no smart without leveraging ideas like design thinking, customer experience, and agile development. WHY SMART NOW Smart Government and Smart Cities appear to have more traction than previous digital initiatives. It is not that we have finally learned our digital lesson – it is that there are compelling forces to nudge adoption: • Sustainability: the increasing recognition of the impact of using too many resources to support growth, with the need to improve environmental resilience and citizen well-being to prevent conflict. • Globalisation: the impact of trade and competition provides the opportunity for financially sustainable growth and innovation. • Future of Work: the impact of digital technologies is changing the nature of education, employment, and manufacturing placing significant regulatory and reform burdens on governments • Trust: the traditional paternal relationship between government and citizens has resulted in lower levels of trust in the world of social media, meaning that governments need to improve services. WHAT IS SMART? Technologists see smart as the intersection of SMACT technologies: social, mobile, analytics, cloud, and the Internet of Things (IoT). IoT is a driver for Smart Cities. Technologies do not make for smart. Smart Government is about: • Citizen-centric: the reform of processes and silos to provide an effective user experience that

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“A digital mindset requires a citizen-centric approach to radically improve government service delivery and public investments.” improves the efficiency of government to citizen interactions. • Data-driven: the ability to take data from all sources to make data-driven rather than dogmadriven decisions. • Performance-focused: the focus on outcomes rather than inputs as a more effective set of key performance indicators. • Long-term: the need to consider that pay-back benefits for smart government tends to be longterm, where improved planning and financial scenario management is required beyond election cycles. These last three points lead us to conclude that public financial management (PFM) is the foundation for smart government. PFM and government resource planning (GRP) systems are not on the periphery of smart government. PFM is integral to the smart government lifecycle. Smart government is not smart without smart PFM. Effective PFM provides a governance and decision-making structure that covers the planning, acquisition, implementation, maintenance, and results lifecycle.

formulation software with scenario planning. Budgets need to be tied to government objectives and performance indicators, particularly for public investments. Public investments require multiple years of financing in infrastructure, health, and education. PFM enables smart planning through integrating policy like SDGs and national development strategies with programme budget classifications. These classifications are used to track performance and results in advanced PFM systems. Multipleyear planning is supported through medium-term expenditure frameworks (MTEFs) to ensure smart government fiscal stability. Open government techniques like open budget portals and participatory budgeting can be integrated with PFM. For example, governments can publish budget expenditures, transfers, and variances daily to enable civil society engagement. ACQUISITION Smart procurement is needed to achieve the best value for money on smart technology acquisitions, including the ability to effectively manage complex capital assets, contracts, outsourcing, and public private partnerships (PPPs). Value and cost becomes critical to manage through tying acquisitions with performance criteria in budget classifications. The contract and payment process needs to be value-focused. E-procurement systems can increase competition, reduce spending, and improve value. E-procurement is particularly valuable when integrated with GRP procurement software to automate the acquisition process and to ensure effective spending controls. IMPLEMENTATION System implementation requires technology and project skills, like other ICT investments. There is the additional risk and opportunity of newer technology inherent in smart government projects. Public investments like smart grids, smart infrastructure, and smart buildings are government capital assets. These assets need to be valued on the books to show the investment, location, and responsibilities.

PLANNING Smart government needs to be planned, controlled, and monitored using multiple-year budget CFI.co | Capital Finance International

MAINTENANCE The maintenance of smart government infrastructure is also a complex process. GRP systems support the entire capital asset lifecycle of tracking and budgeting operating, upgrade, and maintenance costs. This includes maintenance schedules and work orders tied to the GRP system to track true costs. The useful lives of assets are tracked. Assets are depreciated and disposed.

The ‘smart’ in smart government Winter 2016 - 2017 Issue

RESULTS Smart government requires performance management. GRP systems provide a 360-degree view of performance. This provides the structure for programme governance and smart government decision-making. Performance management differs in the public sector because of the need to tie outputs and outcomes to financials. Results-based budgets provide the metadata for tying smart government objectives with performance outputs and outcomes. The performance structure embedded in budget classifications enables the creation of value-formoney procurement.

public policy than simple budget portals that track revenue and expenditures. There is not 360-degree performance management and e-results transparency without a unified data structure or metadata to integrate tracking for every stage in the smart government lifecycle. The budget classifications from GRP systems can be enhanced with performance classifications tied to government objectives. This provides the structure necessary to show the purpose and results of smart technology presented through open government portals.

Smart devices in public investments such as transportation sensors, fleet GPS systems, or wearables for health care workers, quantify the use of assets to gauge value. These devices help predict changes in the useful life of government capital assets. They also help to track real maintenance costs that can be used to improve budget estimates. Smart devices also reduce maintenance costs through predictions. Sensors provide transportation, water, sewage, electricity, and other types of important data that can be used to improve government effectiveness. This information can be augmented by citizen reporting through smart phones and other devices about outcomes such as the quality of roads, water, sewage, and electricity processing. The state of performance can be presented online through e-results portals that track the original purpose of any smart government initiative, the actual cost vs. budget and outputs and outcomes achieved. This is more useful for

to overcome problems such as gridlock and pollution. The process of determining problems, identifying solution sets, and implementing technical systems is complex. The process of determining relevant smart government technologies to address national development objectives, finding funding, monitoring outcomes, PFM reform, and convincing stakeholders, managing politics, and overcoming resistance to change is complex. Public investments, like smart government, are highly political. PFM, supported by GRP systems, enables governments to quantify decisions to make technical and financial sense for smart government investments. GRP systems drive government performance management and fiscal transparency efforts. ABOUT FREEBALANCE FreeBalance was founded in 1984 to help government organisations around the world leverage technology to accelerate growth and economic development. The vision of the company has not changed. The technology and approach to good governance has. The FreeBalance mission continues to be to provide national, state or provincial, and local governments around the world with innovative, sustainable, and smart solutions to support good governance, accountability, and transparency.

SMART GOVERNMENT IS COMPLEX Smart government projects are technically complicated. Many technologies need to be integrated to provide smart cities, smart water, smart grids, smart education or smart health. Smart government domains, like smart transportation, are technical solutions CFI.co | Capital Finance International

FreeBalance provides the smart in smart government. The company’s unified governance platform improves the performance of smart government by providing a single view of data from government priorities (budget) through to execution and results. i 159

> CFI.co Meets the Founder & CEO of Park West Gallery:

Albert Scaglione

lbert Scaglione completely transformed art collecting through his passion and innate sense of ingenuity. By taking it outside of traditional gallery walls, he raised the level of excitement in fine art collecting and made the Park West Gallery experience available to customers around the world. As a young man, the native of Nutley, New Jersey, found himself at Michigan State University in 1962 working his way from graduate assistant to assistant instructor to instructor with faculty privileges while pursuing his doctorate in mechanical engineering. In 1967, he became an assistant professor of mechanical engineering sciences at Wayne State University doing research and teaching such subjects as thermodynamics and fluid mechanics. Between 1964 and 1969, Mr Scaglione did research for NASA and was focused on the mission of landing a man on Mars. He was bitten by the art bug as a teen while working at a relative’s gallery, and before he knew it, his passion for art overcame his passion for science. In 1969, Mr Scaglione made the decision to leave academia for the art world and opened Park West Gallery that same year. Early on, Mr Scaglione recognised that he wanted to create meaningful experiences for collectors and the artists the gallery represented. That idea grew into Park West Gallery locations and auctions in prestigious hotels and on more than a hundred cruise ships worldwide, and the gallery’s by-invitation-only VIP land events and exclusive art cruises. Mr Scaglione met Peter Max in 1971 and very quickly became one of Max’s most important art dealers. Soon after, while in Paris, he established key relationships with Yaacov Agam – considered the father of the kinetic art movement – and Victor Vasarely, one of the developers of Op Art. Mr Scaglione also worked directly with the prime dealers of MC Escher, Marc Chagall, and Joan Miró, giving him the opportunity to make those artists’ work available to a larger segment of American collectors. In 2006, Mr Scaglione and his wife Mitsie created the Park West Foundation to provide aid to underprivileged youths aging out of the foster care system in South-eastern Michigan. Through hands-on work, the foundation provides a sustainable support system to empower these young adults in developing critical life skills and self-sufficiency. The Park West Foundation quickly evolved and now provides support to a broad variety of organisations committed to strengthening positive values and leadership in 160

Founder & CEO: Albert Scaglione

local communities. Whether donating clothes and art supplies to those in need, contributing fine art and art books to universities, or supplying free event space to non-profit organisations, Park West Gallery and the Scaglione family are committed to making a difference in the lives of those in their community and across the globe. In 2015, the Park West Foundation expanded its mission to include environmental conservation, art awareness, and education. To this end, the foundation has supported the Guy Harvey Ocean Foundation, Best Buddies International, the Forever Wild Foundation, and Turnaround CFI.co | Capital Finance International

Arts through artist and child prodigy Autumn de Forest. The foundation has also helped sponsor multiple museum exhibitions around the United States. Extending the foundation’s reach overseas, in 2016 the Park West Foundation and its founders became the first founding US sponsors of Prince’s Trust International, a global charity founded by Prince Charles to empower disadvantaged youths around the world with real-world skills. Mr Scaglione resides in Farmington Hills, Michigan. i

> Park West Gallery:

Bringing Art to Life

ark West’s mission is to create an educational and welcoming environment that ignites a passion for the arts in people of all walks of life by means of its unique and highly entertaining collecting experience. Founded in 1969 by Albert Scaglione, Park West Gallery brings the experience of collecting fine art to more than two million collectors around the world through art auctions on more than a hundred cruise ships and gallery locations in Michigan and Florida. Park West has also refined the robust European tradition of exhibitions and auctions in hotels through its exhibitions and auctions in more than a hundred of the finest hotels in major metropolitan areas across the United States. A MASTERPIECE COLLECTION At a Park West auction, collectors are exposed to a diverse array of the world’s finest artwork. Park West is the largest and often the exclusive dealer of many important contemporary masters. Since 1971, Park West has worked with pop artist Peter Max who defined a generation with his colorful cosmic art and American imagery. Also notable is Yaacov Agam who began working

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“Since the gallery’s inception, more than ten million works of art have been collected through Park West auctions and gallery events.” with Park West in 1974 and who is a founding father of kinetic art with a new museum opening in Rishon LeZion. Other contemporary artists include Michael Godard, Scott Jacobs, Linda Le Kinff, David “Lebo” Le Batard, Tim Yanke, Duaiv, Dominic Pangborn, Autumn de Forest, and Romero Britto, the latter of whom served as an ambassador for the 2016 Summer Olympics and whose colorful pop art is collected worldwide.

