CFI.co Winter 2023-2024 by CFI.co

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WAT C H M A K I N G O N C E A G A I N F I N D S BRITISH SHORES The Limited Edition Bremont Longitude is a groundbreaking timepiece that not only looks back at our country’s legacy but also forward to an exciting future of British watchmaking. The watch’s case back incorporates brass from the original “Flamsteed Line,” in Greenwich, the very spot where the first Astronomer Royal made his celestial observations in pursuit of an aid to navigation. It has long been the goal of Bremont to bring watch manufacturing back to Britain. The Longitude represents a milestone in that journey, a homecoming of sorts, and proof that, to get where you’re going, you need to know where you came from.

First Thoughts Artificial intelligence has surpassed budding tech status to become a fundamental force changing the world around us. AI has been seamlessly incorporated into daily life; it can tailor healthcare via our smartphones as easily and efficiently as it can generate trading algorithms — and 2023 was a watershed year. Algorithm breakthroughs — most notably in natural language processing (NLP) and machine learning (ML) — have fuelled adoption across industries, from healthcare and finance to manufacturing and retail. The tech’s potential to tailor experiences and improve processes has been clearly demonstrated. It is now revolutionising how we engage with it — and, more generally, the world. Generative AI has proven itself capable of creative output, too, producing images, literature, and music with astonishing finesse. This has created possibilities in the spheres of content-creation, design, production, and marketing. Developments in NLP have enabled AI systems to process complicated input with increasing accuracy and attention to nuance and detail. Human-AI interactions have become more “natural”, more engaging, as it lends an algorithmic hand to customer service, virtual assistance, and translation.

First Thoughts

A subset of machine learning, deep learning, also advanced in 2023, particularly in computer vision, natural language interpretation, and predictive analytics. These advances have powered breakthroughs in self-driving cars, medical image analysis, and fraud detection. AI can tackle complicated, real-world problems as well as giving wings to flights of creative fancy. There has been a significant impact on healthcare, with individualised treatment plans now based on patient data — and unique genetic information. AI-powered systems have helped with diagnosis, surgical support, and drug delivery. New medical compounds have been discovered floating in the data-rich ether. Finance is an industry undeniably changed by AI. Algorithmic trading systems allow 8

the optimisation of market tactics (and the minimisation of human error). Bots are being used to detect fraudulent activity, analyse risk, and manage financial portfolios. In the manufacturing sector, AI is streamlining production processes, predicting maintenance needs, and driving up quality. Predictive analytics identify potential bottlenecks and resource inefficiencies, while the robots still work in the area to which they were once limited: assembly lines. AI-based customisation in retail has seen product recommendations, customer experiences, and marketing strategies tailored to feed and furnish individual interests and needs. Supply-chain optimisation has cut inefficiencies and eased the intricacies of inventory management. It’s crucial to address the ethical problems that still haunt its existence, and delay its unfettered implementation. Bias and discrimination are stumbling blocks that must be addressed through governance frameworks and responsible development. Societal ramifications must not be underestimated, either. Job losses, privacy concerns, and impacts on autonomy are complicated topics under constant legislative oversight and review. The potential for transformative advances — in fields such as quantum computing, Explainable AI (XAI), and neuromorphic computing — bodes well. These developments will pave the way for advances in healthcare, autonomous systems, and — eventually — artificial general intelligence, or AGI. Collaboration between academia, industry, and governments is required to safely exploit the possibilities. Education and public debate will be needed to develop a society that recognises AI's capabilities while managing obstacles and ethical concerns. So, 2023 has indeed been an AI watershed. Industries have been revolutionised, and human capabilities given a leg-up. Future development and deployment must be consistent with ethics and societal wellbeing. AI promises a brighter future. Let’s be certain that it keeps its word.

First Thoughts

Correspondence

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I am writing to express serious concern and disappointment about Geert Wilders’ recent win in the Dutch elections. As a long-time observer of political trends, and an advocate for inclusive, progressive principles, I find this surge in support for his Party for Freedom (PVV) concerning. Both he and the party are well-known for divisive and discriminatory attitudes. The Netherlands has a tradition of tolerance, variety, and openness. It has long been seen as a beacon of liberal principles and progressive ideas. The apparent popularity of Wilders — notorious for his confrontational views on Islam and immigration — indicates a shift that could erode those age-old ideals. His provocative and polarising rhetoric threatens the social cohesion and multicultural harmony so typical of Dutch society. It is especially sad to see policies that promote division rather than unity swaying a sizable segment of the electorate. While all opinions must be heard and represented in a democracy, it is also critical that these voices should not incite enmity or marginalise communities based on religion, ethnicity, or nationality. The rise of PVV raises serious concerns about the direction of our society, and the values that we as a nation choose to defend. The country’s international reputation as an open, tolerant, and progressive country is at stake. As citizens, we must remain attentive and committed to supporting a society that appreciates diversity, supports respectful speech, and opposes all forms of bigotry and xenophobia. I urge my fellow citizens to consider the potential consequences of this election outcome, and to actively participate in establishing a political atmosphere in which inclusion and tolerance are not simply advocated, but actively practised. Let’s work together to ensure that the Netherlands remains a welcoming country that respects diversity, and champions the rights and dignity of all. JAN BROOD (Utrecht, Netherlands)

“

I feel forced to express my worries about tendencies on X (which, some day, will no longer need the tagline “formerly known as Twitter”) since its acquisition by Elon Musk. Since he took control in October, there has been a clear spike in hate speech, misinformation, and online harassment on the platform. This alarming development not only affects individuals, it also poses serious threats to the pillars of democracy and civil debate. Several regulatory changes implemented by Musk have exacerbated an already poor climate. The loosening of content moderation criteria has created an ugly environment open for abuse. The reinstatement of accounts previously banned for policy infractions — such as that of Donald Trump — sends a troubling message. These adjustments have transformed X into a breeding ground for unhealthy views. The widespread dissemination of conspiracy theories and misinformation undermines public trust in critical institutions — and the democratic process. My worries are especially strong for marginalised communities, which are frequently the targets of internet hate speech and harassment. Musk's policy changes have made them more vulnerable still, raising fears of increased violence and prejudice.

Winter 2023-2024 Issue

I would beg Elon Musk to reconsider his management approach. Reintroducing strict content-moderation measures, and permanently banning accounts that spread hate and extremism, would be logical first steps. Investing in effective protective measures of some sort, at least, is crucial for the platform's health. In the meantime, I recommend prudence and critical thinking when interacting with X. It is vital to question information, report breaches of social standards, and consider supporting alternative social media platforms dedicated to safe and inclusive settings. JASON OGILVY (Chicago, US)

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I disagree with much of the article The American Economy is Holding Strong — and Getting Greater Still that appeared in your most recent edition. While the essay seeks to create a rosy picture of the US economy, it fails to address the underlying issues that threaten its long-term stability. The article's claim that the US economy is "holding strong" is predicated on flimsy metrics such as consumer spending and GDP growth. It ignores the fact that such benefits have come at the expense of rising inequality and unsustainable levels of debt. Even the author concedes that "a growing number of Americans fall through the cracks of an almost Kafkaesque patchwork of 80 social security programmes"; he also notes that homelessness has increased by six percent since 2017. These are indications of a declining civilisation, not a booming economy. The article also glosses over the dangers of the US government's increasing economic intervention. While it is true that government spending helped to keep the country out of a deeper recession during the pandemic, your story fails to note that this expenditure has also contributed to surging inflation and a ballooning national debt. The article's claim that future GDP growth will simply "outpace" the US's debt concerns seems to me to be wishful thinking. The article's claim that the United States is a "special case" because it is the world's reserve currency issuer is deceptive. While America benefits from seigniorage and other perks linked with the dollar's global role, they come at a high cost. The country must run perpetual trade deficits, eroding its industrial base and increasing its reliance on foreign finance. The dollar's status as the world's reserve currency provides the US government enormous influence over global markets, which it has frequently used to advance its own interests at the expense of others. CARLOS GARCIA (Mexico City)

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Amid the awful complexities of the ongoing conflict between Israel and Hamas, an often-overlooked facet has again emerged: the enormous support for Palestinian rights from within liberal Jewish and Israeli communities. This demonstrates a genuine commitment to human rights and peace that transcends national and religious boundaries. Liberal Jews and Israelis are among the most vocal and expressive supporters of the Palestinian cause, pursuing a vision of equality and co-operation. Such individuals frequently face hatred and ostracization for their views and convictions, yet their commitment to justice and peace remains unwavering. Their advocacy is not against Israel, but for the creation of a more equitable nation that will uphold the highest ideals of justice and peace. Those concepts had been firmly established in Jewish philosophy and tradition. JOYCE NELSON (Melbourne, Australia)

IBM Thought Leadership >

Chairman Lord JD Waverley

Transparency Makes the Invisible Hand COVER STORIES Visible Again, And Inclusive

Editorial Team

Sarah Worthington by Paolo Sironi George Kingsley Tony Lennox How to Accelerate Growth and Progress Brendan Filipovski John Marinus (14) Paolo is the global research leader in Banking and Financial Ellen Langford Markets at IBM, Institute of Business Value. IBV is the Helen Lynn Stone thought leadership centre of IBM. Naomi Snelling

World Bank

Columnists

Otaviano Canuto Lord Waverley

Production Director Jackie Chapman

Distribution Manager William Adam

Subscriptions Maggie Arts

IBM Vast Potential for Finance Sector (20 – 22)

Cover Story ‘The Madman’ Takes Charge (28 – 35)

Kellogg Insight What Comes Next for Crypto?

Commercial Director John Mann

Director, Operations Marten Mark

Publisher Anthony Michael

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(128 – 129)

Asian Development Bank Climate Adaptation (135)

Women's Brain Project Precision Medicine (138)

UNCDF Weathering Unpredictability

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(140 – 141)

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Winter 2023-2024 Issue

FULL CONTENTS 14 – 37

As World Economies Converge World Bank

Indermit Gill

M Ayhan Kose

Otaviano Canuto

Paolo Sironi

IBM

Nouriel Roubin

Mohamed A El-Erian

Scott Barrett

Noah Kaufman

Joseph E Stiglitz

38 – 45

Winter Special Looking Back, Leaning Forward, Listening Hard, Fingers Crossed

46 – 85

Europe

86 – 95

Byblos Bank Europe (BBE)

Victor van der Kwast

Alessandro Hatami

Claire Trachet

Michael Kreibich

Dr Adrian Presse

Kathrein Privatbank

Aaron Damiano Sparkes

PSP Swiss Property

Giacomo Balzarini

Kristian Torode

Liam Walsh

Wilhelm Celeda

CFI.co Awards Rewarding Global Excellence

96 – 105

Africa Ridha Tekaïa

106 – 113

Banco Société Générale Moçambique

Middle East QIC Group

114 – 121

Latin America Gayatri Murthy

122 – 131

CGAP

North America Sarit Markovich

Kellogg Insight

132 – 141

Asia Pacific

Asian Development Bank

Declan Magee

Agnes Surry

Women’s Brain Project

Christine Bahls

Dr Antonella Santuccione Chadha

UNCDF

142

Final Thought

CFI.co | Capital Finance International

> World Bank:

How to Accelerate Growth and Progress in Developing Economies By Indermit Gill and M Ayhan Kose

mid a barrage of shocks during the past four years, the global economy has proved to be surprisingly resilient. Major economies are emerging mostly unscathed after the fastest rise in interest rates in 40 years—without the usual scars of steep unemployment rates or financial crashes. Global inflation is being tamed without tipping the world into a recession. It is rare for countries to bring inflation rates down without triggering a downturn. But this time a “soft landing” seems increasingly possible. Yet beyond the next two years, the outlook is dark. The end of 2024 will mark the halfway point of what was expected to be a transformative decade for development—when extreme poverty was to be extinguished, when major communicable diseases were to be eradicated, and when greenhouse-gas emissions were to be cut nearly in half. What looms instead is a wretched milestone: the weakest global growth performance of any half-decade since 1990 with people in one out of every four developing economies poorer than they were before the pandemic. The World Bank’s latest Global Economic Prospects forecasts imply that most economies— advanced as well as developing—are set to grow more slowly in 2024 and 2025 than they did in the decade before COVID-19. Global growth is expected to slow for a third year in a row—to 2.4 percent—before ticking up to 2.7 percent in 2025. Those rates, however, would still be far below the 3.1 percent average of the 2010s. Per-capita investment growth in 2023 and 2024 is expected to average just 3.7 percent—barely half the average of the previous two decades. Without corrective action, global growth will remain well below potential for the remainder of the 2020s.

"If each developing economy that engineered such an investment boom in the 2000s and 2010s were to repeat the feat in the 2020s, prospects for developing economies would move a third of the way closer to their full economic potential." a comprehensive policy package: consolidation of government finances, expansion of trade and financial flows, stronger fiscal and financial institutions, and a better investment climate for private enterprise. If each developing economy that engineered such an investment boom in the 2000s and 2010s were to repeat the feat in the 2020s, prospects for developing economies would move a third of the way closer to their full economic potential. If all developing economies also repeated their best 10-year performance to improve health, education, and labor force participation, they would close most of the remaining gap. In other words, the potential growth in developing economies in the 2020s would be similar to what it was during the 2010s.

than it is in other developing economies. Fiscal spending among commodity exporters also tends to be 40 percent more volatile than in other developing economies. The result is a chronic drag on their growth prospects. The drag can be reduced by—among other things—putting in place a fiscal framework to discipline government spending, adopting flexible exchange-rate systems, and avoiding restrictions on international movements of capital. If instituted as a package, these policy measures could help commodity exporters in developing economies increase per capita GDP growth by 1 percentage point every four or five years.

For the two-thirds of developing economies that rely on commodity exports, an additional avenue is open. They can do better simply by applying the Hippocratic principle to fiscal policy: first, do no harm. These economies are prone to debilitating boom-and-bust cycles because commodity prices can rise or fall suddenly, and their fiscal policies tend to make matters worse. Fiscal procyclicality is 30 percent stronger in commodity-exporting developing economies

The 2020s have so far been a period of broken promises. Governments across the world have fallen short of the “unprecedented” goals they promised to meet by 2030: “to end poverty and hunger everywhere; to combat inequalities within and among countries;…and to ensure the lasting protection of the planet and its natural resources.” But 2030 is still more than a halfdecade away. That is long enough for emerging markets and developing economies to regain some of the lost ground—if their governments act now. i

Author: Indermit Gill is Chief Economist and Senior Vice President

Author: M Ayhan Kose is Deputy Chief Economist and Director of

for Development Economics at the World Bank

the Prospects Group at the World Bank

Our forecasts may seem dismal. Yet the policy analysis provides hope.

Global Economic Prospects includes the first systematic assessment of what it takes to generate the most desirable kind of investment boom—one that comes with an increase in percapita income growth, a step-up in productivity, and a reduction in poverty. Since the 1950s, countries across the world have managed to generate nearly 200 windfall-producing investment booms—episodes in which per-capita investment growth accelerated to 4 percent or more and stayed there for more than six years. The secret sauce for sparking such episodes was 14

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> Otaviano Canuto

A Tale of Two Technology Wars: Semiconductors and Clean Energy The global economic environment has changed as the US — and, to a less confrontational degree, the European Union — have clearly established a context of technological rivalry with China.

indering China’s progress in the sophistication of semiconductor production has become a centrepiece of US foreign policy. While America is clearly winning the semiconductor war, the picture is different when it comes to clean-energy technology. Both technology wars overlap with access to and refinement of critical raw materials (CRM), key upstream components of the corresponding value chains, encompassing mineral-rich emerging markets and developing economies. The way in which the US and the EU approach the goal of self-sufficiency, as well as access to and refinement of CRMs, will make a big difference. Technological progress in the Chinese economy in recent decades has hinged on involved using knowledge made available by globalisation. In conjunction with local investment and forced transfer in some segments, Chinese firms can now produce and adapt technologies and make basic innovations.

Figure 1: Semiconductor Production. Source: Haramboure, A.; Lalanne, G.; Schwellnus, C.; and Guilhoto, J. (2023). Vulnerabilities

in the semiconductor supply chain, OECD Science, Technology and Industry Working Papers 2023/05.

CFI.co Columnist

The US and EU are in a technological rivalry with China. In a September 2022 speech, US White House national security adviser Jake Sullivan mentioned advanced semiconductor and computing technologies, biotechnology, and clean-energy technology as areas in which the US should maintain global leadership, as “a national security imperative”. The US has raised barriers against Chinese access to North American equipment and tech, preventing China from climbing the ladder and ensuring that other countries do not circumvent the restrictions. Despite the fragmentation of the chip supply chain, all the basic components are in the hands of the US or its allies. China will have to build the upper rungs of the ladder itself. Figure 2: Share of global semiconductor value added, %. Source: ZhanHaramboure, A.; Lalanne, G.; Schwellnus, C.; and Guilhoto, J.

The picture is different when it comes to clean energy. China has built a strong position here; to catch up, the US is counting on the Inflation Reduction Act (IRA), approved by Congress in 2022, and other bills. The EU is launching an investigation into Chinese state support for EV manufacture, as their exports stoke fears for European car makers. 16

(2023). Vulnerabilities in the semiconductor supply chain, OECD Science, Technology and Industry Working Papers 2023/05.

Both tech wars include the issue of access to and refinement of CRMs encompassing mineral-rich emerging markets and developing economies. While China already has a firm foothold domestically and abroad, the US and Europe will need to safeguard their needs. As CFI.co | Capital Finance International

a report authored by Garcia-Herrero et al points out, this can be best done through green tech partnerships. DUAL-USE GOODS AND DEGLOBALISATION In 2017, when I was one of the executive

Winter 2023-2024 Issue

transistors can be included in a single chip. Smaller and faster semiconductors are needed for computers, smartphones, home appliances, electronic games, medical equipment, and telecommunications. The first generation of electronics in the 1970s had one chip per device. Now, an electric car needs more than 2,000 — more than twice the number in fossil fuel-powered cars. Chips also play a key role in 5G internet, cloud services, and AI. These tiny things are at the heart of the rivalry. At the end of 2019, the US-China confrontation initiated by Donald Trump continued under Biden. New Washington rules block China’s access to chips and prohibit the sale of equipment needed to produce them. Certain essential technologies to produce advanced chips are unavailable thanks to restrictive rules.

Figure 3: Semiconductor industry value added by activity and region, 2019 (%).

Source: Smith, N. (2023). Three books about the technology wars, Noahpinion, January, 19

Chips and their manufacture have become a kind of substitute for the weapons and armies in proxy wars. Hindering China’s progress is central to US policy. President Joe Biden’s fiscal package dedicated to semiconductors received bipartisan support. Taiwan and South Korea have mastered chip technology and account for close to half of the world market. The US accounts for 12 percent, but its companies do not produce on a large scale. Many stages of semiconductor production rely on US technologies, including the most advanced chips. Figure 1 displays the value chain of semiconductor production. Figure 2 depicts the evolution of global market shares, without any breakdown of figures by levels of sophistication and technological requirements. China has occupied a share of the markets for cheap, larger semiconductors. This is an attempt to make good use of globalisation to increase added value, and to climb the ladder of per-capita income.

Figure 3: Semiconductor industry value added by activity and region, 2019 (%).

Source: Smith, N. (2023). Three books about the technology wars, Noahpinion, January, 19

directors of the World Bank, I visited the Gaza Strip on a work mission. A sanitation project financed by the bank in a residential area subject to sewerage flooding had been halted because of a ban on hydraulic pipes. The Israeli military told us that the problem lay in their possible military use.

The argument has found bipartisan support in the US. A serious problem can always arise if a broad interpretation of dual use results in the

The main category is the semiconductor sector. Semiconductors are an integral component of cars and smartphones, but they can also be used in civil and military aircraft, supercomputing and AI — areas with potential implications for national security. Yoon (2022) distinguished between more advanced semiconductors three to 14 nanometres in size, and the cheaper and simpler chips above 14 nanometres. The economy is increasingly hanging on billionths of a metre between individual transistors. The smaller the gap, the more CFI.co | Capital Finance International

The semiconductor proxy war consists of cutting access to the higher rungs of the ladder for certain economies. Figure 3 shows at which stages of semiconductor production different countries predominate. In October 2022, the US announced broad export controls targeting China. Any semiconductor made with American technology for use in supercomputing or AI can only be sold to China with an export licence that is difficult to obtain. Given that nearly all semiconductors are produced using US tech, this effectively covers the global industry. The US doesn’t export many semiconductors to China. Export controls target chip-making countries that use US software and/or machines in their manufacturing facilities. Users and partners outside the US have been pressured to abide by those restrictions. 17

CFI.co Columnist

I remember this when I see references to national security in arguments against free trade in dualuse goods. Of all justifications for globalisationreversing national policies, national security is the most powerful. It is also the most difficult to evaluate, as it cannot be directly analysed; it is necessary to accept what intelligence sources say.

restriction of goods and services — even clothing or medicines. With the potential to lead to broad restrictions across multiple sectors, it could spur economic retaliation.

Third countries must either seek export licences or stop using US tech and equipment. The phrase “armed interdependence” is used to characterise how the United States has used global trade and supply chains to force its trading partners to align with it. Citizens are prohibited from working with Chinese chip producers without specific approval. Figure 4 suggests that the effect of such restrictions has been significant. An alternative interpretation of recent semiconductor export restrictions is that they have little to do with national security, but are aimed at curbing China’s path of economic development. If so, the new restrictions mark the end of an era of globalism and economic co-operation, and the beginning of another cold war.

Figure 5: China dominates clean-energy manufacturing. Source: García-Herrero, A.; Grabbe, H.; and Källenius, A. (2023). De-risking and

decarbonising: a green tech partnership to reduce reliance on China, Bruegel, October 26.

The case of semiconductors fits well with what we observe to be a partial reversal of globalisation in high-technology segments considered sensitive, with costs still considered justifiable by government authorities. As with the hydraulic pipes in Gaza, everything will depend on dual uses. The results are yet to be seen. Semiconductor producers in Taiwan and South Korea are grateful, because the US has made it harder for mainland Chinese producers to dominate. The US is winning the war. Despite the fragmentation of the supply chain, all the basic components are in the hands of America or its allies. CLEAN-ENERGY TECHNOLOGIES In this area, China has a very strong position. The transition to clean energy requires scientific innovation and large-scale expansion of established technologies. The US remains excellent at carbon capture, storage, and removal. It is also exploring frontiers in geothermal energy, benefiting from fracturing expertise in the shale oil and gas industry. On the other hand, the US lags China in the most critical areas of decarbonisation: solar, wind, batteries, and hydrogen (Figure 5). The higher pace of investment by China in the last decade has given it an advantage.

Figure 6: Share of solar panels all-components manucaturing (top) and share of global wind turbine manufacturing (bottom).

CFI.co Columnist

Source: García-Herrero, A.; Grabbe, H.; and Källenius, A. (2023). De-risking and decarbonising: a green tech partnership to reduce

Chinese dominance is evident in solar energy (Figure 6). The 90 percent decline in the cost of solar energy generation over the past decade came mainly from there, with Chinese companies being responsible for 75 to 95 percent of each component of the value chain. Tariffs and import bans have not changed that, and US imports of photovoltaic cells come mostly from Chinese manufacturers in South East Asia.

reliance on China, Bruegel, October 26.

The Chinese are also at the forefront of EV batteries, gaining ground from rival firms in Japan and South Korea. In this case, physical proximity

The challenge is more complex in the case of wind energy. China has most of the world’s largest turbine producers, but they mainly

to car manufacturers matters. Chinese producers benefited from the explosion in the production of EVs in China, whose local consumption was subsidised by the government. The results in terms of productivity and competitiveness mean that China surpassed Germany in car exports in 2022.

CFI.co | Capital Finance International

serve the domestic market. Turbines require assistance and services at installation sites, and Chinese firms face difficulties there. Finally, Chinese companies are taking the lead in producing clean hydrogen, an energy source that could grow over the next decade. Its production uses significant energy to break down water molecules through electrolysis. The sharp drop in the cost of solar and wind energy could eventually change the cost-benefit ratio.

Winter 2023-2024 Issue

"The ways the US and the EU approach the goal of selfsufficiency, as well as access to and refinement of critical raw materials, will make a big difference for their stake." It is worth noting that Chinese clean-energy technology has advanced in part because of massive investments in its application. In this decade, spending on renewable energy capacity in China was greater than in the US and Europe combined. And the US? The Inflation Reduction Act, passed by Congress in 2022, will provide $400bn to $1tn in support for solar energy, high-capacity batteries, hydrogen production equipment, and other forms of renewable energy. Jake Sullivan referred to this and other bills from the Biden Administration as pillars of the country’s modern industrial and innovation strategy. If the US seeks to be self-sufficient in clean tech, partly by including “friendly” countries and excluding China, it will be harder to climb the ladder of productivity and competitiveness. If it tries to follow the same path as for advanced semiconductors, at the very least their energy transition will be more expensive. CRITICAL RAW MATERIALS Mining and refining of critical minerals upstream of the renewable energy supply chain are important. China’s territory is abundant in mineral resources, many of which are central to the production of clean-tech goods, including 72 percent of the world’s natural graphite and 66 percent of rare earth elements. Overall, the extraction of clean-tech minerals is spread across the globe. Chinese companies have been making acquisitions abroad, purchasing a large part of the cobalt and lithium supply. Minerals are distributed across the globe, but most of the refining is done in China. Recent

threats by China to restrict exports of gallium and germanium represent an escalation in global competition for critical minerals and metals.

clean-energy providers. This could include Latin America, Africa and the Caribbean offering opportunities of “powershoring”.

China has also built up abroad a network of agreements to supply its domestic refining industry, including cross-border acquisitions and trade agreements. These are primarily in southern and western Africa, Oceania, Latin America, and regional neighbours. China has a special position in terms of processing of rare earth elements, with a market share above 85 percent, and of silicon and cobalt, all of which are integral to the production of high-energy-density batteries, wind turbines, and solar panels (Figure 7).

The global economy faces risks of fragmentation, with national security among the reasons for national policies of de-risking supply chains, or decoupling with China. Such an environment encompasses proxy tech wars with sectoral landscapes differing with respect to semiconductors and clean energy.

China’s share of metals processing is higher than its share of extraction. That reflects Chinese strategy to achieve dominance of the clean-tech industry. There is no equivalent initiative on the side of the US, EU, and other advanced economies. Domestically, environmental challenges and risks — including depletion of groundwater resources — have been a stumbling block. This illustrates how costly and ineffective a search for self-sufficiency would be for the US. An obvious response would be partnerships with emerging markets and developing countries (EMDEs) that would include local refining and some movement up the value chain, provided that environmental risks and others are properly dealt with. Instead of reacting to China’s current dominance in clean-energy tech, advanced economies should enhance the search for complementarities and synergies with those EMDEs that have significant potential to be

The ways the US and the EU approach the goal of self-sufficiency, as well as access to and refinement of critical raw materials, will make a big difference for their stake. i

A previous version was published by the Policy Center for the New South ABOUT THE AUTHOR Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, a visiting public policy fellow at ILAS-Columbia, and principal of the Center for Macroeconomics and Development. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil. Otaviano has been a regular columnist for CFI.co for the past 12 years. Follow him on Twitter: @ocanuto

CFI.co Columnist

Figure 7: Refining of renewable energy minerals, 2019-2020.

Source: García-Herrero, A.; Grabbe, H.; and Källenius, A. (2023). De-risking and decarbonising: a green tech partnership to reduce reliance on China, Bruegel, October 26.

CFI.co | Capital Finance International

Paolo is the global research leader in Banking and Fin Markets at IBM, Institute of Business Value. IBV is thought leadership centre of IBM.

> Paolo Sironi - Regenerating Banking via Bots:

AI Has Our Full Attention — and Vast Potential for Finance Sector Financial services specialists — like professionals in so many sectors — are embracing the radical technology, to great effect...

enerative AI has seized the world’s attention like no technology before it. Executives are either dazzled by bright futures or dismayed by dystopian scenarios, and boardroom discussions have become polarising. The financial services sector is not immune to all this. Banking executives are brainstorming the best ways to assess and prioritise the technology’s economic potential, estimate the access costs, and manage the attendant risks that come with it. The real power of large language models (LLMs), which underpin generative AI, lies in speed and affordability. Foundational models enable multiple solutions to be derived from one base.

IBM Thought Leadership

The most widespread application thus far is to shape compelling narratives and conversations. Without underestimating business and ethical imperatives to control bias or “hallucination” risks, generative AI can help to redefine a bank’s competitive edge in client relationships by taking communication to new levels of personalisation. This empowers financial institutions to capitalise on long-term investments in Cloud and AI tech, paving the way for customised and digitalised client interactions. Smartphones allowed digital banking to mature as a primary engagement platform. A global survey of 12,000 consumers was conducted by IBM Institute for Business Value. Of the respondents, 62 percent were using a mobile app, and 12 using a bank website. While branches still have a crucial role to play in banking intermediation, their numbers have been shrinking since 2012. In Italy, figures are down 38 percent; stands at 32 percent in Germany, 23 percent in Australia, and 10 percent in France and the US. This is primarily due to intense M&A activity — chivvied along by declining demand and revenue pressures from the low-interest rates over the past 10 years. Branch networks 20

Figure 1: Evolving with exponential tech. Three technology pillars to build better customer service. Source: IBM Institute for Business Value

are growing in some advanced and emerging economies, along with economic wealth, the earning capacity of banks, and the provision of services to previously unbanked citizens. Service provision has risen by 53 percent in India, 19 percent in China, and eight percent in Indonesia. In the short term, the recent hike in interest rates is boosting global banking profits. But given clients’ enthusiasm for the convenience and efficiency of digital banking, a return to branch network expansion is unlikely. How have banks responded to this increasing digital adaptation, and the need to shift from branches to mobile contact points? Banks have focused on three strategies supporting customer service. Each phase corresponds to a different investment focus in their tech portfolio (see Figure 1). Clients, accustomed to managing their personal and business lives via mobile apps, are reshaping the landscape. Already, 16 percent of global consumers are comfortable with a branchless, fully digital proposition — and that figure is significantly higher in advanced and emerging economies. In Brazil, 29 percent of respondents report holding a primary account with a neobank — a firm offering applications, software, and other technologies — to streamline banking experiences. But providing digital access doesn’t automatically translate to personalised, frictionless digital services. Apps can’t capture CFI.co | Capital Finance International

the same “soft” information about clients as human branch managers, but machine learning offers new avenues to determine client preferences and needs via their transactions. Advantages notwithstanding, insights and new information alone have failed to drive a comprehensive shift in client intermediation. Mobile, being demand-driven, is effective for users who can self-direct — but most banking revenues originate from offers. Bank officers typically offer products to clients who rely on them to make informed financial decisions. Without sufficient conversational touchpoints, many might pivot to digital banking before resolving important financial decisions. While 69 percent of consumers prefer to execute investments online, financial advisors are 29 percent more likely to trigger investment decisions than factors such as access to planning tools, mobile support, or timely news. First-generation chatbots, powered by natural language processing (NLP), provided rudimentary conversational capabilities to assist clients — but rarely provided an adequate conversational experience. This restricted their capability to handle relationships in a confined, rule-based set of domains. As generative AI matures, this barrier is dissolving. While chatbots answer questions, generative AI engages clients and employees by assisting them in task management — with potential impact on productivity and financial performance.

Figure 2: Almost 8 in 10 institutions are tactically implementing generative AI for at least one use case. 8% take more systematic, enterprise-wide approach. Q: What is you institution's approach to implementing generative AI for each use case presented? Note: For a list of domains and use cases, please see page 44 of IBM 2024 Global Outlook for

Banking and Financial Markets.

Author: Paolo Sironi

The 2024 Global Outlook for Banking and Financial Markets, published by IBM Institute for Business Value, investigated what’s really going on via a global survey of 600 banking executives worldwide (see Figure 2). It found 86 percent of banking organisations are in production, or preparing to go live, with at least one generative AI use-case. Eight percent are taking a systematic approach, covering all business domains: client engagement, risk and compliance, information technology, and other support functions. On the reverse side,

14 percent of organisations have no immediate plans to work with generative AI. No typical starting point or implementation pattern has emerged. The 78 percent of institutions using a tactical approach work on a small number of use-cases or domains — without significant preference. Yet, they reveal more traction in the risk and compliance space, as well as client engagement. Will generative AI’s potential to transform businesses and boost productivity scratch the CFI.co | Capital Finance International

Banks’ investments in tech are not confined to user interfaces; they also address the need to redesign architectures end-to-end. In 2022, tech outlay in the banking sector averaged seven percent of total operating expenses. Besides technology, total operating expenses include workforce and real estate. Correlating the impact of spending on technology to financial performance is not straightforward. More than other industries, traditional banking business models strongly depend on macroeconomic conditions — and regulation defines application. Most importantly, the total spend does not determine outcomes. It’s the use of 21

IBM Thought Leadership

surface of these economic models? Or will it help to course-correct their financial performance? The industry average has proved disappointing since the Global Financial Crisis. This requires meticulous assessment.

technology that holds greater significance. An effective technology spend can increase the value of services that motivate a willingness to pay for superior experiences, protect economic value from cyberattacks, and embed ecosystem interactions into non-banking platforms. Research commissioned by the ECON Committee of the European Parliament has revealed some banks with a lower IT spend outperformed higher-spending counterparts, emphasising the importance of efficient IT use. Cost-to-income dynamics indicate that many banks struggle to translate efficiency-orientated initiatives into structural gains. Similarly, investments in innovation did not achieve expected productivity outcomes. While total operating expenses have been growing over the past 15 years, the percentage directed to technology changed less than other domains. Workforce costs increased by almost five percent of the total amount, whole technology and communication expenses by 0.6 percent. To significantly impact financial performance, tech investment must concurrently address automation and augmentation to re-balance bankers’ contributions to the bottom line, and generate more business value per workforce unit. This cannot happen tactically, but requires investments in platforms and an enterprise-wide strategy grounded on clear AI governance. That engenders trust — not an easy task as new risks emerge (intellectual property considerations across the AI value chain, for example) and best practices are still shaping risk management.

IBM Thought Leadership

Generative AI can be configured as a riskmanagement tool while alleviating the burden of compliance management. But it also presents challenges for financial organisations as they navigate the balance between value, innovation, and risk on platforms that must be both open and trusted. A pragmatic approach is indispensable, guiding institutions through continuous needed to guide the application of this new technology. And this gets personal: every employee must be not only be a risk manager, but also an AI-risk manager. While the precise impact on productivity is yet to be realised, fully exploiting the benefits is likely to require a human response. What is required is a collaborative effort from industries and regulators, and a wholesale reimagining of business models and workflows. i

For more information, visit: ibm.co/2024-banking-financial-markets-outlook ABOUT THE AUTHOR Paolo Sironi is the global research leader in banking at IBM, the Institute for Business Value, and he is author of business literature. His latest Banks and Fintech on Platform Economies has been Amazon bestseller in banking books worldwide. 22

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> Nouriel Roubin:

Where Will the Global Economy Land in 2024? © Project Syndicate 2024

round this time a year ago, about 85% of economists and market analysts – including me – expected that the US and global economy would suffer a recession. Falling but still-sticky inflation suggested that monetary policy would grow tighter before rapidly easing once the recession hit; stock markets would fall, and bond yields would remain high. 24

Instead, the opposite mostly happened. Inflation fell more than expected, a recession was avoided, stock markets rose, and bond yields fell after going higher. One therefore must approach any 2024 forecast with humility. Still, the basic task is the same: start with a baseline, an upside, and a downside scenario, and then assign time-varying probabilities to each. CFI.co | Capital Finance International

The current baseline for many, though not all, economists and analysts is a soft landing: advanced economies – starting with the United States – avoid a recession, but growth is below potential and inflation continues to fall toward the 2% target by 2025, while central banks may start to cut policy rates in the first or second quarter of this year. This scenario would be the best one for equity and bond markets, which have already started to rally in expectation of it.