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In addition, Park West proudly represents the estates of such artists as: Pino, a painter and illustrator whose works are provided on an exclusive basis to collectors; Thomas Kinkade, so that the “Painter of Light’s” dream of having his artwork made available to everyone is a reality; and Itzchak Tarkay, the Israeli artist whose paintings of women continue to fascinate viewers. The gallery’s collection also includes not-forsale artwork shown at exhibitions that are free to the public. In this grouping are works recently shown in museums by Yaacov Agam, Peter Max, Autumn de Forest, and Anatole Krasnyansky as well as collections of masterworks by Pablo Picasso, Marc Chagall, Rembrandt, and Joan Miró. Since the gallery’s inception, more than ten million works of art have been collected through Park West auctions and gallery events. Park West Gallery makes every effort to provide the most accurate and extensive information on all of the works offered. Each work has been thoroughly documented and every client is provided with a certificate of authenticity.

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STATE-OF-THE-ART FACILITIES Headquartered in Southfield, Michigan, Park West Gallery is situated on a beautiful 3.5-acre site that includes a natural pond and sculpture garden. The 63,000-square-foot classical Greco-Roman building is designed in the style of many museums built in North America during the 20th century. The gallery houses 23 exhibition halls, each devoted to a particular artist or type of art. New collections are mounted continuously with hundreds of works permanently on display. An exterior gallery of windows showcases rotating artwork from Park West’s extensive collection. Also housed within the Southfield headquarters

are the company’s executive offices, fine art storage facilities, restoration studios, a research department, digital catalog printing facilities, and a client service department. In 2003, Park West Gallery built a 181,000-square-foot distribution center in Miami Lakes, Florida, to service cruise ship and land-based auctions. This facility, including additional executive offices and a newlyconstructed gallery, is dedicated to custom framing, worldwide shipping, art transport, and distribution of materials. Park West Gallery’s Miami Lakes centre also serves as the training academy for auctioneer teams that maintain art programs aboard 100-plus cruise ships around CFI.co | Capital Finance International

the world. Training sessions are held there at least seven times a year. TODAY Park West’s mission statement is as it was in 1969 — to bring fine art and art education to as many as possible throughout the world. Park West Gallery continues to make collecting fine art available to and possible for a growing number of avid collectors each year, with more than two million in over eighty countries. Through the Park West Foundation, Park West supports art and education by assisting museums in organising exhibitions for the public. The Park West Foundation also supports foster care youths and others through its Blue Babies programs in Detroit. i 163

> The Leica Moment:

How to Capture the World By Darren Parkin

Small, silent, simple, and built like a tank. When Oscar Barnack invented the first Leica 102 years ago, he only wanted to create something compact and easy to use so that he could pursue his love of photography through his declining health.

he brilliant German microscope engineer had a passion for taking pictures in his spare time, but he feared his chronic asthma was going to prevent him from carrying the cumbersome paraphernalia that came with it. He was head of microscope research for Ernst Leitz, and used his skills to look at reducing the size and weight of cameras and equipment. In doing so, he also introduced the concept of creating a negative that could be later enlarged as a print in a darkroom. The original designs were simply for his own comfort, leaving him initially oblivious to the fact that he was on the verge of making a change to the world of photography so revolutionary that it would not only alter the way we took photographs, but also leave a legacy lasting more than a century. In the build up to his Eureka moment that would eventually go on to famously become a Leica moment, Barnack worked night and day at the Leitz laboratories in Wetzlar, searching for ways to reduce the bulk that came with photography of the day. Much of his time had been eaten up by attempting to make hefty, single-use glass plates accommodate four images. Even though he had successfully quartered the surface area and managed to created prints, the image quality was invariably poor as contact printing was reliant on the size of the original negative. He eventually concluded that making photography lightweight was going to have to involve something less dense than glass plates. By coincidence, in the workshop next to his own, a colleague called Emil Mechau had been charged with the task of improving the quality of motion picture projectors. In the early 19th century, the fledgling cinematic industry was plagued by flickering images. Mr Mechau had begun experimenting with celluloid film in a 18mm x 24mm format – the standard movie frame. CHANCE MEETING A chance meeting quickly switched Mr Barnack 164

“It would be 1925 before Europe had sufficiently recovered from conflict and was ready to receive Leica’s magnificent creation.” on to celluloid, but he discovered the frame wasn’t large enough for a high resolution still image. The pair looked at upgrading from the 3:4 aspect ratio to a 2:3, doubling the frame size to a 24mm x 36mm and making it horizontal, rather than vertical. The replacement for glass plates had been found. Now all Mr Barnack needed to do was create a camera to use it in. Until this point, cameras were handmade and the casings were constructed of wood. Mr Barnack produced a prototype in thin metal. Within the body he had attached a sprocket wheel that aligned with tracks punched into the strip of film. Once the shutter had been released, the film could be wound on for another frame, but moving horizontally rather than the vertical operation of a movie camera. Without realising it, Mr Barnack had invented the basic principal of 35mm photography. His mind had been on other developments. The principle was in place, but the logistics were not. The negative images on the film were too small to produce sharp prints once projected from an enlarger. He need a way of improving their sharpness. As luck would have it, Mr Barnack was surrounded by genius. Another of his colleagues – Max Berek – was a master lens-maker, and he came up with the first Elmar lens of 50mm which possessed the qualities needed for Mr Barnack’s prototype. Remarkably, Mr Barnack’s intention with the prototype was for his personal use, but after looking at some of the images he produced, it quickly dawned upon him that he may have made a ground-breaking discovery. CFI.co | Capital Finance International

BRILLIANT He took the prototype, the designs, and the images to Ernest Leitz who instantly saw that his engineers had stumbled upon a truly brilliant piece of equipment. Without hesitation, he gathered his top experts to support Mr Barnack as he encouraged him to devote his time to perfecting the compact camera. Throughout 1913 and 1914, they worked tirelessly on delivering their first commercially-viable camera the Ur-Leica. The Ur-Leica sported a frame counter, twospeed shutter, and, most importantly of all, Max Berek’s Elmar f3.5 lens. The Elmar on later prototypes was also capable of retracting, thus making the small Leica even more compact than the original design. It was a truly jawdropping piece of engineering that would shape photographers, photography and the use of photographs for decades to come. Unfortunately, by the time Leica was ready to unveil its momentous invention, Germany was mobilising to unleash something else on the word – war. Ironically, one of the first photographs Mr Barnack captured on his new compact device was the image of a German soldier pasting a declaration of war onto a public noticeboard. It would be 1925 before Europe had sufficiently recovered from conflict and was ready to receive Leica’s magnificent creation. The Leica made its bow at the Leipzig Fair where it fast became the star of the show. Everybody wanted to get their hands on one, and Leica’s manufacturing plant struggled to keep up with demand as orders soared to almost 60,000 units. The Leica I remains, to this day, a thing of beauty. With an optical viewfinder, Elmar lens and various shutter speeds from 1/20th to 1/500th of a second, it was revolutionary. It is rare for a surviving model to come up for sale, but, when they do, they fetch a king’s ransom. Collectors would do well to get any change out of a million pounds. The equipment that Leica produced was truly magic. The stylish cameras were as aesthetically pleasing as the remarkably sharp photos they

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Leica I, 1927

were taking. People also found them easy to use for documenting their family and leisure time, but – and this was one of the main ingredients in Leica’s enchanting formula – they were also a massive hit with professionals. Old black and white movies are full of stereotypical journalists with pale hats and a small card with the word PRESS screaming out of the brim band, all carrying huge camera bodies and flash units the size of car headlights. Suddenly, here was a super-tough little camera that made it easy to be unobtrusive. The print industry loved it, and Leica never looked back. The world’s biggest newspapers and magazines were quickly adorned with photographs all captured on Leica cameras, and some of the most iconic and memorable images were born. ICONIC IMAGES Che Guevara’s classic pose, Marilyn Monroe’s beauty and angst, the euphoria of VJ Day as a US soldier kisses a nurse in New York, a Russian flag over Berlin in 1945, Muhammed Ali’s fist, Ghandi’s funeral pyre, a riled Richard Nixon poking his finger at Nikita Khruschev, and Nick Ut’s Terror of War as a nine-year-old Vietnamese girl runs naked from a US napalm attack. All are among some of the greatest photographs ever taken, all are by some of the greatest photographers who ever lived, and all were taken on a Leica. And could there be a better endorsement than NASA handing astronaut John Glenn a Leica to take pictures on the moon?

As well as style, robustness, and a domination of the classic images of our time, Leicas are renowned for another attribute… price. They’ve never been cheap. Reassuringly expensive, some might say. But once you’ve had one in your hands, you can appreciate why. Their touch, sound, and precision all ooze pure quality. And it’s a quality that lasts. You’ll encounter many professionals still using some of the classic M4s from the 1980s, still in their original condition. When you weigh up the expense against their longevity, then consider their lack of depreciation, they’re actually a hell of an investment. Finding a critic of the Leica Brand is a little like trying to find someone who couldn’t find the Dalai Lama likeable – they’re few and far between, and would no doubt be a little terrified of the public outcry. Leicaphilia is already jokingly recognised as a fairly incurable condition among the ardent fanatics of the century-old brand, and you don’t cross them lightly. Their obsession is akin to those music lovers who refuse to let vinyl die, snubbing CDs and downloads. But then, much of that nostalgic warmth radiates from Leica itself. The company has been purposely reluctant to usher in the digital age and has almost single-handedly kept the 35mm film market out of the graveyard. Leica’s steely-eyed stubbornness in the face of the digital revolution has had a tremendous knock-on effect for other retro brands. Carl Zeiss lenses continue to be all the rage, while the Zenit – once thought of as a Russian relic CFI.co | Capital Finance International

is also finding itself being nudged out of the shadows, albeit as a cheaper alternative to the Leica, although those terminally afflicted with Leicaphilia will compare it to buying a Maserati when you really desire a Ferrari. There’s an old substance over style aphorism among designers that says form follows function, but in Leica’s case, it would be fair to say the boffins in the back rooms are happy to deliver both in equal measure. LEITZ THE HERO Ernst Leitz, the German industrialist who founded Leica, kept a secret with him until his dying days – he helped hundreds of Jews escape Nazi Germany. In 1938, when Adolf Hitler was already fully engaged in his persecution of the Jewish people throughout the county, Mr Leitz used his enormous wealth to relocate countless families to Britain and America. Even after the infamous Kristallnacht, when thousands of troops and armed civilians across Germany and Austria began smashing and burning Jewish property, Mr Leitz continued to smuggle Jewish employees out by insisting their skills were needed at Leica’s premises abroad. No one really knows the exact number of people he saved before the borders were shut in September 1939. Mr Leitz ensured there were no records kept, and he rarely spoke of it, but his son Gunther has estimated it to have been more than 700 people. i 165

> Asia Pacific:

Preparing for the Digitised Age and Deglobalisation By Wim Romeijn

Shifting to a knowledge-based economy and away from the low-cost labour roots upon which its progress depended until recently, Southeast Asia is ready to embark on the Fourth Industrial Revolution – a future powered by the Internet of Things, robotics, and artificial intelligence providing individuals, businesses, and states with a host of smart technologies. As the region faces the advent of the digitised era, and looks for ways to adapt and prosper, education is becoming a priority. “Teachers need to get a handle on digital technologies, curriculums must be updated, and students encouraged to obtain the qualifications that the new economy demands,” says Saadia Zahidi, head of Employment and Gender Initiatives at the Geneva headquarters of the World Economic Forum (WEF).