Winter 2023-2024 Issue

A modest downside scenario is a bumpy landing with a short, shallow recession that pushes inflation lower, faster than central banks expect. Lower policy rates would come sooner, and rather than the three 25-basis-point cuts that the Fed has signaled, there could be the six that markets are currently pricing in. Of course, there could also be a more severe recession, leading to a credit and debt crisis. But while this scenario looked quite probable last year – owing to the commodity-price spike following Russia’s invasion of Ukraine and some bank failures in the US and Europe – it seems unlikely today, given the weakness of aggregate demand. It would become a concern only if there were a new large stagflationary shock, such as a spike in energy prices stemming from the conflict in Gaza, especially if it escalates into a wider regional war involving Hezbollah and Iran that disrupts oil production and exports from the Gulf. Other geopolitical shocks, like new tensions between the US and China, would probably be less stagflationary (lower growth and higher inflation) than contractionary (lower growth and lower inflation), unless trade is massively disrupted, or Taiwanese chip production and exports are impaired. Another major shock could come in November with the US presidential election. But that will bear more on the 2025 outlook, unless there is major domestic instability ahead of the vote. Again, though, US political turmoil would contribute to stagnation rather than stagflation. With respect to the global economy, both a nolanding scenario and a hard-landing scenario currently look like low-probability tail risks, even if the probability of no landing is higher for the US than for other advanced economies. Whether there is a soft landing or a bumpy landing then depends on the country or region.

An upside scenario is one with “no landing”: growth – at least in the US – remains above potential, and inflation falls less than markets and the US Federal Reserve anticipate. Rate cuts would occur later and at a slower pace than what the Fed, other central banks, and markets are currently expecting. Paradoxically, a no-landing scenario would be bad for stock and bond markets despite surprisingly stronger growth, because it implies that interest rates will remain somewhat higher for longer.

For example, the US and some other advanced economies look like they may well achieve a soft landing. Despite tighter monetary policy, growth in 2023 was above potential, and inflation still fell as the pandemic-era negative aggregate supply shocks subsided. By contrast, the eurozone and the United Kingdom had belowpotential growth close to zero or negative for the last few quarters as inflation fell and may miss out on stronger performance in 2024 if the factors contributing to weak growth persist. Whether most advanced economies will have a soft or bumpy landing depends on several factors. For starters, monetary-policy tightening, which operates on a lag, could have a greater impact in 2024 than it did in 2023. Moreover, debt refinancing could saddle many firms and households with substantially higher debt servicing costs this year and next. And if some CFI.co | Capital Finance International

geopolitical shock triggers another bout of inflation, central banks will be forced to postpone rate cuts. It would not take much escalation of the conflict in the Middle East to drive up energy prices and force central banks to reconsider their current outlook. And many stagflationary megathreats over the medium-term horizon could push growth lower and inflation higher. Then there is China, which is already experiencing a bumpy landing. Without structural reforms (which do not appear forthcoming), its growth potential will be below 4% in the next three years, falling closer to 3% by 2030. Chinese authorities may consider it unacceptable to have actual growth below 4% this year; but a growth rate of 5% simply is not achievable without a massive macro stimulus, which would increase already high leverage ratios to dangerous levels. China will most likely implement a moderate stimulus that is sufficient to get growth slightly above 4% in 2024. Meanwhile, the structural drags on growth – societal aging, a debt and realestate overhang, state meddling in the economy, the lack of a strong social safety net – will persist. Ultimately, China may avoid a full-scale hard landing with a severe debt and financial crisis; but it likely looks like a bumpy landing ahead, with disappointing growth. The best scenario for asset prices, stocks, and bonds is a soft landing, though this may now partly be priced in. A no-landing scenario is good for the real economy but bad for equity and bond markets, because it will prevent central banks from following through with rate cuts. A bumpy landing would be bad for stocks – at least until the short, shallow recession looks like it has bottomed out – and good for bond prices, since it implies rate cuts sooner and faster. Finally, a more severe stagflationary scenario is obviously the worst for both stocks and bond yields. For now, the worst-case scenarios appear to be the least likely. But any number of factors, not least geopolitical developments, could be this year’s forecast spoiler. i ABOUT THE AUTHOR Nouriel Roubini, Professor Emeritus of Economics at New York University’s Stern School of Business, is Chief Economist at Atlas Capital Team, CEO of Roubini Macro Associates, CoFounder of TheBoomBust.com, and author of the forthcoming MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them (Little, Brown and Company, October 2022). He is a former senior economist for international affairs in the White House’s Council of Economic Advisers during the Clinton Administration and has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. His website is NourielRoubini.com, and he is the host of NourielToday.com. 25

> Mohamed A El-Erian:

Don’t Extrapolate Last Year’s Trends for the Global Economy © Project Syndicate 2024

ehavioral economists have popularised the term “recency bias” to describe our tendency to be disproportionately influenced by the latest events compared to earlier ones. Could this cognitive phenomenon explain why numerous analysts have a rather optimistic tilt for the world economy in 2024? Or are there really positive trends counterbalancing the obvious and mounting challenges to global growth? 26

A recent Financial Times editorial reflected the prevailing optimism, proclaiming that “after this year’s resilient showing, there is every chance that the reality next year will also be better than expected.” The trends that supported the global economy’s unexpected resilience in 2023 “also offer plenty of reasons to be optimistic for 2024.” This upbeat mood has spread to financial markets. A growing number of commentators have predicted that stock markets will finish the CFI.co | Capital Finance International

year above the already elevated levels of 2023, which were buoyed by a remarkable year-end rally. Today’s optimistic sentiment stands in stark contrast to the grim predictions that dominated the run-up to 2023, when Bloomberg Economics asserted that there was a 100% probability that the United States would fall into a recession. It is also at odds with a range of economic, financial, geopolitical, and political developments. Notably,

Winter 2023-2024 Issue

"While central banks have had a significant effect on market confidence, their impact on actual economic outcomes has been limited. Their ultra-dovish policies during the 2010s helped keep the global economy afloat, yet overall growth remained disappointingly low, unequal, and still detached from climate realities." classes, and facilitating a notable shift in wealth distribution that overwhelmingly benefited the wealthiest. But this trend reversed in 2022 when central banks, led by the US Federal Reserve, belatedly responded to rising inflation by embarking on one of the most aggressive cycles of interest-rate hikes ever. The subsequent losses in both high-risk and low-risk assets seemed poised to continue into 2023 until the consensus forecast shifted toward significant rate cuts and renewed talk of a “Fed put.” While central banks have had a significant effect on market confidence, their impact on actual economic outcomes has been limited. Their ultra-dovish policies during the 2010s helped keep the global economy afloat, yet overall growth remained disappointingly low, unequal, and still detached from climate realities. The 2022 shift to tighter monetary policies was expected to lead to higher unemployment and sluggish growth; instead, the US unemployment rate ended 2023 at a remarkably low 3.7%, and third-quarter annualised growth accelerated to 4.9%. Moreover, the extent to which aggressive interest-rate hikes contributed to reducing inflation has become the subject of debate among economists. These developments suggest that central-bank policies alone – investors currently expect the Fed to cut interest rates by around 1.5 percentage points – may not be enough to generate the necessary growth momentum to withstand the headwinds facing the global economy.

it appears to be predominantly driven by a single factor: central banks aggressively cutting interest rates amid the softest of all soft landings for the US economy. To be sure, central banks have enormous sway over financial-market sentiment. Since the 2008 global financial crisis, central bankers have acted as the world’s leading policymakers – flooring interest rates, flooding economies with liquidity, fueling huge gains across virtually all asset

In fact, one would be hard-pressed to find a systemically significant economy poised for breakout growth in 2024. As China remains saddled with an economic model that yields diminishing returns, the authorities have acknowledged that its growth rate is constrained by domestic inefficiencies, pockets of excessive debt, increased global fragmentation, and the West’s weaponisation of trade and investment. Europe, for its part, is unlikely to replicate last year’s unexpectedly strong performance, given especially the sluggishness of global manufacturing and Germany’s economic stagnation. Once again, commentators seem to be placing their hopes on US economic exceptionalism. But things have evolved over the past year. Lower CFI.co | Capital Finance International

pandemic-era household savings and higher debt act as headwinds to America’s remarkably agile and resilient economy. Moreover, recent interest rate increases are likely to continue to constrain new household mortgages, companies navigating the mountain of corporate debt expected to mature in 2025, and highly leveraged non-bank institutions dealing with their losses. The current geopolitical climate also is not conducive to robust growth. The devastating aftermath of Hamas’s brutal October 7 attack against Israel, in which Israel has destroyed much of Gaza and is reported to have killed more than 23,000 Palestinians – mostly civilians, including thousands of women and children – has challenged hopes of containing the crisis. Israel and the Iran-backed Lebanese militia Hezbollah appear headed toward greater hostilities, and attacks against commercial vessels in the Red Sea by the Yemeni Houthis are already disrupting global trade in a manner that renews stagflationary pressures on the global economy. Beyond the Middle East, Western democracies and many developing countries face important elections in 2024. Given these circumstances, the chances of robust global growth in 2024 appear tenuous. Nevertheless, there are two ways to mitigate the threats posed by an increasingly fragile economic and geopolitical environment. First, policymakers need to launch major economic-policy overhauls, focusing on structural reforms aimed at cultivating the growth and productivity engines of tomorrow. Second, the international community needs to do better to end the atrocities in the Middle East before that conflict spreads even further across the region and fuels geopolitical turmoil beyond it. Without these interventions, today’s optimists will be sorely disappointed by year’s end. i ABOUT THE AUTHOR Mohamed A El-Erian, President of Queens’ College at the University of Cambridge, is a professor at the Wharton School of the University of Pennsylvania and the author of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse (Random House, 2016) and a co-author (with Gordon Brown, Michael Spence, and Reid Lidow) of Permacrisis: A Plan to Fix a Fractured World (Simon & Schuster, 2023). 27

LONG LIVE FREEDOM:

‘THE MADMAN’ TAKES CHARGE — TO DELIGHT OF ARGENTINIANS

But Javier Milei, newly inaugurated president of Argentina, has a hard row to hoe...

n an inaugural address delivered on the steps of the Argentina’s domed neoclassical congress building, President Javier Milei reminded the assembled crowd that “all the money” had gone — and austerity was looming.

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His message was met with roars of applause, even as he warned the nation to brace for massive cuts in public spending. Milei supporters from all parts of the country had travelled to Buenos Aires in their tens of thousands to witness a turning point in their nation’s history. While short on specifics and details, Milei promised to heal the ailing economy with shock therapy and drag the country into a new era of “peace and prosperity”. He also vowed to end governmental corruption and to fight organised crime. He took a lead from former US president Donald Trump’s 2017 inaugural speech when he vowed to return power to “the people”. Among the foreign dignitaries present were King Felipe VI of Spain, Ukrainian President Volodymyr 28

Zelensky, and Hungarian Prime Minister Viktor Orbán. Brazilian President Luis Inácio Lula de Silva was noted for his absence. Dismissed by the political establishment as a radical libertarian, mercurial eccentric or farright extremist, Javier Milei cruised to victory in the decisive second round of the presidential election in November. He secured about 56 percent of the vote — and delivered a knock-out blow to the ruling Peronist coalition Unión por la Patria. Visibly annoyed by insults hurled at her, outgoing vice-president Cristina Fernández de Kirchner was caught on camera flipping the bird at the crowd of Milei fans. De Kirchner was widely considered the power behind the throne of former president Alberto Fernández over the past four years. CRISIS SUPREME With inflation running at an annualised 200 percent before the end of 2023, and over 40 percent of Argentines living in poverty, the task CFI.co | Capital Finance International

awaiting the incoming administration is nothing short of titanic — as noted by the incoming president. In his first official act, Milei halved the number of government ministries, from 18 to nine. His plan to shutter the central bank and replace the long-suffering peso with the US dollar has for now been shelved due to an acute lack of forex. Although Argentina is awash in US dollars, and home to an estimated 10 percent of all the greenbacks in global circulation, precious few are in state coffers. The country’s net currency reserves have dipped an estimated $7bn into the red. This year, and soon, Argentina must somehow come up with $40bn to pay its financial obligations with the International Monetary Fund and other creditors. In a largely symbolic gesture, the new president did order the central bank to stop minting pesos. He also shaved five percent off the federal budget as a first step towards re-establishing fiscal discipline. Earlier, Milei had promised to take

Javier Milei

a chainsaw to the budget and cut expenditure across the board by 15 percent or more. Known as “El Loco” (The Madman) for his extravagant behaviour and sometimes outlandish ideas, Milei is difficult to pigeonhole. A selfdescribed anarcho-capitalist, he believes that the state is the problem rather than the solution. “Taxation,” Milei says, “is nothing more than armed robbery by the government.” A somewhat esoteric ideology, anarchocapitalism revolves around stateless societies, free of government, and held together by contracts and private agencies. The name of the fringe movement was coined by the American libertarian economist Murray Rothbard in 1971. Rothbard argued that the power of the state restricts individual rights and dampens prosperity by creating social and economic problems.

This backpedalling coincides with the first signs of Argentina’s powerful labour unions

President Milei repeatedly warned that he would not be swayed by protests — even though anger on the streets has prematurely ended the careers of three presidents since Argentina’s return to democracy in 1983. PRAISE FOR A FORMER FOE The post-election moderation of Milei’s views was welcomed by investors concerned about his ability to govern without a congressional majority. The president seems to have abandoned the idea of cutting ties with China — “ruled by a regime of assassins” — and other communist countries. He declined an invitation for his country to join the BRICS group, extended by Chinese President Xi Jinping. In terms of foreign policy, Milei is determined to align his country with the United States, Israel, and the West. He has said he would not “push or promote relationships with dictatorships, communists; those who have no regard for CFI.co | Capital Finance International

peace or don’t hold democratic values”. While maintaining regular relations with China, Argentina will no longer toe the Beijing line to secure soft loans and trade and investment perks. Though frequently described as a right-wing extremist, Javier Milei is well placed among conservative free-marketeers. During the election campaign, he heaped praise on the empowering policy formulae of the late British prime minister Margaret Thatcher. (Who, in 1982, dispatched an expeditionary force to recover the Falkland Islands after their invasion and annexation by Argentina.) The mention of the former foe was seen as particularly gutsy in a country still bearing the psychological scars from the defeat suffered four decades ago. Milei does not seem to lack bravado or courage. He has a plan for Argentina to rise from the ashes and reclaim its destiny, manifest or otherwise, as a regional power. That plan — hare-brained and far-fetched though it may seem — is more than the previous administration could offer. Which was more of the same, embellished with good intentions and empty promises. With almost nothing left to lose, Argentine voters have chosen hope over past experience. i 29

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Since his surprise election win, Milei has toned his message down and cautioned his followers that many decades of “Peronist-socialist” rule could not instantly be undone. And he no longer brands climate change as a “Marxist plot”.

and social movements mobilising against plans to end subsidies on energy, transport and food staples. There are also fears that thousands of civil servants could be dismissed, and state assets such as oil company YPF and Aerolineas Argentinas sold.

> IMF Team and Argentine Authorities Reach

Staff-Level Agreement on Seventh Review

Details of funding developments are announced one month after the inaugural address.

Cover Story

he administration of Argentine President Javier Milei has been in talks with IMF officials in Buenos Aires to unlock the seventh review of the Extended Fund Facility (EFF) programme and free-up new funds for debt repayments. An IMF team led by Luis Cubeddu, deputy director of the Western Hemisphere Department, and Ashvin Ahuja, mission chief for Argentina, has reached understandings on a set of economic policies to restore macroeconomic stability in the country. The team issued a statement after the discussions. IMF staff and the Argentine authorities aim to put the current programme back on track. The agreement, subject to “continued and durable” 30

policy implementation, will be brought forward for approval by the IMF executive board in coming weeks. On completion of the review, Argentina would have access to about $4.7bn — consistent with some rephasing within the envelope of the programme. “The proposed disbursement is intended to support the new authorities’ strong policy efforts to restore macro-economic stability and help Argentina meet its balance of payments needs,” the statement read. “The new administration inherited an exceptionally challenging economic and social situation, with rising macro-economic imbalances primarily reflecting inconsistent CFI.co | Capital Finance International

and expansionary policies, especially during the final quarters of last year.” Monthly inflation rose to 12.8 percent in November, reserves were depleted, the currency became more overvalued, and the FX gap rose to historic highs. Continued reliance on central bank financing and interventionist measures “led to a further deterioration of the central bank’s balance sheet” and an overhang of importers’ commercial debt. Meanwhile, real wages fell to multi-year lows, and poverty levels are estimated to have exceeded 45 percent. “The programme went severely off track,” the IMF said. “The end of September primary fiscal deficit and domestic arrears targets were missed,

Winter 2023-2024 Issue

The plan also looks to scale-up social assistance to protect the most vulnerable sectors of society. An Emergency Decree has been issued and an Omnibus bill submitted to congress to support the authorities’ plans for stability and growth. The IMF notes that while the path to stability will be challenging, initial actions had been successful in avoiding an intensification of the crisis. “This marked an inflection point, with central bank FX purchases exceeding $3.6bn over the past month, and some Argentine corporates starting to tap international markets. “In the initial stages, the elimination of legacy price controls and correction of the FX misalignment will have an inflationary impact and deepen the contraction in activity that is already under way.” As policies are implemented and credibility is rebuilt, a gradual disinflation process should take hold, the IMF said, accompanied by a further strengthening in the external position — and an eventual recovery in output, demand, and real wages. Given the uncertainties, the authorities said they were committed to “recalibrating polices as needed”.

and preliminary data suggest that the end-year targets were missed by an even larger margin. “The targets for net international reserves were also missed, with deviations relative to end-year target by around $15bn prior to the start of the new administration.” AMBITIOUS STABILISATION PLAN “Against this backdrop, President Javier Milei and his economic team moved quickly and decisively to develop and begin to implement a strong policy package to restore macro-economic stability,” the statement continued, “and (they) are fully determined to bring the current programme back on track.

Social protection. The authorities have reinforced social assistance via the child allowance and food stamp programmes, while moving away from social programmes distributed through intermediaries. They plan to preserve the real value of pensions and scale-up social assistance as conditions warrant. FX policy and reserves. Following the large step devaluation in mid-December, the authorities’ exchange-rate policy will continue to support reserve accumulation goals. They have abandoned the “opaque system” of administrative import controls (SIRA) and are in the process of addressing the large importer debt overhang. This involves offering FX instruments to importers who properly register CFI.co | Capital Finance International

Monetary policy. This stance will evolve to support money demand and disinflation, while monetary policy framework and operations will be adjusted to strengthen its anchoring role. The authorities have committed to end central bank credit to the government, and will continue to reduce the large peso overhang, while also gradually strengthening the central bank’s balance sheet. Financing plans. Consistent with the fiscal programme, the Argentine government will not seek any form of net market financing, focusing instead on improving the maturity profile of domestic debt. Rebuilding relationships with international capital markets is a top priority. Structural policies. Authorities are determined to address the long-standing impediments to growth and exports, and boost Argentina’s energy and mining potential. This will include increasing competition and cutting red tape. Recent legislative initiatives represent an important step in this direction, for which political support is being sought. Programme modalities. The authorities have updated targets, consistent with their plans for a more ambitious fiscal and external consolidation. IMF staff expressed gratitude to the Argentine authorities, led by Minister Caputo, Central Bank president Santiago Bausili, and Chief of Cabinet Nicolas Posse. They praised their “deep engagement, as well as their strong commitment to the hard work of restoring economic stability”. Their efforts would form the basis for a more sustainable and vigorous private sector-led economy to benefit all Argentines. Based on the preliminary findings of the mission, IMF staff will prepare a report for the executive board for discussion and decision. i

End-of-Mission reports include preliminary findings after an IMF visit to a country. The views expressed are those of IMF staff and do not necessarily represent the views of its executive board. 31

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“The authorities are building social and political support for their stabilisation plan. The plan centres on the establishment of a strong and credible fiscal anchor, along with actions to rebuild reserves, correct relative price misalignments, strengthen the central bank’s balance sheet, and create a simpler, rules-based, and market-oriented economy.”

KEY UNDERSTANDINGS Fiscal policy. Authorities intend to achieve a primary surplus of two percent of GDP this year (consistent with overall balance), through a combination of revenue and expenditure measures. Revenues are expected to be temporarily supported by higher trade-related taxes, as well as gains from the normalisation of agricultural production. Expenditure rationalisation will be underpinned by reductions in administrative costs, energy and transport subsidies, discretionary transfers to provinces and state-owned enterprises, and lower-priority infrastructure spending. Initial measures will be complemented by efforts to safeguard an overall fiscal balance, through improvements in the efficiency of tax and expenditure systems.

their commercial debts. They have moved to a more market-based regime and abandoned the previous approach of intervening in the parallel and non-deliverable futures FX markets, while lifting trading restrictions. They are committed to eliminating multiple currency practices and exchange restrictions in the near term. They will also be seeking to unwind capital-flow management measures (CFMs) as imbalances are addressed. These policies are expected to lead to a $10bn build-up in net reserves by the end of 2024, including $2.7bn accumulated during the final weeks of 2023.

> Argentina’s Milei Sings Praises of Capitalism and

Demonises Socialism at WEF Address

‘Ultimately, a successful entrepreneur is a hero...’

Cover Story

'm here to tell you that the Western world is in danger.” This was the grim opening to a special address given by Argentina’s President Javier Milei to the WEF in Davos.

And, he told the assembled delegates at the World Economic Forum’s annual meeting, that danger had arisen because those charged with defending the values of the West had been “co-opted by a vision of the world that inexorably leads to socialism, and thereby to poverty”. Leaders of the Western world had abandoned the “model of freedom” for wildly differing definitions of collectivism, Milei said. “Some have been motivated by well-meaning individuals who are willing to help others, and others have 32

been motivated by the wish to belong to a privileged caste.” Collectivist experiments would never be the solution to global problems, he added. “Rather, they are the root cause. Do believe me: no one is in better placed than us, Argentines, to testify to these two points.”

industrial revolution in the 19th Century, he said, and had brought about continued growth. Since then, global per-capita GDP had multiplied 15fold, lifting 90 percent of the global population out of poverty.

His country adopted the model of freedom in 1860, and embraced collectivism over the course of the past century. “We saw how our citizens started to become systematically impoverished.”

“If you look at the period between the year 1900 and the year 1950, the growth rate accelerated to 1.66 percent a year,” he said. “So ... if you take the period between 1950 and the year 2000, you will see that the growth rate was 2.1 percent, which would mean that in only 33 years we could double the world's per capita GDP.”

Milei said data showed that free enterprise capitalism provided the only possible path — and “the only morally desirable system” — to ending world poverty. The evolution of economic growth was triggered by capitalism and the

This trend was alive today, he claimed. “If we take the period between the years 2000 and 2023, the growth rate again accelerated to three percent a year, which means that we could double world per capita GDP in just 23 years.”

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what Israel Kirzner, for instance, calls a market discovery process. If the goods or services offered by a business are not wanted, the business will fail ... The market is a discovery process in which the capitalists will find the right path as they move forward.” If the state “punished” successful capitalists, “they will destroy their incentives” resulting in lost production. Collectivism, by inhibiting discovery processes, hampered entrepreneurs, he believes. “Thanks to free-trade capitalism, the world is now living its best moment,” he told the WEF. “Never in all of mankind or humanity's history has there been a time of more prosperity than today. This is true for all. “The world of today has more freedom, is rich, more peaceful and prosperous.” He qualified this by adding: “This is particularly true for countries that have more economic freedom and respect the property rights of individuals.” Countries with greater freedoms were 12 times richer than those that were repressed, by Milei’s calculations. “The lowest percentile in free countries is better off than 90 percent of the population in repressed countries. Poverty is 25 times lower and extreme poverty is 50 times lower. And citizens in free countries live 25 percent longer than citizens in repressed countries.” Milei quoted “the greatest authority on freedom in Argentina”, Professor Alberto Benegas Lynch Jr, who said that libertarianism was the unrestricted respect for the life project of others based on the principle of non-aggression, in defence of the right to life, liberty and property. The empirical evidence for the benefits of freetrade capitalism was undeniable, Milei said, with no doubt of its superiority in productive terms. Attacks by the Left on capitalism’s morality were “unjust”, he said. “They say that capitalism is evil because it's individualistic, and that collectivism is good because it's altruistic. “Of course, with the money of others.”

“This means that the state is financed through coercion and that the higher the tax burden, the higher the coercion, and the lower the freedom.” Milei criticised the notion of the economy as a pie to be shared. “It's wealth that is generated in

Successful capitalists, in the president’s view, are “social benefactors who ... contribute to the general wellbeing. Ultimately, a successful entrepreneur is a hero.” This, he said, was the model that Argentina was advocating for the future: “A model based on the fundamental principle of libertarianism. The defence of life, of freedom and of property. “Now, if the free enterprise, capitalism and economic freedoms have proven to be extraordinary instruments to end poverty in the world, and we are now at the best time in the CFI.co | Capital Finance International

“(It is) precisely because in countries that should defend the values of the free market, private property and the other institutions of libertarianism, sectors of the political and economic establishment are undermining the foundations of libertarianism, opening up the doors to socialism and potentially condemning us to poverty, misery and stagnation.” He denounced socialism as being “always and everywhere an impoverishing phenomenon that has failed in all countries” — economically, socially, culturally. It had “also murdered over 100 million human beings”, he added, without expanding on that. The West needed to come to grips with those who, “even after the fall of the Berlin Wall”, continued to advocate for socialism. Leaders, thinkers and academics were too often relying on “a misguided theoretical framework” to undermine the fundamentals of the system that has given us the greatest expansion of wealth and prosperity in our history. The framework he referred to was that of Neoclassical economic theory, which designed a set of instruments that end up serving intervention by the state, socialism, and social degradation. What Neoclassicals “fell in love with” did not map reality, so “they put down their mistakes to supposed market failures rather than reviewing the premises of the model”. Regulations had been introduced under the pretext of a supposed market failure, Milei believes, which create distortions in the price system, and prevent economic calculus.” The presence of growing returns involved concentrated structures, or monopolies. “How come, then, something that has generated so much well-being for the Neoclassical theory is a market failure?” he asked. “Neoclassical economists think outside of the box. When the model fails, you shouldn't get angry with reality, but rather with a model, and change it. The dilemma faced by the Neoclassical model is that they say they wish to perfect the function of the market by attacking what they consider to be failures. “But in so doing, they don't just open up the doors to socialism, but also go against economic growth.” Regulating monopolies would automatically destroy economic growth, he said. “The empirical evidence that (state intervention) has 33

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Social justice was not just, and nor did it contribute to general well-being. “It's an intrinsically unfair idea because it's violent. It's unjust because the state is financed through tax and taxes are collected coercively. Or can any one of us say that we voluntarily pay taxes?

Its fundamental institutions were private property, markets free from state intervention, free competition, and the division of labour and social co-operation, in which “success is achieved only by serving others with goods of better quality or at a better price”.

history of humanity, it is worth asking why I say that the West is in danger,” he went on.

failed couldn't have been otherwise. The solution proposed by collectivists is not greater freedom, but rather greater regulation, which creates a downward spiral.” Socialists had been forced to change their agenda, he said, and had left behind the class struggle based on the economic system and replaced it with other supposed social conflicts. He invoked religion and attacked gender equality. The first of these new battles was “the ridiculous and unnatural fight between man and woman”, Milei said. “Libertarianism already provides for equality of the sexes. The cornerstone of our creed is that all humans are created equal, and that we all have the same inalienable rights granted by the Creator, including life, freedom and ownership.” “All that the radical feminism agenda has led to is greater state intervention to hinder economic process,” he said, “giving jobs to bureaucrats who have not contributed anything to society. Examples are ministries of women or international organisations devoted to promoting this agenda.” Another conflict was that of humans against Nature, “even going as far as advocating for population control mechanisms or the abortion agenda”.

These “harmful ideas” had taken hold in society. “Neo-Marxists have managed to co-opt the common sense of the Western world, and this they have achieved by appropriating the media, culture, universities, and also international organisations,” the president said. “The latter case is the most serious one, probably because these are institutions that have enormous influence on the political and economic decisions of their member states.” The case of Argentina was a demonstration that no matter how rich one might be, if measures were adopted that hinder the free functioning of markets, “the only possible fate is poverty”. “Do not be intimidated by the political caste or by parasites who live off the state,” he concluded. “Do not surrender to a political class that only wants to stay in power and retain its privileges. You are social benefactors. You are heroes. You are the creators of the most extraordinary period of prosperity we've ever seen. “Let no one tell you that your ambition is immoral. If you make money, it's because you offer a better product at a better price, thereby contributing to general wellbeing.” i

> The Tribe of Davos Globalists Meets, and

Rebuilding Trust is Vital. Milei Speaks.

By Otaviano Canuto

Cover Story

he World Economic Forum Annual Meeting took place in Davos, Switzerland, in January. For 54 years, members of the world’s business elite have been making the pilgrimage, whether to interact with customers, suppliers, intellectual leaders on broad topics or — in an informal environment — with the representatives of governments and multilateral authorities. The forum has established itself as a stage from which important announcements are made, and the opinions of key players obtained. I had the opportunity to witness the forum in action back in 2003, as a member of the Brazilian delegation. There was considerable interest in what the first Lula government would deliver. Rarely have I seen such a large group of renowned economists in one room. They listened to addresses on policy plans by the then-newly appointed Minister of Finance, Antônio Palocci, and the president of the Central Bank, Henrique Meirelles. Lula was a central focus, and the forum served to satisfy some of the universal curiosity. Chinese President Xi Jinping knew how to use the platform to defend globalisation and free trade in 2017. China managed to climb the 34

per-capita income ladder by taking advantage of globalisation. At that time, it had to deal with the anti-China stance taken by the Trump administration. There could not have been a better platform from which to deliver his message. The official motto of this year’s event was “Rebuilding Trust”. Geopolitical risks dominated discussion, from the wars in Gaza and Ukraine to the possible consequences of Trump’s return to the White House. This was despite a degree of optimism generated by some favourable surprises in the global economy. At the previous forum, the dominant view — later contradicted — was that the economy would go into decline. It was agreed that there was a need for more trust and co-operation to mitigate risks. January 2003 was also a time that fell under the shadow of geopolitics. The looming invasion of Iraq — which happened two months later — was discussed. The memory of 9/11 was fresh enough in memory to feature in debates. But the predominance of the economic globalisation agenda was crystal clear. Not so in 2024. The Global Risks Report proposed highlighted 10 major risks for the next decade. Five referred to environmental issues: CFI.co | Capital Finance International

Winter 2023-2024 Issue

"The Davos Forum is so deeply identified with the expansion and strengthening of globalisation that it could not emerge unscathed from its recent partial retrenchment. Fears of deglobalisation were predominant." 1. Extreme weather events 2. Critical change in Earth systems 3. Loss of biodiversity and ecosystem collapse 4. Scarcity of natural resources 5. Pollution. The report noted that such environmental risks could exceed tipping points. It also highlighted growing political polarisation, the technological risk of AI evolving beyond the reach of regulatory control, and new security concerns accompanying a rise in geopolitical tensions. These themes predominated in the open online sessions I attended. The Davos Forum is a giant networking event, and the pandemic did nothing to change that. But something seems to have changed now: what political scientist Samuel Huntington described in 2004 as an elite global group with “little need for national loyalty, [...] seeing national borders as obstacles that are fortunately disappearing and national governments as residues of the past.” He was labelling the Davos delegates as a tribe of globalists. The Davos Forum is so deeply identified with the expansion and strengthening of globalisation that it could not emerge unscathed from its recent partial retrenchment. Fears of deglobalisation were predominant. It is paradoxical that, in addition to the smaller presence of globally significant public authorities compared to previous forums, the event featured a speech by the new president of Argentina, Javier Milei.

Cover Story

He warned Davos about the risks of being captured by a worldview that “leads to socialism and, consequently, poverty”. Milei came across as many of the far right have characterised the ‘globalists’ (as resembling the people who attend the World Economic Forum Annual Meeting). It must have been odd for the Davos globalists to receive such a message. i

> Scott Barrett, Noah Kaufman, and Joseph E Stiglitz:

How to Enforce Climate Agreements with Trade Measures © Project Syndicate 2024

asual observers of the recent United Nations Climate Change Conference in Dubai (COP28) can be forgiven for attributing high stakes to the event. “We are on the brink of a climate disaster, and this conference must mark a turning point,” UN Chief António Guterres warned during the proceedings. Then, when a final agreement was reached, Canadian Environment Minister Steven Guilbeault hailed its “breakthrough commitments on renewable 36

energy, energy efficiency, and the transition away from fossil fuels.” But the truth is that neither the contents of the Dubai agreement, nor what was left out of it, will have much impact on climate change. We have seen this movie many times before, starting with the 1992 treaty that created the UN Framework Convention on Climate Change. Back then, all countries committed to preventing “dangerous” climate change, which would have required CFI.co | Capital Finance International

dramatic cuts in annual global greenhouse-gas (GHG) emissions. But emissions have continued to rise, albeit at a lower rate than they might have otherwise. Voluntary commitments have proven mostly hollow. To be clear, we are not suggesting that fevered warnings about climate risks and the need for action are misguided. As economists who have spent decades studying climate change, we recognize that some of the economics literature

Winter 2023-2024 Issue

claims that relying on carbon prices alone is the most cost-effective way to reduce emissions. In fact, the many market failures that stand in the way of a rapid, equitable transition to netzero emissions underscore the need for a broad portfolio of policies (which includes carbon prices). In a world of urgent challenges, policymakers and the public have limited attention for climate change. Rather than focusing so much on international conferences that require unanimous support, entail no accountability, and ultimately have little effect on emissions, we should be directing our energies toward negotiating agreements that can achieve transformational progress in narrow, but crucial, economic sectors. We already know that this more targeted approach works. Consider the Montreal Protocol, which protects the stratospheric ozone layer, or the International Convention for the Prevention of Pollution from Ships (MARPOL). Unlike the voluntary commitments made at each climatechange COP, these two treaties established binding obligations that can be enforced through international trade markets. The Montreal Protocol bars participating countries from trading in chlorofluorocarbons (ozonedepleting chemicals) with non-participating countries; and under MARPOL, access to ports is restricted to ships that meet certain technical standards. These two treaties have worked because they create positive feedback effects: the more countries that agree to participate, the higher the pressure on others to join. As a result, the ozone layer will return to its pre-1980 level in a few decades, and over 99% of oil is now shipped according to MARPOL specifications, virtually eliminating a major source of marine pollution.

has too often been used by those opposing a meaningful response. As we note in a recent report for the Institute of Global Politics, economic models that purport to identify “optimal” climate policies often systematically underestimate the benefits of emissions reductions and overestimate their costs. Moreover, economists have let their admiration for a single policy solution, carbon taxes, get the better of them. This has given rise to misleading

The same approach has already worked for climate agreements. The Kigali Amendment to the Montreal Protocol phases down hydrofluorocarbons, a powerful greenhouse gas. Like the examples above, the amendment incorporates a trade measure designed to create a positive feedback effect once a critical threshold of participation has been met. Owing to this structure, ratification is in every country’s interest. Even in polarized America, it received strong bipartisan support in the US Senate last year. We should now do the same for other major emissions sources. Aluminum production, for example, is responsible for about 2% of global GHG emissions each year. Yet by replacing carbon anodes with inert anodes, the industry could dramatically reduce its emissions. An aluminum treaty might require that parties both switch to inert anodes and import aluminum only from other participating parties. CFI.co | Capital Finance International

In contrast to unilateral threats of trade measures, this approach to international climate agreements is fundamentally cooperative and multilateral. It differs from unilaterally imposing domestic regulations on foreign production, as the European Union is doing, or from imposing carbon-based tariffs on certain imports without any corresponding domestic regulations, as some in the US have proposed. These methods may only invite retaliation. To succeed, international climate agreements must be compatible with countries’ economic strategies, not least those of lower-income countries like India, where most future emissions will occur. That is why the Montreal Protocol and Kigali Amendment include provisions whereby richer countries agree to help poorer countries pay the costs of compliance. The international community took the wrong lesson from the Kyoto Protocol. It should be obvious by now that relying on voluntary commitments and aspirational targets does not work. The problem with Kyoto was that it did not get the incentives right. By focusing climate agreements on individual sectors, linking obligations to trade access, and addressing the “common but differentiated” roles of rich and poor countries in international negotiations, the world will have a better chance to achieve the goals outlined in the Dubai agreement: a rapid and equitable transition to net-zero emissions. Then, future climate-change COPs can focus on other consequential issues, rather than on crafting the right mix of hollow words that everyone can agree on. i ABOUT THE AUTHORS Scott Barrett is the Lenfest-Earth Institute Professor of Natural Resource Economics at Columbia University’s School of International and Public Affairs and the Earth Institute. Noah Kaufman, a senior research scholar at the Center on Global Energy Policy at Columbia’s School of International and Public Affairs, is a former senior economist for the Council of Economic Advisers and a former deputy associate director of energy and climate change at the White House Council on Environmental Quality. Joseph E Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, is a former chief economist of the World Bank (1997-2000), chair of the US President’s Council of Economic Advisers, and co-chair of the High-Level Commission on Carbon Prices. He is a member of the Independent Commission for the Reform of International Corporate Taxation and was lead author of the 1995 IPCC Climate Assessment. 37

> Winter 2023-2024 Special

Looking Back, Leaning Forward, Listening Hard, Fingers Crossed CFI.co lets some of recent history’s greatest minds shine a light on economic policy — then and now.

select group of philosophers left indelible traces on the way we perceive and approach fiscal policy, market dynamics, and the interplay between government and free enterprise. The 20th Century — remember that? — was a time of economic upheaval and transitions. The same can be said of the 21st, perhaps, but the 1900s produced a plethora of influential ideas and ideals. Here, CFI.co dusts off the various perspectives that have formed the contemporary discourse by delving into the profiles of six of the most influential economists of (reasonably) recent times.