Indonesia: Jakarta

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eporting on the plight of start-ups in Indonesia, Ms Zahidi notes that a dearth of local talent holds back the growth of the country’s budding tech sector. Annually, only a few hundred graduates emerge from university with a degree in computer science or engineering. Of those, an estimated fifty percent board the first flight out to better-paying jobs overseas, leaving companies like Kudo in the dust. Kudo – Bahasa for online kiosk – is an interesting proposition as it aims to provide a bridge between cyberspace and the often chaotic universe of tiny kirana shops that line the streets in almost every Indonesian city, town, and village. Kudo developed an app that enables shopkeepers to set up an online presence with only a few taps. Meanwhile, Kudo agents help shoppers navigate this vast retail space and provide solutions to those without credit cards or simply not techsavvy enough to do their own online buying. Kudo represents a real-life example of the coming Fourth Industrial Revolution which the WEF touts as the unstoppable wave of the future. “There are many young and productive people looking for opportunity and a chance to channel their energies into something they care about, but there are not that many who also have the skills we need, especially in engineering,” says Agung Nugroho, co-founder of Kudo and a WEF global shaper. In order to latch national destiny on to the digital future, and secure and sustain progress, the proper management of human capital is of crucial importance. Whilst this may seem an empty statement, if not a platitude, few developing countries are currently actively encouraging their workforce to learn and adapt. Investing in the future is not something that comes naturally to politicians concerned about the next election cycle. The WEF Human Capital Index, which measures and tabulates countries’ abilities to maximise and leverage their human capital endowment, paints a rather sombre picture. Seven of the ten countries best prepared to face the digitised future are European. Japan, New Zealand, and Canada make up the remaining three. On a scale of zero (best) to hundred (worst), India – which finds success in numbers – sits near the bottom of the 124 countries assessed. Indonesia fares slightly better and ranks 69th. WEF researchers ask CEOs to assess the availability of skilled employees and found that business in Myanmar, Cambodia, Laos, Thailand, and Vietnam reported severe talent shortages. Of

“There are many young and productive people looking for opportunity and a chance to channel their energies into something they care about, but there are not that many who also have the skills we need, especially in engineering”. the ten ASEAN (Association of Southeast Asian Nations) member states, only Malaysia does not suffer an acute skills deficit. Since the shift to a knowledge-based economy requires, well, knowledge, no country aspiring to move away from a development model based on cheap labour can do without considerable investments in education. Moreover, technology – rigorously obeying Moore’s Law – is becoming low cost itself. Advanced automation is driving down manufacturing costs across the board which, in turn, nibbles away at the overall advantages emerging economies can offer global corporations. Already now, a trend is visible that sees multinationals redirecting value chains back to their home markets. George Saravelos, a strategist at Deutsche Bank, warns that globalisation is not an irreversible process: “History shows that globalisation ebbs and flows over long cycles. It does not take major wars to reverse globalisation; domestic politics is sufficient.” In a research noted titled Deglobalisation Is Here: What It Means for Global Macro, Mr Saravelos emphasises that creeping protectionism coupled to the unexpected side effects of technological innovation put the multinational business model at risk. In an aside, the strategist also cautions that housing bubbles will again burst with economies running large current account deficits – read the United States and the United Kingdom – most at risk: “There is a strong negative causal link between house prices and current accounts, driven largely by wealth effects,” says Mr Saravelos. Another peril faced by emerging market economies concerns the stated intention of President Trump

to change the US tax code in such a way that US corporations may repatriate the estimated $2 trillion held offshore without incurring punitive tax liabilities. This large pool of money is to help the Trump Administration finance its ambitious domestic infrastructure upgrade programme. This disappearance of the money is expected to aggravate dollar funding pressures which will strongly affect Asia’s emerging markets. Stating that the world is now exposed to the greatest tail risk of the century, Deutsche Bank sees few reasons for an optimistic outlook. However, that is not to say all is lost – yet. ASEAN countries in particular benefit from the steady advance of regional integration which allows businesses access to enlarged markets and economies of scale not previously available. The eleventh hour stranding of the Trans-Pacific Partnership (TPP) need not be a setback. Indonesia has since proposed seeking closer cooperation with the Pacific Alliance (Alianza del Pacífico), a trading bloc comprising the four most buoyant economies of Latin America – Chile, Peru, Colombia, and Mexico. Formed only in 2012, the Pacific Alliance has already succeeded where other initiatives, such as the now moribund Mercosur, have failed: a lowering of trade barriers (tariff and non-tariff alike), a common stock exchange, standardisation of legislation, visa-free travel, and even joint embassies in a number of countries. Without much fanfare, the four member states of the Pacific Alliance look westwards across the ocean to tap into new markets. Canada, which already has bilateral free trade deals with each of the four Pacific Alliance countries, has been invited to join as have Costa Rica and Panama. A link up between ASEAN and the dynamic Latin American trading bloc should be relatively straightforward. Chile already has in place bilateral free trade agreements with five of the ten ASEAN member states (Thailand, Vietnam, Singapore, Brunei, and Malaysia). As one of the fastest-growing macro-regions in the world, ASEAN and the wider surrounding sphere suffer no lack of opportunity. No longer entirely at the mercy of volatile global markets – as a result of reforms undertaken after the 1997 crisis – Southeast Asia plus China have become a world onto itself. A measure of its startling success is the tripling of ASEAN’s per capita GDP from $1,170 in 2000 to $3,750 last year. In a word: Southeast Asia has options, although not the time to explore them at leisure. However, that should not be an issue in a region known for its resolve to take the lessons imparted by history and experience to heart. i

“As one of the fastest-growing macro-regions in the world, ASEAN and the wider surrounding sphere suffer no lack of opportunity. No longer entirely at the mercy of volatile global markets – as a result of reforms undertaken after the 1997 crisis – Southeast Asia plus China have become a world onto itself.” 168

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> CFI.co Meets the President and CEO of RCBC:

Gil A Buenaventura

r Gil Buenaventura has been President and Chief Executive Officer of Rizal Commercial Banking Corporation (RCBC) since July 2016.

With over forty years of professional experience in banking and general management, Mr Buenaventura has overseen the growth in revenues and profits with the various banks he has been associated with through his expertise in strategy formation, business development, and relationship building. Prior to joining RCBC, Mr Buenaventura was President and CEO of the Development Bank of the Philippines (DBP) from October 2012 to June 2016, which he steered to unprecedented growth, with earnings and total resources reflecting an annual compounded growth rate of 5.11% and 11.1% respectively. He fulfilled the Bank’s role in nation-building by offering financing to infrastructure development, responsible entrepreneurship, and the protection of the environment. DBP ended 2015 with a net income of P4.7 Billion and P504.1 Billion in total resources. Thus, DBP retained its position amongst the top ten banks in the industry. Aside from his position as President and CEO, Mr Buenaventura was Vice-Chairman of the Board of Directors and Executive Committee as well as member of the policy-setting trust, IT governance, and human resources committees. He also held key positions in DBP subsidiaries as Chairman of DBP-DAIWA Securities Corporation, DBP Management Corporation, DBP Data Center Inc., Local Government Unit Guarantee Corporation, and Vice-chairman of the Al Amanah Banking Corporation. Additionally, Mr Buenaventura held other key management positions such as Chairman of the credit, management, and asset liability committees. Mr Buenaventura also held senior management positions at various other banks such as the Bank of the Philippine Islands (November 1996 – September 2012), where, as SEVP & COO, he was in charge of the Corporate Banking Group composed of corporate, middle market, and SME accounts representing more than 75% of BPI’s lending portfolio and the Consumer Banking Group covering all nationwide branches. Additional responsibilities included the supervision and management of special business units such as the BPI Leasing Corporation, BPI Rental Corporation, Card Banking Group, the Japanese Desk, Special Accounts Management Department (managing remedial accounts), and the Special Lending Unit in charge of

President and CEO: Gil Buenaventura

BPI’s special funding sources from BSP, DBP, LBP, and guarantee/risk sharing facilities with LGUGC, IFC, and USAID. He also held additional direct oversight responsibilities of non-revenue generating areas including the Centralized Operations Group, Information Systems Group, and Human Resources Management Group. Mr Buenaventura held key board positions at BPI Subsidiaries such as Chairman of the Board of Directors of BPI Leasing Corporation, BPI Rental Corporation, BPI Bancassurance Inc., BPI International Finance Ltd., BPI Express Remittance Corporation, Pilipinas Savings Bank, Prudential Investments Inc., BPI Direct Savings Bank, Ayala Life Assurance Inc., Ayala Plans Inc., FGU Insurance and BPI Foundation Inc.. He also held other key management positions such as Vice-Chairman of the Unibank management, credit risk, and asset liability committee and was a member of the Unibank financial risk management and asset management trust committees. As head of Institutional Banking and Operations Group, Mr Buenaventura managed the Unibank’s loan portfolio composed of corporate, middle market, SME, and retail banking accounts representing all of BPI’s lending business. He likewise held key board positions as Chairman of Citytrust Realty Corporation, Citytrust Securities CFI.co | Capital Finance International

Corporation, member of the board of directors of BPI Family Savings Bank, and BPI Leasing Corporation. He was also a member of the Unibank Integration Committee during the bank’s merger with Far East and Trust Co in 2000. In July 2005, Mr Buenaventura was appointed President and CEO of Prudential bank after its acquisition by the Bank of the Philippine Islands while awaiting regulatory merger approvals. He was also a member of the Unibank integration committee during the merger with Bank of the Philippine Islands. Seconded from Citibank Manila Branch, he served as Executive Vice-President of Citytrust Banking Corporation (May 1989 – April 1993) where he managed all lending activities except consumer loans, representing more than 70% of the banks’ lending portfolio. He also supervised the Unibank Centralized Operations Group. Mr Buenaventura likewise held various key senior positions in Citibank North America, Manila Branch and Citicorp International, Philippines (1975 – 1993). Mr Buenaventura graduated from the University of San Francisco with a BA in Economics and holds a MBA in Finance from the University of Wisconsin. i 169

> Rizal Commercial Banking Corporation:

Setting the Pace

CBC is the financial flagship company of the Yuchengco Group of Companies (YGC), one of the oldest and largest conglomerates in the Philippines and South East Asia covering over sixty businesses including banking, insurance, construction, and education. Now in its 56th 170

year, RCBC is amongst the largest private domestic banks in terms of assets, with 477 branches and 1,475 ATMs (as of September 2016) all over the Philippines. The RCBC group is able to provide a wide scale of services through its thrift bank, investment CFI.co | Capital Finance International

bank, foreign exchange brokerage house, leasing company, and overseas remittance companies. Between 2010 and 2016, the bank has received over 100 awards from various entities and bodies, 26 of these came from AsiaMoney such as the Best Domestic Private Bank and Overall Best Private Bank in

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the Philippines, the fourth successive year it received such honours. These recognitions are a testament to RCBC’s growth story and serve as its inspiration to continue to innovate, improve, and reach out beyond its 8 million customers (as of September 2016). The bank aims to continue growing its client base and achieve twelve million customers in five years through expansion of its distribution and electronic banking channels, brand building, and introduction of innovative products and services. KEY PERFORMANCE HIGHLIGHTS In 2015, RCBC was able to grow its core business with loan growth at 14.4% and total deposits growing by 8.4%. Loan growth was broad based, with corporate growing by an average of 18%, SME by 24% and consumer by 17%. The deposit mix shifted favourably for low cost deposits, accounting for 65% of total deposits in 2015 compared to 62% in 2014. By the end of 2015, the Basel 3 CAR Ratio was at 15.72%, substantially above the minimum requirements. The bank’s net income reached Php 5.13 billion, return on equity (RoE) as of 2015 was at 9.33%, and its return on assets (RoA) of 1.09%. In November 2015, the bank successfully raised $320 million worth of senior unsecured 5.25 year bonds out of its medium-term note programme with a coupon of 3.45% – the lowest coupon ever by a Philippine bank and reflective of strong investor confidence in RCBC’s creditworthiness. The bank received orders of over $1.3 billion, over four times its intended issuance. Entering its 5th year in 2015, the bank’s microfinance arm, Rizal Microbank (RMB), doubled its portfolio growth from 44.5% in 2014 to 88.6% in 2015. As of year-end 2015, RMB’s loan portfolio stood at Php404 million. Aside from its focus on microfinance and the sub-SME market segments, Rizal Microbank launched a value chain agri-finance loan product geared at supporting the agricultural industry through the technical assistance from the International Finance Corporation (IFC). RCBC: Headquarters

“In 2015, RCBC was able to grow its core business with loan growth at 14.4% and total deposits growing by 8.4%.”

Rizal Microbank continues to retain an excellent quality on loan portfolio maintaining portfolio-at-risk (PAR) > 1 day of 3%. Rizal Microbank’s yield of 27.7% dominated its peers. TECHNOLOGY The bank invested in various technologies

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in 2015, including the introduction of the ambit focus asset and liability management and funds transfer pricing modules to further strengthen risk management practices. The ARC Logics Operational Risk Management System provided the bank with the opportunity to adopt the advanced measurement approach of Basel II; a new web-based human capital management (HCM) system, myHRIS, was implemented in the RCBC Group. Powered by Adrenalin, myHRIS is one of the most flexible and configurable HR systems in the market. The bank converted its physical servers to virtual machines and upgraded its core banking mainframe to support the growth objectives and enhance the resiliency of its technology infrastructure. TouchQ, the lobby management system was also rolled out in 2015. The system allows pre-staging of transactions inbranch and remotely via mobile, home, or office access which allows customers to dedicate less time for transactions. More TouchQ machines will be deployed in the branches in 2016 to serve customers better. In 2011, a strong partnership for Bancassurance was established with Sun Life GREPA Financial. Bancassurance fees grew by 102% in 2015. TALENT MANAGEMENT The Bank continues to invest in its people by strengthening the talent pipeline and increasing competencies through training programmes and seminars on leadership, customer service, sales planning and management, product knowledge, risk management, and technical skill. The Retail Banking Group (RBG) and Corporate Banking Group (CBG) Learning Academies were established to develop highly competent, credible, and productive retail and corporate bankers and leaders. This will allow a sustainable supply of personnel, equipped and trained to provide quality service. The bank instituted five levels of management development programmes from the entry level Officers Development Program (ODP) & General Operations Learning and Development Programme (GOLD) to the Supervisory Development Programme (SDP) to the Middle Management Development Programme (MMDP), the Leadership Development Programme (LDP), and the highest level Executive Development Programme (EDP), in order to sustain the development of our people as they grow in their careers. i 171

> Myanmar Oriental Bank:

Expanding Operations

yanmar Oriental Bank was incorporated as a private limited bank under the Financial Institutions of Myanmar Law and started its operations on November 18, 1993. Its founding members were prominent bankers retired from state-owned banks, family members holding the majority of shares, their close friends and relatives from the business circle. Over the past 23 years, the bank has played an important

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role with stability and success in domestic banking in Myanmar by contributing its efficient and reliable banking services to the promotion of financial intermediation in the country.

the bank also provides banking facilities and other financial assistance to its customers in the form of commercial loans, trustee, and remittance services.

The bank currently accepts foreign currencies (USD, EUR, SGD) for current accounts and Myanmar Kyat for current, call, savings, and fixed deposits within its present banking network of 36 branches across the country. In addition,

Upon approval from the Central Bank of Myanmar, the bank was among the first few selected financial institutions that were allowed to operate foreign currencies dealing and international banking. It was among the first

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Winter 2016 - 2017 Issue

batch of six private banks to be permitted to open currency exchange counters in the country. The bank has now opened 16 currency exchange counters in the commercial cities of Yangon, Mandalay, Mawlamyaing, Monywa, Magwe and Pyay. Being a leading member of the Myanmar Payment Union, the bank has introduced ATM and POS debit card and credit card facilities for the promotion of electronic payment systems in the country. Internationally, the bank at present has established correspondent banking relationships with 56 overseas banks worldwide. The bank has also signed a partnership agreement with Western Union of which customers could transfer funds through its affiliated network in 109 countries from/to the bank. Apart from the core banking business, the bank has formed a subsidiary leasing company, the Oriental Leasing Company Limited (OLCL), which extends financial assistance to its customers in acquiring their household and other durable consumer items. The bank owns 99% of the company’s share capital. In foreseeing the future needs, the bank inked a memorandum of understanding with IFC on joining its Global Trade Finance Program (GTFP) which has provided the bank with a $5 million trade finance facility and allowed the bank to establish working partnerships with a vast number of major international banks through the GTFP network. In addition, under the framework agreement, IFC is helping the bank to strengthen its corporate governance and improve its trade finance operations. IFC disbursed MMK 8,981 million, which is equivalent of $7 million, to MOB as a convertible loan.

Myanmar

“Internationally, the bank at present has established correspondent banking relationship with 56 overseas banks worldwide.”

MYANMAR ORIENTAL BANK PRINCIPAL BUSINESS ACTIVITIES • Deposit taking in the forms of current, fixed, and saving deposit: The bank offers an interest rate of 8.25% pa on saving deposit, 9% pa on 1-month, 9.25% pa on 3-months, 9.5% pa on 6-months, 9.75% pa on 9-months , and 10% pa on 12-months fixed deposit and 4% pa for balances under MMK10 million and 8% pa for balance MMK10 million and above on call deposit daily balance. The bank does not provide any interest on current deposits. By the end of FY 2015-2016, the amount of deposit reached MMK 273.1 billion, achieving an increase of 32% from the previous year. • University Education Saving Scheme (UESS): UESS was introduced on May 2, 2002, to promote saving habits in Myanmar. The UESS programme is aimed to plan in advance for the tertiary education of a child currently under the age of 12. Anyone, a parent or guardian, who wants his or her child to enjoy the benefit of the bank’s UESS may open a saving account with the bank and regularly save in multiples of MMK 5,000 per month. By joining the scheme, customers will enjoy a benefit of an additional 3% interest contribution on account yearly balances. At the time the child (the beneficiary) CFI.co | Capital Finance International

is entitled to pay the annual school fees out of his/her account by producing documents certifying his/her admission to a college or university. • Extension of commercial loan to business borrowers: The bank’s loan committee is composed of the managing director and members of senior management. The committee strictly observes its prudential loan policy by reviewing the prospective borrower’s credibility, business performance, and collateral before it grants its approval. Currently, the bank is extending commercial loans for a term of not more than one year. The loans are disbursed mainly for the borrower’s working capital. Interest on loans charged by the bank is based on the central bank’s interest rate policy and the current rate is set at 12% pa and 1% service charges on loan. The bank’s total outstanding loans and advances amounted to MMK 189.3 billion, equivalent to 69% of total deposits, at the end of March 2016. There has been an increase of 34% over last year. • Customer Profile: Most of the current account holders and loan customers are business entities and private entrepreneurs, the remainder are household individuals. • Bill payment services were launched on October 2, 2001. The bank is collecting service charges on both electricity bills and phone bills at the rate of MMK 500 per settlement of each bill. All these bills are paid by the bank on behalf of its customers out of their designated current account. • Domestic remittance services: With its own network of 36 branches across the country and in collaboration with ten other domestic private banks, MOB provides remittance services in places covered by the bank’s own branches or branches of other banks. • International money transfer services: In collaboration with the Western Union, one of the most well-known international money transfer companies, the bank became the first financial institution in Myanmar delivering (both inbound & outbound) money transfer services. • ATM and POS debit card & credit card facilities: Being a leading member of the Myanmar Payment Union, the bank has issued debit cards and credit cards to its customers together with POS terminals installed at various locations like shopping malls, restaurants, and hotels. The bank has also setup its own ATMs at various public places for the added convenience of customers. • Foreign banking services: The bank was one of the privileged banks granted an authorised dealer license from the Central Bank of Myanmar in 2011. Taking this opportunity, the bank has installed a SWIFT communication system and started setting up international network of correspondent banks for its operations. With the support of international organisations and reputable financial institutions worldwide, the bank gains a great momentum in expanding its foreign banking presence with higher standard of practice in overseas remittances, trade financing, and treasury operations. i 173