First up, John Maynard Keynes, whose innovative theories during the Great Depression redefined the role of government in economic stabilisation. Then we look over the life and times of Milton Friedman, fervent supporter of free markets and fierce opponent of nannying governments. His monetarist theory provided an alternative to those of Keynes. Add Friedrich Hayek to the mix, for a conceptual basis that continues to impact modern thought with an unshakeable belief in classical liberalism (and, yep, the free market). Joseph Schumpeter popularised the term "creative destruction" — capitalism's dynamic, evolutionary nature — which we know as the

London: Bank of England and Equestrian Statue of the Duke of Wellington

CFI.co | Capital Finance International

definitive buzzword of the 2020s: Disruption. Paul Samuelson, Nobel laureate and prolific author, popularised economic theory and impacted generations of academics. We look at him, too, and we won’t forget Amartya Sen, the thinker who broadened the scope of economics to include welfare, poverty, and social justice. Each profile provides a chink of light that allows us a glimpse into the minds of titans, allowing us to see how their theories emerged — and how they continue to resonate. These aren’t historical artefacts, they’re the concepts that have shaped the policies and discussions of today’s global economy. i

Winter 2023-2024 Issue

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> JOHN MAYNARD KEYNES John Maynard Keynes Got Them Talking, and They’re Talking Still It all starts with Keynes, really: Was he a product of his time, or the economist of an era? In retrospect, John Maynard Keynes seems somehow destined for a life of discovery and influence. He was born in Cambridge, England, in 1883, to an intellectually dynamic family. His father, John Neville Keynes, was an economist and a lecturer in moral sciences at the University of Cambridge; his mother, Florence, was a social reformer. The home environment was the ideal growth medium for a developing an inquiring mind. Keynes was educated at Eton and King's College, Cambridge, and strongly influenced by Alfred Marshall’s economic theory. Close association with the Bloomsbury Group, the forward-thinking writers, thinkers and artists of the era, extended his horizons. In his 1919 essay, The Economic Consequences of the Peace, Keynes criticised economic components the of the Treaty of Versailles — and demonstrated his mastery of several subjects. But it was the publication of The General Theory of Employment, Interest, and Money in 1936 that linked his name with an enduring change in economic thinking. Keynes argued against market auto-correction during economic downturns, and called on government to promote demand and fight unemployment. Keynesian economics, as his views became known, have been implemented worldwide — to varying degrees of success. His ideals underpinned the Marshall Plan, which helped to reconstruct European economies after WWII. The plan's efficacy is frequently cited as proof of the Keynesian pudding. During the 2008 global financial crisis, Keynesian-inspired stimulus packages were deployed — and averted greater economic disaster. The adoption of his economic theories, however, has not been without criticism. Many Western economies struggled with stagflation — high inflation and concurrent unemployment — in the 1970s. Keynesian policies seemed ill-equipped to address this, and the era saw a revival of classical theories such as monetarism, as advocated by Milton Friedman. Two of Keynes' works, A Treatise on Money (1930) and A Tract on Monetary Reform (1923), delved into the complexities of currency, interest rates, and inflation. They cemented his status, 40

in popular perception, as an economist with an imagination. Keynes' fans regard him as a trailblazing thinker who radically altered the governmental approach to economic policy — particularly during crises. His plea for official involvement to stabilise wayward economies has had a lasting impact on policymakers. His detractors — particularly those who favour free-market economics — believe that his CFI.co | Capital Finance International

advocacy for government intervention can lead to market distortions, runaway inflation, and public debt. John Maynard Keynes was a towering figure, and his studies have had huge academic impact. When applied to the real world, his theories have met with varied outcomes. The ongoing disputes, and modifications of his proposals, writings and advice, illustrate the evolving nature of economic thoughtleadership.

Winter 2023-2024 Issue

> MILTON FRIEDMAN One of the Great Architects of Global Economic Policy A legend and an ongoing dispute over inherent market efficiency and government interference... That towering figure, Milton Friedman, was a revolutionary thinker who indisputably changed the economic landscape. Born in New York to working-class immigrant parents in 1912, Friedman was a supporter of free markets, limited government interference, and monetarism. In pursuing those convictions, he influenced modern global economic policy. Friedman's schooling at Rutgers and the University of Chicago paved the way for his career. He was inspired by the Chicago school's emphasis on free-market economics — and his admiration for that theory would reverberate throughout his work in coming years. Friedman's A Monetary History of the United States, 1867-1960, co-authored by Anna Schwartz, substantially altered the understanding of the origins of the Great Depression. His claim that the Fed's inadequacies were a primary cause turned the focus of economic debate to the function of monetary policy. Friedman persuasively argued for a direct connection between economic and political freedoms. He supported proposals such as a volunteer military, rather than conscription. He also wanted a “negative income tax”, and promoted the idea of school vouchers, a certificate of government funding. His conviction in the market's efficiency — without the government’s interference — ran through all his work. Friedman's influence was particularly felt in Latin America, thanks to the students he came to know as the "Chicago Boys". These Chilean economists had studied under him at the University of Chicago. During the Pinochet era, they implemented his free-market ideals in Chile. The results were transformational, and while they have been credited with stabilising the country’s economy and lowering inflation, they are also said to have worsened inequality. They were, after all, implemented in a dictatorship. Friedman's supporters applaud him for his advocacy of individual liberty. "There are very few people over generations who have ideas that are sufficiently original to materially alter the direction of civilisation," said former Fed chair Alan Greenspan. “Milton is one of those very few people."

But Friedman had his share of naysayers. Nobel laureate Paul Krugman criticised aspects of his legacy, claiming that Friedman's confidence in the free market was "a bit naive". Many point to the 2008 financial crisis as proof of that.

His ideas continue to spark debate. Some applaud his vision of a minimally regulated economy, others contend that it ignores fundamental social and ethical considerations.

Friedman's impact has been long-lasting. His contributions to monetary theory, and his persuasive arguments for economic liberty, influenced generations of policymakers. His ability to communicate complex ideas to the layperson — particularly via his regular column in Newsweek and his book Free to Choose — bolstered his reputation and following.

Milton Friedman's historical importance cannot be ignored. His views and ideas spurred debate that continues to this day. Whether considered as a visionary or a divisive character, his legacy lives on. And so do discussions about the delicate balance between market efficiency and government involvement...

CFI.co | Capital Finance International

> FRIEDRICH HAYEK How One Man Balanced his Distrust of Government Interference with a Fervour for Free-Market Capitalism Former Tory PM Margaret Thatcher slammed Hayek’s book on the table at a party confer-ence and declared: ‘This is what we believe!’ Friedrich Hayek’s work, encompassing economic theory, psychology and political philosophy, helped to shape the framework of free-market capitalism and classical liberalism. Hayek was born in Vienna, Austria, in 1899, into a scholarly family that encouraged learning. He served in World War I, which influenced his views on society — and economics. His aca-demic career began with a degree in law and political science from the University of Vienna. Hayek's contributions to economics are many and varied. He rose to fame thanks to his work on the business cycle, for which he shared the Nobel Memorial Prize in Economic Sciences with Gunnar Myrdal in 1974. His theory emphasised the role of central banks in producing economic oscillations via erroneous monetary policies. It was a criticism that resonated with critics of government intervention in the economy. Hayek's reputation was solidified by his work in political philosophy and his advocacy of clas-sical liberalism. He argued against central planning and collectivism in his 1944 book The Road to Serfdom, predicting that those paths would eventually lead to dictatorship. Support-ers of free-market capitalism and minimal government interference saw the book as a clas-sic. Hayek never worked at the University of Chicago, but his views had a profound impact on one of its faculties, the School of Economics. His views on price as an information mecha-nism — and that lingering distrust of government — struck a chord with economists includ-ing Milton Friedman. Hayek's ideas also won the approval of Britain’s “Iron Lady”, Margaret Thatcher. She memo-rably slammed a copy of his book, The Constitution of Liberty, on a table and declared to the nation: "This is what we believe." Critics contend that Hayek's hostility to governmental intervention ignores the importance of regulatory frameworks in addressing market failures and protecting vulnerable people. His views have been criticised for potentially worsening inequality — and ignoring social welfare. Hayek’s intellectual legacy has spurred disputes across political and philosophical divides. His support of individual liberty and free-market 42

principles continues to influence debate over the role of government in society, market functioning, and freedom preservation. CFI.co | Capital Finance International

Love him or loathe him, Friedrich Hayek's influence on the economic and political thought is indisputable.

Winter 2023-2024 Issue

> PAUL ANTHONY SAMUELSON Pragmatic Punch with a Keynesian Slant: Paul Samuelson’s Take on Life Growing up in an immigrant household in the Great Depression — what a grounding for an economist... Paul Anthony Samuelson, born in Gary, Indiana, in 1915, is widely regarded as one of the 20th Century's most influential economists. He established the groundwork for much of modern economic philosophy, combining theoretical rigour with practical application. Growing up in a Jewish immigrant household during the Great Depression, Samuelson saw at first-hand the harsh realities of life. But he managed to complete his education at the University of Chicago — recognised for its conservative economic views — before going on to the home of more liberal theories: Harvard. This variety of educational experience helped to formulate his own diverse approach to economics. His 1947 book, Foundations of Economic Analysis, changed the field to one which was more mathematically based. It introduced the analytical tools that laid the foundations for modern theory. Samuelson is well-known for his contribution to the expansion and popularisation of Keynesian economics. His interpretation and synthesis of Keynes’ philosophies rendered them more accessible, especially in the post-war era in which Western economies struggled to stabilise. One of Samuelson's most enduring legacies is a textbook, simply entitled Economics. It was used to train generations of economists and politicians when it was released in 1948. Its en-gaging and thorough presentation of micro- and macroeconomic principles shaped the views of many. But Samuelson's impact went beyond academia. He was a trusted economic advisor to the US government, helping to shape the modern welfare state. His work can truly be said to have had global impact. Despite garnering recognition, Samuelson's work never won universal approval. Some feel his Keynesian tendencies resulted in an overemphasis on government intervention. Others argue that while his mathematical technique is innovative, it could oversimplify complex facts. With his analytical method, he changed the discipline to make economics more accessible to a wide audience. His pragmatic approach, combined with a commitment to thorough analy-sis, solidified his reputation and legacy. Samuelson received the Nobel Prize in Economic Sci-ences in 1970. He was the first American

to win the honour, cementing his position in the financial firmament. He died in 2009, but his CFI.co | Capital Finance International

influence lives on in concepts that shaped the modern economic world. 43

> JOSEPH SCHUMPETER Driven to Destruction by Creative Impulse — or does Disruption Power Economics...? Czech thinker Joseph Schumpeter investigated the roles of innovation and instability in his philosophy of development. With an emphasis on innovation, entrepreneurship, and the dynamic essence of capitalism, Joseph Alois Schumpeter made a name for himself in the field of economic philosophy. Schumpeter was born in 1883 in Třešť in the Austro-Hungarian Empire, now Czechia. His views on “creative destruction” have shaped modern understanding of capitalist economies — and the forces that drive them. Schumpeter grew up in intellectual and prosperous surroundings that nurtured his budding interest in economics and sociology. He went on to study under Friedrich von Wieser and Eugen von Böhm-Bawerk at the University of Vienna. Unlike many of his colleagues, he focused on issues more complex than market balance and statistical models. He investigated the role of innovation, and had a close look at the economic contributions of the “start-up founders” of his day. Inventive entrepreneurs, he argued, drive development by disrupting equilibrium and creating new markets.

The Theory of Economic Development (1911) and Capitalism, Socialism, and Democracy (1942) are two of his key publications. In the former, he proposed that entrepreneurial innovation lies at the heart of economic development. In the latter, he focused on the concept of creative destruction, and forecast capitalism's ultimate decline — because of its success. Corporate bureaucracy, went his thinking, stifles innovation. His theories were revolutionary for the day because they shifted the emphasis from static models towards a more dynamic concept. Capitalism, according to Schumpeter, is an evolutionary process typified by persistent internal instability. His theories had an impact on economic theory and commercial practise. That emphasis on innovation and entrepreneurs struck a chord with economists, policymakers and business leaders, among whom his work is widely regarded as seminal. His concept of creative destruction has become widespread in the modern day, particularly in comprehending the dynamics of technologydriven markets. Modern economies and industries, marked by swift technological development and disruptive innovation, reflect Schumpeter's view of capitalism's evolutionary nature. 44

His work won backers and critics. Some felt his emphases — entrepreneurship and innovation — undermined the role of government and other institutions. And while his concept of creative destruction was regarded as insightful, it has since been criticised for downplaying the societal consequences of economic turmoil. CFI.co | Capital Finance International

The significance of Schumpeter’s contribution to economic philosophy has been justly emphasised. His concepts have influenced the way in which experts, business leaders and policymakers see the economy. His explanation of entrepreneurs' transformative abilities and disruption remain pertinent in the 21st Century — and provide an insight into the nature of economic progress.

Winter 2023-2024 Issue

> AMARTYA SEN Starvation and the Surreptitious Ravages of Unethical Policies lie at the Heart of Sen’s Philosophy Amartya Sen witnessed famine and folly on his way to winning a Nobel Prize. Indian economist and philosopher Amartya Sen, born in Bengal in then-British India in 1933, has carved a distinctive niche for himself. His work in welfare economics, social-choice theory and development economics incorporated elements such as ethical issues and human development — and earned him the 1998 Nobel Prize in Economic Sciences. Sen's formative years, during which he witnessed the Bengal Famine of 1943 and the partition of his country, deeply influenced his take on poverty and inequality. His dedication to combating the latter was shaped by these encounters, and by his education at Kolkata’s Presidency College and Trinity College in Cambridge. Sen's most noteworthy contribution is perhaps his groundbreaking work on welfare economics and social-choice theory. He devised the “capacity approach” to wellbeing and progress by using metrics that go beyond traditional measurements such as GDP. His method focuses on the capabilities of individuals. Sen disputed the widely held belief that famines are nothing more than the result of food shortages. In Poverty and Famines: An Essay on Entitlement and Deprivation (1981), he contended that a food shortage could occur even in times of excess due to economic differences and discrepancies in distribution and acquisition. In 1998, Sen received the coveted Nobel, and the theories that took him to that stage have had a significant impact on the global grasp of poverty, inequality, and development. They also affected the Human Development Index (HDI) used by the United Nations to summarise and measure average achievement in key dimensions. Sen's emphasis on judging development in terms of human skills and wellbeing is reflected and echoed by the index. Despite his success, Sen's work has its share of critics. Some contend that, while conceptually convincing, the capabilities approach can be difficult to apply to economic policy. Others argue that his focus on social justice overshadows the importance of prosperity. Sen has been able to see, during his own lifetime, the impact of his theories. His incorporation of ethical factors into economic research has reshaped modern thinking, and he continues to participate in global discussions by championing policies that prioritise wellbeing and social justice.

Amartya Sen's distinct blend of economics, philosophy, and humanism, and his novel approach to understanding personal development, have won him recognition in academic and CFI.co | Capital Finance International

policymaking circles. His influence hinges on the ethical beliefs he holds, and his constant striving to solve the most serious social concerns of the modern day. 45

> Europe

Dutch Treat: A Field of Economic Study with Enduring Applications

Econometrics won a Nobel Prize for Jan Tinbergen — and hearts and minds in the slightly obscure realm of mathematical data modelling. The Netherlands has long held pioneer status for its historical contributions, academic institutions, and homegrown economists. Seats of learning such as the Erasmus University Rotterdam, the University of Amsterdam and Tilburg University are recognised for their research and teaching, and attract students from the world over. And, thanks to continued research and innovation, the country continues to make contributions to education. Its economists and academics are regularly quoted and sourced by prestigious international publications dedicated to the dissemination of the theory and practice of econometrics. The Netherlands also has a history of econometric research, a discipline that analyses and interprets economic data using statistical tools, mathematics, and computer technology. It's used to put hypotheses to the test and forecast future trends. It can be applied in various domains, including finance, labour economics, macro- and micro-economics.

he field of econometrics comes in several flavours, but the man front and centre is Jan Tinbergen. In 1969, he and Ragnar Frisch were awarded the first Nobel Prize in Economic Sciences for their creation and application of dynamic analysis models.

facility jointly operated by Erasmus, Amsterdam University (UvA) and Vrije Universiteit Amsterdam (VU). The Institute boasts some 150 research fellows, 200 PhD and research master students and 700 PhD alumni. Supervision is available there in almost every field of economics.

Tinbergen's work formed the basis for much of modern econometric modelling. The field focuses on the development of statistical methods and seeks out verifiable economic models. Applied econometrics is the use of these methods in real-world data analysis. It aids in the testing of economic theories, the prediction of future trends, and the formulation of policy decisions.

Tinbergen was not alone, of course. The Netherlands has produced several econometricians of note — all of whom have made substantial contributions to the field. Their work covers a wide range of theory and application, and their learnings, shared at international conferences and seminars, have stimulating global collaboration and knowledge exchange.

This is not all theoretical, educational, or academic. Dutch economists have had a significant impact on real-world issues such as the formulation of economic policy. The pragmatic and empirical national approach to economics has aided the development of the sector.

Policy, financial markets, corporate choices, and academic research all benefit from this field. It provides a mathematical foundation for decisionmaking and aids comprehension of complex events. It is a dynamic and constantly evolving area.

Jan Tinbergen, born in The Hague in 1903, was fascinated by physics and mathematics. In 1929, he received a PhD in physics from Leiden University — but his interests progressively drifted towards economics and social science. The trials and woes of the 1920s and 1930s, particularly the Great Depression, prompted him to begin applying statistical approaches to economic problems — aka the developing subject of econometrics.

Econometrics graduates will find a diverse range of professional options at their feet. Many work in economic research and statistical analysis in government agencies, thinktanks, research institutes, and international organisations, including the IMF, the World Bank, and the UN.

Tinbergen was among the first to create mathematical models that characterised economic processes. His early work consisted of developing models to explain economic activity, such as business cycles and the impact of investment on economic growth. He created the first complete macroeconomic models, which were applied in his home country and in the United States for economic forecasting and policy evaluation. Tinbergen didn’t restrict himself, or his intellect, to academia. He worked for the Dutch Central Bureau of Statistics and the League of Nations, the precursor to the United Nations. His work influenced governments and organisations by laying the framework for quantitative analysis. Tinbergen is especially well-known for his contributions to economic theory, and to the principles of effective policymaking. Research and teaching were constants in Tinbergen’s career. He pondered the issues of economic distribution and social fairness, and devoted much of his latter work to these subjects. Jan Tinbergen died in 1994, but his legacy didn’t. He contributed to the innovative use of mathematical tools, and laid the groundwork for systematic quantitative examination of economic policies. His thinking has had a lasting impact on how economic theory is approached. Established in 1987, the eponymous Tinbergen Institute is a graduate school and research 48

Their quantitative skills are valued by the finance sector: investment banks, commercial banks, and insurance organisations. Risk analysis, financial modelling, quantitative analysis, and portfolio management are other possible roles. General and economic consulting firms apply their knowledge in data analysis and the application of theory to real-world situations. As big data grows bigger still, so does the demand for specialists who can evaluate enormous datasets. Thanks to their statistical modelling and analysis skills, econometrics graduates are well-placed to find rewarding careers. Some are employed by government agencies and public policy bodies to provide insights into economic conditions and trends. Academia is one avenue for those interested in a research-oriented profession. Working in universities or research institutions, conducting research, and teaching econometrics and economics are all part of the job. Industry research analysts are needed by businesses of all sizes to understand customer behaviour, industry trends, and competitive landscapes. Tech organisations and start-ups need experts to examine data, model customer behaviour, and inform business plans. Again, econometrics graduates can deliver. Some operate as freelance consultants, providing their knowledge on a project-by-project basis. Experts in this field, even newly graduated ones, have distinct advantages: strong quantitative and analytical skills. Continuous learning to keep CFI.co | Capital Finance International

abreast of the latest statistical tools and data analysis techniques can advance careers. The perceived arcane nature of econometrics varies according to one's background and aptitude in mathematics and statistics. Mathematical concepts, particularly those found in calculus, linear algebra, and probability theory, have a solid role to play. A solid foundation in these areas is essential — ensuring that this remains an elite business skillset. Modern econometrics also necessitates expertise in statistical software tools, which can add another layer of complexity. Abstract concepts can be difficult to grasp, and understanding how they transfer into real-world realities necessitates intuition as well as analytical thinking. Dealing with messy data, acknowledging its limitations, and making suitable methodological choices are all part of the practical application of econometric models. Maintaining current methodologies, models, and best-practice necessitates continuous learning. Econometrics combines mathematics and statistics. Because of this multidisciplinary nature, those practising it must be comfortable in these realms. Understanding economic theories — and being able to perceive how economic variables are related — are required for conceptualising interactions. Econometrics requires critical thinking, and the capacity to analyse results within the framework of theory and practice. Back to those “flavours”, or variants, of the discipline. Regression analysis, time-series analysis, panel-data analysis, and hypothesis testing aid in the estimation of economic links — and putting theories to the test. Time-series analysis deals with data collected over a specific period. Autoregressive integrated moving average (ARIMA) models are used to assess and forecast time series data. Paneldata analysis —observing data for the same organisations or individuals over multiple time periods — aids in the comprehension of changes through time and across entities. It has given birth to tests such as Granger Causality, which examines how variables interact. Multicollinearity, autocorrelation, and heteroskedasticity — cumbersome titles all — plague econometric models. The accuracy of econometric models is largely dependent on data quality and the suitability of the model employed. Analysis frequently necessitates the use of specialised software such as Stata, EViews, R, or Python. Those with a good background in maths and stats will find econometrics an engaging and intellectually stimulating field of study. For others, it remains impenetrable. Success frequently boils down to how much time and effort one is prepared to put into its understanding and mastery. i

access more potential

Winter 2023-2024 Issue

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> A Niche Bank Getting Bigger and

Better — But Never Losing Touch with the Human Needs of Clients

Belgium’s BBE has old-school values and a modern take on operational excellence.

n the global arena of international finance, always aspiring to broader reach, there exist beacons of expertise spreading the light of operational excellence, speed, convenience and availability. Founded in 1976, Byblos Bank Europe (BBE) achieves all this via a profound understanding of its client base — and an enviable position among the niche banks in Europe’s emerging markets. It has built on a heritage of international trade finance, differentiating itself from the competition by its intercontinental experience. BBE connects organisations seeking local insights with specialist knowledge of the ever-changing dynamics of international commerce. With banking licences to operate in Belgium, France and the UK, BBE considers its international team its most vital asset. This makes it feel “at home” in the markets it operates in, facilitating personal dialogue and continuing its role as a “listening ear for the needs of its clients and network”. Trade finance is at the core of BBE operations, an integral component of its business. Local knowledge cultivated by BBE over the years has served its clients well across Europe. The bank takes rightful pride in that. “Being recognised as the Best International Trade Finance Bank in Europe for two consecutive years (2022 and 2023) is testament to our unwavering commitment to our clients and our mission,” says CEO and MD Victor van der Kwast. “The heritage we carry is not just due to the passage of time. We have made our bank’s name synonymous with reliability and proficiency in London, Paris and Brussels.” BBE saw 2023 as a pivotal year, taking many strides. The primary focus is investment in optimisation, structure and digitalisation in Europe, positioning BBE on the international map for digitally driven products and services 50

"Hard work has brought BBE to its present position, braced for growth with a focus on day-to-day operations, actions, and delivery. The core pillars of BBE are clientcentricity, striving for growth via solid governance and management, and fostering a culture of innovation." — combined with the personal touch. BBE is building on its efficiency, the proximity to its network, profitability, and scale. The bank maintains momentum by leveraging the "digital, yet personal” concept to its greatest advantage. The official mantra: "Get it right — first time, every time.” Hard work has brought BBE to its present position, braced for growth with a focus on day-to-day operations, actions, and delivery. The core pillars of BBE are client-centricity, striving for growth via solid governance and management, and fostering a culture of innovation. The DNA is visible in the creative way BBE integrates the digital aspect of its personal- and proximity-based solutions into the client base. The bank continues to diversify through expansion and focus; BBE’s comparatively modest size does not allow it to be all things to all people. “We are selective and focused,” says van der Kwast. “BBE positions itself as a focused financial institution bucking the prevailing trend of extensive de-risking and stepping away from emerging markets.

for clients and parties in various countries. This allows us to fill the need for a European-based bank in Asia, the Middle East and Africa.”

“BBE’s strategic focus is on being a bridge with European and emerging markets,” the chief executive says, “with a defined risk-appetite

BBE believes that its position can provide benefits that extend beyond growth and client satisfaction. Integrating ESG considerations

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Winter 2023-2024 Issue

into operations has put it at the forefront of its priority areas, underscoring a focus on long-term value creation and responsible business conduct. “BBE has started to reflect on its business activities and its impact in the markets it operates,” says van der Kwast “We help businesses to conduct their trade

activities. This drives our responsibility to facilitate counterparties' activities by providing internationally acceptable services.” This includes engaging with countries in a manner that goes beyond the transactional, fostering sustainable and responsible CFI.co | Capital Finance International

relationships. “Filling that gap is what BBE has achieved, while adding value to it.” This is especially true as BBE engages in shortterm deals and is mostly focused on consumer goods and essential food and agriculture products, and relevant services in its tradefinance operations. i 51

> AI is Certainly Coming to Banking Sector —

It’s All About Integration

BBE’s CEO and managing director Victor van der Kwast initiated an allencompassing, digitally focused transformation journey in 2020.

CEO: Victor van der Kwast

t has been challenging and intense for BBE at times, but the trajectory has been marked by impressive impacts on efficiency and growth across its three branches.

The chief executive remains dedicated to steering a course towards steady transformation.

"Despite a wealth of traditional banking experience, van der Kwast identifies as an entrepreneur — and one who knows how to heed his clients and address the needs of his organisation."

Reflecting on the markets that BBE chooses to work with, van der Kwast admits that the bank is only now netting the results — embracing the transformational trend of the digital world. The

emergence of AI technologies can definitely be beneficial for a bank and fits BBE as a way to pursuit its efficiency and innovation, the CEO says.

Despite a wealth of traditional banking experience, van der Kwast identifies as an entrepreneur — and one who knows how to heed his clients and address the needs of his organisation. His day-to-day role is infused with an almost “start-up spirit”, and an unlimited mindset to help navigate the path.

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“I am immersed in the realm of AI-backed tools, witnessing the impactful and revolutionary changes they bring to the everyday activity of the workforce.” “But,” he adds, “I believe there are inherent limitations to the technology.” While harnessing AI can be beneficial, it must be integrated into daily routines. “The limitations touch those aspects of the business that create value by maintaining the human connection,” says van der Kwast. “Building meaningful networks and connections with digital tools is not new, but it can’t yet replace the real ‘classic’ conversation or face-toface interactions. This is a strategic opportunity that organisations need to consider when deciding where and how best to incorporate AI into their everyday.” i

Winter 2023-2024 Issue

A BRIEF HISTORY OF TIME GETS A NEW CHAPTER

“I have wondered about time all my life.” - Professor Stephen Hawking

Professor Hawking did more than wonder about time. He spent most of his life probing into the beginnings of our universe, and discovered the very origins of time itself. And then, this theoretical physicist, whose legacy stands alongside those of Galileo, Newton and Einstein, made his discoveries accessible to everyone. The fact that he did all of this whilst battling debilitating motor neurone disease was all the more remarkable, showing Hawking’s courage, insatiable curiosity, and ambition. The Hawking limited series watches are a fitting tribute to this titan of science, and Bremont is proud to present them alongside Professor Hawking’s family.

CFI.co | Capital Finance International

> Movie Review - Napoleon

Flawed but Fascinating Historical Tribute to an Enigmatic Emperor Ridley Scott’s Napoleon gets the mood just right, captures all the emotion and torment ... but sometimes takes liberties with the truth.

his historical epic directed by Ridley Scott is a masterful depiction of the French emperor's rise and fall.

Joaquin Phoenix excels in the title role, conveying Bonaparte’s charisma, ambition, and cruelty with nuance and complexity. The film follows his story, from modest beginnings as a Corsican military officer to his rapid rise to power, eventual exile, and death. Phoenix's performance is the epic's heart and soul. With pleasing subtlety, he conveys the emperor's personality. It’s a challenging role; Phoenix adapted his physique to accommodate Napoleon's known mannerisms and speech patterns. It’s a portrayal that is both sympathetic and disturbing, revealing the paradoxes that created such a fascinating individual. Phoenix is well-supported, and Vanessa Kirby, as Josephine, gives an enthralling performance. She communicates the character’s fortitude, perseverance, and devotion, even as their relationship deteriorates. Jodie Comer is outstanding as Napoleon's sister, Élise Bacciocchi, who was a bright and fiercely independent woman, as devoted to her brother as Josephine. The marriage is a turbulent one, defined by passion and conflict. The couple’s bond is electrifying from the start, fired by mutual admiration and a shared sense of ambition. Napoleon is charmed by her beauty and refinement, while Josephine is captivated by his magnetism. Their marriage, initially a political arrangement, soon transforms into a true love affair. An affair riddled with tension and insecurity, though. Napoleon's unquenchable ambition and unrelenting quest of power detract from his personal life, leaving Josephine feeling neglected. Her socialite status — and Napoleon's inability to sire an heir — put further strain on things. Love persists; even when the emperor explores other relationships, he remains emotionally 54

"The acting, camerawork, lighting, and colour capture the essence of Napoleon Bonaparte — and that of Josephine, the love of his life." committed. Josephine reciprocates with love and support, even when her partner’s actions cause her pain. The relationship could be seen as a microcosm of the French Revolution and the Napoleonic Wars, times of enormous upheaval and change. The couple’s relationship progresses from love to a complex and difficult alliance. The tale is ultimately a tragic one. Napoleon annuls the marriage due to concerns about that missing heir, and a need for stability. Josephine dies heartbroken. Despite this finale, the sense of romance endures. This is a story about passion, ambition, treachery, and undying love. Scott's direction is superb, with magnificent battle scenes and grand panoramas. The set design is exquisite, and the costumes are beautiful. While Napoleon is visually gorgeous and emotionally moving, it takes some artistic licence with historical facts. Although cinematic cannonballs are fired at the Egyptian pyramids, there is no proof that such an attack took place. In another lapse, Napoleon is shown witnessing Marie Antoinette's execution in 1793. He was stationed in Toulon at the time — and did not arrive in Paris until after the event. In Scott’s account, Napoleon and the Duke of Wellington met in person — but their sole meeting was at the Battle of Waterloo, and they didn’t meet face-to-face. The cinematic CFI.co | Capital Finance International

Napoleon is visibly younger than Josephine, but the real age difference between them was just six years. The idea that he came from a modest background is also misleading; his family came from Corsican nobility. But the emperor's military operations are creatively and faithfully depicted. The chaos and horror of conflict are plain to see. The filmic wars feature a huge cast of extras (some of them CGI, no doubt), and Napoleon's army's tactics and methods are well represented. There is no skimping on the violence and brutality of war. Some of the conflicts are shown as more exciting and frightening than they may actually

Winter 2023-2024 Issue

have been. Napoleon's personal experiences on the battlefield sometimes eclipse the larger backdrop of the conflicts in which they took place. But who cares? At its heart, this film is a celebration of an emotional, if often frightening, marriage. Josephine’s name is never far from Napoleon's lips. Martin Phipps' musical soundtrack is melancholy but evocative, and perfectly matches the generally gloomy tone of the epic. The soundscape combines symphonic elements and Corsican folk music — and makes good use of silence. Phipps avoids orchestral flourishes and sticks to his restrained and subtle style. This generates a sense of

intimacy, allowing the viewer to interact with the emotional heart of the picture. The music perfectly underscores the grim events, and the resulting ambiance of gloom. It's haunting and moving, and will linger after the final credits have rolled. The photography is also superb, capturing the sweeping grandeur of Napoleonic France as well as an intimate and emotional portrayal of the emperor. Polish born cinematographer Dariusz Wolski deploys a range of techniques, such as wide vistas and extended takes, to convey that sense of grandeur. There is no shortage of intimate and personal moments. Close-ups and handheld camerawork bring us closer CFI.co | Capital Finance International

to Napoleon, allowing us to almost feel his emotions and sense his flaws. Lighting is effectively handled, with dramatic contrasts of light and shade. Wolski uses a subdued colour palette that reflects the grim tone — and the national mood of Napoleonic France. Napoleon is framed in a way that accentuates his solitude and loneliness, while emphasising his power and authority. Overall, this is an outstanding accomplishment that propels the art of film to new heights. The acting, camerawork, lighting, and colour capture the essence of Napoleon Bonaparte — and that of Josephine, the love of his life. i 55

> Be Like Bonaparte and Do Battle in

Business with Cunning — and Class Lessons learned in the mud and blood of yesteryear’s battlefields can be applied to modern commerce.

apoleon Bonaparte, military leader and emperor, possessed an exceptional talent for strategic thinking — and it extended beyond the battlefield.

responsibility according to ability, and fostering a sense of camaraderie and shared purpose.

He came up with philosophical and practical insights that can be of benefit to today’s entrepreneurs and execs. Here are some of them...

Effective company leaders must foster a collaborative work atmosphere, empower staff, and recognise individual accomplishments. They must establish clear objectives, communicate effectively, and provide direction and support.

STRATEGIC PLANNING AND VISION WW Bonaparte's military conquests were fuelled by forethought and well-articulated plans. He believed in “know thy enemy” and methodically researched his opponents, identifying strengths and weaknesses that would help him to outwit and outmanoeuvre them.

STRATEGIC RESOURCE ALLOCATION Bonaparte understood the significance of strategy in the deployment and allocation of resources. The cunning use of available troops, equipment, and infrastructure ensured that his forces were properly equipped and properly positioned for maximum impact.

The modern application of this in business is clear enough: Look to the future, and develop strategies that will help you to attain your objectives. Understand the market, define target consumers, and keep a keen eye on longterm growth.

Business leaders can use adjacent wisdom to similar ends, deploying capital and distributing talent in a way that aligns with strategic goals. Ongoing evaluation of processes and the optimisation of supply makes for efficient management.

ACCEPT CHANGE — AND ADAPT Napoleon's ability to incorporate rapidly changing circumstances in his military endeavours was legendary. Flexibility and agility allowed him — and will allow the modern leader — to pivot swiftly when confronted by the unexpected. Survival, in either circumstance, requires the ability to meet, and be equal to, unpredictable conditions. To remain relevant despite unforeseen technical advances and random client preferences calls for flexibility, experimentation, and constant review. LEADING FROM THE FRONT The French emperor was a master of inspiration and motivation. He knew that his armies needed structural unity, and the modern application of this is in forming solid teams: assigning

INVENTION AND CONTINUOUS IMPROVEMENT What the legendary warrior fully grasped was the potential of invention. He would always explore notions and theories that might enhance his military aims. Experimentation and feedback loops came from all sources — including his opponents. Businesses that embrace innovation are likely to stay relevant by developing fresh products and services that will increase operational efficiency. Creativity, and fostering a culture of learning, push the “troops” forward. Napoleon Bonaparte's life and leadership contain valid lessons for business in the 2020s. His acumen, adaptability, ingenuity and drive for innovation gave him insights in the brutal world of war. They can do the same for executives fighting less bloody, but equally fierce, battles for commercial superiority. i

"Napoleon Bonaparte's life and leadership contain valid lessons for business in the 2020s. His acumen, adaptability, ingenuity and drive for innovation gave him insights in the brutal world of war." 56

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Winter 2023-2024 Issue

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> Collaboration, Fintech and Crypto

Dominate Italian Summit, and New VC Fund Announced by Generali By Alessandro Hatami MD of consultancy firm Pacemakers, and co-author of Reinventing Banking and Finance

Why Italy is bucking a downward trend, and some take-aways from the 2023 Milan Fintech Summit...

talian insurance giant Generali Assicurazioni has announced a specialised insurtech and fintech venture capital fund within its larger Generali Ventures fund.

It will dedicate €250m to early-stage investments. The objective is to focus on longterm opportunities in the global innovation ecosystem. That includes project development seeking areas for collaboration. The fund will target start-ups at pre-seed and late stages, with a view to giving a boost to the insurance sector. The news came too late for discussion at the fourth Milan FinTech Summit (MFS), but is clearly good news for the insurtech and fintech sectors. It is also a vote of confidence in Italy’s ability at financial innovation. Fintech investment there has slowed only slightly since 2022. The overall mood in Milan was upbeat, despite geopolitical tensions and the threat of global recession. Some key themes emerged. One is that the Italian public has embraced digital banking. The sector is seen as increasingly sophisticated, and consumers and businesses are keen to engage. According to Statista, online banking penetration in Italy has grown twice as fast as in the rest of Europe. That brings it closer to the online banking reach of Germany. This surge helped to create the first two Italian fintech unicorns, Satispay and Scalapay.

"According to Statista, online banking penetration in Italy has grown twice as fast as in the rest of Europe. That brings it closer to the online banking reach of Germany." A notable presence at the event was that of non-Italian unicorns, including Spotify, Qonto, Alipay and eToro. Representatives from global players including Visa, Mastercard, Intesa Sanpaolo and Oracle also attended, some taking to the stage. Topics included the complexity of accessing the Italian market and difficulties around regulation and customer access. These concerns were addressed by the Italian and EU regulators present, with financial institutions and associations confirming Italy’s change of attitude and emphasising the need to attract foreign expertise — and capital. The Italian regulators' change of perspective was echoed on a separate panel, whose members also noted the tangible change in the acceptance and support of fintech. This shift was underlined by those in Italian fintech innovation. Another panel discussed

"A notable presence at the event was that of nonItalian unicorns, including Spotify, Qonto, Alipay and eToro. Representatives from global players including Visa, Mastercard, Intesa Sanpaolo and Oracle also attended, some taking to the stage." 58

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similarities and differences in innovation between Italy, France, Spain and the UK. Miguel Santo Amaro, of VC firm Coverflex, Manuel Silva Martinez, of Mouro Capital, and Jacopo Lambri, from the European Investment Bank, provided a pan-European perspective. They described the Italian market as still trailing some European countries in terms of digital banking. Leda Glyptis, author of Bankers Like Us was the keynote speaker; she has held senior roles at 10X Banking, 11FS, and Sapient. She said big banks were embracing digital transformation — but not making a great job of it. The title of her address, Great Ideas, Mediocre Outcomes, says a lot. The global crunch in investment has changed the fintech ecosystem, which needs investment beyond VC money. Big banks are working with challengers and innovators to accelerate their own transformation. These trends have led to a number of partnerships around the globe. One panel discussed how such collaborations come to fruition. The innovator and the

Winter 2023-2024 Issue

incumbent must start to think like one another “without losing what makes them distinctive”. Fear of change, operational legacy and culture mismatch were discussed, and action points explored. Many panellists agreed that the most important thing was to “listen to what the other side needs, and don't just think about what you want”. The panel also discussed three prominent partnerships. Christian Miccoli, of wallet provider Conio, and Emanuele Cacciatore, of Banco Desio, explained how they are working together to offer cryptocurrency services to bank customers. Vittorio Carlei, of tech firm Qi4M, and Edoardo Del Bosco, of Generali Investments, talked about adding AI-powered research to investment capabilities. Marco Tricarico, of Switcho, and Gian Battista Baà, of Intesa Sanpaolo, explained collaboration is helping people to source better energy and utility offers. There was much talk of the growing role of AI, the changes open banking is bringing about,

and how embedded finance can make banking omnipresent. A panel with Matteo Rizzi, of advisory firm FTS Group, Paolo Zaccardi, of Fabrick, André Gardella, of Treezor, and Laura Verguts, of Booking.com, discussed how non-financial players are seamlessly embedding financial products in their existing customer flows.

This year’s Milan Fintech Summit underscored Italy’s emergence as a significant European digital financial services hub. It will be interesting to see if the country’s fintech scene will continue its current positive trajectory. i

Treezor’s experience in supporting Lydia and Qonto, Booking.com’s strategy in embedding payments and offers for travellers, and Fabrick’s experience with Illimity, are some examples of embedded finance services. A session that attracted a good deal of interest involved Silvia Attanasio of the ABI (Italian Banking Association) and Lisa Loud of FLUIDEFI, discussing cryptocurrency opportunities. They said established players and innovators could see how well-regulated cryptocurrency, issued by a central bank, could remove inefficiencies and weaknesses in the payments ecosystem. Even after FTX’s collapse, the imminent “eEuro” has promise. CFI.co | Capital Finance International

Author: Alessandro Hatami

> PE Market ‘Showcases Divergence’ By Claire Trachet CEO and Founder of business advisory firm Trachet

Expert Claire Trachet discusses the M&A landscape for 2024.

recent Office for National Statistics (ONS) report reveals a fluctuating trend in M&A activity in the UK.

The year began with a dip in July and a further decline in August, but September marked a pivotal moment as total numbers stabilised, indicating potential equilibrium. Factors such as strategic adjustments, enhanced regulatory clarity, and external economic influences contributed to this stabilisation. Despite some challenges, legal experts anticipate a growing confidence in private equity (PE) deal activity for 2024. The market has displayed resilience in the overall M&A landscape, although larger buyouts have become less common. The ONS report shows a divergence, where high-quality assets face aggressive strategies and others experience extended processes marked by heightened due diligence. PE firms are shifting focus to international markets, with outbound M&A on the up. Looking ahead, there is optimism for a robust PE landscape. A number of assets have been prepared for sale in the first half of 2024. Investment banks report record pipelines, signalling a positive outlook. Estimates put the total amount of unused capital at $3.7tn, and it is this capital which will help fund the revival of the global M&A market. It is vital that founders are honest in terms of the long-term viability of their businesses — and start planning for an exit as soon as the end of the runway is in sight.

"In today's unpredictable environment, new companies are faced with the challenge of securing their future. They need to use foresight, assessing their financial health and the real-time implications of the broader market." If not, dealmakers can often capitalise on lastminute desperation — leaving start-ups with a less than favourable deal. In today's unpredictable environment, new companies are faced with the challenge of securing their future. They need to use foresight, assessing their financial health and the realtime implications of the broader market. Despite a shift from larger buyouts, the PE market showcases divergence with highquality assets facing aggressive strategies, and others undergoing extended processes of due diligence. i

"Despite some challenges, legal experts anticipate a growing confidence in private equity (PE) deal activity for 2024. The market has displayed resilience in the overall M&A landscape, although larger buyouts have become less common. The ONS report shows a divergence, where high-quality assets face aggressive strategies and others experience extended processes marked by heightened due diligence." 60

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Winter 2023-2024 Issue

"Despite a shift from larger buyouts, the PE market showcases divergence with high-quality assets facing aggressive strategies, and others undergoing extended processes of due diligence."

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CELEBRATING 160 YEARS

Winter 2023-2024 Issue

> From Beeb ‘Rescue’ to Champion of a

Break-out Platform for Content Creators

he former founder of BBC iPlayer is helping to formulate a platform to help content creators get their work noticed — and financially rewarded.

Ben Lavender, from Letchworth Garden City, recalls the moment he presented the iPlayer idea to the BBC’s executive committee. “They gave me a round of applause and the director-general [Greg Dyke] said ‘you saved the BBC’.” Lavender, now fully behind the Lounges.tv, went on to lead the design and development of the LOVEFiLM video-streaming service in the UK and Germany. That project led to its acquisition by Amazon — laying the groundwork for what would become Prime Video. He served as the principal product manager for Amazon Instant Video before moving to DAZN, where he took on the chief product officer’s role. Lavender led the product from start-up to launch in nine countries. A key early player in the streaming service dubbed “the Netflix of sport”, Lavender was the sixth staff member to join — enabling him to hand-pick his team.

After six years in that role, Lavender joined Lounges. tv, initially to help shape the concept in its formative stages. He stayed on, and alongside Lounges.tv’s co-founder and CEO, Scott Green, became a key member of the team that pitched the idea to music mogul and TV personality Simon Cowell. Looking to address long-standing issues in the industry, the platform provides what it calls “a fairer and faster way for content creators to monetise their content online”. It ensures that they keep 80 percent of all their streaming income — and are paid within 24 hours of their on-demand content or livestream. Catering to creators from musicians and comedians to fitness trainers, Lounges.tv offers a space to share exclusive content through live interactive and videoon-demand streaming. It also offers a free streaming space in North London for creators to produce content, with professional quality cameras and audio, with sound and stream engineers on-hand. Thousands have signed up to the ad-free platform, and joining Cowell and Lavender in cheerleading is the former manager of Prince, Kiran Sharma. CFI.co | Capital Finance International

Ben Lavender said it was a platform that resonated with him. “Now that Lounges.tv has Cowell’s backing, the platform can really kick on and continue to make inroads,” he said. He views Lounges.tv as a democratising force for people who could not otherwise get involved. “My wife was a professional dancer,” he said, “and her friends still in the business invested in Lounges.tv before they even found out I was involved — so it ticked two boxes for them. “There are a lot of people in the industry who are excited about this and sense that the future is bright for content creators.” Lounges.tv Co-Founder and CEO Scott Green says Lavender will play a key role in forming and driving strategy “as we optimise our mobile service”. The platform would allow content creators “to shine amidst the noise” and garner deserved recognition. “By eliminating the reliance on ads and introducing diverse fan-funding options, our platform departs from the conventional ad-centric model,” he said. i 63

> Strategic Asset Allocation in a

Higher Interest Rate Environment By Michael Kreibich Head of Investment Consulting at Berenberg & Dr Adrian Presse Investment Consulting at Berenberg

For the first time in many years, interest rates have risen noticeably in 2022 and 2023, and as a result, conditions on bond markets have changed rapidly since then. What some are calling a regime change is, in fact, a return to normality. This means that fixed income (public & private) is becoming much more attractive again. But will the asset class be able to offer the stabilising characteristics that investors were accustomed to in the past? For the strategic asset allocation (SAA), there are many new aspects to consider that require a professional analysis and implementation. LONG TERM TREND OF FALLING INTEREST RATES Until the end of 2021, European bonds delivered above-average risk-adjusted returns for an extended period of time. This was due to artificially low volatility caused by the European Central Bank's (ECB) expansionary monetary policy in the aftermath of the global financial crisis. After the impact of further interest rate cuts had become minimal in 2014, the central bank focused on its key bond-buying programmes, which helped stabilise inflation towards the ECB's target of around 2%. However, efforts to gradually exit this policy were put on hold by the COVID-19 pandemic in early 2020, as inflation surged while at the same time the central bank was forced to launch a new emergency programme to stabilise capital markets by injecting billions more in liquidity. INVESTORS SHIFTED INTO RISKIER ASSET CLASSES As a result, the trend of falling rates intensified, resulting in notably low, and even negative, yield levels in the European bond market. The 10-year German government bond yield for example reached its ultimate historic low at -0.86% in early March 2020. The consequent limited potential for further significant declines in yields and associated gains in bond prices prompted many investors over the past years to gradually reduce their allocation to fixed income securities. Instead, investors shifted their allocation towards more opportunistic asset classes, which was especially beneficial for private markets. Depending on what regulation, if any, was in place, SAA shares in asset classes such as real estate, private debt, and private equity – and in some cases public equities – increased noticeably. Successively, the risks of the underlying portfolios rose significantly, especially when these were realistically modelled for the private markets segment. 2022 – THE PERFECT STORM ON THE CAPITAL MARKETS The year 2022 finally marked the turning point of falling yields, followed by a rapid rise in rates. The significantly increased inflation rates in the Eurozone – mostly driven by higher energy and food prices – forced the ECB to reverse its 64

Director, Head of Investment Consulting: Michael Kreibich, CFA, CAIA

interest rate policy. However, despite historical precedents of interest rate increases of a similar magnitude and speed (1989/1990 and 1994), the resulting drawdown in the bond market was unmatched in its extent: the price of a 10-year German government bond, for instance, lost more than 12% over the course of the year. While there was a positive carry in the more distant past that could counteract interest rate increases, this component was negative at -0.18% by the end of 2021. Simultaneously, the war between Russia and Ukraine began in Europe, which weighted heavily on market sentiment. Moreover, an economic slowdown became increasingly evident, causing riskier assets (especially equities) to also experience significant losses. The resulting absence of diversification effects created the CFI.co | Capital Finance International

perfect storm for multi-asset investors in 2022. Besides the US dollar and direct or indirect commodity exposure, hardly any liquid asset class did not record a substantial price decline during that year. Investors who had allocated shares of their SAA to private markets investments certainly performed better. The valuation of private debt in the senior/super senior segment remained largely stable and even the real estate market as well as private equity investments did not show significant declines in value. However, it must be mentioned that transactions were also absent in these last two segments and therefore developments should be cautiously analysed with regards to the significantly increased cost for real estate loans and the possible impact of the multiple contraction of public equities.

Winter 2023-2024 Issue

Associate, Investment Consulting: Dr Adrian Presse

BONDS DELIVER A NOTICEABLE RETURN CONTRIBUTION TO THE OVERALL PORTFOLIO AGAIN The good news is that fixed income securities are now priced at a fairer valuation and that the asset class offers a significant contribution to the overall portfolio performance again. This is, however, no regime change but rather a return to normality, which makes the asset class for investors far more attractive again for the upcoming years – at least at first glance. The question remains whether the long-term correlation characteristics of bonds will return and if they will provide (again) stabilisation effects on overall portfolio risk, especially during periods of increased uncertainty. One answer to this will be revealed through the further development of inflation rates, as historically, in periods of high inflation, bonds have shown a stronger correlation with equities and vice versa. THE INVESTMENT SUCCESS DEPENDS SIGNIFICANTLY ON THE STRATEGIC ASSET ALLOCATION In terms of the SAA, the effects of recent developments are diverse. Higher expected returns alone do not necessarily result in a higher portfolio allocation. The associated risks and changing correlations as well as the developments of the risk/return profiles of all other investable assets need to be considered. A professional analysis and implementation of the SAA is therefore highly complex and must be treated individually. It is essential to model different historical and forward-looking market CFI.co | Capital Finance International

scenarios to thoroughly understand the risk/ return characteristics of the allocation and, as a result, make adjustments where necessary. Additionally, the benefits of a risk overlay need also to be analysed. Due to the increasing level of complexity, experienced investment consultants are increasingly involved to determine the optimal portfolio allocation and interpret the results for the investor as part of a comprehensive consulting process. When applied professionally, the SAA can influence up to 90% of the investment success. Long-standing experience, the use of robust estimation parameters for risk, return and correlations, as well as a realistic and accurate modelling of illiquid asset classes such as real estate or private debt are crucial factors for the level of professionalism and, hence, the long-term success of the investment strategy. i

ABOUT BERENBERG Berenberg was founded in 1590 and is today one of Europe's leading private banks with its Wealth and Asset Management, Investment Bank and Corporate Banking divisions. The Hamburg-based bank is managed by personally liable partners and has a strong presence in the financial centres of Frankfurt, London and New York.

> Kroll Confident in Alternatives Risk-Assessment Platform

roll, a provider of global risk and financial advisory services, has announced the launch of the Alternatives Risk-Assessment Platform.

It aims to help asset allocators and fund managers make better-informed investment decisions and manage portfolio risk with a unified and comprehensive view. The collection, analysis and exchange of risk information covers financial, operational, environmental, social, and reputational data. Also included is a suite of benchmarks to assist the rapid identification of areas of potential concern. The platform supports the enhancement of operational efficiency and proactive risk identification for the private capital markets industry, the company says.

Managing director of Kroll Digital Solutions, Janos Renz Hotz, said alternative asset investors had significantly broadened the scope of data employed in their investment selection and portfolio management strategies. “However, this evolution has brought to light a critical data infrastructure gap that is impeding investments,” he said. That could increase costs and conceal potential risks, and Kroll believes asset allocators and managers are seeking ways to streamline operations. “Our (platform) excels in optimising the entire data lifecycle—collection, analysis and sharing,” says Renz Hotz. That would lessen the friction for asset managers “in need of a cohesive solution” to efficiently distribute content to investors.

Kroll president Don Carey said the growth in private capital markets — and the associated operational demands — required made-to-measure solutions. John Ward and Julianne Recine, both managing directors of Kroll Alternative Asset Advisory, call the platform “a unique offering that gathers meaningful information in one central location. “It creates an efficient due-diligence process and a streamlined approach for ongoing monitoring of portfolio risks,” said Recine. Other capabilities are said to be peer comparisons and background searches, news feeds, financial statement reviews and regulatory filings. “We’ve heard from our clients that they are challenged with the current manual collection methods,” said Ward. “This platform addresses industry barriers.” i

"John Ward and Julianne Recine, both managing directors of Kroll Alternative Asset Advisory, call the platform “a unique offering that gathers meaningful information in one central location. “It creates an efficient due-diligence process and a streamlined approach for ongoing monitoring of portfolio risks,” said Recine." 66

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Winter 2023-2024 Issue

> Charting the Future — with Clients at the

Very Centre of Our Universe

Wilhelm Celeda, chief executive of Kathrein Privatbank, on the forces and values galvanising change at the institution.

n an era defined by digital transformation, staying ahead requires continuous innovation and a keen understanding of evolving customer needs.

At Kathrein Privatbank, we’ve taken major strides to revolutionise and streamline the banking experience — and our clients are at the centre of any transformative advance. Digitalisation is the cornerstone of a superior customer experience, and we’ve long been committed to that. Our focus has been on developing tools and services to provide our clients with cutting-edge solutions. In response to the changing financial services landscape, we offer smooth and efficient digital securities trading. Our CommuniKATE platform has become integral to this. ACTIVE ASSET MANAGEMENT In times of poly-crises, the benefits of active asset management swiftly become evident. Kathrein Privatbank constantly adapts strategies to navigate emerging complexities and uncertainties, ensuring resilience and responsiveness. Since mid-2023, our relationship managers (RMs) employ a state-of-the-art portfolio analysis tool: PIA. PIA simplifies complex calculations, allowing for the building, optimisation, and comparison of portfolios. It facilitates real-time portfolio checks, identifying weaknesses — and opportunities. In client interactions, PIA enables RMs to respond promptly to spontaneous input, ensuring our advice is perfectly aligned with each client's risk profile. We’ve enhanced our product offerings with a new dividend strategy on an individual securities basis. This combines criteria focused on dividend potential and quality, emphasising broad diversification — even in more defensive equity strategies. Our commitment to innovation extends to the Kathrein Private Markets Platform, allowing clients to effortlessly, digitally, and flexibly invest in global private equity markets. With exclusive access to a curated selection of international funds, the platform brings to bear a rigorous selection process conducted by our expert private equity team and our partner, Moonfare.

CEO: Wilhelm Celeda

HOLISTIC WEALTH MANAGEMENT With Family Konsult, we consolidate our expertise in succession planning, family and entrepreneurial wealth, and foundations. Our holistic consulting approach aids clients in structuring, passing on, or dedicating their wealth to philanthropic causes. The recently extended Family Konsult team combines discretion, expertise and experience to give clients comprehensive support and peace-ofmind. Talking of our holistic approach, we must make mention of our ongoing commitment to sustainability. That is unwavering, and this year, CFI.co | Capital Finance International

we’re proud to offer clients the opportunity to acquire LBMA-certified sustainable gold — without additional charges. Kathrein Privatbank is one of the first private banks to provide such a service, aligning with the growing demand for environmentally conscious investment options. Above and beyond that, we’ve expanded the already strict ESG standards that apply to more than half of all Kathrein Investment Funds. Kathrein Privatbank's journey of continuous evolution has been guided by a commitment to excellence, sustainability, and client-centric solutions. We remain dedicated to providing unparalleled financial services. i 67

> Raise Your Glasses, Investors:

Your Profits Could Follow By Aaron Damiano Sparkes Founder and Managing Director of Whisky 1901

Whisky is emerging as a neat (sorry) alternative investment; 373 percent over 11 years, anyone? Aaron Damiano Sparkes reports...

he whisky sector in 2022 saw the sort of result more traditional investment sectors can only dream of.

It saw double-digit growth. But how does the golden tipple measure up against “less alternative alternatives” such as gold, fine art or crypto? Rising interest rates, surging inflation, and a lingering cost-of-living crisis have all contributed to volatile global markets. Unsurprising, then, that savvy investors are turning from the stock exchange to seek more unusual targets. Scotch whisky has been remarkably resistant to the economic downtown — and continues to outperform traditional investments, say experts. The market does appear in rude health. The Global Whisky Market Overview 2023-2028 found that sales are on track to reach £99.48bn by 2028, from £69bn in 2022. ALTERNATIVE INVESTMENTS This term essentially covers everything that doesn’t fall into traditional categories: stocks, bonds, or cash. By definition, the assets are varied in nature; they can include real estate, commodities, and collectibles — often referred to as “passion investments”. Think art, antiques, vintage cars and motorcycles — and, of course, Scotch. The reasons people choose to invest in alternative assets are as diverse as the assets themselves. Some are looking to diversify their portfolio; others are seeking to balance traditional investments with tangible commodities. Others still are excited about an emerging sector, and keen to get their foot on the ladder.

"Scotch whisky has been remarkably resistant to the economic downtown — and continues to outperform traditional investments, say experts." All investors hope for strong returns, and sometimes, they get them. In 2022, a cask of Ardbeg whisky sold at auction for a tidy £16m — a record. And while cask investment is typically viewed as a long-term asset, knowledge and experience are prerequisites before getting involved. Investors have a slew of opportunities to shape their portfolios according to budget, timeline, and interests. Regardless of the current economic landscape, some investments are riskier than others. Gold has seen wild fluctuations throughout the year, sometimes almost daily. Cryptocurrencies have been up and down in the past 12 months, leading to a degree of investor caution. Non-fungible tokens (NFTs) have had a dramatic fall since their inception in 2021. Even the fine art market, traditionally a solid choice for the ultra-wealthy, has witnessed erratic shifts. Damien Hirst, one of the most successful living artists, has seen the price index for his works fall by 60 percent since their peak.

"This is one of the key advantages of investing in a cask, because the contents continue to age, and the shape and size of a cask, and what it was made from, have a profound effect on the maturing liquid within." 68

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Scotch whisky, meanwhile, has continued an upward trajectory — worldwide. The latest Knight Frank Luxury Investments Index shows that rare bottles of Scotch continued to be the 10-year leader of investments-of-passion — with 373 percent growth since 2012. That’s 91 percent more than fine art over the same period. The Scotch Whisky Association reported that global exports of Scotch exceeded £6bn for the

Winter 2023-2024 Issue

first time in 2022. That’s 53 bottles exported every second. And while these eye-watering stats refer only to bottles of the spirit, they are historically linked to “the spirit of the cask” from which it came. This is one of the key advantages of investing in a cask, because the contents continue to age, and the shape and size of a cask, and what it was made from, have a profound effect on the maturing liquid within.

And this is just the beginning, according to the BC20 Whisky Cask Index. Casks have “significantly outperformed all the traditional investment options in recent years”, it says, with the market predicted to grow by 14.95 percent in 2022. DEMOGRAPHIC CHANGES Another factor to be considered is the changing demographic of cask investors. The perception that whisky investing is for CFI.co | Capital Finance International

gentlemen “of a certain age” is outdated. Millennials and Gen Z now make up more than 36 percent of cask buyers — and women comprise 7.14 percent. This fresh optimism, coupled with the surging popularity of Scotch across international markets, has established cask investment as a top-performing alternative asset. It’s also one that’s expected to become even more desirable in coming years. i 69

> Obituary - Slán, Shane:

Farewell to a Singer, Rabble-Rouser, and Street Poet Shane MacGowan has finally left the building — but no one would be surprised if he called out for another round...

hane MacGowan, charismatic lead vocalist and songwriter of The Pogues, died on November 30, 2023, robbing the music firmament of another star.

The virtuoso of street lyricism blended tales of love, sorrow and revolt with Celtic folklore — tinged with a distinctive shot of punk energy. His smoky, whiskey-soaked voice was an integral part of The Pogues' aura — as was his intriguing, if unpredictable, persona. Proud Irishman MacGowan was actually born in Kent, England, on Christmas Day in 1957. His childhood was characterised by insecurity and turmoil, and his adolescence (unsurprisingly) spent rebelling against authority and exploring society’s fringes. His defiant, even confrontational, character was reflected in his music, which celebrated outsiders. Shane MacGowan was a big fan of Irish literature, his songs influenced by poets and writers such as Brendan Behan and James Joyce. He had a profound respect for classical literature generally, and could quote Shakespeare as easily as he could order another pint. His lyrics, rich in imagery, vivid descriptions and intriguing analogies, reflected this love of books. His thought-provoking lyrics echoed a tradition of humour, irony, and sadness. More than once, music legend Bob Dylan professed his admiration for MacGowan’s talent — naming him as one of his favourite artists who had a direct influence on his own musical output. In a 2017 interview, Dylan praised the Irishman’s rawness and authenticity, as well as his ability to "convey emotion in a way that is both direct and deeply personal". Dylan also mentioned that he played Fairytale of New York every Christmas. And who doesn't? The classic touches the hearts of millions, at least once a year since it was released in 1987. The raunchy tale of a couple having “issues” on Christmas Eve is heartfelt and gently tragic, encapsulating love, sorrow, and — hopefully — redemption. The late Kirsty MacColl's counterpart to MacGowan's scratchy vocals is an exercise in emotional intensity. The song has been lauded for its rude honesty — but political correctness has led to the release of laundered versions, without the cursing and slander most of 70

us love so well. The original, uncensored version is — rightly — the most played, and the most popular. MacGowan's career began in the late 1970s, when he and a group of pals joined to create The Pogues. The band became known for boisterous live shows and a distinctive blend of punk and Irish folk. The album Rum, Sodomy & the Lash was a classic released to great acclaim in 1985. The band’s musical output reflected reallife issues, including those MacGowan was personally facing. Throughout his life, he battled drug addiction and alcoholism, and his lyrics covered themes of loss, substance abuse, and salvation. The Pogues became one of the most popular alternative rock bands of the ‘80s and ‘90s.

If I Should Fall from Grace with God, released in 1988, was the third and most successful album from the group. Throughout the 1990s, The Pogues continued to churn out popular albums — but personal conflicts and MacGowan's deteriorating health took a toll. The band officially split up in 1998, although some tours and performances took place in following years. MacGowan continued to collaborate with other artists and recorded solo albums. Put simply, MacGowan was the real deal. His impact on Irish and punk rock music was enormous, and his songs are already viewed as treasures for future generations. CFI.co | Capital Finance International

The singer was laid to rest on December 8 in Tipperary. It was an appropriate place for the performer to be buried, but the procession began in the packed streets of Dublin. The coffin, on a horse-drawn carriage, was serenaded by mourners’ own soulful farewells. The cortege made its way to Tipperary's St. Mary's Church in Nenagh, where celebrities including Johnny Depp, Nick Cave, and Irish President Michael D. Higgins attended. Johnny Depp presented a eulogy in praise of MacGowan's skill, charisma, and resilience. He made mention of MacGowan's unique voice, unyielding spirit, and ability to connect with people. Pogues numbers were performed, including Streams of Whiskey, Thousands Are Sailing, and, of course, Fairytale of New York. Mundy, Imelda May, and Damien Dempsey were among those paying vocal tribute. Shane MacGowan was interred in the family plot in St Mary's. Only family and close friends attended the burial. It was a fitting farewell to a life lived well, if chaotically. Bono, of U2 fame, called him "a fearless poet and singer”, with a lyrical genius second-to-none. This rebel with a cause was one of a kind; he broke the mould with honesty, a bawdy laugh, and a raised glass. Merry Christmas, Shane. i

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> All Creatures Great and ... Mall?

Urban Wildlife Is On the Increase Feral beasties have taken up residence in all urban centres — and you should get to know your furry neighbours...

ature is quick to adapt to changing circumstances, and many animals still considered “wild” can be found in any modern city.

Birds show amazing adaptability; think of pigeons, sparrows and crows, no strangers to any urban setting. Pigeons once lived on cliff faces; they found a similar environment on the ledges of tall buildings — and rich pickings in food scraps. Crows and ravens have adapted further still, developing novel habits — including a method of cracking nuts under the wheels of passing traffic. Rats and mice are notorious for infesting cities. They need just the tiniest space to enter buildings and homes. These adaptive feeders can flourish on our trash. City insects are also surprisingly diverse: bees can be spotted pollinating plants in any city garden or park. Some rooftops and communal gardens sustain their own honeybee populations. Butterflies will grace any green space with flowering plants. Squirrels have grown so accustomed to the presence of humans that they approach park visitors in the hope of a feed. Their agility lends itself to urban landscapes as well as it does to trees and branches. Raccoons, known colloquially in the US as “trash pandas”, revel in the riches found in our rubbish. Nocturnal animals slip largely unnoticed into our cityscapes. Foxes, too, flourish in cities; they have lost much of their fear of humans. They forage and hunt in neighbourhoods and parks, helping to keep rodent populations under control. Bats reduce pesky insect populations, roosting in historic buildings and under bridges. Even deer can adapt, eating garden plants instead of wild

"Parakeets in London demonstrate how nonnative species can come to dominate urban areas. Their vibrant plumage and harsh calls lend an exotic air to capital’s parks." herbage — and thriving well enough to become an occasional traffic hazard. Monkeys are a legitimate tourist attraction in Lopburi, Thailand, and form part of the city's character. They can be found in ancient ruins and temples, including the Phra Prang Sam Yot temple — which is more-or-less dedicated to them. Locals tolerate, and in some cases, even revere their simian compatriots. It’s all about peaceful coexistence. Deer in Nara, Japan, have become virtual city mascots — and are considered messengers of the gods in the Shinto religion. The animals have become so inured to city life that they amble alongside pedestrians — and have learned to wait for traffic lights at road crossings. Parakeets in London demonstrate how non-native species can come to dominate urban areas. Their vibrant plumage and harsh calls lend an exotic air to capital’s parks. They are native to northern India and Pakistan, and they have adapted to the comparatively chilly British climate to create a new niche in a once-settled ecosystem. The penguin community at Boulders Beach in Cape Town, South Africa, is an example of

"Foxes, too, flourish in cities; they have lost much of their fear of humans. They forage and hunt in neighbourhoods and parks, helping to keep rodent populations under control. Bats reduce pesky insect populations, roosting in historic buildings and under bridges." 72

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wildlife tourism done right. The colony and its environment have been protected, allowing an effortless relationship between humans and Nature. Boulders Beach has become a definite tourist destination thanks to its waddling residents. Wild horses have roamed America’s Assateague Island for generations. Their survival in the tough Atlantic environment, with regular storms and a scarcity of fresh water, has made them a symbol of resilience. The island is managed by the National Park Service, which strives to balance conservation and tourism. Cats have become a cultural phenomenon in Istanbul, freely wandering streets, stores, and

Winter 2023-2024 Issue

mosques. Residents feed and care for them, and the beloved felines feature in local art — and on social media. In Austin, Texas, bats are honoured for their role in pest control. Their nightly appearance from beneath the Congress Avenue Bridge has become a must-see local event. Kangaroos in Australia’s capital, Canberra, serve as a reminder of the country's unique natural make-up. They can be spotted grazing in nature reserves and parklands — and occasionally in residential gardens. Their presence emphasises the need to include wildlife corridors and habitat protection in urban design. Cities have evolved distinct relationships with their native fauna, demonstrating how development can coexist with Nature. Animal populations can, of course,

also pose challenges for management and conservation.

conservation organisations can provide a better awareness of wildlife challenges.

City residents can improve their awareness and appreciation of nature by getting to know their furry or feathered neighbours. Birdwatching can be done from your apartment window. If you have a garden or a balcony, create wildlifefriendly zones by planting native flora. Feeders and birdbaths can make a big difference, and even window boxes can attract insects and birds.

Promote the preservation and establishment of green places in your city, and practise responsible pet ownership: cats and dogs can ravage local animal populations, whether native or endemic. Many cities offer education programmes that can enhance wildlife knowledge, and put you in touch with like-minded souls.

Citizen science projects monitor urban wildlife with bird counts, animal surveys, and reports on local biodiversity. Keep a respectful distance from visiting beasties, and do what you can to preserve their habitat. Volunteering with local CFI.co | Capital Finance International

Participating in neighbourhood clean-up initiatives and minimising garbage is a worthy pastime. City dwellers owe it to themselves, and to Nature, to develop a stronger bond with their animal neighbours, and develop a healthy urban ecology. i 73

> The Most In-Demand Office

Amenities Around Europe

Privacy appears to be front-of-mind for office workers globally, with conference rooms, private office space and lockers prioritised.

Health and privacy are key concerns for workers in Europe — standing desks are this year’s surprise office amenity, with a search volume of over 50,000. Meeting and event space is also in high demand, with a combined UK search volume of 4800. Well-designed office space incorporating suitable features can significantly impact employee satisfaction. To enable employers to understand the global workforce’s most in-demand office amenities, office design and fit-out firm Studio Alliance researched search trend data. THE FIVE MOST POPULAR OFFICE AMENITIES GLOBALLY Office Amenity/ Features Search Volume Conference Rooms 49,500 Private Offices 5,400 Lockers 4,400 Phone Booths 4,400 Ergonomic Furniture 1,900 Privacy has emerged as a key concern for the global workforce. Conference rooms, private offices and lockers are the top three office amenities. Employees have spoken out on their desire for private meeting spaces, in addition to space for personal belongings. The drive for privacy and security at work is probably a result of the rise of open-space layouts that favour flexibility and a fluid structure. Office lockers are a simple way to provide security and organisation options and support flexible working, reduce clutter and prevent theft. They also promote a sense of autonomy and privacy, data show. Health is at the top of the list for European workers. Across the UK, France, Italy, Poland and Belgium, demand for standing desks is higher

"In the UK, the search volume for conference rooms and event spaces totals 4,800, while globally, private offices and conference rooms together generate a search volume of 54,900." than all other office amenities. This suggests a new emphasis on health and wellbeing. The desks offer ergonomic benefits, reducing the risk of sedentary issues and promoting better posture. They can also enhance energy and focus, contributing to improved productivity. In the UK, the search volume for conference rooms and event spaces totals 4,800, while globally, private offices and conference rooms together generate a search volume of 54,900. There’s a growing preference among employees for diverse workspaces promoting productivity, enhancing collaboration, and providing a sense of freedom. Conference rooms are still popular, as they provide a dedicated space for collaborative meetings and discussions, fostering communication. Event spaces are invaluable and versatile areas for meetings, presentations, and team-building activities. Particularly crucial in the context of a post-Covid, hybrid-working world, well thoughtout spaces help maintain a strong company culture by offering a change of environment, reducing monotony, and facilitating team interaction. i

"Particularly crucial in the context of a post-Covid, hybrid-working world, well thought-out spaces help maintain a strong company culture by offering a change of environment, reducing monotony, and facilitating team interaction." 74

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Winter 2023-2024 Issue

"Conference rooms are still popular, as they provide a dedicated space for collaborative meetings and discussions, fostering communication."