> China Banking Corporation (Philippines):

Shared Corporate Values & Sustainable Operations It has always been the goal of China Banking Corporation, founded in Manila in 1920, to maintain the highest ethical standards, sense of responsibility, and fairness with respect to customers, employees, shareholders, and the surrounding community. This is the same set of ideals that guide daily operations, along with the core values of integrity, high performance standards, commitment to quality, concern for others, efficiency, resourcefulness, and initiative.

hina Bank employs an enhanced corporate governance framework that provides an integrated and effective approach on how it responds to stakeholders especially in addressing various social, environment, and sustainability issues. It provides the tone and guidance in further strengthening the bank’s business strategy. Good corporate governance is one of the most important cornerstones in ensuring the sustainability of China Banking Corporation’s business. In banking, trust is everything. By building on this trust and complementing it with leading edge technology, efficient systems and processes, and by running its business with a highly trained professional team, China Banking Corporation is able to attract the best customers and business partners, lower its cost of funds, and ultimately, build a strong brand franchise with loyal customers. China Bank’s operations and management are anchored on a structure that exercises principled leadership, a high standard of excellence, and unified commitment to good corporate governance. It is led by a vigilant and high functioning board of directors and management team with unquestionable integrity, dedication, and competence, fully embracing the bank’s mission, vision, and values; they chart China Bank’s path to success, guided not only by the bank’s principles, but also by those of good corporate governance – fairness, accountability, integrity, and transparency. China Bank’s leaders set the tone of governance and ensure that mechanisms for disclosure, protection of the rights of shareholders, equitable treatment of shareholders, and accountability of the board of directors and management are in place and diligently implemented in accordance 174

“Profit with honour is indeed an admirable business philosophy. Ultimately, it ensures the long term viability and sustainability of the business.” with the highest ethical standards and strictest regulatory compliance. Together, the board and management maintain a collaborative and productive work environment that drives high performance and quality orientation, consistent with the bank’s commitment to deliver strong customer and shareholder value. China Bank was founded on a strong commitment to doing business the right way. For the bank, “the right way” means conducting day-to-day activities in a manner that serves the best interest of its various stakeholders and upholding the principles of responsible corporate citizenship: fairness, accountability, integrity, and transparency. China Banks constantly endeavours to improve its governance practices not only because it is good for business, but more importantly, to enable shared success – for customers, shareholders, employees, and the communities served. China Bank has a very assertive and dynamic board fully engaged in good governance, that is moving beyond compliance, attuned with the reforms imposed by the country’s regulators to elevate corporate governance practices in the country, such as the creation of a Related Party Transaction Committee that CFI.co | Capital Finance International

is wholly composed of independent directors, going beyond the Bangko Sentral ng Pilipinas requirement to have at least two independent directors. Enhancements of policies on fraud prevention, anti-bribery and related party transactions, whistle-blowing mechanisms, continuous training for directors on corporate governance, and anti-money laundering laws, rules and regulations, to name a few, send a clear message to the entire organisation and to business partners that good governance is essential and mandatory in all business undertakings. Profit with honour is indeed an admirable business philosophy. Ultimately, it ensures the long term viability and sustainability of the business. To strengthen the implementation of good governance in the field, China Bank continuously educates its employees about compliance, good governance and its benefits, the bank’s code of ethics, and its policy on the avoidance of conflict of interest, among others, to ensure that everyone in the institution helps maintain good corporate governance and to develop a culture of good governance. Trust is the foundation of China Bank’s culture. And for nearly a century, China Bank continues to uphold fair employee and service provider practices, competitive employee compensation, balanced working environment, sense of responsibility for and the protection of privacy for customers, and open communication amongst all stakeholders. ENVIRONMENT Deeply rooted in the way China Bank conducts its operations is a culture that regards its communities and the environment with as much importance as it does its business. This culture

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is embodied in the bank’s innate sense of obligation to give back and in sustainability efforts aimed at creating value not only for shareholders, but more importantly, for the nation and for the environment. The ongoing “Going Green” campaign aims to encourage our employees and customers to adopt and promote environment consciousness and sustainable working and living habits. Despite a growing workforce and operations, the bank continually pursues initiatives in all branches aimed at minimising power, water, and paper consumption, as well as reducing waste. Even in business, China Bank flexes its environmental conscience with its clients and partners. Case in point: China Bank acted as one of the co-lead arrangers and senior lenders of the recent $105 million syndicated project finance deal for Alternergy Wind One Corporation (AWOC), provider of alternate energy services and developer and operator of wind farms in Singapore and in the Philippines. The bank looks to partner with more clients such as AWOC. The bank likewise advocates climate change awareness and disaster preparedness. It continues to provide its employees and service personnel with relevant information, basic life support, and first aid training, and ensures that its premises and infrastructures are disaster resilient and compliant with regulatory standards. SOCIAL China Bank continues to support charities, foundations, and associations that represent sectors and communities close to its heart. The bank also endeavours to promote education through its investment in various scholarship and financial literacy programmes. China Bank integrated corporate social responsibility by motivating its employees to extend personal goals beyond the workplace and share a part of themselves with the needy through community-nurturing programmes. The bank also partnered with the Department of Education in Region 3 to give assistance to public school teachers and non-academic staff. Correspondingly, China Bank’s thrift bank subsidiary, China Bank Savings (CBS), launched the Easy DepEd Loan and the Affordabundle DepEd Loan, which both offer easy-to-avail and low interest loans to this market. China Bank has received compliance certifications from government bodies such as the Department of Labour and Employment and Occupational Health and Safety Standards as a testament to its commitment to prioritise the health and wellbeing of its employees. i CFI.co | Capital Finance International

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> Max Myanmar:

A New Era for Max Myanmar Myanmar is at the heart of the world’s fastest growing region and begins its transformation in the digital age with an exciting window of opportunity – a highly unusual and potentially promising market prospect. Emerging from decades of economic and political isolation, Myanmar is striving for sustainable inclusive economic growth and poverty reduction. Myanmar has strong potential for broad economic expansion, possessing abundant natural resources, a strategic location at the crossroads of Asia, a young population, and a sizable market with wide-ranging investment opportunities.

fter nearly half a century of isolation, followed by five years of reform-driven growth, Myanmar’s economy is currently expanding at a record rate together with the political reform process. Depending on the actions of Myanmar’s leaders, in both the public and private sectors, Myanmar’s potential could become the fastest economic transformations or a great disappointment.

GROWTH IN SECTORS By developing a diversified set of sectors with a compelling growth plan and effective implementation, Myanmar has the potential to more than quadruple the size of its economy to over $200 billion by 2030 (McKinsey & Company, 2013). With a long-term vision and specific roadmap, focus will be placed on restructuring the economy in three important fields such as

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“Max Myanmar’s priority is to provide the highest customer satisfaction, by being a trusted partner, and to be the most responsible and transparent company business group in Myanmar.” investment in infrastructure especially electricity, road and transport, education and health, financial markets and financial institutions; and business enterprises, in particular private business and state economic enterprises.

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Myanmar has the potential to achieve rapid economic growth equivalent to 8% per annum if it takes actions to tap the full potential of all seven key sectors of its economy such as manufacturing, agriculture, infrastructure, energy, tourism, financial services, and telecommunication. According to the OECD, expanding these seven sectors could more than quadruple the size of the economy from $45 billion in 2010 over $200 billion in 2030 and per capita GDP (PPP) could rise from $3,100 in 2010 to $5,100 by 2030 with an additional 10 million non-agricultural jobs. The government has worked hard to encourage these activities under manufacturing-friendly as well as environmental-friendly laws and regulations, as well as moving forward with a plan to build a handful of special economic zones (SEZs) in the country.

Winter 2016 - 2017 Issue

Cement Factory

Thilawa Oil Terminal Project

MAX MYANMAR Myanmar is in the midst of a transition and many people would like to know more on investment opportunities in the country. With a newly elected government, Myanmar is heading in the right direction. To align with the country’s development master plan, through an aggressive growth strategy, Max Myanmar steadily expanded and diversified into the fields of civil construction, mechanical engineering, transportation, hotel and tourism, rubber plantations and trading industry, and the downstream energy industry. Myanmar’s government has also placed an emphasis on these sectors in the interest of economic development. Myanmar’s economy is growing rapidly and many aspects of the infrastructure are still in need of development. Therefore, aid from other countries is essential and Japan’s active role in providing aid will benefit both countries. This aid will

increase the flow of goods and people and boost Myanmar’s economy. During the recent visit to Japan, Max Myanmar Group signed MOU on a business alliance with Mizuho Financial Group and had interactive discussions with other Japanese companies regarding corporate tie-ups and investments between Japan and Myanmar to accelerate economic development in the future. Max Myanmar’s priority is to provide the highest customer satisfaction, by being a trusted partner, and to be the most responsible and transparent company business group in Myanmar. Max Myanmar is one of the Top 3 most transparent companies in Myanmar for three consecutive years by MCRB and most of the subsidiaries of Max Myanmar are members of the UN Global Compact. Max Myanmar focuses investment in improving management practices, quality of group business CFI.co | Capital Finance International

and asset portfolio, and raising the strength of financial positions that can generate greater benefits for stakeholders in the years to come. Max Myanmar worked with Deloitte-MVG to conduct financial performance review in accordance with international financial reporting standards (IFRS). In addition, corporate social responsibility activities were audited by independent external auditor BSR.org in 2014 and 2015. LOOKING FORWARD Max Myanmar’s goal is to be a leading institution in Myanmar in terms of success, transparency, responsibility, and governance in every business activity. In the energy sector, Max Energy just completed the construction of the Oil Storage Terminal at Thilawa with an initial capacity of 41,000MT to meet the growing energy downstream sector of the country. It intends to expand the capacity up to 90,000 MT in 177

Founder and Executive Chairman: Ihsan U Zaw Zaw

the future. Max Energy currently has 32 filling stations across Myanmar and has plan to expand up to a 220 filling stations by 2020. Max Highway manages about 500 miles of roads and highways in Myanmar and it is the 2nd in rank in terms of managed road length with expertise and advanced-technology in highway construction and modern toll management. Max Myanmar Manufacturing Co. just completed upgrading the Max Cement plant with a capacity of 2100 TPD with advanced manufacturing technology and is also planning to expand into downstream business such as ready mixed concrete. Shwe Yaung Pya Agro operates a 3,500-acre plantation with a plan to increase the size over the coming years with the strategic plan of building a TSR rubber factory with a capacity of 12,000 MT per year which will promote the export business of the company as well as of the country. Max Construction has great legacy of successfully building National Sport Stadiums for SEA Games and several infrastructure projects. At present, Max Construction is developing road construction projects, condominiums, and other mix-used buildings. Max Hotels Group plans to develop new hotel projects in major tourist destinations in Myanmar in the future. For new 178

business ventures, Max Myanmar is setting up a logistics business unit to meet rising demand with the ultimate goal of expanding group businesses in each and every sector to create job opportunities for Myanmar’s people. Under the leadership of Chairman U Zaw Zaw, AYA bank will continue to extend its branch network throughout Myanmar. AYA Financial Group (AYA Bank, Ayeyar Myanmar Insurance, AYA Trust Securities) will continue to focus on building relationships with customers, providing excellent customer service, and leverage technology as the enabler to enhance its customer base. At the same time, the bank aims to strengthen its governance, risk, and compliance structure as a measure to ensure balanced and sustained growth. To become a leading institution in Myanmar which exceeds global expectations in caring and providing greatest benefits for all stakeholders, and also enlightens peoples’ lives through corporate responsibility activities and sustainable solutions, Max Myanmar Holding, AYA Financial Group and its subsidiaries, together with Ayeyarwady Foundation, have donated more than 59 billion kyats to several charities and philanthropic projects in healthcare, education, youth development, and grassroots football programmes, besides launching the first Asian CFI.co | Capital Finance International

pioneer project of Football for Health. For these and other CSR initiatives in the sports sector, Max Myanmar received the Dream Asia Award presented by AFC. FOUNDER AND EXECUTIVE CHAIRMAN U Zaw Zaw is the founder and executive chairman of Max Myanmar Holding Company Limited. He is an established and well-connected entrepreneur and business leader in Myanmar, with twenty years of management experience. Mr U Zaw Zaw graduated from the University of Yangon with a major in Mathematics and has worked in Japan for several years. He returned to Myanmar in 1995 and managed Max Myanmar Company, which is now known as Max Myanmar Group of Companies, a major conglomerate. Mr U Zaw Zaw is also the chairman of the Myanmar Football Federation (MFF) since 2005 and is a firm believer in contributing to society and helping those in need. Through the Ayeyarwady Foundation, he has donated more than 59 billion kyats to various philanthropic causes and carried out numerous corporate social responsibility activities. He has also donated generously for the development of football in Myanmar. Mr U Zaw Zaw’s vision on Max Myanmar Group of Companies is to become the best institution in Myanmar especially in transparency and corporate responsibility. i

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> Sakar Healthcare:

Tech-Rich Pharmaceutical Goes Global

akar Healthcare has taken the final leap to get listed on NSE Emerge in October 2016. Sanjay Shah, founder and managing director of the company, commented that the listing allows Sakar Healthcare to tap into additional funds with which to expand overseas operations, register brands, and introduce tech-rich products incorporating a manufacturing unit for lyophilisation. The key drivers for growth are marketing and customer management, which has helped Sakar Healthcare grow in leaps and bounds over the past decade. The listing ceremony held at the National Stock Exchange (NSE) in Mumbai was attended by Ravi Varanasi, chief of Business Development at the NSE, Aarsh Shah, joint managing director of Sakar Healthcare, Rita Shah, company director, and Mahavir Lunawat, MD-Pantomath Capital Advisors, along with well recognised individuals from the organisation and National Stock Exchange. With the ringing of the bell, Sakar Healthcare debuted on the NSE Emerge platform. The roadshow that preceded the IPO helped establish Sakar Healthcare’s credibility at a number of locations. Participants learned about the company’s growth trajectory and its product line: • Oral liquids • Cephalosporin: tablets, capsules, dry syrup, sachets • Cephalosporin dry power injection • Small volume parenteral-SVP ampoules and vials With the manufacturing units approved by the WHO-GMP and ministries of health of various overseas countries, Sakar Healthcare surges ahead within the Indian pharmaceutical industry. The enriched technology of lyophilisation has been proven to deliver better quality products, having commercially viable shelf life with stable formulations. With this inclusion of lyophilised products from early 2017, Sakar Healthcare has aligned further with the industry advancements, meeting the expectations of its partners such as Zydus Cadila Healthcare, Torrent Pharma, Intas Pharma, Merck, USV, Indoco Remedies, Claris Life Sciences, and others. Sakar Healthcare is expanding globally by foraying into regulated markets strategizing joint ventures and overseas acquisitions. The giant leap to get onto the NSE platform and the planned introduction of lyophilised products by early 2017 have definitely brightened the prospects of Sakar Healthcare. i 180

CEO: Sanjay Shah

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> Red & White Consulting Partners LLP:

Voyage of Entrepreneurship By Eric Sandosham, Co-founder & Partner

Three years ago, after almost twenty successful years as bankers, Sally and I shed our inhibitions and set sail on an unknown voyage of entrepreneurship and discovery. We started a boutique business analytics / business engineering consulting practice, leveraging the knowledge we had accumulated as business analytics leaders in our former careers. The results have surprised us both, pleasantly.

ithin the three years, we had consulted for no less than fifteen clients across seven countries, ranging from financial institutions, manufacturing companies, retail businesses, and non-profit organisations. Sally and I founded this company on the principles of value-creation and diversity of perspectives. We engender that through our very different personalities and experiences, supported with an amazing collaborative trust. We share the same perspectives on business, on talent, on what success means. We both have an eye for hiring and grooming talent. But more importantly, we complement and supplement each other’s competencies. We started this company on the conviction that businesses could be more effectively reengineered on the basis of data-driven decisions. We achieved that in our corporate careers, and we wanted to accomplish the same for our clients. We knew we saw the business world just a little differently from most others, and that allowed us to effectively connect the dots between people, products and profits. We actively pursued projects that were intellectually challenging and in domains that were sometimes overlooked. We never set any financial goals for our company, but rather, we measured success by our ability to exceed our client’s expectations and generate continued engagements or word-ofmouth referrals. It is this ethos that took us on a pioneering journey into the realm of human capital analytics. Someone once wrote that there are only two inputs to business – financial capital and human capital. And while the world has developed robust approaches to measuring and optimising the value of the former (including ourselves), the latter is all but neglected. We were passionate to bring the art of decision science to the ancient craft of people management, and we have since made two major in-roads both in terms of pathbreaking thought leadership and significant consulting engagements with some of the top

“We never set any financial goals for our company, but rather, we measured success by our ability to exceed our client’s expectations and generate continued engagements or word-of-mouth referrals.” banks in Asia. And suddenly people were paying extra attention to our tiny boutique firm.

And tiny we continue to stay. We embrace the belief that small is agile and powerful; we work intimately alongside our consultants to personally solve our client’s business challenges. And we tap into the dynamism and raw creativity of millennial power, epitomising modern, digital companies – uncluttered, unstuffy, unconventional work spaces and work culture. The young ones who have and are working with us were selected on the basis of our data-driven profile assessment, and have proven to be better than the conventional analysts we had in our past organisation. This CFI.co award couldn’t come at a better time – a gift to celebrate our third business anniversary. We dedicate it to our team of consultants, our clients and alliance partners. Thank you. i — Eric Sandosham, Co-founder & Partner

Red & White Consulting Partners LLP: Eric Sandosham, Sally Taher, Anny Rosyani, Frenny Na, Eka Aulia

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> Leyla Aliyev, Heydar Aliyev Foundation:

Azerbaijan’s Can-Do First Daughter As Donald Trump moved into the White House, reluctantly swapping his goldclad luxury pad in New York for the relatively austere dwelling on Pennsylvania Avenue, half a world away a government is celebrating the arrival of its moment: Azerbaijan is set to become a key US ally in Middle Eastern affairs with Baku – a city of glamour and plenty newfound wealth, and as such instantly appealing to the tycoon-turned-president – gaining its long-sought status of regional powerbroker.

n the Muslim world, Azerbaijan – sandwiched between Russia and Iran, two increasingly assertive powers – enjoys a unique position and one that merits recognition. While he rules a Shi’ite nation, President Ilham Aliyev (56) points out that his country boasts one of the oldest Jewish communities in the world. In fact, Azerbaijan is one of only a select few countries where Christians, Jews, Baha’is, and Shi’ite and Sunni Muslims coexist in peace and harmony – a feat of immense importance as the incoming Trump Administration inherits a deconstructed policy for the restless region. Azerbaijan is not just a haven of religious tolerance; the country of eight million also assumes an outsized role as a dependable provider of energy to both North America and Europe. Azerbaijani exports of oil and natural gas – boosted by the completion of a 1,768 kilometrelong pipeline linking the country’s Caspian Sea oilfields with Ceyhan, a seaport on Turkey’s south-eastern shore – will already this year allow Europe to diversify its energy procurement and lessen the continent’s dependency on Russian supplies which, in the recent past, have been used as a political weapon by the Kremlin. It is widely expected that President Aliyev will be amongst the first foreign heads of state to be invited to the Trump White House in recognition of his country’s pivotal role in the region. Additionally, the White House has cast an eye on Azerbaijan’s State Oil Fund (SOFAZ), the country’s $35bn sovereign wealth fund as