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Winter 2023-2024 Issue

> Swiss Can’t Miss With an Attitude Like This —

CEO’s Dedication Shines Through

Commercial property sector’s many facets polished to a lasting shine by PSP Swiss Property’s chief executive.

SP Swiss Property is a major player in Switzerland’s commercial property market, with offices and buildings from Zurich to Geneva — and a portfolio value of some CHF10bn (£9.19bn).

Giacomo Balzarini is the man at the helm of this empire; he took the chief executive’s position in April 2017 after 10 years as CFO. Under his guidance and leadership, PSP Swiss Property has delivered solid performances year after year — with steady increases in dividend payments and share price. PSP has always put great emphasis on sustainability, Balzarini and his team have taken that commitment to new levels by linking the company’s overall debt financing to a green asset portfolio. In terms of management style, Giacomo Balzarini has always understood the value of strong teams. The co-operative and creative teamwork he has fostered form the cornerstone of the company’s enduring success. His informed and fact-based decision-making combines with excellent communication at all levels. Balzarini has created a working environment based on mutual trust and respect. He has full confidence in his staff, and that allows him to delegate — not just tasks, but responsibility. He wants his people to be critical as well as creative, constantly striving to drive the company forward. Balzarini’s input and leadership were decisive factors when PSP secured a coveted “Great Place to Work” award. Balzarini’s vision for the commercial property sector goes beyond bricks, mortar, steel and concrete; he wants the company’s buildings to be tangible sources of inspiration and innovation. He sees that state-of-the-art, future-orientated spaces as optimal working environments that inspire people. His focus is always on the long term, considering stakeholder ambitions — and that means all stakeholders, from co-workers and tenants to bond- and shareholders, as well as the needs of society and the environment.

CEO: Giacomo Balzarini

It's an attitude and a work ethic that have proven a winning formula for PSP Swiss Property over the years — and one that promises to take it from strength to strength in the future.

University of Chicago, considers all aspects of his sector — not just profit. He is more than just “a company man” — and is active on the board of a charitable foundation. His drive and enthusiasm extend beyond the PSP Swiss Property brief to concern for the world about us.

Giacomo Balzarini, who studied economics at the University of Zurich and earned an MBA from the

His professionalism has not gone unnoticed: he was named CFO of the Year by the CFO Forum CFI.co | Capital Finance International

Switzerland, an association of more than 500 CFOs, in 2015. He focuses on capital management and corporate finance, having held senior positions at Union Bank of Switzerland and Swiss Re. Balzarini is active at an international level as chair of the Best Practices Committee of the European Public Real Estate Association EPRA (Brussels), and holds the same position at the EPRA Accounting and Reporting Committee. i 77

> Is It Time to Put AI in Charge of Pricing Strategies?

Most Firms Seem Hesitant to Take the Leap

espite corporates enthusiasm for AI, its use in pricing strategies — using algorithms to determine optimal prices for goods and services — is yet to gain the approval of many.

More than half of those canvassed by data and technology consulting firm Valcon do not harness any form of AI for business purposes — and only 27 percent deploy AI-based pricing. The study surveyed 1,500 European, Asian, and American SMEs and corporates; 40 percent had over 10,000 employees. It was found that 53 percent don’t believe their internal data is mature enough for AI-based pricing. That renders them unable to benefit from a practice that experts say can help maximise margins at a time when they are facing headwinds from inflation, volatile market conditions, and fluctuating customer loyalty. In terms of the risks and barriers associated with AI-based pricing, respondents — who included 78

CEOs, CFOs, CSOs and CPOs (chief pricing officers) — believed the loss of control or a lack of understanding was the key risk (34 percent), followed by a lack of internal acceptance (23 percent), high maintenance costs (13 percent) and compliance and regulatory issues (11 percent). KEY STATISTICS FROM THE AI-BASED PRICING STUDY: • 76 percent of respondents consider AI-based pricing relevant or highly relevant • 27 percent reported regular use of AI to optimise promotions • 19 percent regularly review and optimise prices via Chat GPT, while eight percent use specific applications like dynamic pricing • 53 percent say their internal data is not sufficiently robust for AI-based pricing • 67 percent say their IT infrastructure is not mature enough. • 46 percent use historical transactional data for pricing, 21 percent use internal cost data, and 11 percent use customer demographic data. CFI.co | Capital Finance International

Study author Danilo Zatta said that while most respondents recognise the transformative potential, adoption rates are lagging. More than half of respondents reported an increase in profitability in 2022, despite inflation and market volatility. As economic growth continues to stagnate, Zatta says the use of AI will become critical for corporates to drive top-line profitability. “It capitalises on machine learning and data analytics techniques to analyse large volumes of data, making pricing decisions that maximise profits, spur revenue growth or fulfil other objectives, such as increasing market share or customer satisfaction.” Data quality and IT architecture are seen as the biggest inhibitors to AI-based pricing, and Zatta urges companies to start with small pilot projects. The perceived enormity of big data projects can put some organisations off. “It’s pricing and data evolution, not revolution,” he says. “But time is of the essence.” i

Winter 2023-2024 Issue

THE HUNGARIAN EXPORT CREDIT AGENCY

Cross-border financing solutions

for foreign customers importing from Hungary Functioning as a financial engine

for Hungarian exporters

Financing and insurance facilities for global trade

exim.hu/en

EXIM Hungary is the official export credit agency specialized in supporting Hungarian companies in their local and international investments, foreign expansion and global trade by providing various financing and insurance products. CFI.co | Capital Finance International

> Major Tech Boost for Logistics Sector By Kristian Torode Director and Co-founder of business broadband provider Crystaline

How 5G technology will keep the supply chain moving...

wC predicts that wide-scale development of 5G communication networks will contribute an additional $1.3tn to global GDP by 2030.

With logistics and transport among the primary target sectors for the technology, what are the key benefits it could bring? With speeds comparable to home broadband and low latency, 5G is set to revolutionise homes and industries. Logistics has historically struggled with labour shortages, rapid changes in demand, and poor tracking information. And, say experts, 5G could provide the solution to these issues. REAL-TIME TRACKING More advanced than barcodes and RFID tags, which can have problems during scanning, 5G-enabled tracking does a better job. An enabled device doesn’t need to be scanned and can report its location independently and in real time, allowing for more precise tracing. It’s possible to track the product right to the shelf it’s stored on, enabling transparent and accurate tracking throughout the supply chain. COMPLETE NETWORK One of the factors previously holding back the adoption of Internet of Things (IoT) devices has been capacity. A 4G cell tower can only handle around 2,000 devices at a time. Highly populated areas often suffer with performance issues. A 5G tower can support far more — up to a million devices at any one time. This boost means businesses will be able to have far more devices on the network. That includes product inventory, delivery vans and lorries, on-site forklifts, and other tools essential to day-to-day operations. Precise planning becomes faster and easier, minimising unscheduled delays and maximising use of available equipment. Security is enhanced too, with a reduced risk of goods being lost or stolen.

"A 5G tower can support far more — up to a million devices at any one time. This boost means businesses will be able to have far more devices on the network." COMPREHENSIVE VIEW It will also be possible to gather more comprehensive information. Where you might previously receive only location information, developments in sensor technology mean that more parameters can be measured. Temperature and humidity sensors and live video feeds are just a few possibilities. These sensors will allow logistics companies to guarantee the quality of their service. This is particularly relevant for the transport of perishables such as medicines or chemicals, which require special storage conditions. STAFF SHORTAGES Lastly, the development of 5G-enabled autonomous vehicles could help to tackle skills shortages. With a lack of qualified drivers, others have had to take on extra pressure. This can lead to longer hours on the road, sometimes without proper breaks. A 5G vehicle could drive autonomously for certain periods, such as on motorways, giving the driver more time to rest without losing time on the road. It’s even possible that drivers won’t be needed at all. Lorries could be remotely controlled, thanks to low latencies. It's clear that 5G isn’t just a gimmick — it can offer real benefits for logistics companies. With improved visibility across all operations, 5G could be the key to a truly robust supply chain. i

"It's clear that 5G isn’t just a gimmick — it can offer real benefits for logistics companies. With improved visibility across all operations, 5G could be the key to a truly robust supply chain." 80

CFI.co | Capital Finance International

Winter 2023-2024 Issue

"Where you might previously receive only location information, developments in sensor technology mean that more parameters can be measured."

CFI.co | Capital Finance International

> Ay-oop, America:

West Yorks Has a Whole Lot Going For It

West Yorkshire, United Kingdom: Harewood House, Harrogate

Trade mission from England’s West Yorkshire county hopes to lure stateside companies to ‘northern powerhouse’.

delegation from West Yorkshire in the UK has landed in Toronto, en-route to Boston, New York and Pennsylvania in a country-hopping bid to boost trade and investment at home.

West Yorkshire mayor Tracy Brabin will meet US and Canadian business leaders to champion her region as a prime destination for employment and expansion. It’s part of International Trade Week, supported by the British government. Brabin will meet North American businesspeople to discuss how best to scale and export. She said the trade mission was “an exciting first for West Yorkshire” and a chance to show the US and Canada “what we’re made of”. She touted the beauty of the region’s towns, countryside, and cities of culture — as well as its attractive work-life balance.

was an ideal place to start and scale a business, with a supportive ecosystem of public-private partnerships. “We can deliver the talent pipelines and upskilled workers our businesses need to thrive,” Ridyard said, “with the majority of our graduates choosing to live, work and play in West Yorkshire rather than move elsewhere.” With seven universities, almost 100,000 established businesses and an economy valued at £60bn, the county hopes to attract major global investors. Brabin visited multinational IT firm Cognizant after its pledge to create 1,000 jobs in the UK. With 160 people already employed, hundreds more tech and digital job opportunities are expected to follow.

“As we continue to punch above our weight with an economy that’s bigger than several EU nations,” she said, “now is the time to declare West Yorkshire open for business, as we build a stronger, brighter economy that works for all.”

The New York office is expected to strengthen Cognizant’s regional commitment; it recently partnered with the Leeds Community Foundation to provide digital support and laptops to local charities. The company also donated £250,000 to the West Yorkshire Combined Authority to support new digital apprenticeships.

Aerospace manufacturing expert Mandy Ridyard, Brabin’s business advisor, said West Yorkshire

Cognizant’s UK and Ireland MD, Rohit Gupta, said it had been “an easy choice” to set-up in

CFI.co | Capital Finance International

West Yorkshire, given the wealth of talent that Leeds had to offer. Sarah Tulip, head of the Leeds Delivery Centre, said the firm was on a mission “to empower people from under-represented backgrounds to shine” in the north of England’s digital sector. The UK delegation will meet with the US leadership teams of several leading West Yorkshire businesses, including the Academy of Live Technology, Turner & Townsend, and IMAHOME. Leeds-based IMA-HOME, the UK’s largest full service integrated agency outside of London, has clients including adidas, Hisense and the UK’s number one tour operator, Jet2. IMA-HOME is a 350-strong agency, mostly based in West Yorkshire and growing internationally in New York, Sydney, Amsterdam and Cape Town. Nickii Gray, chief executive partner at IMAHOME, said Leeds was “our agency engine room”, with creativity on-tap from local schools and universities. The trade mission, the first of its kind, stems from the West Yorkshire Plan, which set out to deliver prosperity to the region. i

Belvoir’s Rental Index...

Winter 2023-2024 Issue

...a detailed review of the UK’s latest market trends, not only for the UK on average, but also for each county and region. Visit belvoir.co.uk/rental-index With over 170 offices around the UK, our property experts are always nearby when you need a hand. Over the last twelve years we have produced the Belvoir Index to give landlords an upto-date and accurate picture of what’s actually happening in the rental market. Visit belvoir.co.uk to find your local property expert.

CFI.co | Capital Finance International

> CFI.co Review: Mr Bates vs The Post Office

Post Office Debacle is Barely Believable — But Sadly True Produced by Little Gem and ITV Studios. By Liam Walsh

How on Earth did the British Post Office scandal come to pass? An ITV tour-de-force answers at least some of those questions — and poses many more...

an against machine; it’s a standard sci-fi theme, and — in Hollywood, anyway — the humans usually overcome.

The plots are preposterous, the odds agonisingly unequal, the battles brutal. From Arnie’s skirmishes with Skynet and killer robots from the future in the Terminator franchise to our more mundane battles with banks and records departments, the balance is always skewed — and seldom in our favour. “Computer says No” is one thing; computer says “You’re a thief” — well, that’s another. But far worse was to come in this case: a fiendish coverup and unspeakable corruption from individuals in positions of trust and responsibility. And that is just what has been happening — for decades. Mr Bates vs The Post Office is a drama-documentary, cataloguing one of the most unimaginable scandals of the modern age. It’s the tale of a digital witch-hunt driven by faulty technology, obtuse and arrogant bureaucrats, and courts of law that do indeed seem blind — and asses. Some 3,000 British sub postmasters and -postmistresses (the Post Office’s archaic terminology; it was established in 1660, after all) were affected in this debacle. Many were accused — and convicted — of misappropriating funds and false accounting. It was all down to faulty software, introduced in 1999, called Horizon, made by Fujitsu. It was touted as fail-safe and foolproof; it was neither. For reasons still not completely clear, it found that Post Offices around the British Isles had been wrongfully appropriating funds.

"Some 3,000 British sub postmasters and -postmistresses (the Post Office’s archaic terminology; it was established in 1660, after all) were affected in this debacle. Many were accused — and convicted — of misappropriating funds and false accounting."

They faced their accusers, heads held high, and the people they served over the years, in this central part of British village life, largely stood by them (although there was the most awful vilification at times). Sometimes humans can see what machines can’t: innate goodness.

Each of the accused — holders of a certain beloved and respected status in most towns and villages — thought they were fighting a unilateral battle against a faceless enemy. They weren’t, but there was no way of knowing their strength of numbers. The Post Office was playing a devious game.

The organisation once so trusted by the British public had done little to compensate the sub postmasters and -mistresses whose convictions were overturned. Fortunately, the government has now stepped in to quash all the convictions and ensure that there are proper settlements. Politicians were reacting to the mood of the country after the drama was broadcast, mindful that there is to be a general election soon. An enquiry is underway.

Some people questioned their sanity. Many paid back the supposedly mislaid funds from their own pockets. Some accepted plea deals, despite their innocence. One man at least went to prison despite taking a plea; all were driven to distraction by the accusations. To say lives were ruined is a cruel understatement. There were suicides and untimely deaths. In this filmic recreation of what will go down in history as one of the world’s most gross miscarriages of justice, one telling thing, for the viewer, is some justification for human intuition. The accused Post Office workers on screen were somehow visibly innocent, good people. Our instincts told us so. These were not sly, evasive criminals, ashamed of their actions.

No such quality can be perceived in the weaselly Post Office CEO Paula Vennells — awarded a CBE in 2019 for her role at the top of a once-venerable institution — who did squirm and evade, guilt written all over her. She has, at least, handed back her governmental honour; her personal honour she forfeited with her own words and actions.

Vennells has said she’s “sorry” for the suffering; Fujitsu, manufacturer of the mysteriously malfunctioning Horizon software, made similarly contrite noises. ITV has done an amazing job of capturing the enormity of this debacle and fitting it into four 45-minute episodes and a documentary. Much is left unsaid, but an awful lot has been made plain. Clearly the computer is not always right, and those responsible for correcting things promptly, can sometimes, even wilfully, get everything wrong. Injustice of this kind must never again be allowed to happen. i

"In this filmic recreation of what will go down in history as one of the world’s most gross miscarriages of justice, one telling thing, for the viewer, is some justification for human intuition. The accused Post Office workers on screen were somehow visibly innocent, good people. Our instincts told us so. These were not sly, evasive criminals, ashamed of their actions." 84

CFI.co | Capital Finance International

Winter 2023-2024 Issue

> Post Apocalypse:

A Tragic Miscarriage of Justice and a Total Loss of Faith in Tech Lessons learned in the mud and blood of yesteryear’s battlefields can be applied to modern commerce.

he Post Office scandal in the United Kingdom, one of the most significant miscarriages of justice in British history, revolves around the Post Office's implementation of the Horizon IT

system. The system, developed by Fujitsu, was introduced to Post Office branches in 1999. It was intended to modernise and streamline operations, including accounting and inventory management. However, soon after its implementation, numerous sub-postmasters (independent operators of local Post Office branches) began reporting unexplained accounting shortfalls. These shortfalls, often amounting to thousands of pounds, were flagged by the Horizon system.

Despite sub-postmasters’ protestations of innocence, the Post Office maintained that the Horizon system was reliable and began a series of aggressive legal actions. Many of the accused were forced to make up the shortfalls from their own pockets, leading to financial ruin for some. Worse still, the Post Office began a campaign of legal action against those it accused of theft, fraud, and false accounting. Over a period of years, this led to the wrongful conviction of numerous sub-postmasters, with many receiving prison sentences, community service, or suffering severe damage to their reputations and mental health. The scandal came to light more broadly through a series of investigations by journalists and a concerted campaign by the Post Office workers. CFI.co | Capital Finance International

It became increasingly clear that the Horizon system was flawed, prone to bugs and errors that could — and did — cause shortfalls. In December 2019, a significant legal victory for the sub-postmasters occurred when the High Court ruled that the Horizon system was not reliable. The UK government has launched an inquiry to investigate the extent of the injustices, the role of Fujitsu in the deployment and maintenance of the Horizon system, and the actions of Post Office leadership. The scandal has raised serious questions about corporate governance, the reliance on complex IT systems, and the handling of criminal justice in a corporate context. i 85

ANNOUNCING

AWARDS 2024 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.

CFI.co | Capital Finance International

As world economies converge we are coming across many inspirational individuals 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 2023-2024 Issue

> BANCO DO BRASIL: BEST SUSTAINABLE BANK SOUTH AMERICA 2023

At Banco do Brasil, sustainability guides every action and aspiration. Over the past two centuries, the bank has cultivated a true partnership with clients and Brazilian society at large. It recorded an adjusted net income of $5.3bn in the first nine months of 2023, up 14 percent compared to the same period of the previous year. This represents a 21.3 percent return on equity — and over $13.1bn of value added to society. The bank credits the good results in part to an expanding loan portfolio where sustainable

loans are the star performer. The sustainable loan portfolio has increased by 5.5 percent in 12 months and now comprises a third of the loan book. It intends to bring the portfolio up to $102bn in sustainable loans, including ambitious financing to back low-carbon agriculture and renewable energies. In 12 months, Banco do Brasil achieved 14.2 percent growth in SME loans and 18.9 percent growth in agribusiness loans. It prioritises responsible investments that move the needle of climate

management and generate positive impacts across the value chain. Banco do Brasil leads by example on ESG issues and consistently makes the cut for all major sustainability indices. The bank recently appointed its first female CEO, Tarciana Medeiros, while 23.7 percent of leadership positions are held by women and 22.8 percent by people of colour. The CFI.co judging panel presents Banco do Brasil — a repeat programme winner — with the 2023 award for Best Sustainable Bank (South America).

> KPMG: OUTSTANDING CONTRIBUTION TO YOUNG TALENT DEVELOPMENT QATAR 2023

KPMG started out in Qatar in 1977 and is one of the most prestigious professional firms in the country, offering audit, tax and advisory services. In a mid-December statement to the UN, the state emphasised that youth empowerment aligns strongly with its National Vision 2030. This vision is to transform Qatar into an advanced country capable of sustainable development and ensuring a decent life for its people generation after generation. Qatar ranks highly on the Youth Development Index (YDI) thanks to substantial government efforts. But

according to the CFI.co judging panel, “the private sector has a key role to play too, and KMPG’s efforts have been exemplary.” The firm is committed to providing work experience to young Qataris and employs many interns and graduates. This commitment extends to ongoing technical training and hands-on experience under the guidance of professional staff. KPMG alumni have leadership roles in the public and private sectors and help create a bright future for the country. There is a culture of continuous learning, and the KPMG

Business School offers the latest technical, business and leadership skills development. The firm supports education, training, and the community. KPMG in Qatar employs over 350 professional staff and partners and recruits the best and brightest (drawing on 42 nationalities). This creates an atmosphere of excellence and provides examples of latest thinking and best practice. The panel congratulates KPMG in Qatar and confirms the 2023 award Outstanding Contribution to Young Talent Development (Qatar).

> BERENBERG: BEST STRATEGIC ASSET ALLOCATION TEAM GERMANY 2023

In more than four centuries of operation, Berenberg has witnessed firsthand the truth of its corporate motto: change is the only constant. Germany's oldest privately owned bank has demonstrated a keen capacity for adaptation and steadfast commitment to client accountability. From origins in the textile trade and import-export business, Berenberg has evolved into one of the leading independent private banks of Europe. It specialises in wealth and asset management as well as investment and corporate banking and has established a strong presence in the financial centres of Frankfurt, London and

New York. Berenberg’s investment consulting division advances the group’s legacy as a traditional bank emphasising exemplary customer service and relationship management. Berenberg Investment Consulting oversees the strategic asset allocation (SAA) of the bank’s entire investment platform, managing around €40bn in assets from institutional investors, corporate pensions, single family offices, endowments and high-net-worth individuals. SAA development is a complex process that can determine up to 90 percent of the longterm investment success, so the team applies CFI.co | Capital Finance International

a research-backed and hi-tech approach to achieve robust and diversified allocation over time. A state-of-the-art technical platform allows the team to customise high-quality SAA studies in short work, which has proven a considerable advantage in an environment of ever-shorter capital market cycles. A recent academic collaboration, rooted in mathematics and data science research, is expected to boost investor value groupwide. The CFI.co judging panel announces Berenberg as the 2023 award winner for Best Strategic Asset Allocation Team (Germany). 87

> KATHREIN PRIVATBANK: BEST PRIVATE BANK AUSTRIA 2023

Kathrein Privatbank pulls from a nearly 100-year legacy to provide clients with the most innovative and personalised financial services. It was founded by Carl Kathrein in 1924, an era marked by difficult economic headwinds, to serve the complex needs of private banking clients. Over the past few years, the Vienna-headquartered bank has invested considerable resources to expand advisory capabilities, enhance the customer experience and strengthens its presence across CEE markets. A strategic focus on digital transformation has helped the bank make progress in each area.

Kathrein clients benefit from an integrated advisory tool that enables comprehensive monitoring and control of their financial assets. It seeks to empower better decision making via realtime insights into portfolios, investment options and risk analysis. The online platform is intuitive and user-friendly, allowing clients to manage portfolios, execute trades and access additional financial products and services. The bank has built a technology and digital infrastructure powered by the latest advances and brightest minds. Kathrein Privatbank is taking steps to

reduce its carbon footprint and has found a steady increase in investor appetite for ESG-managed assets. In December 2022, Kathrein Privatbank became one of the first private banks in Austria to offer customers sustainably produced gold, certified and embossed by the London Bullion Market Association. Gold bars are insured by the bank, and clients can track their value on a daily basis. The CFI.co judging panel presents Kathrein Privatbank — a repeat programme winner since 2019 — with the 2023 Best Private Bank (Austria) award.

> OPTIMUM ASSET MANAGEMENT S.A.: BEST VALUE REAL ESTATE INVESTMENT STRATEGY GERMANY 2023

Optimum Asset Management S.A. has a strong track record in generating extremely attractive risk adjusted returns. It achieves this by identifying, acquiring and transforming mispriced and mismanaged real estate assets into stable, attractive portfolios. The firm regularly prefers niche markets around the world, where its smaller target asset size and focus on specific sub-sectors enables it to outmanoeuvre larger competitors. Optimum is currently active in the German and US markets, with a network of strategically located offices in Berlin, Hamburg, London, Luxembourg, Miami, Boston and New York. It is authorised and regulated by the Luxembourg Financial Sector Supervisory Commission. Optimum take

a hands-on approach to asset management at every stage of the investment process, from property purchase through asset optimisation to exit. The firm is active with its fourth fund in a series of Berlin residential and commercial focussed vehicles, has partnered with Blackstone on a joint venture and is launching a luxury hospitality fund in partnership with the globally renowned operator, Cipriani. During recent years Optimum’s established portfolios have navigated the challenging economic environment with relative resilience. The longer-term fundamentals that drive the cherry-picked investments provide a great platform for future performance. This combined with the team’s proactive operational

approach is how the company generates returns for its clients. The firm manages €1.5bn in assets, with portfolios weighted towards residential, commercial and hospitality properties. Optimum works with institutional investors, such as pension funds, global investment managers, insurance companies and foundations, amongst others, and continues to seek out transactions worldwide. Over the next 12 months, the firm intends to continue its value enhancing asset management initiatives, whilst keeping a keen eye on potential future opportunities. The CFI.co judging panel presents Optimum Asset Management S.A. with the 2023 award for Best Value Real Estate Investment Strategy (Germany).

PSP Swiss Property is a publicly listed company with a real estate portfolio of office and commercial buildings worth more than $10.9bn. The holding company’s shares have been traded on the SIX Swiss Exchange since 2000. PSP Swiss Property continues to develop core activities, such as the leasing of commercial space, with the objective for long-term value creation and sustainable asset management. It has completely transformed the debt book, shifting $4.3bn in public bonds and outstanding loans towards green

bonds and sustainability-linked loans. PSP Swiss Property now ranks as the largest issuer of green bonds in Switzerland. It has achieved a 4.5 percent increase in property income and a 2.6 percent increase in total assets in the first three quarters of 2023 versus the same period in 2022. PSP Swiss Property recently purchased a modern and centrally located property in Zurich, moving decisively on the acquisition while competing interests were still analysing the market and seeking funding. The company executed a $244.2m deal for

the property. It realised that the acquisition and asset yield would align perfectly within the PSP portfolio, thanks to valuable insights from a team member with firsthand experience on the original building construction. PSP Swiss Property has offices in Zurich, Geneva and Basel. Low vacancy rates across the real estate portfolio contribute to a solid capital structure and confident outlook. The CFI.co judging panel announces PSP Swiss Property as the 2023 award winner for Best Real Estate Portfolio Growth Strategy (Switzerland).

> PSP SWISS PROPERTY: BEST REAL ESTATE PORTFOLIO GROWTH STRATEGY SWITZERLAND 2023

CFI.co | Capital Finance International

Winter 2023-2024 Issue

> CALCULO CAPITAL: BEST AI COMMODITY TRADING STRATEGY EUROPE 2023 Calculo Capital has a trade mark — diversify, prosper, evolve — that exemplifies its origin story and future-forward vision. In 2011, the commodity research and software company, founded by CEO Philip Carlsson, set out to create a specialised trading platform for commodities. After developing a commodities trading engine and management tool, the company registered with the Danish FSA as a manager of alternative investment funds. Within two years, it had launched the Calculo Evolution Fund, which relies on an inhouse trading platform and systematic trading strategy powered by algorithms, machine learning and automated processes. Calculo Capital promotes commodities as a crucial element of a well-diversified investment portfolio. Commodities offer protection against cyclic corrections, as they’re noncorrelated towards traditional investments

such as stocks, bonds and real estate. Calculo’s trend-following commodity fund removes the err of human emotion from the investment process by establishing rules for calculating and filtering trading signals. Calculo Capital sets the parameters that drive the algorithms and automation of the fund’s signal selection, risk management and trade execution. The fund seeks to capitalise on fluctuating prices of underlying commodities in the futures market by harnessing AI to optimise exits and adjust exposure according to historic observations. Calculo Capital is evolving by intelligent design, learning from past experiences to shape the fund methodology in step with market trends. Carlsson fields a strong team. The CFI.co judging panel congratulates Calculo Capital on claiming the 2023 award for Best AI Commodity Trading Strategy (Europe).

> LA TROBE FINANCIAL: BEST INVESTMENT MANAGEMENT TEAM AUSTRALIA 2024 With AUM of A$18bn, this highly disciplined team (including 150 credit analysts), ensures that La Trobe maintains, with distinction, its position as one of Australia’s dominant credit asset managers. The firm traces its legacy back over seventy years and has funded customers to the tune of A$34bn. Its investors include major institutions, the big domestic banks, family offices and individuals. The team operates one of the most highly diversified funding programmes of non-banks in Australia. La Trobe, passionate about ESG, is committed to safer communities, creating employment, and assisting the underserved. Its values are trust, excellence, accountability, and making a difference. On 1 December, La Trobe introduced a new global fund in partnership with Morgan Stanley, and it’s off

to a tremendous start. The team spent seven collaborative months with their Morgan Stanley counterparts working on this. The relationship was initiated two years ago but was put on ice during the harmonious Brookfield acquisition. According to CIO, Chris Paton, “there’s a bottom-up approach in Australia, and many managers come over here and get things wrong, but Morgan Stanley is a good partner.” La Trobe is known for its quality offerings and Paton is always happy to be on the road talking to investors and advisors. The CFI.co judging panel comments that, “year-by-year, this outstanding repeat winner has a great story of tell of exciting new developments.” Without hesitation, La Trobe Financial takes the 2024 award for Best Investment Management Team (Australia)

> eFACTOR NETWORK: BEST DIGITAL SUPPLY CHAIN FINANCE PLATFORM LATAM 2023 Business hardly needs to be reminded of the problems that can result from supply chain delays and working capital problems. The CFI.co judging panel applauds Mexico’s eFactor platform which can significantly improve information sharing and transparency as regards payment and invoicing flows. eFactor helps supply chains to become more efficient and cash flow concerns to ease. Its roster of 35 domestic and international funders (as well as its own solution eFactor Diez) can get things looking brighter for clients. And fast. Set up in 2009, thousands of companies (many of the largest) are now making use of eFactor services and are glad to be doing so. Aside from superb customer focus at eFactor, the secret sauce is inspired use of cutting-edge

technology. The panel terms eFactor as a leader in unlocking cash flow, noting that the company provides clients with access to multiple currencies and countries. Cash can be accessed as quickly as within 24 hours. eFactor has made $5bn available to grateful businesses over the past decade. eFactor, an industry leader in Mexico, looks for long term client relationships. The panels comments that, “this company, with its exceptionally well-thought-out platform, forward-thinking approach, and dedicated professional team, is likely to be very successful in retaining business.” The judges consider eFactor an exemplary provider of factoring, trade finance, and supply chain finance, and the worthy winner of our 2023 award Best Digital Supply Chain Finance Platform (LATAM). CFI.co | Capital Finance International

> SMIT MOROCCAN AGENCY FOR TOURISM DEVELOPMENT

BEST TOURISM INVESTMENT PROMOTION TEAM NORTH AFRICA 2023 The Moroccan Agency for Tourism Development (SMIT) counts its people among its most valued resources. The agency has established a work culture where talents are nurtured and human potential maximised. SMIT has a multidisciplinary team with backgrounds in engineering, architecture, communications and financial markets. The investment promotion team provides high-touch, concierge-style support for private and public investors. It offers detailed analyses concerning a project’s feasibility, development and profitability. SMIT shares insights and information to help

investors better understand Morocco’s tourism industry and make the most of its competitive positioning. Tourism accounts for 7.1 percent of the country's GDP — and SMIT is striving to attract more visitors and investors. It capitalises on a network of international partners to position Morocco as a prime destination for tourism investment and development. It helps SMEs and entrepreneurs connect with the funding to finance tourism projects and helps investors find promising projects to back. SMIT is headquartered in Rabat with additional offices in Tangier and Agadir. The agency encourages

continuous learning among its workforce and organises training courses for new recruits and ongoing skills development. SMIT hopes to stimulate professional growth throughout the workforce via a mobility programme offering dynamic career development prospects and a dedicated manager to guide employees’ journey. The agency is governed by a value system rooted in transparency, teamwork, innovation and excellence. The CFI.co jury announces SMIT as the 2023 award winner for Best Tourism Investment Promotion Team (North Africa).

EXCELLENCE IN TOURISM DEVELOPMENT AFRICA 2023 Since its launch in 2007, the Moroccan Agency for Tourism Development (SMIT) has promoted the country as an ideal destination for tourism and investments. SMIT takes an engineering approach to tourism development, combining multiple disciplines to solve problems, improve systems and boost productivity throughout the sector. It provides investors and decision-makers with information and assistance to develop tourism projects via public arrangements, private schemes or public-private partnerships. In recent news, the agency signed a partnership agreement with

the UN’s World Tourism Organisation (UNWTO) to promote investment and digitalisation in Morocco’s tourism sector. At the 117th UNWTO Executive Council, SMIT celebrated the Marrakesh Call to Action programme to accelerate the digital transformation of tourism SMEs while supporting the sector’s sustainable and resilient recovery. Morocco was selected as a pilot country for the UNWTO’s Digital Futures programme and a nationwide start-up competition was introduced. SMIT encourages SMEs and entrepreneurs to develop innovative, inclusive and future-forward ideas.

The agency recognises SMEs as the backbone of the national economy and the spearhead of the tourism industry. It estimates SMEs to comprise 95 percent of the Moroccan economy and 80 percent of all tourism businesses. SMIT has established a digital platform enabling SMEs to network and cocreate efficient ecosystems at the local level. It collaborates with foreign investors and state agencies to facilitate funding for tourism development. The CFI.co judging panel announces SMIT as the 2023 award winner for Excellence in Tourism Development (Africa).

OUTSTANDING CONTRIBUTION TO MOROCCAN ECONOMY 2023 The Moroccan Agency for Tourism Development (SMIT) promotes Morocco as a business-friendly and culturally rich tourist destination. The agency acts as a catalyser for sustainable, inclusive and resilient tourism in Morocco. SMIT connects Morocco’s tourism SMEs, which represent 80 percent of the tourism sector, with financing options through private investors, public funding and public-private partnerships. It launched a digital platform to encourage SMEs to collaborate in local networks for mutual growth and benefit. SMIT understands how to best 90

combine complex elements to foster a thriving tourism industry. It provides potential investors with analyses to make data-backed decisions and assistance to get the ball rolling. The agency engages with tourism SMEs across various outreach campaigns and digital channels. In 2021, SMIT partnered with a local council to finance a programme aiming to create 150 tourist SMEs and more than 600 new direct jobs. It recently announced another partnership to support the conversion of ksours and kasbahs, traditional adobe architecture including CFI.co | Capital Finance International

citadels and tribal villages, into authentic hotel accommodations. Grant funding would cover up to 40 percent of the project investment amount, plus an additional contribution of 10 percent of the investment to improve the surrounding area. SMIT expects significant economic and social impact from the initiative in terms of job creation, income-generating activities, reduction of the rural exodus and promotion of local products. The CFI.co judging panel congratulates SMIT on claiming the 2023 award for Outstanding Contribution to Moroccan Economy.

Winter 2023-2024 Issue

> SOCIETE GENERALE MOÇAMBIQUE: BEST BANKING TEAM MOÇAMBIQUE 2023 In 2015, France’s Societe Generale inked an agreement acquiring a stake in Mauritius Commercial Bank Mozambique and went on to establish Societe Generale Moçambique. This move reinforced the notion that large African companies and multinationals present in the continent had increasingly sophisticated banking needs and often required the expertise of more mature economies. Our winner is now the leading commercial bank in the country and has a keen and successful focus on retail, corporate and investment banking. It has a substantial network of branches and boasts excellent online and mobile banking services. According to the CFI. co judging panel, “Societe Generale Moçambique has supported the growth of the national economy as an important partner to government and the nation’s businesses. Its financial

performance is good and customer service here is exemplary. The Bank is to be congratulated on assembling a very strong and loyal team of skilled professionals that has a deep and comprehensive understanding of the market”. The team has worked diligently on a new business plan which is taking Societe Generale Moçambique to another level. The Bank is a devoted corporate citizen and has done much to help its host communities, notably offering support to young children. CEO Ridha Tekaia insists that the Bank wants to be part of the solutions for communities by helping those who need it most. The panel congratulates the Societe Generale Moçambique team and, without hesitation, confirms the 2023 award Best Banking Team (Moçambique).