“Mixing entrepreneurial savvy with a taste for fine art, Ms Aliyev brought in glossy publisher Condé Nast International to help her launch Baku Magazine – Art, Culture, Wild – to showcase the country’s vibrant art scene.” it considers public private partnership for the long overdue upgrading of the United States’ infrastructure. Though SOFAZ reserves have been leveraged to compensate for low oil prices and underwrite social programmes deemed essential, Azerbaijan is considered a premier partner as the US tries to regain the initiative in the Middle East via active engagement with dependable partners. Well on its way to implementing a sustainable development model that aims to ensure the country’s long-term prosperity, Azerbaijan moved to place ESG (environment, social, and governance) values centre stage as it seeks to diversify its economy. Leyla Aliyev, the president’s first daughter, has taken the lead with the founding of the International Dialogue for Environmental Action (IDEA) which seeks to offer young people a global platform for sustainability. The idea was inspired by the toxic

legacy left after the Soviet Union fell apart in the late 1980s. Whilst exceptionally rich in natural resources – and beauty – Azerbaijan suffered severe environmental degradation as a result of Soviet extractive policies which seldom took environmental concerns into account. Ms Aliyev has been a driving force behind a large scale initiative to save the black-tailed gazelle – a species officially classified as vulnerable – from extinction. Celebrated for its grace and beauty, the Azerbaijani gazelle once roamed the plains from Jeyranchol on the border with Georgia in the west to the Caspian Sea further to the east in their thousands. In the late 1800s, travel writers reported observing grazing herds as far as the eye could see, yet by the early 1960s a census found only 171 animals. Established in 2003, the 54,000-hectare Shirvan National Park now counts more than 6,000 gazelles – the largest population of the species anywhere in Europe. According to Ms Aliyev, the bounce back of the Azerbaijan gazelle shows what may be accomplished once an executive decision is taken. The first daughter has launched new initiatives to rescue both the endangered Caucasian leopard and the Caspian sturgeon (beluga), listed as critically endangered, which has a lifespan of up to 120 years and grows to a length of five metres or more. The first results of the conservation programme are promising with increased sightings of the Azerbaijan leopard in the Zangezur National park where females displaying territorial behaviour

“Though only 32, Leyla Aliyev is a force of note – and a remarkable presence – in Azerbaijan and beyond. At times, it seems that Ms Aliyev is determined to personally ensure that Baku – once a dusty boomtown where fortunes were made, and lost, in weeks if not days – becomes the Dubai of the Silk Road.” 182

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Heydar Aliyev Foundation: Leyla Aliyev

repeatedly set off camera traps. The country’s Ministry of Ecology and Natural Resources has recently strengthened legal provisions to protect the big cat. A Leopard Record Monitoring Network has been set up with neighbouring countries to track the leopard’s range and facilitate the exchange of data. As a goodwill ambassador for the Food and Agriculture Organisation of the United Nations, Ms Aliyev has also helped to cement Azerbaijan’s position as a food-secured country. She has been instrumental in the shaping of the FAO’s Country Programming Framework which helps Azerbaijan expand its competitive edge in agriculture by promoting livestock health, plant protection, skills development, and resource management amongst others. FAO Assistant-Director Vladimir

Rakhmanin recently praised Azerbaijan’s efforts to reduce food waste with innovative measures that offer blueprints for others to follow.

Azerbaijan Tower rising a full kilometre skywards and slated to displace the Burj Khalifa as the tallest building in the world.

Though only 32, Leyla Aliyev is a force of note – and a remarkable presence – in Azerbaijan and beyond. At times, it seems that Ms Aliyev is determined to personally ensure that Baku – once a dusty boomtown where fortunes were made, and lost, in weeks if not days – becomes the Dubai of the Silk Road. The city is not far off from attaining its goals. Ms Aliyev is a tireless promoter of the Khazar Islands project – a universe of some 41 artificial islands in the Caspian Sea, linked by 150 bridges and able to withstand a magnitude 9.0 earthquake, that is to house around a million inhabitants by 2030. At its centre, the new $100bn city is to feature the

Mixing entrepreneurial savvy with a taste for fine art, Ms Aliyev brought in glossy publisher Condé Nast International to help her launch Baku Magazine – Art, Culture, Wild – to showcase the country’s vibrant art scene. The magazine quickly gained a dedicated international readership with newsstand sales in 22 countries for its avantgarde coverage of cultural trends and events.

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In between, Ms Aliyev also helps run the Heydar Aliyev Foundation as its vice-president. The foundation is the driving force behind a growing number of social-impact initiatives and projects in both Azerbaijan and abroad. i 183

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> Dani Carrillo:

The Plight of the Immigrant By Steve Dyson

When immigrants are treated like unwanted strangers, it increases their isolation and makes them less inclined to become part of the country that’s rejecting them.

his process is what young sociologist Dani Carrillo refers to as being “otherised,” an ongoing estrangement that not only causes problems for immigrants but, in the long term, is bad for the host nation

as well. Ms Carrillo first caught the academic world’s attention with her theory after researching immigrant communities in France for her Master’s at the University of California. She found that the way French society alienated immigrants reduced the chances of them ever wanting, let alone being able, to become “official” in France. Her analysis of a Trajectories and Origins Survey found that Muslims in particular felt more marginalised than other immigrants because of the extra connotations that had been negatively applied to their religion. Writing for the Journal of Ethnic and Migration Studies last year, Ms Carrillo described how “living in an anti-immigrant climate,” being identified as Muslim and “feeling otherised” had a damaging effect on immigrants’ “naturalisation behaviour.” She concluded that otherised immigrants had little sense of belonging to their new country, making them feel even more alienated. This meant they were less likely to become French citizens and, more pertinently, less likely to desire such citizenship. The obvious result was that immigrants did not then enjoy any financial or social benefits of naturalisation, starting a process of increasingly tight circles of exclusion. Ms Carrillo hopes that her work will trigger more research on how politics can be positively used to help the integration of different ethnic groups in France and across Europe. She said her work was inspired by her own background as a Mexican immigrant growing up in the Chicago Heights suburb. Young Dani Carrillo had felt out of place as a pupil at elementary school where classmates laughed if she got her English words mixed up. She also felt marginalised by her own community for not being Mexican enough because she looked white. Ms Carrillo is now studying for a PhD at the University of California, Berkeley, where she

University of California: Berkeley

continues to explore immigration, race, and ethnicity in the context of urban sociology. Her focus is on the difference between urban and suburban locations for immigrants, following increased poverty levels in suburban areas. She argues that this is having a particularly bad impact on low-income immigrants living in those deprived areas. Ms Carrillo is comparing how urban and suburban immigrants are using their own networks to navigate social services, therefore showing the CFI.co | Capital Finance International

differences in the quality and structure of this safety net in different areas. She hopes her work will help reduce poverty levels or at least provide more social services to low-income populations, decreasing the marginalisation experience of suburban immigrants and perhaps then raising their aspirations to become part of society. Ms Carrillo’s research on how immigrants are treated, and how they react, has real significance as the world tries to balance the effects of migration. i 185

> The G20’s Investment Guiding Principles:

A Key to Unlock FDI Flows By James Zhan

n what has become a perennially tough economic environment, growth prospects for global foreign direct investment flows are volatile. For most regions the prospects are negative, and even where flows are expected to be positive, the growth is set to merely claw back losses raked up in the previous year. By region, flows to developing Asia are expected to decline by about 15% in 2016, reverting to levels in 2014. Data on cross-border M&A sales and announced greenfield investment projects in the first part of 2016 indicate the possible slowdown. Latin America and the Caribbean Region are expected to see their FDI decline further as challenging macroeconomic conditions persist. In 2015, the value of announced greenfield projects to the region declined by 17% from the 2014 level, led by an 86% decline in the extractive sector. Lower announced project values were also registered in the services sector. Africa is expected to buck the downturn trend with FDI inflows to the continent projected to increasing by some 6%. The anticipated increase is already apparent in announced greenfield projects. The biggest prospective rise is anticipated in northern Africa, including in Egypt and Morocco. But FDI flows are also expected to increase to some countries as a result of liberalisation measures – as were implemented in Kenya and the United Republic of Tanzania – or as a result of the privatisation of state-owned commodity assets in some countries, such as Algeria and Zambia. The positive prognosis for the continent nonetheless will only just about see the losses of the previous year restored. Over the past eight years the growth rates of real GDP, trade, employment, and productivity have been subdued, undermining investor confidence and hampering the investment recovery. Yet even as investor confidence has slumped and flows have receded in recent years, FDI remains the largest and most stable component of international capital flows, and the most resilient to financial and economic crises. In the continuing difficult current economic climate the overall level of external financing for developing economies declined by 37% in 2015 — to $1.2 trillion from a level of $2 trillion in the previous two years. With official development assistance retreating by 12% and portfolio and other investment also contracting sharply, it was only FDI flows and remittances that held the ship relatively steady (figure 1). In these trying economic times it would be prudent for the international community to 186

“Policy makers need to find the right balance between creating a climate conducive to investment and removing barriers to investment on the one hand, and protecting public interests through regulation on the other.” concentrate its efforts on restoring reliable, stable sources of external finance such as FDI flows to developing countries and help wean these economies off their reliance on development aid, which can only be anticipated to keep declining as tough economic conditions persist. What is more, development aid provides only temporary relieve and cultivates entrenched dependence. Private investment, through the right government policies, can facilitate the structural transformation of developing country economies, thereby enabling them to address their social and environmental challenges. Good progress has been made over the past decade in growing the share of investment, proportional to ODA, in the total pot of external finance for developing countries (figure 2). It is only in Africa that investment struggles establish a clear foothold as dominant source in the external finance pot (figure 3). Yet, as we have previously argued here, and as the FDI trend line for Africa over the past two decades show, the continent has excellent potential and offers ample reward to investment into nonextractive sectors. This means the situation can be remedied through suitably designed and targeted investment policies. The need to harness investment policies that are attuned to contemporary circumstances to increase investment is widely acknowledged — not only in Africa, but globally. However, a set of particular features complicates the push to adapt investment policies to better facilitate increased investment. First is the prevailing dynamics of the policy environment for cross-border investment, which is in constant flux. National investment policy continues to evolve, with on average a hundred investment measures adopted annually. These policies are accompanied by wider measures that influence the overall business environment for investors. Similarly, the dynamics at the international level are also fluid, with new CFI.co | Capital Finance International

investment agreements concluded at the rate of one every fortnight, while at the same time the number of private codes and standards that govern the behaviour of corporate investors have also grown exponentially in recent years. In other words, investors have to negotiate a vastly complex magma of rules, regulations, requirements, and standards that complicate their operating environment and affect their investment decisions. A second characteristic of the policy environment is the dichotomy that marks national investment policymaking. While the overall trend is to liberalise and promote investment, it is apparent that there is also a new-found appetite to regulate and restrict investment. It is true that most policy measures adopted in recent years sought to ease and promote investment. Yet the overall share of restrictive measures has also risen (from an average of 5% in the early 2000s to an average of 27% in the past five years), signalling a tougher environment for investors. The third conundrum facing the investment environment is the fragmentation of the regime of international investment treaties. The multilayered, multi-faceted and highly atomised regime is leading to increased divergence and overlap. The regime already consists of more than 3,300 treaties and the continuing proliferation of treaties adds to inconsistency and incoherence. There is significant divergence even within the treaty networks of individual countries, increasing the regulatory complexity for investors. With the negotiation of new treaties so far, negotiating parties have opted to grandfather existing treaties, which means the old treaties coexist with new ones, compounding the complexity and potential inconsistency. Lastly, efforts to boost investment in sustainable development are hampered by policy dilemmas. It has been established that private sector finance would be pivotal if progress is to be made with the achievement of the UN’s sustainable development goals. This is particularly true, of course, in relevant SDG sectors such as education, water and other basic infrastructure. However, many of these sectors are sensitive or have a public service nature, which precludes private sector participation. The conventional approach therefore establishes an interesting policy conundrum. Policy makers need to find the right balance between creating a climate conducive to investment and removing barriers to investment on the one hand, and protecting public interests through regulation on the other. They need to find mechanisms to

Winter 2016 - 2017 Issue

Figure 1: External development finance to developing economies, 2007-2015 (Billions of dollars). *Loans among non-affiliated enterprises. Source: © UNCTAD.