> AVON HMO: BEST HEALTH INSURANCE PLAN NIGERIA 2023 Avon is an exemplary HMO (health maintenance organisation) operating in Nigeria. The MD/ CEO Adesimbo Ukiri described its task as ensuring that all Nigerians can access the necessary healthcare without the burden of financial worries. CFI.co says, “Bravo!” Avon HMO’s digital transformation started in 2015 with an upgrade of its contact centre infrastructure. In 2016 Avon became the first HMO in Nigeria to offer health plans to the masses and allow online purchases. By 2019 the awards started flowing in. These included one characterizing Avon HMO as a company to inspire Africa, but according to our panel that should read “for inspiring the world”. Also, Avon HMO has smartly expanded its plans portfolio and opened more offices. The panel says, “Keep them rolling!” Ukiri was named CEO when Avon

HMO’s licence was granted in 2012. She selected her team and decided the way forward. She got it right. Her first pillar is “people and culture”. The CEO wants the workplace to be peaceful, joyful, and calm. Ukiri’s second pillar is “analytics and digitalisation”. Despite rapid technological change, it seems unlikely that Avon HMO will ever be left behind. The third pillar is “brand management and marketing”. The CEO, while a trained lawyer, also has a background in marketing some of Nigeria’s leading brands in the past, and, my goodness, it shows! Sometimes award deliberations are easy, as in this case. The panel respectfully salutes Adesimbo Ukiri and her team while unanimously declaring Avon HMO the Best Health Insurance Plan in Nigeria for 2023.

> TUNIS INTERNATIONAL BANK (TIB): BEST BANKING GOVERNANCE TUNISIA 2023 Tunis International Bank is a private commercial bank established in 1982 as the first banking corporation in Tunisia licenced to deal primarily with non-residents. TIB main shareholder is Burgan Bank Kuwait a subsidiary of the Kuwait Projects Company (Holding); one of the largest holding companies in the MENA region. A repeat winner with CFI.co, TIB has been well recognised by other esteemed organizations too. Tunis International Bank has a strong reputation as a local provider of products and services for corporates, financial institutions, governments and individuals both in Tunisia and abroad. Tunis International Bank is committed to the highest standards of corporate governance and recognizes that good

governance is pivotal in helping the business to deliver its strategies whilst meeting its obligations towards shareholders and other stakeholders. The adopted corporate governance ensures the responsible, value-driven management and control of the bank. The panel notes that TIB tends to go well beyond basic governance requirements. According to the judges, “TIB recognises that good governance is critical to its business success and fulfilment of obligations to stakeholders.” TIB appreciates that best practice and transparent management are fundamental requirements of the Bank. CFI.co is pleased to announce Tunis International Bank the 2023 winner of our award Best Banking Governance (Tunisia). CFI.co | Capital Finance International

> JADARA: BEST UNIVERSITY IN THE MIDDLE EAST IN PURSUING INTERNATIONALISATION VIA WORKING TOWARDS THE UN’s SDGs

‫ﺟﺎﻣـﻌــﺔ ﺟـــــﺪارا‬

JADARA UNIVERSITY Jadara was founded in 2005 and began its educational programmes in 2006. It is a prestigious private university located in the northern province of Jordan, the only private university in the province to be included in the current QS ranking, securing a position between 170 and 200 among the best institutions in the Middle East. It derives its name from the historic city of "Um Qais," which was one of the ten towns in the Decapolis during the Roman Era. The university has 8,500 students enrolled in nine faculties: engineering, pharmacy, allied medical sciences, education, law, business, science & IT, arts and languages, educational sciences, and faculty of graduate studies. These faculties provide a combined total of 34 unique fields of

study for undergraduate degrees and 15 graduate programmes, including 14 master's programmes and one higher diploma. Jadara hosts several annual international conferences, facilitating its path towards internationalisation. It is considered one of the leading universities in Jordan and the Middle East in terms of sustainability, since it has just been listed among the top 182 institutions globally in the GreenMetrics international ranking system. The CFI.co judging panel commends the Jadara motto: ‘Eager to Embrace Sustainability’. Jadara undeniably has a well designed and wellmaintained green campus. All buildings have been equipped with solar panels to fulfill their cooling and heating requirements, and there is a strong emphasis on using energy-efficient

electrical equipment. Jadara implements ‘Single Stream Recycling’, which ensures efficient waste disposal processes. Paper is used cautiously, while plastic bags are prohibited on campus. The institution has an abundant supply of water resources and does not rely on external sources. Jadara provides students with courses focused on sustainability in education. The travel strategy aims to minimize gas emissions, prioritizing virtual meetings wherever feasible. According to the panel, Jadara is faithfully serving the community and the country, ever mindful of the UN imperatives, and is the natural choice for the 2023 award Best University in the Middle East in pursuing internationalisation via working towards the UN’s SDGs.

> KUWAIT INTERNATIONAL BANK: BEST BANKING VISION & BEST SHARIAH-COMPLIANT BANK MENA 2023

Kuwait International Bank (KIB) stays close to customers with over a dozen branches and more than 120 ATMs throughout the country. A robust digital platform ensures customers stay in control of their finances at all times, including outside of regular banking hours or whenever the Shariah-compliant bank shuts in observance of Islamic holidays. KIB runs a contact centre to cover client queries and has introduced two new contact centre services. Customers can now skip all hotline queues and get an instant response using the WhatsApp

interactive service. Premium KIB account holders from the KIB Black segment now benefit from a dedicated team to take their calls day or night. KIB has come a long way since its 1973 start as the Kuwait Real Estate Bank, building a loyal client base through a service proposition rooted in exceeding expectations, forging winwin partnerships and rapidly adapting to market trends. KIB recently unveiled revamped versions of its retail and corporate banking platforms as well as a first-of-its-kind real estate platform with

digital appraisal request and follow-up features. KIB’s advanced banking and real estate platforms are the result of ongoing digital transformation strategies. In the first half of 2023, customers made 95 million digital transactions through KIB’s web portal and mobile app, in addition to 422,000 transactions via KIBPay. Once again in 2023, the CFI.co judging panel reaffirms KIB’s long-running winning streak in the awards categories for Best Banking Vision and Best Shariah-Compliant Bank in the MENA region.

Kuwait International Bank (KIB) is a full-service Islamic financial institution celebrating a 50-year anniversary. The bank has contributed to the socio-economic development of the country with its innovative service suite and comprehensive CSR activities. It believes financial literacy to be a key factor in a country’s economic stability and growth potential. As such, KIB sponsors initiatives and supports national campaigns to raise financial awareness and banking literacy across all sectors of society. It participates in major industry conferences to spread brand recognition,

recruit staff and connect with potential partners. It organises information sessions at high-traffic venues to engage directly with the public and promote the benefits of conscientious savings and investment practices. This enables the bank to stay close to customers and adapt to their changing needs. Bank representatives present products to suit personal circumstances and aspirations, while also highlighting customers’ financial rights and responsibilities. Cyber safety and fraud prevention are common themes across KIB events and publications. It regularly

disseminates warnings against emerging threats, particularly in relation to card usage and digital channels. The bank recently cautioned investors and traders to avoid digital currencies and assets due to their lack of regulatory oversight. KIB first registered on the CFI.co radar as the fastestgrowing bank in the MENA region. While the bank continues along an impressive growth trajectory, the judges felt its educational outreach activities deserved special attention this year. KIB wins the 2023 award for Best Bank in Financial Literacy Programme (MENA).

> KUWAIT INTERNATIONAL BANK: BEST BANK IN FINANCIAL LITERACY PROGRAMME MENA 2023

CFI.co | Capital Finance International

Winter 2023-2024 Issue

> PORT AUTONOME DE CONAKRY: BEST PORT INFRASTRUCTURE MANAGEMENT AFRICA 2023

The Port, given its favourable location, is long and well established, but modernday development commenced in 1981. Its infrastructure had deteriorated severely by this time, but technical assistance and funding from The World Bank and Germany resulted in the creation of the Autonomous Port which replaced earlier authorities. Little time has been wasted since then, and the infrastructure now in place is exemplary. These days 90 percent of Guinea’s economy passes through the Port to benefit the country. Shippers

insist on an efficient service, and that’s what they get: with unloading times reduced to the minimum. The Port’s management efficiency has been recognised, and merits top ranking. General manger Biro Diallo was appointed in 2021 and his successful handson approach is contributing significantly to the development of the country. Diallo started his civil engineering studies in Conakry and he graduated at London University. The modern infrastructure of the Port serves and adapts to the needs of local communities. Its

operations are consistent with international standards and Conakry is a member of the Central African Ports Organisation. The Port was official sponsor of the Guinea Economic Forum in July 2023. With a highly qualified board of directors and top management team, its governance is of a very high standard. The leadership is committed to providing superior quality services and a modern infrastructure to ensure safety and security. Port Autonome de Conakry is the 2023 winner of the award Best Port Infrastructure Management (Africa).

> MauBank: MOST PROMISING BANK MAURITIUS 2023

MauBank continues to report strong growth. Financial year 2022/23 saw operating income up 24 percent, net interest income rose by 27 percent, and after-tax profits of MUR 380.8m ($8.6m) - an improvement of 42 percent over the previous year. Quarter One of 2023/24 saw a post-tax profit of Rs 162.55 Mn already for the three months ended 30 September 2023, against Rs 115.49 Mn for the same period last year, thus an increase of 40.75%. Management must be congratulated on tripling profits since year 2020/21. MauBank certainly acted decisively in response to the post-pandemic challenges and geopolitical disruption and

has done a sterling job in reducing costs. As for the current financial year, CEO Vishuene Vydelingum promises that the bank will be, “strengthening relationships, staying innovative, and reinforcing customer-centricity,” MauBank consistently displays this prudent attitude and looks set to reap the benefits moving forward. The MauBank approach has resulted in strong fundamentals in a competitive industry. It has effective management, and is dedicated to product and service innovation (including its superb digitalisation programme). The CFI. co judging panel is delighted to see the bank investing wisely to protect the long-term.

MauBank’s above average growth record indicates that it is outperforming its competition and satisfying its loyal customer base. This is a young bank that punches well above its weight and the panel expects to see the momentum continue. MauBank offers exemplary services in SME, retail, corporate and international banking. It boasts a strong banking network with 19 business centres and 30 ATMs. CFI. co recognises SMEs as the lifeblood of national economies and applauds the unwavering support MauBank provides to these smaller businesses. The 2023 award for Most Promising Bank Mauritius goes, without hesitation, to MauBank.

> MauBank: BEST DIGITAL EXPERIENCE IN BANKING MAURITIUS 2023 MauBank was established in 2016, and from there started its journey to an ambitious and far-reaching digitalisation programme. This has resulted in satisfying operating and cost efficiencies, but the overriding concern has always been customer satisfaction and improved experiences for those served by MauBank. The board dipped its feet in the water first, switching to board meetings by tablet. It was important to maximise staff understanding and buy-in before the digital offers were placed in front of customers, and the transition was highly successful. Paperless account openings and statements, and

automated loan processing were soon to be introduced. The trailblazing WithMe app came to life in 2018. Another convenience is online lending via MyLease. The solid commitment to harness financial technology to improve the client banking experience and back office operations has been profound and is working very well. The bank was recognised by our award body last year for its digital transformation progress, and customers agree. “WithMe, for example, has received glowing reports for being easy to use, having great features and a responsive interface. It has been further CFI.co | Capital Finance International

developed to provide the trending instant – and NFC - payment features, and continues to outperform competition when it comes to functionality” states Issa Soormally, Deputy Chief Executive of MauBank. Significantly, users note that the app is improving over time. The judging panel points out that MauBank is often the first to introduce digital innovations in Mauritius, works hard to maintain and improve customer service standards, and uses tech wisely to push the business forward. The 2023 award Best Digital Experience in Banking (Mauritius) goes to MauBank. 93

> ABU DHABI GLOBAL MARKET: BEST INTERNATIONAL FINANCIAL CENTRE EMEA 2023

Abu Dhabi has been referred to as a “falcon” economy given its high-growth transformation and abundant resources. It has also been called the “capital of capital” for the large sovereignwealth funds under management. Located in the international financial centre and free zone, Abu Dhabi Global Market (ADGM) is delivering record results that reinforce the emirate’s position as a financial powerhouse. As of June 2023, AUM at ADGM has grown by 35 percent year-on-year. It has several firms and funds under its jurisdiction, including over

100 asset managers overseeing 128 funds and a pipeline of 32 potential new hedge funds. ADGM functions as a highly responsive and progressive regulator in an ever-evolving market, serving as a single gateway for financial institutions, multinationals, and entrepreneurs, with development support as well as court and arbitration systems. ADGM’s jurisdiction has grown tenfold in the financial centre, totalling 14.4 million square metres with the recent expansion to Al Reem Island. ADGM is a pioneer of sustainable finance, designing

and implementing solutions to accelerate the nation’s transition to net-zero emissions. ADGM was among the first to regulate voluntary credits as financial instruments and establish a framework for licensing exchanges and clearing houses. AirCarbon Exchange (ACX), the world’s first regulated carbon offsets exchange and clearing house, follows the ADGM framework. The CFI.co judging panel announces ADGM — a repeat programme winner — as recipient of the 2023 award for Best International Financial Centre (EMEA).

> EMAD SHAHIN: BEST INVESTMENT DIRECTOR 2023

An excellent investment director requires a wide array of skills — and Emad Shahin at Ethra Invest has proven up to muster. The investment director pulls from a 20-year career in banking and wealth management to navigate the complexities of a financial landscape that’s constantly changing. Shahin began his professional journey as a banker in Egypt and gained extensive international experience in investment management posts across the Middle East as well as Canada. He was appointed as the investment director of Ethra Invest, a leading Dubai-based investment

and private equity firm, in January 2023. Shahin has a track record of consistently delivering above-market returns for clients and stakeholders. He combines financial acumen with meticulous due diligence to develop forward-thinking investment strategies that tend to beat the benchmarks. This has earned the trust and confidence of institutional and individual investors alike. Shahin takes a holistic and hands-on approach to fund management, applying rigorous market analysis to identify valuedriven opportunities and develop effective risk

mitigation strategies. He stays at the forefront of industry trends, leveraging innovative financial instruments to optimise portfolio performance and ensure compliance at every level. The investment director has fostered a culture of excellence within the teams he’s led and contributed significantly to the overall success of the firms he’s joined. Shahin’s prowess has positioned his funds as leaders in the competitive landscape of private equity — leading the CFI.co judging panel to declare Emad Shahin as the 2023 award winner for Best Investment Director.

> ETHRA INVEST: BEST PRIVATE EQUITY FUND INVESTMENT SOLUTIONS 2023 Ethra Invest strives to exceed expectations by delivering superior returns for investors and creating lasting value for stakeholders. The Dubaibased firm designs customised solutions to help individual and institutional investors generate and preserve wealth. The firm stays aligned with client interests, whether high-net-worth individuals or institutional investors like pension funds and endowments. Ethra Invest prioritises strong relationships, sustainable growth and positive impacts. It’s an active asset manager with a conservative investment approach. 94

Ethra Invest is guided by a value system rooted in excellence, integrity, transparency and innovation. It specialises in non-traditional investment solutions, conducting extensive due diligence and market analysis to achieve client objectives with creativity and confidence. Ethra Invest gives clients access to a curated selection of private equity funds managed by an experienced internal team and reputable external partners. Supplementary services at Ethra Invest extend to brokerage as well as advisory on local and international capital markets. At the CFI.co | Capital Finance International

start of the year, the firm highlighted maritime shipping as a promising investment sector with high capacity for profitability and risk control. It intends to focus investments on maritime transportation of dry goods, a sector which plays a vital role in commodities trading and has seen sustained growth in recent years. The CFI.co judging panel looks to the firm’s track record of successful investments as a positive indication of its potential growth trajectory. The jury announces Ethra Invest as the 2023 award winner for Best Private Equity Fund Investment Solutions.

Winter 2023-2024 Issue

> Headline.net: BEST WEB3 CRYPTO TRADING PLATFORM 2024 | LEADING INNOVATOR IN

MTF TRADING SOLUTIONS 2024 | OUTSTANDING PLATFORM FOR EQUITABLE FINANCIAL TRADING 2024 Headline.net is a revolutionary WEB3 CFD trading platform that has made significant strides in financial technology. It empowers users to take advantage of diverse economic events, helping them transform market movements into profits. For the past seven years, the platform has enhanced the trading experiences of CFD and forex enthusiasts, opening doors for global users to invest in over 100 financial products. Headline.net offers speed, accuracy, and invaluable insights, catering to experienced traders and less experienced investors. Headline.net is transforming the way users engage with financial products using cryptocurrencies and offers an impressive array of innovative features. Its Order Matching System eliminates spreads, providing unparalleled market transparency and helping users make informed decisions. Headline.net provides a secure, equitable, and transparent trading environment. Its MTF trading framework means that every user has equal access to trading opportunities.

Leveraging Blockatm technology, the platform allows seamless wallet connections and direct transactions through WEB3. This groundbreaking approach removes the need for traditional deposits and withdrawals, guaranteeing utmost security. A dynamic real-time trading ticker keeps users informed about trading pairs, offering market insights and opportunities. The platform’s dedicated team is passionate about providing valuable trading tips and guidance. It fosters a vibrant community through a Telegram group to keep users well-informed. More than just a trading platform, Headline.net speaks to the future of financial trading. By combining technology, security, and fairness, a superb user experience follows. Headline.net’s innovative approach and commitment to excellence position it as deserving winner of the 2024 awards: Best Web3 Crypto Trading Platform; Leading Innovator in MTF Trading Solutions; and Outstanding Platform for Equitable Financial Trading.

> BANGCHAK CORPORATION PUBLIC COMPANY LIMITED: BEST SUSTAINABLE INNOVATION STRATEGY THAILAND 2023 The CFI.co judging panel applauds Bangchak for being a “tireless energy-transition champion working for energy security and a greener future.” The company, whose ESG credentials are exemplary, acts responsibility throughout its core business activities in petroleum refinery and trading, marketing, bio-based products, green power and natural resource business development. The values Bangchak holds itself accountable for are innovation, agility and mobility, boldness, customer empathy, passion, and ownership. The company wants to be virtuous, knowledgeable and a worthy contributor to sustainable business innovation in harmony with the environment and society. It approaches this via a 4S strategy: Security (helping to cope with national energy demands); Synergy (always seeking positive collaboration); Sustainability (developing and extending core

business for growth); and Scalability (searching for opportunities to drive new business). Bangchak is now celebrating 40 years of operations and has every right to feel proud of its achievements. It exited the pandemic in a strong condition, and its great team of out-ofthe-box thinkers delivered outstanding results in 2021 and 2022. CEO Chaiwat Kovavisarach expects 2023 to be a vintage year. Bangchak operates 2203 services stations in Thailand (and counting). The company, a shareholder in Exon Mobil and Okea (Norway) is active overseas in The Philippines, Vietnam, Japan, Thailand and the US. It expects to be carbon neutral by 2030 and net zero by 2050. Without hesitation, the panel confirms repeatwinner Bangchak Corporation Public Company Limited for the 2023 award Best Sustainable Innovation (Thailand).

> HLB BEST CROSS-BORDER COLLABORATION FOR TAX SOLUTIONS GLOBAL 2023 Combining local expertise and global capabilities, HLB helps business grow through innovative thinking and working together. They are a global network of accounting and advisory firms made up of 40,831 professionals across 156 countries. According to the CFI.co judging panel, “this global reach enables them to provide an outstanding service to clients, and HLB’s top 10 accounting and advisory network global ranking is truly deserved”. Theirs is a well-assembled coalition of some of the best independents worldwide that scores highly in terms of service quality and client satisfaction. HLB’s tax experts have a profound understanding of the complexities of the global market and respond effectively. HLB works efficiently across multiple jurisdictions, respecting and adhering to regulatory structures, local reporting imperatives and the statutory side of things – aligning everything with the corporate objectives and strategies of clients. HLB has a simple yet ambitious strategy for its

business which is relevant to and addresses the needs of all stakeholders. The panel goes on to say that, “HLB is a good listener and knows how to build trust. There’s a clear sense of direction here and a good action plan.” Digital expertise is harnessed for the benefit of all HLB people, allowing sharper focus. HLB is composed of some very smart thinkers and an innovative mindset is encouraged and fostered at every level of the network. The aim is to offer a collaborative, people first, fact-based approach for reaching decisions for the benefit of the entire HLB global community. Their purpose is to make a positive and sustainable impact on the future of their clients, people and communities as they care about their well-being and success. HLB appreciates the strengths of diversity and encourages a happy crew, extending opportunities for personal growth to all HLB people. The panel is happy to confirm HLB for the 2023 award Best Cross-Border Collaboration for Tax Solutions Global 2023. CFI.co | Capital Finance International

> Africa

The Great Continent Has Everything to Play For in AfCFTA Bid Africa stands at a pivotal point in its economic journey.

CFI.co | Capital Finance International

he continent is poised to build on its reputation for unrealised potential. Transformation will be underpinned by a confluence of demographic trends, technological adoption, natural resources, and a key agreement. Nigeria, Africa's economic giant, continues to leverage vast oil reserves while nurturing a burgeoning tech sector. South Africa's sophisticated financial markets and manufacturing capabilities set it apart, though it grapples with socio-economic challenges. In the north, Egypt's strategic location and evolving infrastructure make it a gateway for trade. Kenya is another beacon of tech innovation, especially in mobile banking, while Ethiopia and Ghana emerge as manufacturing and agricultural powerhouses. Agriculture is still the backbone of many African economies, but there's a shift towards diversification. The African Continental FreeTrade Area (AfCFTA) is reshaping intra-African trade to meet the needs of an integrated market of well over a billion people. From Safaricom's mobile money revolution with M-Pesa in Kenya to Dangote Group's industrial dominance in Nigeria, these stories are about profitability, innovation, and resilience. Kenya’s Jumia's e-commerce platform is redefining retail. These corporations mine the potential of local knowledge, adaptability, and sound leadership. They highlight the importance of understanding African markets' unique dynamics — a blend of local traditions with an appetite for technological advancement. Rwanda's business-friendly policies, Morocco's focus on manufacturing and Tanzania's natural resources make for attractive investment destinations. Each offers a unique proposition, from political stability to strategic locations and thriving markets. The African banking sector is leapfrogging traditional models. Mobile banking and fintech are not just transforming the financial landscape: they are driving inclusion. The insurance sector, though nascent, is managing risk. The advent of insurtech start-ups are a testament to the sector's rapid evolution. As African businesses expand and globalise, the role of advisory firms has become crucial. These firms assist in navigating complex regulatory

"Africa's youthful population is a formidable asset. But capitalising on this requires investment in education and job-creation. Experts predict robust growth in renewable energy, technology, and agribusiness — contingent upon improvements in governance and regional collaboration." environments and crafting strategies that align with global best practices. Africa's youthful population is a formidable asset. But capitalising on this requires investment in education and job-creation. Experts predict robust growth in renewable energy, technology, and agribusiness — contingent upon improvements in governance and regional collaboration. Natural resources must be sustainably harnessed and harvested, with a watchful eye on environmental protection. Other challenges to be addressed include political instability, infrastructure deficits, and educational gaps. International partnerships and foreign investments are vital. Along with capital, they bring expertise and market access. These relationships must be carefully balanced, and based on a principle of mutual benefit. Africa's ascent to economic powerhouse status isn’t possible just yet — but it’s within reach thanks to that history of resilience and innovation. Strategic investment, policy reform, and an inclusive approach to development can accelerate the journey. The AfCFTA free-trade agreement (FTA) between 54 African Union (AU) member states aims to create a single market for goods and services. It is the world's largest FTA in terms of population — over 1.3 billion people — and economic metrics, with a combined GDP of more than $3 tn. AfCFTA was introduced in 2018 after years of talks; it was a watershed moment in global integration. Its principal goals are to construct a unified continental market. Tariff- and nontariff obstacles on most goods will be eliminated, allowing African enterprises to operate freely and effectively across borders. Intra-African trade should be encouraged by the lowering of trade costs, developing infrastructure,

and harmonised regulatory frameworks. The agreement will also allow for the free movement of corporate persons and investments across Africa, supporting economic co-operation and development. Increased economic growth and job creation across the continent enhance competitiveness, attract foreign direct investment, and encourage innovation. Poverty and inequality will be reduced by developing economic potential and improving living standards. Many nations are trying to harmonise their trade laws while the AfCFTA is implemented. It has already had a considerable impact on intraAfrican commerce, which has expanded by more than 20 percent since 2018. Significant impact on the economy — billions of dollars in extra commerce, millions of jobs, and reduced poverty — is anticipated. AfCFTA is regarded as a critical step in realising the African Union's Agenda 2063 goal of a “prosperous and integrated” Africa. PROSPECTS AND CHALLENGES Many countries are unable to build capacity and fully reap the potential benefits. There are also holes in infrastructure. Less-than-perfect roads, ports and railways can stymie trade and hamper integration. It’s critical to streamline customs procedures and harmonise standards. In terms of compliance and enforcement, new measures will be required to ensure regulatory compliance. Inequality is a big one, with effort needed to mitigate its detrimental impact on specific industries and vulnerable populations. Despite these issues, the AfCFTA is widely seen as a game-changer. It can help the continent become wealthier and better integrated — if countries work together to handle the problems and seize opportunities. i

"AfCFTA was introduced in 2018 after years of talks; it was a watershed moment in global integration. Its principal goals are to construct a unified continental market." 98

CFI.co | Capital Finance International

Winter 2023-2024 Issue

> Business is All About Communication —

and a Second Language Boosts Earnings

A smattering of Urdu or a few words in Swahili may be useful, but speaking fluent German will add to your pay packet...

peak a second language? Research shows it’s not only desirable in the workplace — it can boost your earning power.

Not all second languages are equal, however; in the UK, Spanish is the most in-demand — while a good grasp of German seems to be most lucrative. The study by LTL Language School analysed 7,717 job listings on Indeed which mentioned a second language in the description. This revealed the 10 most in-demand languages and their earning potential, based on average annual salaries.

French comes in at fourth spot; a level of fluency in the language was called for in 847 (11 percent) of the job descriptions. Rounding out the top five is Mandarin Chinese, the second-most globally spoken language: more than 1.1 billion people speak it at native or second-language level. Data reflect this, with the language required in 775 (10 percent) of listings. The top five highest-paying second languages: 1. German 2. Portuguese 3. Italian 4. French 5. Spanish

The top five are: 1. Spanish 2. German 3. Italian 4. French 5. Mandarin Chinese

As well as analysing which languages are the most in-demand among UK employers, LTL Language School identified the average salaries offered for each of the second languages to find the most lucrative.

Spanish was the most in-demand, with 1,576 vacancies — 20 percent — requiring a certain level of fluency as part of the description. But Espanol placed just fifth for earning potential.

German, with an average salary of £45,795, tops the list. This is 31 percent higher than the reported median UK salary across all industries and areas.

The second most desirable language for employers is German, which appeared in the job descriptions of 1,479 (19 percent) of job listings across the UK. Italian ranks third for British employers, with the language appearing in the descriptions of 1,038 (13 percent) of jobs listed on Indeed.

The language which offers the secondhighest paying employment opportunities is Portuguese. A fluent speaker could take home an annual salary of £44,463. Following closely is Italian, with an average estimated salary across the listings of £44,214 CFI.co | Capital Finance International

— 26 percent higher than the median UK salary. As well as being the fourth-most desirable language, French provides the fourth-highest paying opportunities: £43,490. Spanish may be the most desired second language, but it was found to be the fifthhighest paying. The study revealed that los que hablan la idioma can earn an average of £42,263 a year. LTL CEO and co-founder Andreas Laimbock said it was interesting to see which languages prove most attractive to employers. “It’s unsurprising that some carry a high earning potential,” he said, “as the demand for multilingualism continues to grow. “Anyone seeking new career opportunities and greater prospects would benefit from learning a new language. The ability to communicate effectively with people from around the world increases networking opportunities and allows for market expansion, which is valuable for employers... “On a more personal level, research also suggests that people who speak more than one language develop stronger problem-solving skills, an increased ability to concentrate, and can even delay cognitive decline in older age. Learning a second language can benefit not only your chances of gaining employment, but also your lifelong wellbeing.” i 99

> Established, Respected, Clear

on Priorities, and Transparent in All its Dealings — This African Bank Has All Its Ducks In a Row

Mozambique institution has a major European player as a shareholder — and an A rating from S&P...

ith a presence in the country since 2015, Banco Société Générale Moçambique is a member of the Société Générale Group, one of the major players in the European Financial Sector. The bank has achieved a coveted A rating from S&P, and is part of one of the three largest international groups present in Africa. The deep knowledge and specialist expertise acquired over more than a century on the continent has made BSGM the first choice to serve corporate, SME and individual sectors. The commercial banking model developed by Banco Société Générale Moçambique is based on a foundation of excellent service to its clients, the specialisation of its advisors — and efficiency in day-to-day transactional banking, with a competitive edge and swift execution in international trades. Established in year 1999 as União Comercial de Bancos Moçambique SARL (UCB), and later renamed Mauritius Commercial Bank Mozambique, Société Générale Group acquired the bank in October 2015. Société Générale, which holds the majority 65 percent stake, chose the new title: Banco Société Générale Moçambique. The bank embarked on a process of transformation and expansion, growing resource and development units to create a fully-fledged SG subsidiary. CLEAR VISION Building and growing with its clients and customers, BSGM has developed innovative solutions for sustainable and inclusive growth

"The bank has achieved a coveted A rating from S&P, and is part of one of the three largest international groups present in Africa." in Mozambique. It prides itself on offering an excellent customer experience, reliability, expertise — and benefits from the solid backing of the established international reputation of the Société Générale Group. With more than 150 years behind it, the group has built on solid values: Innovation, commitment, responsibility, and team spirit. The Banco Société Générale Moçambique team has taken on these values, using them to create its foundation. It has worked well for all concerned, building innovative and sustainable relationships and solutions for the development of Mozambique, working side-by-side with the client base and partners. The man at the helm of Banco Société Générale Moçambique is chief executive Ridha Tekaïa. He is a multinational expert in the financial sector, having held many senior positions over the past 30 years. He held the CEO post at Reunion, Mayotte, in Moldova, and in Algeria. He was also commercial head director at the Czechia office, and the head of corporate affairs in Cameroon. Tekaïa was named CEO of Société Générale Bank in July 2022, and is supported by a strong and dedicated management team. i

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CEO: Ridha Tekaïa

> Diamonds:

Forever Stones With a Timeless History, and a Financial Future Without End Compressed allotropes of carbon might be their most accurate definition, but these sparkling gems boast a particular and enduring magic...

et’s start with a quick multiple-choice. Diamonds are: a) Expensive b) An investment c) A girl’s best friend d) Forever

such as precious metals and gems see sudden upturns in interest — literal, financial, and metaphorical. Recent market trends indicate that the global market for luxury investment assets is likely to grow in coming years — at least as far as the Diamond Registry can foresee.

Only one of those answers — a) — is technically correct. They cost a lot. An investment? Sure, they can be — but they can also lose up to half their worth on resale, due to market fluctuations. A girl’s best friend? That’s a dog, surely; animals aren’t sexist. And forever? The nit-picking jury, aka the internet, is still out on that one...

A more recent focus, in a world of increasingly empathic and concerned consumers, is that of provenance: another moral consideration for the discerning buyer. “Blood” diamonds are those mined in war zones, their beauty used to fund a warlord's ugly ambitions, or finance terrorism. The Kimberley Process is an international partnership banning blood (or conflict) diamonds from international trade. Proving provenance, however, can be complex.

The word itself comes from the Greek “adamas”: meaning indestructible, or invincible, and for us mortals, it’s an accurate enough term. The mining company De Beers, whose name is synonymous with shiny-shiny, massively condensed carbon, used “Diamonds are forever” as its commercial motto back in 1947; the 007 franchise only got there in 1971. But, says physics (again, depending on your www-dot-whatever reference), the gems will eventually degrade to graphite because of a lower-energy configuration under typical conditions (note that disclaimer in italics). This is way above my paygrade and gemmological nous, but — gracias, internet — here goes: “Diamonds are kinetically stable because of a high activation energy barrier. Each carbon atom is strongly bonded to four adjacent atoms located at the apices of a tetrahedron (a threesided pyramid). The four valence electrons of each carbon atom participate in the formation of very strong covalent bonds. These bonds have the same strength in all directions.” But they’re not thermodynamically stable. Makes all the difference, apparently. If you want to stick around to witness the degradation process, you’ll need, I don’t know, a few billion years. Which makes your investment safe enough — if diamonds can be classified as investments. For many — even in the 2020s, where apps and start-ups are the richest seams around — they can. In troubled times, natural sources of wealth 102

So, should we start at the beginning? If so, timetravel is first on the agenda. Getting back to the “forever” label, witnessing the birth of a diamond means going back more than a billion years, and a good 100 miles beneath the Earth’s surface. We all know, from primary school days, that the recipe calls for carbon, extreme temperatures, and enormous pressure. Get those factors right, and eventually you’ll have the hardest natural mineral ever known. Being as diamonds started life so far below the modern streets of, say, Kimberley, it may seem odd that we came to see them at all. Volcanic activity is what brought them up to our realm, via vertical rock formations called “kimberlite pipes”. These remnants of ancient volcanoes are eroded — please don’t keep checking your watch, it’s a slow process — and deposited at surface level for our delectation. Rough diamonds — technically, they’re all just allotropes of carbon — are unearthed by natural cataclysms and distributed by the eruptions themselves, and streams and rivers. Humans probably first found them in gravel and silt — alluvial beds — and that’s how things stayed until the late 1800s. From then on, and still today, diamonds have been actively mined in kimberlite pipes, a process that started in South Africa in 1869. The CFI.co | Capital Finance International

birth of the modern industry was rough, tough, and industrial, with sprawling operations kicking up other discoveries in Botswana, Australia, Siberia, India and Canada. The journey of a modern diamond — modern in terms of discovery, that is — typically starts in a kimberlite quarry. Raw crystals are sorted by size, weight — carats (0.2 grams) — and colour before embarking on one of two possible routes. The most obvious one leads to the doorstep of De Beers, the world’s largest mining group, or that of one of its competitors: Australia’s Rio Tinto, or Botswana’s Debswana. Mining consortia and companies organise “sights” — sales sessions at which unprocessed gems are offered for sale to diamond crafters. If you fancy having a nosey around, you have about as much chance as of seeing a diamond decompose during your lunchtime. These are invitation-only events at which select “guests” pick the stones they fancy for themselves, or intend to sell on to traders who breathe less rarefied air. The smaller traders put the “cut” into rough diamonds and sell the now-polished gems to jewellery creators — who put them into finished pieces — or sell them on to wholesalers. Next in the chain are the retailers. You, the buyer, are still some way away. There are less obvious, less frequently used, and sometimes less salubrious paths a diamond could follow. Independent miners may choose not to sell to a group like De Beers — although most mines are group-operated. They can sell to other buyers, who can choose to cut the

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diamonds and sell the stones themselves. Buying at the source cuts out the pesky “middleman” — and cuts costs. And when it comes to buying and selling anything, the internet has options that trump tradition. All manner of gems and jewellery can be found online — at surprisingly competitive prices. The key factors in a diamond's appearance are its cut quality and its weight. Succeed in your evaluation process and origin verification, and you have an asset to diversify your portfolio. They’re durable, for a start, said by many to be inflation-proof, and — something smugglers have long noted — easy to store and transport. Leaving smuggling aside and moving straight to modern commerce, the Belgian city of Antwerp is the world centre of the diamond trade. Quite why that is, and whether this universe can ever eclipse that of crypto, is worthy of some study. Also noteworthy is the entrance in Belgium of some new players on the scene: followers of the legendarily peaceful Jain faith of India. More about them later. Antwerp’s Diamond Quarter is the undisputed diamond capital of the world, with more than 80 percent of rough stones (and half of the cut ones) passing through it. The city has come a long way from its origins, but it has always been a trade hub. Handily situated on the river Scheldt, linking it to the North Sea, Antwerp began a central trading role as far back as the 14th Century. The world's first stock exchange was established there — and it traded in things like gold, silver, copper, and diamonds. The

diamond exchange itself was established in 1456, coinciding with the local development of the polishing wheel known as a scaife. It allowed symmetrical polishing of all facets, and boosted orders from the super-rich of the day. By the late 20th Century, Nature was no longer the sole source of diamonds. In 1970, the US firm General Electric began creating diamonds in the lab; the first hit the market in 1984. As the tech has advanced, so have the “diamonds” — the use of quote marks is mine. The stones themselves have become almost indistinguishable from the real thing. Cubic zirconia, which contains no carbon, doesn’t cut it, by the way. More recent confections are true to Nature’s recipe — just cooked in the microwave, so the speak. So, talking of dodgy morals, money hunger, and Antwerp... how on Earth did the Jains become involved? Jains are strict vegans — even the harvesting root crops is seen as murder — and they don’t cling to material wealth. And yet, as news organisation Al Jazeera recently reported, Jains are increasingly at home in Belgium. With a “take only what you need” philosophy as their ethical yardstick, they would seem unsuited to peddling wildly expensive gems of sometimes uncertain origin, roughly ripped from the surface of the Earth. The Al Jazeera report found that the majority of Antwerp’s Jains have their roots in the city of Palanpur, in the western state of Gujarat. Now, the diaspora can as easily be found in Hong Kong, New York or Tokyo. They move according to business conditions — and Antwerp is CFI.co | Capital Finance International

where it’s “at” right now. Most in Belgium live in the Antwerp suburb of Wilrijk, near the Jain temple. Jain-friendly restaurants have sprung up, denoting the stability of the new migrant population. Jains have come to dominate Antwerp’s diamond trade, gradually taking the baton from the Orthodox Jewish community over the past 60 years. Why did followers of a faith based on moderation and non-attachment get involved in the first place? For a start, they involve themselves only with trade, shunning production or prospection. By stepping back from the unseemly side of the industry — no root vegetables, remember? — they are able to wash their hands of the muck attached. Double standards? Perhaps. But in a world so enchanted by the glittering facets of a billion-year-old gemstone, pragmatism rules. Looking for a guilt-free diamond yourself? You could start with a lab-cooked one, as above. Fancy a real one? Start by identifying the country of origin — if you can. There’s no way to determine a natural diamond’s provenance by simply examining it. A data trail is necessary, along with thorough, ongoing analysis. A process developed by GIA — scientific matching — means graders can align the characteristics of a polished stone with the rough. But it’s still tricky. So: You do, or you don’t. Have a good look at your bank balance before you make a decision, and think hard. Unless you’re planning on flipping it for a profit — possible, but unlikely — this purchase will be with you forever. And ever. And ever. i 103

> Can I Use Crypto to Get a Mortgage?

Experts Answer With a Qualified ‘Yes’ We all have questions; professional brokers have most of the answers...

ne of the most commonly asked questions about property purchases is: “Can I use crypto for a down-payment?”

The short answer, say brokers from L&C Mortgages, is yes. But for UK residents, at least, there are limitations. Crypto is still relatively new, and some lenders won’t accept it. A few will immediately deny your application, but others may offer you a mortgage — and accept money derived from cryptocurrency as a deposit. Anti-money-laundering regulations mean that lenders must trace the source of any money put towards a down-payment. As crypto is not a tangible form of money, it must be converted to fiat currency in the buyer's bank account, typically done through a third party. This means toil for the lenders, who need to identify the source of that money. It can be a complicated process for an unregulated currency — which is why crypto has become a chosen route for money laundering. Would-be buyers will need to be as co-operative as possible when trying to prove the legality of their nest egg. It’s best to speak to a mortgage broker with specialist knowledge, as they will have relationships with lenders who accept alternatives to fiat currencies. They can advise on legal documents that must be acquired and prepared. Bank statements and other documents can show how much you bought, held, or sold — and all cryptocurrency profits and earnings must be declared to HMRC. A student loan will not affect your application, as it is considered a low-risk debt. It can even indicate to the lender that you are more likely to meet your repayments — the chances of a graduate having a rewarding career are good. The main concern will be the amount of your monthly repayments. Most lenders have an acceptable overall debt level, via which they determine your mortgage affordability. Your application will be affected by a large student loan, along with any other debt. On the plus side, student loans don’t affect your credit score and do not appear on your credit file. This means buyers must declare student loans; withholding information means an application 104

"It is recommended that you get a DIP, a decision in principle. This shows sellers that you are serious, and will give you a clearer idea of how much a lender is prepared to offer." could be denied, and future applications affected. Finally, those who do not earn more than the loan repayment threshold (which differs according to the type of loan plan) should still get a loan, as long as there is stable and adequate income. Some degrees may improve your mortgage affordability, ultimately increasing the amount you can borrow. Those still studying can get on the property ladder, but they must be able to show a solid income and credit history. HOW MUCH CAN I BORROW? Your mortgage affordability determines the amount you can borrow. It’s a term used when lenders assess whether you will be able to afford monthly repayments. Lenders will assess multiple factors, such as age, income, and monthly outgoings. They will also look to see if there are any likely changes to your circumstances that could affect your ability to pay. If you’re about to start a family, childcare may be factored-in. HOW DO I GET A MORTGAGE? The first step is analysing your current financial commitments. You’ll also need to check your credit history, as lenders will use this too. They will use data from a credit reference agency such as Experian or Equifax. If you have a lower credit score, you can improve it by ensuring you make payments on time and CFI.co | Capital Finance International

consider setting-up direct debits. You may need to close any credit card accounts that are no longer in use. Not being on the electoral roll can also damage your rating. A large deposit can boost your chances, but remember to consider other fees that will arise, such as stamp duty, surveys, and additional conveyancing.

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It is recommended that you get a DIP, a decision in principle. This shows sellers that you are serious, and will give you a clearer idea of how much a lender is prepared to offer. There are many types of mortgages, and you will need to determine which one you want; the most common is fixed-rate. Interest will not change for the duration of the fixed rate, which gives you

the security of knowing what repayments are. But that applies even if interest rates fall. This is where professional advice can be invaluable. A good broker will search the market for you, taking into account your situation and checking lender criteria. WHEN WILL INTEREST RATES CHANGE? There is no way to know for sure. Usually, CFI.co | Capital Finance International

rates change every six weeks, but the Bank of England has kept the rate at 5.25 percent since August 2023. This is a measure to tackle high inflation. It is forecast that rates could increase by 0.25 to 0.50 percent, potentially peaking at 5.75 percent before falling over the next five years as inflation eases. i 105

> Middle East

Weaving Hostile Tribal Factions Into a Tapestry of Unity — with an Unwavering Focus on Islam The Kingdom of Saudi Arabia stands as a tribute to the vision and dedication of King Abdul Aziz.

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t sits in the heart of the Middle East, a territory rich in historic trade routes, religious history, and cultural wealth. The founding of Saudi Arabia is a story of political savvy and military might, and a drama that altered the development of the entire Arabian Peninsula.

Prior to the ascension of King Abdul Aziz, popularly known as Ibn Saud, the peninsula was a patchwork of tribal lands caught in the crossfire of regional rivalries and colonial ambitions. Ibn Saud emerged as a unifying force in this friable terrain, combining diplomacy, religious conviction, and military strategy to establish his nation as a participant in global affairs. The king's legacy stretches beyond national boundaries. The architect of modern-day Saudi Arabia consolidated the diverse desert tribes and laid the groundwork for regional alliances, global energy markets, and a reverence for Islamic culture. His shrewd statecraft and vision for nation-building left an indelible influence on the flow of Middle Eastern history. In chronicling King Abdul Aziz's endeavours, his valiant battle to unite the Arabian Peninsula under a single flag cannot be brushed over. This is the story of a dream which came to reality, sculpting a nation from its sands and forever altering its regional status. In the early 20th Century, the peninsula was in flux, ruled by disparate nomadic tribes. They ranged from sedentary populations near Yemen to nomadic groups braving in the Najd Desert. The society that emerged remains firmly anchored in tradition, but adaptable and able to thrive in harsh environments. Centralised governance was scarce amid these tribal dynamics. The Ottoman Empire's presence waned in the Hejaz region, leaving the rest of the peninsula relatively autonomous. There was increased colonial interest, particularly from the British and French, who were keen to explore the strategic location and its resources. The discovery of oil began a transformation that took Saudi Arabia to geopolitical significance. The British played a crucial role in defining the political landscape, establishing a foothold in the Gulf through treaties with local leaders. The primary goal was to secure trade routes to India while excluding other European powers. This resulted in a complex network of alliances and protectorates.

"The king's nation-building initiatives established the groundwork for modern Saudi Arabia." leadership. He rose from a young prince to become Saudi Arabia's founder, a political life defined by a succession of wise campaigns and astute partnerships. Abdul Aziz, born in 1875 into Riyadh's ruling dynasty, experienced upheaval early in his life. Following defeat by the opposing Al Rashid tribe in 1891, his family took refuge in Kuwait. During these formative years, Abdul Aziz, encouraged by his father, Abdul Rahman, had a strong awareness of the region's political and tribal dynamics. He cultivated a vision of recovering the ancestral territories and uniting the tribes. The bold recapture of Riyadh from Rachidi forces in 1902 marked a watershed moment in his quest. This night raid, spearheaded by a tiny group of men, was a masterstroke of military planning and courage. Another milestone was the capture of the Hejaz region in the Battle of Jeddah. This gave Ibn Saud control of the holy sites of Makkah and Medina, boosting his stature in the Muslim world. Abdul Aziz was a fighter as well as a diplomat. He manoeuvred through intricate tribal dynamics, arranging marriages and forming strategic alliances with the Ikhwan movement, a group of religious Bedouin fighters. In relations with foreign countries, particularly the British and the Ottomans, the king demonstrated political savvy. The 1915 Treaty of Darin acknowledged his territory's sovereignty — and obtained British assistance. Abdul Aziz's ascendancy was partly due to his deep knowledge of the region's cultural, ethnic, and religious influences. His ability to combine traditional Bedouin devotion with contemporary statecraft was crucial in his rise from tribal leader to nation-builder.

Tribal life was the bedrock of society and politics in the region. The Bedouin, noted for their sense of honour and independence, constantly shifted their allegiances. Inter-tribal confrontations were frequent and widespread, particularly over access to water and grazing pastures. Fragmented authority and tribal alliances served as the backdrop for Abdul Aziz Ibn Saud's quest.

Abdul Aziz established of the Kingdom of Saudi Arabia in 1932, fulfilling his goal of merging disparate regions into a single sovereign nation. He accomplished this via strategy, political bargaining, and military action. He embraced local customs and traditions and gained the respect of tribal chiefs. Balancing their traditions with Islam was necessary for the creation of a modern state. The king upheld religious ideals while instituting administrative, educational and infrastructure reforms that laid the framework for development.

His rise to global prominence is a narrative of tenacity, strategic foresight, and visionary

The creation of the monarchy required deft international manoeuvring, particularly after the

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discovery of oil in the 1930s. Abdul Aziz expertly managed connections with foreign oil firms and governments, establishing Saudi Arabia’s place in the global economy. Creating a sense of national identity was a challenge. His efforts to instil solidarity focused on stressing a shared Islamic heritage, and the narrative of unity. A unified Saudi Arabia dramatically affected the regional power balance. It offered a new governance model by replacing tribal structures with centralised authority. This had a significant impact on existing political alliances and rivalries. Eventually, unification brought stability. Conflicts were minimised, offering a more predictable environment for development. Under King Abdul Aziz's reign, Saudi Arabia's oil wealth influenced regional and global energy politics. The kingdom found itself the centre of international attention. The king's nation-building initiatives established the groundwork for modern Saudi Arabia. He implemented infrastructural projects, educational reforms, and administrative restructuring, all the while preserving the Islamic identity. King Abdul Aziz was the protector of two holy sites, Makkah and Medina. This increased the kingdom's influence in regional and global Islamic affairs, defining the king's role as a religious, as well as political, leader. Saudi Arabia became a prominent player in international affairs thanks to Abdul Aziz's diplomatic skills. His ability to maintain excellent relations with regional neighbours and world powers, particularly during World War II and the Cold War, helped to stabilise the nation’s standing. The influence of King Abdul Aziz extends to cultural and social arenas. He helped to unify a heterogeneous community by establishing a national identity and a sense of pride. He generated a shared vision of purpose and destiny that continues to define Saudi society. The king’s impact can be seen in his nation’s continued importance in global affairs. His kingdom's participation in OPEC, status in regional politics, and prominence as a centre for Islamic pilgrimage attest to his vision and leadership. His life offers up an example of transformative leadership. His accomplishments provide lessons in statecraft and diplomacy. This is more than a historical chronicle; it’s a story of transcending traditional limits to build a nation that merits its place on the world stage. Abdul Aziz’s achievements, while upholding religious and cultural traditions, demonstrates extraordinary leadership. As Saudi Arabia evolves, the foundations laid by King Abdul Aziz continue to influence the nation's course. i

> UAE’s COP28 Gathering Scores

Some Initial Successes

White hydrogen and AI to the rescue...?

eneath our feet, the Earth manufactures — and hides — a trove of clean energy.

In Lorraine, a former coalmining region hugging the French-German border, a reservoir containing up to 260-million metric tonnes of natural hydrogen has been discovered. That’s almost four times the annual volume of commercially produced hydrogen. The discovery of white (natural) hydrogen in France gives a boost to small independent energy companies scouring the world for such reserves. According to Geoffrey Ellis, a geochemist at the US Geological Survey, white hydrogen may be more prevalent than previously thought. Drilling for natural gas and oil will often tap into natural hydrogen reserves — though in the past, such discoveries have been largely ignored. Earth produces around 23 million tonnes of hydrogen each year, with reserves accumulating in underground traps. While everybody was focused on drilling for oil and gas, white hydrogen finds were routinely dismissed. That dynamic is changing, says Julian Moulin, president of Française De l’Energie, a clean-energy firm capturing methane gas from coal seams in Lorraine. Moulin is intensifying the company’s efforts to explore and extract white hydrogen. “However,” he cautions, “it will take several years to develop the tools and technology necessary for the commercial exploitation of the hydrogen reserves.” GREY, GREEN, AND WHITE Hydrogen, a potential substitute for fossil fuels, is classified according to its provenance and manufacture. Commercial hydrogen, made by splitting water into hydrogen and oxygen, requires energy. When the process is powered by renewable energy, the resulting hydrogen is “green” but when fossil fuels are used, it is classified “grey”. In Nature, hydrogen is continuously generated when hot water interacts with iron-rich rocks at high pressure. The US Geological Survey suspects that just a few Lorraine-sized finds could provide enough energy to power the world for centuries — even millennia. The nascent understanding that the Earth is its own hydrogen factory has sparked a gold rush

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"In Nature, hydrogen is continuously generated when hot water interacts with iron-rich rocks at high pressure. The US Geological Survey suspects that just a few Lorraine-sized finds could provide enough energy to power the world for centuries — even millennia." of sorts, with even Bill Gates getting in on the action. Gates provided $91m in funding from his Breakthrough Energy Ventures to Colorado start-up Koloma, which developed a process to break down iron- and magnesium-based minerals deep in the Earth’s crust to release hydrogen-rich fluids. Scientists long believed that natural hydrogen did not accumulate in large underground reserves, but percolated through the crust in small quantities. That theory was disproved in Bourakébougou, a village some 70km north of Bamako, the capital of Mali. SMOKING CAUSES HARM There, in 1987, an unproductive 108-metredeep well caught fire after a lit cigarette was dropped into the hole. Worker Mamadou Konaré was badly burned, but survived. The fire, smokeless and blue, took weeks to snuff out. The well was capped and all but forgotten until Aliou Diallo, chair of local oil and gas company Petroma, in 2007 acquired the right to prospect the region for oil and gas.

Researchers at investment bank Goldman Sachs predict that the global hydrogen market will breach the $1tn barrier by 2050 as it becomes an increasingly important piece of the net-zero target. Subsidies started pouring in, with the 2021 US Bipartisan Infrastructure Law that includes $8bn for the development of regional hubs for clean hydrogen production. The more recent Inflation Reduction Act provides a tax credit of $3 per kilo of zero-carbon fuel. But current subsidies exclude the drilling for white hydrogen.

Almost immediately, the capped well sparked the interest of Petroma.

FUNDING LOSS AND DAMAGE Engineers’ optimism is not shared by the 70,000 scientists, politicians, business leaders and others gathered in Dubai for the 28th Conference of Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). Muchmaligned, and the source of much scepticism, COP28 got off to an unexpectedly rousing start. On the first day, delegates unanimously agreed to set up a loss-and-damage fund — and pledged up to $385m to help poorer nations.

The company brought in Canadian engineering firm Chapman Petroleum to establish what was coming out of Bourakébougou. It was 98 percent hydrogen gas. The discovery has since been hailed no less significant than the one made 164 years ago in Titusville, Pennsylvania — the world’s first commercially viable oilfield.

The United Arab Emirates, COP28 host, agreed to provide $100m, as did the EU and Germany (a joint $245m). The US earmarked just $17.5m for the fund, while Japan committed $10m. The fund is a victory after years of wrangling over the question who should pay for the impact of climate change.

Today, Bourakébougou is powered almost entirely by the same hydrogen that burned the unfortunate Konaré.

In a decision hailed as “pivotal” by the World Health Organisation (WHO), delegates from 124 countries endorsed the Declaration of Climate

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and Health, the first-ever political statement on the health impact of climate change. COP28 president Sultan Ahmed al-Jaber also announced an “initial tranche” of $1bn in “aggregated financing commitments”. Former Bank of England governor — and current UN special envoy on climate action and finance — Mark Carney reminded the UAE that its ability to confront the fossil fuel industry would ultimately determine the achievements of the conference. Carney agreed that the UAE had been a leading producer of renewable energy — but noted that it sits atop some of the world’s largest oil reserves. Sultan Al Jaber has invited criticism with unfortunate slips of the tongue which detract from his accomplishments in building consensus. Carney asked the COP28 president to openly challenge the fossil fuel industry. Sultan Al Jaber answered the call by garnering the support of 118 countries for a pledge to triple renewable energy capacity to 11,000 gigawatts by 2030. In September, the International Energy Agency (IEA) had argued for the tripling of renewable energy to meet the goals of the 2015 Paris Agreement. Its report also stressed the need to phase-out fossil fuels not offset by carbon sequestering. AI DEBUT In Dubai, researchers and business leaders have sung the praises of AI for mapping and fighting climate change. It can analyse vast volumes of data, better than humans and computers

can, leading to more accurate models and predictions. On the opening day of COP28, the UN revealed that it had struck a partnership with Microsoft for the development of an AI-powered tool to track compliance with pledges to reduce carbon emissions made by countries. Delegates from Google said that by 2030, AI may help reduce by a tenth the harmful emissions, via improved efficiencies in farming and industrial production. Microsoft president Brad Smith admitted that the increased use of AI is causing a spike in the demand for energy, but said that his company was working on the new sources of renewable energy and improved sustainability of its data centres. SMOULDERING EMBERS At COP28, the call for climate action is unanimous, and loud. Promises, pledges, declarations, and commitments are made by the dozen. Creative minds are in overdrive to make a square peg fit a round hole. Political minds are also busy calculating the economic impact of promises made, and how to skirt compliance without being seen to break to agreements. Others are working out how best to monetise the sentiment. For all its unanimity, the world remains ambiguous, if not divided, over climate change. Since 1990, about the time when concerns about climate change started rising along with global temperatures, the world has more than doubled emissions from coal-fired power plants. CFI.co | Capital Finance International

The burning of coal remains the single largest source of carbon emissions: each year, 10 billion tonnes are pumped into the atmosphere via the smokestacks of some 6,500 coal-fired power plants. Since 2014, the 38 members of the Organisation for Economic Cooperation and Development (OECD) have reduced their emissions from coal by an average of six percent annually. That reduction has been overshadowed by emissions growth in emerging economies, which account for some 80 percent of global carbon emissions. And, for all the apparent urgency in Dubai, over 1,000 new coal-fired plants are being built. Japan, turning its back on nuclear after the Fukushima disaster, is building 22 new coalburning plants. Once operational, they will emit almost as much CO2 as all new passenger cars sold in the US. POLITICS VERSUS ENGINEERING Coal is far from dead. Perhaps, then, it’s time to name and shame the “Dirty Dozen” — from Australia and India to China and South Africa, and the other coal miners and users. Otherwise, what’s the point of bringing together some 70,000 participants concerned about the climate? Look to Lorraine for a possible solution, but don’t expect deliverance from politicians. The fault lies with the world’s diversity of interests. Human-induced climate change was caused by technology, and will be addressed by technology. Engineers and scientists hold the key. i 111

> Ultra-Rich Get Richer via

‘Strategic’ Timing When Selling Their Mansions

Actors, directors, sports stars, chat-show hosts and lots of zeroes... Bricks and mortar (and basketball courts, infinity pools and skate parks) make big money.

ctor Mark Wahlberg has emerged as the top celebrity earner in real estate for 2023, netting himself an impressive $46.7m.

Agent Advice analysed 130 celebrity property sales in the US since January. It compared original purchase prices to final transaction amounts — and found that money does indeed make money. In February of this year, Boston-born Wahlberg sold his 30,500-square-foot mega mansion in Beverley Park, Southern California, for $55m. There was an initial listing at $87.5m the previous year, but the star saw a 37 percent reduction. He bought the six acres of land for $8.25m in 2009 and enlisted the expertise of Richard Landry to build a mega-mansion boasting, among other things, a skate park and a basketball court. Next happy celebrity laughing his way to the bank is Brad Pitt. In April, he sold his Los Feliz compound, the home where he raised his six children with Angelina Jolie, for $33m. He bought it from Cassandra Peterson 30 years ago for $1.7m; that’s a profit of 1,840 percent. Pitt acquired neighbouring lots over the years, and recently downsized by swapping homes with actress Aileen Getty, who paid $7m less than his asking price. Canadian singer Celine Dion knocked out her 31,000-square-foot mansion in May for $30m — triple the amount she had paid in 2017. Nestled in the exclusive Las Vegas community called The Summit Club, the four-bedroom, 12-bathroom property was upgraded over the years. It’s uncertain whether Dion officially took residence, but whatever the case, she netted an impressive $20.8m profit. Podcast journalist Diane Sawyer sold her coastal Massachusetts vineyard to healthcare investor David Malm for $23.9m. Knocking just $100,000 off the asking price, the 20-acre estate known as Chip Chop has been her residence since the mid1990s. She bought it for $5.3m. Constructed in the late 1930s, the estate's amenities and detached suites contributed to its sale in less than two months. 112

Retired Boston Red Sox designated hitter David Ortiz set records for the $10.55m sale of his Floridian mansion. He bought the land in 2016 for $1.5m, and made $9m by flipping it in just four months. Amenities on this one? A home theatre, a gazebo, and a sports memorabilia lounge. 2023’S BIGGEST CELEBRITY REAL ESTATE PROFITS Rank Celebrity Name Transaction Gain 1 Mark Wahlberg $46,750,000 2 Brad Pitt $31,300,000 3 Celine Dion $21,800,000 4 Diane Sawyer $18,600,000 5 David Ortiz $9,050,000 6 Judd Apatow $9,000,000 7 James Corden $7,355,000 8 Oprah Winfrey $7,230,000 9 Quin Snyder $6,825,000 10 Russ Weiner $6,400,000 Director and producer Judd Apatow scored a $9m profit for his Brentwood property, surpassing the asking price by an additional $2m. Purchased in 2009 with his wife, Leslie Mann, from Marty Adelstein, the property cost $18m. In a discreet, off-market transaction this year, Apatow finalised a sale for $27m. Boasting over 10,000 square feet of space, the unnamed buyer can relax in the luxurious space with a backyard pool, manicured lawns, and a gated motor court. Adding another Brentwood property to the list is English actor and comedian James Corden. With a net worth exceeding $70m, Corden found himself $7.3m wealthier following his all-cash deal of $17m in July. The sale of his 8,600-square-foot mansion resulted in a 75 percent profit. The Los Angeles property goes to LeeAnn Akouri, daughter of Hong Kong billionaire Weijian Shan, who secured it for $4.8m below the asking price. It has all the usual amenities — and a pizza oven. Next in the rankings is talk-show host Oprah Winfrey. She bid farewell to her ranch house in Montecito for a cool $14.2m. The 3,000-squarefoot property, across the way from her Promised Land estate, is now owned by Red Notice director Dawson Marshall Thurber. Winfrey paid $7m for CFI.co | Capital Finance International

the Californian property in 2005, as part of her decision to acquire neighbouring lots, making a profit of some $7.2m. Last September, she sold another Montecito compound to Jennifer Aniston for $14m. Having cut over 40 percent from the asking price, Atlanta Hawks coach Quin Snyder still managed to secure a tidy $6.8m profit for his

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Utah mansion. Listed on the market since July 2022, the 12,000-square-foot residence, boasting eight bedrooms and 10 bathrooms, includes a pickleball court, a saltwater infinity pool, and a putting green. Snyder moved from the Salt Lake City estate in September. Despite missing his initial asking price by 60 percent, Rockstar energy drink founder

Russ Weiner concludes the list with a profit of $6.4m, marking his departure from one of his six properties. Acquiring the eight-bedroom, 11-bath home in 2018 for $18.6m, Weiner sold up in August for $25m. The home went to NoHo tech CEO Tony Safoian after spending 41 months on the market. The 10,575 square-foot residence is only a few hundred meters away from Mark Walhberg's former mansion... CFI.co | Capital Finance International

Chris Heller, co-founder of Agent Advice, said celebrities were strategic in their timing. The study revealed some fascinating patterns; February, April, and August yielded the highest profits, with January delivering the lowest. “These findings are invaluable for celebrities and aspiring property investors, offering strategic cues on optimal selling times," he said. i 113

> Latin America:

Don’t Buy From Me, Argentina: Debt Crises Have Hampered This Vibrant Latin-American Nation The history of Argentina, land of passion and contrasts, is as varied as its landscapes, a story interwoven with the rhythms of tango and the fervour of political drama.

his nation that has risen from the ashes more than once — to return each time, phoenix-like, stronger and more vibrant.

The late 19th and early 20th Centuries saw the growth of Buenos Aires into a cultural and economic powerhouse. European immigrants brought with them a wide range of skills, traditions, and goals. Architectural marvels such as the Teatro Colón and the Palacio Barolo depicted a modernising metropolis. This was a time of opulent dreams, where every street corner in Buenos Aires whispered a story of hope. Ports were humming with activity, as wool, meat and wheat were exported to fuel the urban boom. Argentina expresses its inner self in tango, a dance and musical tradition originating in immigrant neighbourhoods. Tango's rise, from the barrios to the salons of Paris, mirrored Argentina's own voyage on the international arena. Writers such as Jorge Luis Borges and Julio Cortázar disrupted standard narrative structures, putting their country on the literary map. Visual artists combined European techniques with local subject matter to create a unique aesthetic. Football is more than a sport in Argentina, falling somewhere between a religion and a cultural phenomenon. The nation's World Cup successes — even the controversial 1986 quarter-final triumph against England thanks to Maradona's notorious “Hand of God” goal — are moments of national pride. Argentina's sporting prowess extends to polo — it has produced some of the world's best players — and basketball, for which it won gold at the 2004 Olympics. In Argentina, athletes are more than sports stars; they are heroes vicariously embodying their compatriots’ struggles, aspirations, and successes. Argentina's political history is a tangle of ideologies, revolutions, and reforms. With its enormous social influence and polarising politics, the Perón period stands out. Since 1946, Peronists have won 10 of the 14 presidential elections in which they have stood. Following years of military control and the return to democracy in the 1980s, the country struggled to establish its identity and place in the world. While fraught with challenges, it has been a journey towards justice and democracy.

"Argentina is reliant on commodity exports such as soybeans and meat, which renders it sensitive to global price swings. While the industrial sector is diversified, it suffers from global competition." There are scientific and technological accomplishments, too. Argentina has demonstrated an ability to innovate, from Luis Federico Leloir's achievements in biochemistry to the invention of cutting-edge agricultural technologies. Argentina's scientific community, despite often difficult conditions, has consistently pushed the boundaries. The cultural scene is thriving, with Argentine cinema, literature, and art garnering international praise. Today's Argentina is a mosaic of yesterday, a place where tradition and modernity coexist, and where every challenge is an opportunity for reinvention. Argentina's journey has been one of perseverance, innovation, and tenacity. As the country looks forward, it carries its golden eras with it, ready to pave new roads and celebrate new achievements. Argentina is a tribute to the enduring force of optimism — and the indomitable spirit of its people. The economic environment has been defined by problems and concerns that continue to have an impact. Understanding these economic challenges is crucial to understanding the national story in a broader context. High inflation is one of its biggest economic challenges. The country has undergone periodic episodes of rapid inflation, eroding purchasing power and creating economic insecurity. Fiscal imbalances and monetary policies that frequently prioritise short-term benefits over long-term stability have exacerbated the problem. There is a lamentable history of debt crises, including a default in 2001 that was the

largest in history. Argentina has struggled to balance requirement to service its debt with domestic interests. Negotiations with creditors and foreign financial organisations have been a recurring issue in the formulation of economic policy. The peso has depreciated over the years. The government has frequently implemented currency controls, often resulting in a complicated system of official and unofficial exchange rates. These regulations are intended to protect foreign reserves and stabilise the economy — but they have had unforeseen consequences, including a thriving blackmarket currency exchange. Argentina is reliant on commodity exports such as soybeans and meat, which renders it sensitive to global price swings. While the industrial sector is diversified, it suffers from global competition. These issues have farreaching societal consequences. Inflationary pressures and economic instability can exacerbate poverty and income disparity. Social programmes and subsidies assist the most disadvantaged people — but put added pressure on the budget. Argentina's recent economic history includes debt restructuring negotiations, currency stabilisation, and inflation management. The government bears quite a burden: to implement policies that encourage long-term growth, control inflation, and alleviate poverty. The economic woes are inextricably linked to its political and social fabric. Its ability to negotiate these challenges, execute effective policies, and build a stable and inclusive economic environment will be key to its ongoing progress. i

"The cultural scene is thriving, with Argentine cinema, literature, and art garnering international praise. Today's Argentina is a mosaic of yesterday, a place where tradition and modernity coexist, and where every challenge is an opportunity for reinvention." 116

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Winter 2023-2024 Issue

> Judges Approve Use of ChatGPT in Legal Rulings,

Despite its Tendency to Fib — and ‘Invent’ False Cases

Fallible AI gets the go-ahead in Britain to summarise lengthy texts and perform ‘administrative’ court tasks.

K judges will be allowed use ChatGPT to help write legal rulings — despite warnings that the technology can “invent” cases that never happened.

The Daily Telegraph newspaper reports that the Judicial Office has issued new official guidance to judges in England and Wales: AI can now be used to summarise screeds of text. It can also be used in administrative tasks, but the Judicial Office has admitted that chatbots are “a poor way of conducting research” — and prone to making up fictitious cases or legal texts. The guidance expects bots such as ChatGPT to be used by members of the public when bringing legal cases — and warns that deepfake technology could be used to create phony evidence. Sir Geoffrey Vos, the Master of the Rolls, said that AI “offers significant opportunities in developing a better, quicker, and more cost-effective digital justice system”.

He said the technology would “only move forwards”, and the judiciary had to understand what was going on. “Judges, like everybody else, need to be acutely aware that AI can give inaccurate responses as well as accurate ones,” he said. Senior judge Lord Justice Birss recently described ChatGPT as “jolly useful”, admitting he had used the bot to summarise an area of law with which he was familiar — and deployed the copy-paste function in a court ruling. He said he had used ChatGPT as “a test”, and that he had not entered any secret or confidential information into it. Vos said that lawyers were potentially subject to perjury charges and criminal sanctions if submissions penned by a chatbot produced false evidence. “Nothing changes just because they may have got what they said falsely from an AI chatbot instead of out of their own head.” Suid Adeyanju, CEO of cyber company RiverSafe, said the use of AI in legal rulings brought with it CFI.co | Capital Finance International

“great opportunities” — but opened the door to cyber risks. “Hackers have already proven adept at infiltrating and exploiting security loopholes to steal data,” he said, “and in this scenario could also lead to widespread evidence-tampering. “It’s vital that organisations using this technology tread carefully, and ensure they have the necessary security systems in place.” Josh Boer, director at tech consultancy VeUP, said this was the most recent example of AI reshaping critical functions. The technology would save time and money by managing administrative tasks, he said. “(It) has huge potential to turbocharge the next generation of UK SMEs,” he said, “providing crucial support in the back office. Yet far too many companies lack the skills and support to embrace it. “That’s why it’s crucial that organisations get to grips with the latest generative AI capabilities, by embracing AWS and other key platforms, to boost growth through the cloud for the long term.” i 117

> Data:

The New ‘Gold’ for the Gig Economy...? By Gayatri Murthy Senior Financial Sector Specialist at CGAP

Gig workers are often financially excluded or underserved — but the accumulation of big data could change that.

rom deliveries to ride-hailing services, millions of informal workers opt for gig platforms.

They offer new opportunities for lowincome earners — which means the trend is likely to accelerate. But many of the workers find themselves financially underserved. According to CGAP’s research in five markets, most have bank accounts but few rely on formal credit, unavailable without formal employment or some form of collateral. Gig workers may do it tough between payments or battle to invest in tools and skills. Informal loans are often used to see them through times of need. Author: Gayatri Murthy

Flourishing alongside, and because of, this specialised system are huge amounts of data. These new streams of digital information are capturing everything — from work frequency and regularity to income. This is not usually available to traditional banks but could be golden, providing insights to financial institutions such as fintechs for the creation of credit-scoring initiatives for informal customers. Approaching work data like financial data could unlock transformational credit for low-income workers, normally unlikely to have robust credit scores. New rules and standards are needed to cater for platforms to exchange data widely — but responsibly — with financial institutions. HURDLES FOR FINANCIAL PROVIDERS Platforms tend to guard data closely, and consumer protection norms fail to give clear guidance on their use to financial service providers wanting to aggregate from different sources. But there are other challenges in data sharing which may prevent comprehensive leveraging. Platforms usually collect very few data fields because they want to keep the onboarding process fast and lean. Their systems were not designed to contribute to machine-learning 118

or credit-scoring exercises; they are primarily management tools for service delivery. Secondly, work data are likely to reflect only a portion of a worker’s track-record and earnings. In most urban centres, workers take multiple jobs — so the true picture of work and earnings is spread across providers. Another hurdle: past earnings may not be predictive of future ones. While flexibility is key to the sector, it can make it difficult to assess creditworthiness. Earnings volatility may be driven by seasonality and price changes, so income data may be misleading. Similarly, higher earnings may not always be better if workers burn out or take on debt. Even when earnings data are complete, it may only indicate basic creditworthiness — which must then be coupled with the repayment data from small loans extended to the group. When this is combined with repayment of small-ticket loans, it can unlock durable creditworthiness. POTENTIAL OF PLATFORM DATA Thinking about work data in the same terms as financial data, and consolidating them alongside bureau data, would allow workers to assemble the information in reliable and coherent ways. This could help to unlock CFI.co | Capital Finance International

access to other financial solutions, and to expand opportunities. Credit innovations using work data are already in place for fintechs in India and countries in Sub-Saharan Africa. But those innovations are largely limited to enabling small wage advances, and have yet to meaningfully unlock credit at scale. Karmalife is an inclusive Indian fintech startup serving gig workers and broader pools of blue-collar employees with liquidity and savings solutions. To date, 90 percent of loans disbursed by Karmalife — extending its data-

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driven scoring engine to previously excluded workers — were repaid on time.

of these data in new forms of credit-scoring algorithms, are necessary.

in a way that bolsters the financial health of workers.