800 700 600 500

FDI inflows: Developing countries excl Caribbean Financial Centres

400

ODA: Developing countries excl Caribbean Financial Centres

300 200 100 0

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

70 60 50 40

FDI inflows: Africa

ODA: Africa

20 10 0 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

facilitate sufficiently attractive returns to private investors while guaranteeing accessibility and affordability of services for all. And the push for more private investment must be complementary to the parallel push for more public investment and continued public sector service responsibility. Fundamentally, the entry and protection of private investment must be improved in sectors that are important for sustainable development,

which are exactly those where most restrictions tend to apply in both national and international investment policies. The above challenges can be plausibly addressed if countries created a set of common, harmonised investment principles to ensure greater policy coherence, conducive to investment in sustainable development. CFI.co | Capital Finance International

In the absence of a multilateral investment system to coordinate joint efforts on investment policymaking, the G20’s recent adoption of a set of Guiding Principles for Global Investment Policymaking — developed with the guidance of UNCTAD and the OECD under the Chinese presidency — is a remarkable feat and a decisive step in the right direction. It is the first time in more than five decades of international 187

Key Aspects of the G20 Guiding Principles

• Avoid protectionism • Advance non-discrimination • Protect investors • Facilitate transparency in policymaking • Promote policy coherence, consistent with sustainable and inclusive growth objectives • Recognise governments’ right to regulate • Strengthen promotion and facilitation policies • Inculcate best practice for responsible business conduct and corporate governance • Foster international investment dialogue • G20 Guiding Principles for Global Investment Policymaking With the objective of (i) fostering an open, transparent and conducive global policy environment for investment, (ii) promoting coherence in national and international investment policymaking, and (iii) promoting inclusive economic growth and sustainable development, G20 members hereby propose the following non-binding principles to provide general guidance for investment policy-making. 1. Recognising the critical role of investment as an engine of economic growth in the global econinvestment policymaking that consensus is reached by a sizeable collective of countries with a major interest in the FDI stakes (jointly the G20 represent more than two-thirds of global FDI) to strengthen international policy coordination. While the adopted principles are voluntary in nature, they nonetheless provide a compelling basis on which to build incremental efforts towards the establishment of an open, transparent, and conducive global policy environment for investment. The challenge, of course, is to translate the principles into policy practice at the national and international level. As a start, it can be anticipated that the principles would be advocated among G20 members. Depending on the extent to which members of the bloc adopt these, this may prompt non-G20 countries to follow suit, spurring on the establishment of new principles in international rule making. In this manner the principles could be an important building block for greater global investment policy coherence and at least help roll back protectionism against international investment. The G20 principles may even serve as the basis for an incremental process to reduce barriers that impede the flow of productive investment and eventually lead to impromptu multilateralism in international investment policy. The principles would be well complemented by practical efforts to foster multilateral dialogue on investment policy developments to advance policy coherence. Indeed, UNCTAD’s Action Menu on Investment Facilitation, upon which 188

omy, governments should avoid protectionism in relation to cross-border investment. 2. Investment policies should establish open, non-discriminatory, transparent, and predictable conditions for investment. 3. Investment policies should provide legal certainty and strong protection to investors and in-vestments, tangible and intangible, including access to effective mechanisms for the prevention and settlement of disputes, as well as to enforcement procedures. Dispute settlement procedures should be fair, open and transparent, with appropriate safeguards to prevent abuse. 4. Regulation relating to investment should be developed in a transparent manner with the opportunity for all stakeholders to participate, and embedded in an institutional framework based on the rule of law. 5. Investment policies and other policies that impact on investment should be coherent at both the national and international levels and aimed at fostering investment, consistent with the objectives of sustainable development and inclusive growth. 6. Governments reaffirm the right to regulate investment for legitimate public policy purposes.

“The principles would be well complemented by practical efforts to foster multilateral dialogue on investment policy developments to advance policy coherence.”

7. Policies for investment promotion should, to maximise economic benefit, be effective and ef-ficient, aimed at attracting and retaining investment, and matched by facilitation efforts that promote transparency and are conducive for investors to establish, conduct and expand their businesses. 8. Investment policies should promote and facilitate the observance by investors of international best practice and applicable instruments of responsible business conduct and corporate gov-ernance. 9. The international community should continue to cooperate and engage in dialogue with a view to maintaining an open and conducive policy environment for investment, and to address shared investment policy challenges. These principles interact with each other and should be considered together. They can serve as a reference for national and international investment policymaking, in accordance with respective international commitments, and taking into account national, and broader, sustainable develop-ment objectives and priorities. a stable environment for investment and aims to promote infrastructure development on the African continent. To advance these objectives, it has announced a planned conference on Partnership with Africa in Berlin in June 2017. A strengthened partnership between the G20 and Africa — both at the public and private sector level — will be a solid start to boosting FDI to the continent. i ABOUT THE AUTHOR James Zhan is director of the Investment and Enterprise Division at the United Nations Conference on Trade and Development (UNCTAD). He leads the team that produces the World Investment Report.

the Guiding Principles are largely moulded, has several action lines dedicated to international collaboration, technical assistance, and capacity building to boost the development dimension of investment facilitation. In this respect Germany, which recently took over the presidency of the G20, has given promising signals that it would up the stakes for collaborative and results-oriented action. The country has already indicated that it wants to use its presidency to intensify international cooperation in line with the G20 commitment to ensure globalisation benefits all. The stability of the global economy was earmarked as a top priority by the incoming presidency, while development issues were also signposted. The Germany presidency has already indicated that it would also prioritise the need to put in place CFI.co | Capital Finance International

Author: James Zhan

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The Electoral Folly of the Referendum By Wim Romeijn

Referendums allow demagogues to prosper. Nuance is lost and arguments invalidated as complex issues are distilled to a binary choice. Moreover, voters often fail to answer the question posed, using the ballot instead as a means to vent their frustration with the elites or the powers that be.

onsidered a handy safety valve by politicians, referendums give people the impression that they are heard, and their opinions valued. Unless, of course, these happen to run counter to established wisdom in which case the outcome may be ignored, albeit at a price. In April, voters in The Netherlands overwhelmingly rejected the European Union’s proposed political, trade, and defence treaty with Ukraine. Though the treaty itself was barely discussed, the public used the vote to express its generic discontent with all things European. Even the referendum’s instigators – who had gathered the required 300,000 signatures to force its call – admitted, quite unashamedly, that the Ukraine treaty had merely served as an excuse.

Final Thought

After leading the victorious no campaign, Jan Roos – a journalist-turned-provocateur and the enfant terrible of the satirical shock blog GeenStijl – became the latest unguided missile of Dutch politics. Cashing in on Mr Roos’ notoriety, the newly-founded Voor Nederland Party (VNL) promptly named him its leader. VNL, with two seats in parliament, is home to a few discontents from Geert Wilders’ Freedom Party (PVV) who now aim to pass their former political chief to the right. VNL wishes to follow the United Kingdom and exit the European Union in order to reduce, if not completely stop, immigration. Mr Roos readily acknowledges that his politics appeal to the abdomen and are, largely, deprived of reason. Just like his counterparts in the UK, Mr Roos dislikes experts and sees no problem in entrusting the fate of the nation to the whims of the ill-informed and uninterested. 190

“Not all of society’s questions deserve a yes/no answer.” Referendums allow opportunists such as Mr Roos a soapbox from which they may appeal to the lowest common denominator and manipulate popular opinion almost at will. Take long-suffering Greece. In July 2015, 61% Greek voters rejected further austerity measures in a referendum that was called over the bailout terms imposed on the country by its creditors. The government, of course, ignored the outcome and duly signed on the dotted line. A financial crisis cannot be willed away. Swiss voters in February 2014 approved by the narrowest of margins (50.33% versus 49.67%) a plan to introduce quotas for immigrants and thus end the freedom of EU citizens to live, study, and work in the country. Since Switzerland’s bilateral treaties with the European Union, including the one that establishes the freedom of movement of labour, are all co-dependent, the Federal Council in Bern (the Swiss government) faces a conundrum: carrying out the will of the people would end the country’s association with the EU. This, however, is something most Swiss voters wish to avoid. Another Achilles’ heel of referendums is their snapshot nature. On September 18, 2014, Scottish voters did not wish for their country to become independent from the CFI.co | Capital Finance International

United Kingdom. However, they may change their mind once the UK has finished turning its back to the European Union. But, once independence is attained, there is no going back and the referendums on the status of the nation stop. What if Scotland – or, say, Quebec for that matter – at some future point in time find life as an sovereign country disagreeable? The purpose of referendums seems to be asking the same question repeatedly until the desired answer is obtained. Referendums also possess a destructive power. In Colombia voters rejected a peace accord that could have ended a civil war raging since the 1940s; in Thailand voters endorsed a constitution that curtails democratic rights; in Hungary a referendum ordered the government to restrict immigration; and in the UK a referendum decided to pull the country from the European Union. Portrayed as popular governance in its purest form, referendums are, in fact, subverting democracy due to their whimsical and simplistic nature. Not all of society’s questions deserve a yes/no answer. Also, politicians unable to further their ideas by conventional means often use referendums to force parliament’s hand. “This is a risky tool, but politicians keep using it because they think that they’ll win. However, often they do not which creates new problems,” says Alexandra Cirone of the London School of Economics. Ms Cirone’s research has shown that in a referendum voters tend to support the government’s position if the leadership is well liked. A vote about important issues put before the people is thus reduced to a verdict on the body of present policies. That verdict should be delivered by general elections. i

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