Innovators are finding ways to secure worker consent to access data on their phones to assess earnings across platforms. This could solve the problem regarding work data as broader norms around open finance, or financial data-sharing, take form. But to make open finance the norm, again, new rules and standards are needed. The responsible exchange of work data between platforms and financial institutions, and deeper deployment

OPENING NEW HORIZONS The value of platform work data has yet to be accepted across the sector. Regulatory authorities may need to intervene to accelerate worker access. This may not happen without broader support from global stakeholders. Neither governments nor platforms alone can fully harness the opportunities. It may take philanthropic or public intervention to bring together platforms, fintech, and institutions

While it would be ideal for workers to have access to their work data — and use it how they see fit — this is far from realistic today. But it is a worthy goal for the future. Incremental changes can enable better and more responsible data-sharing between platforms and financial entities.

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The effect could be a triple whammy for gig workers, financial service providers, and platforms. i 119

> Otaviano Canuto on Resilience and the Realignment of Global Trade:

Is It Deglobalisation?

ultiple shocks faced by the global economy over the past three years have shaken the conventional wisdom on gains from economic integration, and sparked calls for protectionist and nationalist policies. Is there already evidence of deglobalisation? So far, there are no signs of an overall reversal in the long-term trend of greater global trade integration. However, a partial realignment seems to be under way. This is probably leading to higher costs and prices on the margin, in the case of realignments to overcome geopolitical shocks. Global trade has been resilient, although it is undergoing some realignment.

Chart 1: Economic globalisation since 1875 - international trade (in per cent of GDP). Source: Cevik (2023).

The global economy has been through multiple shocks: a pandemic, war in Ukraine, a higher frequency of adverse weather event, and the emergence of a so-called “New Washington Consensus” accompanying the ongoing USChina tech rivalry. In advanced economies, the appetite for trade measures and industrial policies discriminating against external agents has increased. One example is the more frequent adoption of punitive tariffs, export restrictions, and local purchase mandates by the US. Deglobalisation is a commercial fragmentation of the world, reversing or reconfiguring the integration that has taken place via global or regional chains, and which underpinned an increase in foreign trade in relation to GDP from the 1990s onwards. It also lifted almost a billion people out of poverty.

CFI.co Columnist

Do the factors that underlie globalisation remain strong? So far, there are no signs of an overall reversal of the trend, but a partial realignment seems to be happening. It is likely that this will lead to higher costs and prices when it is done to overcome geopolitical shocks. Global trade has been resilient, though it is undergoing some realignment. DEGLOBALISATION FACTORS There has been a recent wave of protectionist trade measures, restrictions on FDI, and industrial policies discriminating against external agents. Four classes of justification can be found. First are reasons of a social nature. After the global financial crisis of 2008, the belief grew that globalisation and the transfer of industrial jobs to Asia — or immigration, in some cases 120

Figure 2: Geopolitical risks. Source: Cevik (2023).

"There has been a recent wave of protectionist trade measures, restrictions on FDI, and industrial policies discriminating against external agents. Four classes of justification can be found." — was responsible for the difficulties faced by middle- and low-income classes. This culminated in electoral victories, or at least increases in the shares of votes, of populist leaders. A second source of justification has been a search for resilience in the face of the pandemic, when severe disruptions occurred. The supply-chain bottlenecks and disruptions to key supplier relationships, followed by the Russian invasion of Ukraine, led to discussions about reshoring, near-shoring and friendshoring. Discussions have centred on the merits of shorter, more resilient supplier relationships. CFI.co | Capital Finance International

National security has been a frequently used justification, given the potential dual civil and military uses of some technologies. Russia's invasion of Ukraine highlighted geopolitical risks, but the rivalry between the US and China had already generated narratives about the reversal of globalisation. Finally, the decarbonisation agenda has also generated arguments for the adoption of discretionary measures over external agents. The struggle for decarbonisation will be costly, and compensatory or defensive measures for locals would be justifiable — or necessary.

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This includes the EU law on compensatory commercial tariffs for local producers, who pay a price for the carbon they emit — the Carbon Border Adjustment Mechanism (CBAM). The objective is to prevent the risk of carbon leakage by equalising the price of carbon between domestic products and imports in selected sectors to avoid the replacement of local production by imports. In its turn, the Inflation Reduction Act and the CHIPS and Science Act, approved by the US Congress in the past two years, provide subsidies favouring domestic production of semiconductors and clean energy.

speech, White House national security adviser Jake Sullivan mentioned those as areas as “a national security imperative”.

FACTORS OF RESILIENCE There are reasons to believe that this deglobalisation will be limited. The configuration of global and regional supply chains is not accidental; it arose for reasons of cost efficiency. Abandoning this implies additional costs for value chains and users.

An accelerated digital transformation has been expanding the scope for a possible globalisation of services. The scope of services as a driver of development has an open path. The rise in digital cross-border activity suggests that the nature and scope of globalisation is likely to evolve. Flows may continue to decline in tangible areas, such as trade in goods, while accelerating in others, including trade in services and flows of cross-border data.

The pandemic brought to the fore the idea of a trade-off between resilience and efficiency. This does not necessarily lead to reshoring. If everything is brought back home, the exposure to potential risks remains as high as if there were full dependence on global supply chains. Without the existence of chains abroad, the effects of local shocks would be maximised. In many sectors, companies can choose to bear some costs by accumulating stocks at points in the value chains and/or duplicating sections of these chains in different geographic locations. But the micro-economic incentives faced by companies establish cost-benefit limits to such calculations of renouncing efficiency to increase resilience. This logic could lead to some costly diversification or duplication of links, but not a full reversal of globalisation. As shown in a policy brief for the T20, the recovery of manufacturing output, particularly in technology sectors, was really not commensurate with the retrenchment fears from the pandemic. Data already show a reversal of these concerns.

National security considerations have the greatest reach and influence. Geopolitical risks and geo-economic rivalry are already present in the implementation of industrial policies in segments including advanced semiconductor and computing technologies, medical and military equipment, biotechnology, and cleanenergy technology. In a September 2022

The reversal of globalisation will be sought in the case of foreign trade in other items. There will be a cost for those who opt for an exaggerated demarcation of what should be considered strategic.

On the Chinese side, one can assume a preference for preserving globalisation. It facilitated the country’s success in growth-withstructural-transformation, even though it is also affected by the new geopolitical directions. One can certainly expect slower globalisation and some regionalisation, or a slowdown in the growth of cross-border flows of goods, capital, and people — something present since the global financial crisis, rather than deglobalisation, understood as absolute decline and/or fragmentation. Industrial policies imply economic costs which are compensable from the perspective of a country to the extent that they make such costs redundant, and offset them. The reasons for relative disenchantment do not appear to be sufficient for globalisation’s reversal. RESILIENCE OF GLOBALISATION At the end of October 2023, the International Monetary Fund issued a research paper showing the high resilience of trade and economic interconnection between countries, despite shocks, when viewed in aggregate.

GLOBAL VALUE CHAINS The Bank for International Settlements (BIS) published results in relation to a realignment of global value chains (GVCs). GVCs exist as intricate networks of relationships between companies, across countries and sectors. Using information about companies’ suppliers and customers to map the entire interconnection network, the work compared in detail two moments: December 2021 and September 2023. The most recent data on company-level networks reveals that global value chains have lengthened — although without a consequent network densification. This may indicate that relationships with suppliers are being diversified. The lengthening of supply chains is significant for China’s supplier-customer linkages with the US, where companies from other jurisdictions, particularly Asia, have inserted themselves into supply chains. This is a response to restrictions on Chinese products, with additional links appearing between the two economies. Direct connections between China and the US have declined, giving way to links via other Asian economies. The percentage of direct Chinese suppliers to US customers has declined. However, when indirect links are considered, the change appears more modest, suggesting the “interposition” hypothesis. Asian firms from outside China have risen as a proportion of the value added in the supply chains catering to the US. The evidence that China-US supply chains have been rerouted through other Asian Pacific economies is striking in IT, where the proportion of cross-country links is among the highest. This is also one of the explanatory factors why, despite restrictions on solar energy from China, this continues to be the main source of North American imports of solar panels, via elongated value chains.

The most common indicator for globalisation is trade openness, measured by the sum of exports and imports divided by GDP. There are no signs of structural decline, but occasional fluctuations caused by cyclical factors and disruptions to the global supply chain. Since then, however, international trade as a percentage of GDP has recovered, despite fears of discriminatory geoeconomic fragmentation and protectionism (Figure 1).

There are no signs of a reversal in the longterm trend of greater global trade integration, especially in Asia. There has been, however, a partial realignment of global value chains, reflecting the more durable reaction to recent shocks. This is probably happening at some cost on the margin, in the case of realignment taking place to overcome shocks of a geopolitical nature. i

Cevik found no traces of a systemic retreat in trade globalisation arising from geopolitical developments. Trade links and supply chains keep evolving, reflecting economic and

A previous version was published by the Policy Center for the New South.

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CFI.co Columnist

What about public policies designed to affect those private calculations in favour of what the formulators of industrial policies want, including promotion of reindustrialisation and manufacturing employment, promised as “social” justifications? The trade tariff policies adopted by Donald Trump against China proved to be a drag on employment in the domestic manufacturing industry, according to studies by economists at the Fed. In addition, the US agriculture sector was affected by the trade war.

Access to critical minerals for the use of these technologies and for the energy transition will also grow as an object of geopolitics.

technological causes. However, apart from specific non-frequent moments of radical ruptures in the geopolitical landscape (Figure 2), global trade integration has continued to move forward, with occasional setbacks.

> North America

Go, Canada! North American Ingenuity is in No Way Confined to United States Canadians have long pushed boundaries, earning a reputation for innovation and entrepreneurship. That spirit is still alive...

Canada: Vancouver

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pioneering tradition is ingrained in Canadian culture, education — and even government policy.

"Canadians are known for ingenuity, perseverance, and a willingness to take Canadians are known for ingenuity, perseverance, and a willingness to take chances. From the fur traders and explorers who first chances. From the fur traders and explorers traversed the land to the craftsmen and technicians who installed the country’s modern who first traversed the land to the craftsmen infrastructure, entrepreneurial spirit has been well nourished. and technicians who installed the country’s It has permeated every facet of Canadian modern infrastructure, entrepreneurial life, from the arts to science, technology, and business. The school system focuses on developing creativity and critical thinking. The spirit has been well nourished." aim is to provide students with the tools they need to solve complex challenges and generate game-changing solutions. The growing number of STEM (science, technology, engineering, and maths) programmes at Canadian universities and colleges bring extra focus to entrepreneurial skills.

The government understands that creativity drives economic growth and social advancement. It has policies and programmes to encourage innovation, from R&D tax breaks to start-up funding and inducements for academia-industry collaboration. These policies have helped to nourish a thriving ecosystem. Some Canadian businesses have prompted change in various sectors around the world. From communication pioneer BlackBerry to e-commerce platform Shopify, Canada has kicked up its fair share of leaders able to foresee and meet developing market demands. BlackBerry (originally Research In Motion, or RIM) revolutionised the mobile phone industry. Its gadgets, distinguished by their QWERTY keyboards and secure email capabilities, became a business must-have. Shopify revolutionised online sales by democratising the space and making it simple for entrepreneurs to set up and operate on their own. A user-friendly platform, a complete set of tools and global reach have propelled it to the forefront of the market.

Guy Laliberté, founder of the world-renowned Cirque du Soleil, revitalised the entertainment industry with acrobatics, music, and visual extravaganzas. Jim Pattison, chairman of the group that bears his name, made shrewd investments in retail, food, real estate, and media. He amassed a fortune. Salesforce is a cloud-based customer-relationship management (CRM) software company. Cofounder Marc Benioff changed an industry by changing the way it managed client interactions. Michèle Romanow, co-founder and CEO of financial services platform Clearbanc, pioneered a new path to entrepreneurship lending. There are more: Shahrzad Rafati, co-founder and CEO of Wattpad, Susan Niczowski, founder of food-waste management company Freshlogics, Leonard Lee, founder of the Altitude Trampoline Parks chain. Hamid Arabzadeh created online grocery shopping platform Instacart, changing the way people “do their shopping”. The Canadian government offers inducements and assistance to foster a vibrant business environment and stimulate the economy. Start-Up Canada offers grants, mentorship, and networking opportunities to early-stage companies. It helps to validate concepts, develop business plans, and obtain funding. Each province and territory has a Regional Development Agency (RDA) that provides tailored funding and assistance programmes based on individual requirements and goals.

Tax credits from scientific research and experimental development (SR&ED) encourage enterprises to invest in the field. The Business Investment Incentive programme offers tax credits for investments in SMEs. The New Entrant Tax Credit aims to attract and promote enterprise with breaks during the first few years of operation. CanCode promotes digital skills-training and supports youth entrepreneurship. Entrepreneurship Education Grants help universities, colleges, and other organisations give students the skills and information they need to succeed. There are also government-funded accelerator and incubator programmes providing early-stage entrepreneurs with mentorship, workspace, and access to resources. Local chapters of Start-Up Canada connect entrepreneurs with mentors, peer-support groups, and industry networks. Entrepreneurship Centres offer business development, market research, and legal and financial counsel. The government maintains online information and resource portals to help at various stages of the entrepreneurial journey. The enduring grit of Canadian business leaders, and the support and education from their government, are defining the economic future of a region. As long as Canada embraces innovation, it will remain at the vanguard of global economic development. i

"The Canadian government offers inducements and assistance to foster a vibrant business environment and stimulate the economy. Start-Up Canada offers grants, mentorship, and networking opportunities to early-stage companies. It helps to validate concepts, develop business plans, and obtain funding." 124

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Winter 2023-2024 Issue

> Blockchain, Crypto, and Customer Security:

New Partnership Should Cover All the Bases

Even the vaunted blockchain tech can come with specific challenges — but teamwork can free things up...

lockchain protection company Coincover has joined forces with crypto operations platform Utila.

The strategic partnership aims to unite protection solutions and secure, non-custodial wallet infrastructure. Utila provides crypto asset-management, with personalised wallet infrastructure. The new partnership with Coincover offers an MPC (multi-party computation) solution to simplify institutional access to crypto. Utila customers now have access to Coincover’s third-party recovery technology. This added layer of protection gives clients a self-service back-up solution that “removes the complexity and concerns” surrounding potential lost access to funds. A spokesperson said the partnership “empowers Utila

customers to take control of their digital assets” and enjoy peace-of-mind over security. In the onboarding process, Utila customers can select Coincover as their back-up provider without referral procedures. This streamlines the set-up of crypto businesses and removes entry barriers, the company says, helping to stimulate “institutional involvement” in the world of crypto. Ridhima Durham, chief commercial officer at Coincover, said customers stood to benefit from blockchain protection and “the extra perk” of self-servicing key back-up via Utila. “It's the perfect blend of top-tier recovery and an effortless user experience, making the journey smooth and seamless." Utila co-founder and CEO Bentzi Rabi said there was genuine excitement about the move. CFI.co | Capital Finance International

CoinCover’s crypto-asset security “perfectly aligns with our commitment to safeguarding users' keys and digital assets”. The collaboration should provide a comprehensive solution for crypto asset-management, he said, combining recovery expertise with an advanced wallet infrastructure. Both companies hope it will contribute to trust, security, and ease-ofuse in the evolving landscape of digital asset management. Blockchain technology is known for its independent checks, but brings its own set of unique risks. Coincover aims to ensure universal protection — without constraints. Founded in 2018, Coincover protects some 350 of the biggest names in blockchain, including Fireblocks, BitGo, and Ledger. i 125

> Get Your Motor Running — and

Dial the Time Machine Back a Few Decades to Find Perfection

When cool is king, you can’t beat two wheels — and the golden era of motorcycling conjured up some gems that are still with us, in spirit and in style.

f the motorcycle revolution started, as many contend, in the 1970s, where exactly was ground zero? The introduction of the Earth-shattering Honda CB750 four, or the Kawasaki Z1 that swiftly followed its tyre tracks?

But the Japanese had been quietly building a two-wheeled empire they were about to unleash. Honda, Yamaha, Suzuki, and Kawasaki — the "Big Four" —rocked the world with machines that didn’t just change the game; they started a whole new one.

Both share distinct silhouettes, typical of the 1970s and 1980s. In that alone, they are sensory delights, reverberations from a pivotal era that extend to the roar of engines uncompromised by EU and UK noise- and pollution controls — at least to the ear of the enthusiast. You can tell the bikers in a crowded room; they’re the ones who break away from what they’re doing and cock their heads as a bike blasts past outside, trying to deduce the make, or at least the engine layout.

The bike most credited for this revolution is the Honda CB750, introduced in 1969. It was the first "superbike", with an overhead cam inline four engine, disk brakes, and electric start — rare for the day — as a standard feature. (Manufacturers wisely continued to fit manual kick-start levers to their bikes in these days, giving riders a fall-back option if the starter or battery died.)

We’re talking about a time that prized freedom and an air of rebellion, and bikes became cultural icons of that mood. They were engineering marvels of their time, from HarleyDavidson’s thumping Shovelhead models to the Japanese “rice rockets”, as they were disparagingly referred to by rednecks when they hit the international market. The lasting charm of older bikes lies in their design as much as their engineering achievements — and their role in defining the temporal zeitgeist. They shaped popular culture via cinema, music, fashion, and social movements. Let’s take a look at the models and brands that epitomised the age and have had an enduring influence on bikers — and the machines they ride in the 2020s.

In the 1980s, more changes were usheredin — all of them exciting. This was the dawn of models like the Suzuki GSX-R series and Kawasaki Ninja, which brought near-racetrack performance to the road. This period may be notable for its tech advances, but progress was not always even. The engines, sometimes liquidcooled by the ‘80s, were bursting at the seams with horsepower and torque. Unfortunately, the frames and brake systems often lagged performance. The push for power might have made marketing sense, but it gave bikes a bad name. Some riders discovered, to their cost, that you can get too much of a good thing. Wobbles, weaves and other disasters could accompany high-speed thrust, and quickly take the fun out of ton-up blast.

A GOLDEN ERA Motorcycles suddenly moved from transport options to icons of a burgeoning subculture. These were decades of radical experimentation.

Today, electronic rider aids — on top-range, high-power models, anyway — include leansensitive traction control, ABS, Bluetooth compatibility and navigation systems. The introduction of digital ignition and fuel injection systems marked a significant shift to electronic integration.

For Europe, the UK and the US, the bikes that first struck a chord with the public were either American or British. Harley-Davidson, BSA, Royal Enfield and Triumph — all still going strong in 2023 — were the go-to marques.

Motorcycles were gaining mainstream appeal, and the biker image evolved from “outsider” to emblem of enchanting possibilities. Each brand contributed to what we may as well continue to call the Golden Era. Harley-Davidson's Evolution

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engine took over from the notoriously unreliable shovelhead; it was night and day in terms of reliability and performance. Honda stayed true to four-cylinder powerplants, from the little 350 onwards, and upwards. These engines were a clockmaker’s delight, smooth, grunty, and rugged. Kawasaki, Yamaha and Suzuki followed, with Kawasaki the rising star. Its Z1 was perfectly styled, perfectly named, and followed by the equally cool Z1000J. BMW's R series of boxer (horizontally opposed) twins won buyers over with their ability for trouble-free, long-distance touring. While Yamaha did enter shift to multicylinder engines, one of its twins — the XS650 — was once the one winning hearts. It has been described as “a Triumph that actually starts and runs” (British bikes were developing a bad reputation, back in the day). The vertical twin had the Brit-bike feel with Japanese precision. It also lent itself to customisation, as did Harleys. That was a niche to nurture — and modern twins from

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Royal Enfield, Triumph, born-again BSA and Norton feature styling that goes all the way back, tugging at the heartstrings and wallets of enthusiasts from the day. The unexpected arrival of the GSX-R Series from Suzuki pumped up the performance stakes, in terms of horsepower and handling. Kawasaki’s GPz900 Ninja flew its own flag with pride, becoming synonymous with speed and agility. ENGINEERING MARVELS AND INNOVATIONS The shift to liquid-cooled engines, electronic ignition and fuel injection were key moments in motorcycle engineering. There were also, thankfully, advances in frame design, braking and suspension systems to tame the power that was being unleashed. A focus on aerodynamics and rider-centric designs led to more comfortable and efficient machines. Modern motorcycles stand on the foundational technologies of the ‘70s and ‘80s. The

integration of digital technology is just the most recent frontier to be breached. THE COLLECTOR SCENE Old bikes are having a moment. What was once a cheap banger is now an “appreciating classic”. The lure of big money has attracted enthusiasts of another stripe. Restoration combines mechanical skill and historical appreciation; do it right, with the right model, and you’re onto a good thing. An original, good condition Z1 can easily fetch a five-figure sum. Shows and club events provide platforms for showcasing these vintage machines — as do auction halls. Lucky restorers, originally keen only to preserve a piece of motoring history, have come some into staggering windfalls. WHERE TO NOW? Today's designs pay homage to their predecessors with BMW R9Ts, Triumph Bonnevilles, Speed CFI.co | Capital Finance International

Twins and Thruxtons and Enfield Interceptors blending modern tech and production standards with classic aesthetics. Ducati, Benelli, and even Kawasaki offer “period piece” models with all the perks of modern engineering. The motorcycles of the ‘70s and ‘80s live on, literally in the case of cherished older bikes, and figuratively in the seeds sown by their ancestors. Classic DNA has proven enduring. Yes, there are new performance and safety benchmarks — some bikes now churn out over 200 horsepower, and have a power-to-weight ratio of 1bhp:1kg. That’s F-1 territory. Does anyone really need that? Probably not, and the future of motorcycling is all the better for that realisation. Rebellion? Sure, there’s still a touch of that. But outsider or outlaw status is no longer the price of entry. For most, cool still is. The Golden Era bikes have that in spades. i 127

> Kellogg Insight:

Crypto Had a Brutal Year. What Comes Next? By Sarit Markovich. This story first appeared in Kellogg Insight

An increase in caution might not be a bad thing, believes the Kellogg School’s Sarit Markovich...

he year since the collapse of cryptocurrency exchange FTX has seen US regulators, including the SEC, bring charges against the industry’s two biggest exchanges, Binance and Coinbase. The industry is calling this new climate a “crypto winter”, and authorities have indeed taken a frosty view of digital currencies. “What we’re seeing now, after years of ambiguity and delay, is some clarity from the SEC,” says Sarit Markovich, clinical professor of strategy at the Kellogg School. “And what’s clear is that they’re not at all happy with the state of crypto.” So, what might emerge from this latest moment of reckoning? For Markovich, the collapse of FTX and other exchanges was a wake-up call for an industry that lacked consumer awareness and transparency. And while she thinks crypto is here to stay, she expects to see a strong push toward defi, or decentralised finance. It means less risk that a single actor, or group of actors, can crash an exchange. In the meantime, retail investors and fintech entrepreneurs will probably move at a more deliberate pace, given the risks and the prospect of more regulatory enforcement. “There’s definitely more caution now, which might not be a bad thing,” says Markovich. “Before the fall of FTX, people weren’t very careful in terms of the risk involved in projects they were investing in, or the level of transparency the project offered. Many of them are now entering back into the market, but they’re doing so with a little more awareness and caution.” A WIN FOR DeFi? Caution is certainly justified. The trial of Sam Bankman-Fried has shown how dangerous the hype machine can be. FTX used customer deposits to invest in other companies, sponsor political ad campaigns, and purchase deluxe real estate. FTX was a centralised exchange, which some view as its primary flaw. These exchanges tend to produce the same problems that the earliest crypto advocates were trying to solve in the first place. The whole idea behind Bitcoin and the blockchain it ran on was to circumvent unreliable centralised institutions, such as governments and banks,

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"Caution is certainly justified. The trial of Sam Bankman-Fried has shown how dangerous the hype machine can be." which could charge onerous fees, misappropriate funds, or simply fail. Ethereum tried to expand on this, using a network of “smart” contracts to execute transactions. With decentralised exchanges — at least theoretically — you remove the need to trust a central authority with your money, whether it’s JP Morgan, Bernie Madof, or Sam Bankman-Fried. “When you give a small group too much control over other people’s money, that’s when things are going to fail,” Markovich says. “Fans of defi are actually saying, ‘Hey, we told you so’.” THE FUTURE OF CRYPTO? “Given all the uncertainty, it’s not exactly a bull market,” she says, “but there’s definitely more trust now in decentralised exchanges.” One of the most popular is Uniswap. Launched in 2018, it allows users to directly swap cryptocurrencies using Ethereum-based smart contracts. It might not be for everyone. For those accustomed to centralised exchanges such as Binance or FTX, a defi exchange, or DEX, takes some getting used to. The typical interface is less user-friendly. There’s also the harrowing prospect of forgetting the password to unlock a digital wallet. Lose that, and you lose access to your crypto assets — forever. The final adoption barrier has to do with the nature of trading itself — or swapping, as the users of a defi exchange would call it. Because you’re swapping tokens instead of buying them, and because the value of tokens fluctuates with each transaction, there’s an element of uncertainty when executing a swap. Effectively, the price you get depends on whether others were able to execute transactions ahead of you. It would be like swapping dollars for yen at the airport, only much murkier, and with the possibility that you might end up with fewer yen if someone “front-runs” your swap. CFI.co | Capital Finance International

And while Markovich has done research that suggests this slippage — the difference between the expected price and the actual price — is pretty close to the “spread” in centralised exchanges. It’s still a potential barrier. “Psychologically,” she says, “it’s a concern. It would take some time for people to get comfortable with that.” Yet it does appear that the industry’s energy and innovation are moving toward decentralised exchanges. This momentum is tempered by the need for fintech entrepreneurs to avoid the mistakes that brought down Luna, one of the major defi crypto projects that went bust last year, while finding a way to offer products and services that are user-friendly and transparent. Luna, the native blockchain token of Terra, crashed due to its connection to TerraUSD (UST), the network’s algorithmic stablecoin. Unlike fiatbacked stablecoins, special cryptocurrencies backed by established national currencies such as the dollar, UST’s stability was derived from algorithms that linked its value to Luna. While some in the defi community were sceptical that an algorithm achieve that, the hike in Luna’s price attracted many to buy the token. “I really do see this push toward more decentralisation,” says Markovich, “and I think these projects will be more careful now with their algorithms. The fact that exchanges like Uniswap and MakeDao are still around and doing well builds a lot of confidence.” DROP IN VC INVESTMENT At the same time, there’s been a sharp decline in venture-capital funds for crypto firms, and for blockchain technology generally. “A lot of these start-ups know it will be hard for them to raise funds, so they’ll only spend on bets that they feel very strongly about,” she predicts. “Which means that innovation might slow down, but that could be a good thing, since some of the innovation was bad.” It was certainly destructive. After last year’s dramatic losses across the industry, the overall crypto market is now valued at roughly a third of what it was in 2021. The innovation that is moving forward is more focused on integrating crypto-based technologies into mainstream finance. Over the Summer,

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"The innovation that is moving forward is more focused on integrating crypto-based technologies into mainstream finance. Over the Summer, Paypal launched a stablecoin backed by the US dollar. 'I think you’ll see more and more of this kind of integration,' Markovich says. 'Things are still progressing, just at a slower, more careful pace.'" Paypal launched a stablecoin backed by the US dollar. “I think you’ll see more and more of this kind of integration,” Markovich says. “Things are still progressing, just at a slower, more careful pace.” SHOWDOWN WITH THE SEC These firms have reason to play it safe. The SEC has filed a number of lawsuits as part of its effort to regulate the industry. It calls Coinbase and others “unregistered securities”. What’s interesting to Markovich is that firms are winning these cases. In August, Grayscale received the right to create a Bitcoin exchange-traded fund. In September, Uniswap won a potentially precedent-setting case over fraud on defi exchanges. That was good news for Coinbase, because it showed there might be a limit to applying existing securities laws to crypto products and services. But Markovich says the industry still has work to do in clarifying their platforms and protocols, so that more crypto assets can be given the stamp of legitimacy. Following the fall of FTX, Binance started to provide what it calls “proof of reserve” to boost users’ confidence that it held the funds to back its assets. Coinbase is a public company, with all the regulation and transparency that comes with it. Still, there is a lot of discussion about the best way to prove that the required reserves are indeed held. “I think that what Coinbase is trying to do is great,” Markovich says. “They’ve been working with the regulators and educating the market. Which is ironic, because that’s what BankmanFried was trying to do. It can only work if the companies are honest and transparent. “But I think that that’s the best thing that can happen to the crypto market.” i

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> Avatar Influencers are Storming

Up the Earnings Charts — and Creators Stand to Make Some Healthy Profits

Virtual and AI personas have the highest earning potential for single Instagram posts...

igital personas created via AI or software have had a surge in popularity on platforms such as Instagram — leading to significant earnings for their creators.

Love has posted seven times in the past month; had those posts been sponsored, she could have earned around £29,400. That’s how much the average UK worker makes working full-time for 10 months.

Enterprise solutions provider SAP.com delved into the earnings potential of the top 60 “human replica” AI influencers — those designed to resemble humans, as opposed to animal or cartoon-based characters.

By analysing follower numbers and using an earnings calculator, the study estimated potential income for each sponsored post, shedding light on a financially rewarding realm of marketing. Lu do Magalu is the AI influencer raking in the most from a sponsored Instagram post: £26,200. @magazineluiza, featured on the cover of Vogue Brazil, was created as part of a promotion for iBlogTV by Magazine Luize in 2009 — and has posted to Instagram 80 times in the past 30 days. If monetised, her creators could have made up to £2.09m in a month. Miquela Sousa ranks second among AI influencers, commanding £4,200 for each sponsored post. Known as @thalasya_ on the platform, she identifies as the “first Indonesian digital human character”. Having last posted to her main feed 26 months ago, if her creators had maintained a schedule of one sponsored post per month, they could have amassed up to £109,200 by now. That sum equates to 20 years of earnings for the average Indonesian worker. Leya Love comes in joint fourth and could earn an estimated £4,200 per post. A creation of Cosmiq Universe AG, @leyalovenature blends digital modelling with environmental advocacy. She's even listed as a co-author in the book Life Values: When Dreams Become True, with fellow Cosmiq avatar Aya Stellar. 130

Noonoouri, in sixth place, could earn up to £4,000 per post. She is recognised for her chic style and advocacy for veganism and sustainability. It is estimated that she could earn up to £16,400 each time. @lilmiquela’s creators, Trevor McFedries and Sara DeCou, don’t have to rely on sponsored posts — because their creation, Lil Miquela, has been a steady earner for their company, Brud, with collaborations involving BMW, Samsung, and Calvin Klein — which sees the digital influencer share a kiss with Bella Hadid. Alara X places third and could earn up to £4,600 per post. The profile has posted 32 times in the past year. If monetised, the creators could have generated up to £147,200 since November 2022. That’s 32 percent more than the average salary of a principal software engineer at Microsoft. IAMX Digital Human created @iamxalara as one of the first human-like digital avatars, with the aim of bringing it into the Metaverse via a “new era of interactive storytelling”. Thalasya Pov ranks fourth in earning potential, and attracted more than 424,000 followers to her page @noonoouri. Noonoouri, created in CFI.co | Capital Finance International

2018 as a Metaverse avatar, has been involved in lucrative endorsement deals with Marc Jacobs and Balenciaga — and was recently signed by Warner Music. Her debut single Dominoes has received more than 660,000 Spotify plays. Imma ranks seventh, and garners potential earnings of £3,800. @imma.gram's 395,000 followers receive a blend of contemporary

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fashion and art, making Imma a stand-out influencer. She’s worked with brands such as Porsche Japan, Ikea, and Puma. Shudu and Kyra share the eighth position. Shudu, the self-proclaimed world’s first digital supermodel, has amassed more than 240,000 followers at @shudu.gram. That allows a charge of up to £2,600 per post, and Kyra, @kyraonig — the self-proclaimed first virtual influencer in India — has over 237,000 followers which

justifies a charge of up to £2,600. Bermuda rounds out the top 10 with potential earnings of £2,500. @bermudaisbae, created by designer Christian Guernelli, has amassed 236,000 followers and is known for edgy and provocative content. A spokesperson from SAP said the study revealed the earning potential of AI-generated influencers. As they gain followers, they become “an increasingly important aspect of CFI.co | Capital Finance International

social media marketing that brands cannot overlook”. Advances in AI image-generation are “democratising the field of influencer marketing”. Virtually anyone could create a digital avatar, the spokesperson said, “which opens up opportunities for brand collaborations that were once exclusive to traditional celebrities and early social media influencers”. i 131

> Asia Pacific

Downunder is Coming up Roses as Tech Sector Adds Heft and Balance Australia is playing an increasingly influential global role, and playing it well...

Perth, Australia: Elizabeth Quay Park

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ustralia's economy stands out as a shining example of resilience and adaptability in a time of global change.

The situation isn’t static, either, with new prospects fuelling on-going growth. This sturdy and diverse economy — with mining, agriculture, and services as its backbone — has breezed past the global shocks that stunned other nations. Its natural resources equip it to lead the field of renewable energy, with solar, wind, and the burgeoning field of hydrogen energy all playing their parts. Things like the pandemic and emerging trade tensions, have, however, forced a rethink of tactics. An increase in the number of tech companies and innovation hubs indicates a transition towards a knowledge-based economy. Government actions are creating an environment conducive to technical advances. Australia was quick to rejig the tourist industry post-pandemic, with a focus on sustainable and experience-rich travel. Government policies gee-up accelerating growth with tax breaks for enterprises, ambitious infrastructure improvements, and backing for the development of green tech. This gung-ho attitude is moulding the nation's societal, economic, and environmental future. As the world becomes more integrated and connected, Australia's strategic position in the Asia-Pacific area brings new opportunities for commerce and collaboration. The worldwide emphasis on sustainability puts it at the head of the field as others catch up. While opportunities abound, not all are without risk. Diversifying the economy, addressing talent shortages, and limiting the impact of market volatility are challenges that must be dealt with. The “Lucky Country” has vast and diverse potential to back up any action — plus the vision, inventiveness, and willingness to adapt. Decisions taken today will channel and influence future success. RENEWABLE ENERGY Changes in the energy sector have created a welcome shift; since 2022, renewables have met 33 percent of the country's electrical demand. Sunshine is something Australia has in plenty, and

"Australia was quick to rejig the tourist industry post-pandemic, with a focus on sustainable and experience-rich travel. Government policies gee-up accelerating growth with tax breaks for enterprises, ambitious infrastructure improvements, and backing for the development of green tech. This gung-ho attitude is moulding the nation's societal, economic, and environmental future." solar has emerged as the champion, accounting for 14 percent of all energy generation. Wind has also gained traction — 11 percent — while hydropower has slightly decreased, making up six percent of 2022’s electricity output. This forward march is far from over. The country has set ambitious penetration targets, aiming to generate 39 percent of its electricity needs from renewable sources by 2025 — and 50 percent by 2030. These goals are consistent with Australia's pledge to cut greenhouse emissions and promote a low-carbon economy. TECHNOLOGY START-UPS Australia is emerging as an important player in the global tech landscape. While the IT industry has faced some setbacks, tech start-ups Downunder have defied negative twists and turns with innovation. Between 2019 and 2022, financing for this ecosystem reached A$10.5bn. This was above the world average, demonstrating strong momentum in attracting foreign investment and driving innovation. The resilience of Australia's digital startup ecosystem came to the fore during the pandemic. Despite a global slowdown, its tech sector continued to grow, led by fintech, edtech, and AI. Businesses have profited from strong educational institutions, supportive government policies, and the widespread use of technology. The sector is expanding, with firms emerging in health, agriculture, and even space exploration. This diversity reflects Australia's economic strength — and the realisation that tech has the potential to revolutionise a number of industries.

Several digital businesses have achieved billion-dollar-plus “unicorn” status; Canva, Atlassian, Afterpay, and WiseTech Global are among them. Global investors are taking note of the country's track record for innovation, and its potential to greenhouse a new generation of tech titans. Despite this outstanding growth and resilience, Australia still has hurdles to overcome. The relatively limited domestic market — the population stands at just 25.69 million — may limit expansion, and the talent pool for some specialised industries must be developed. But Australia has been dealt a good hand. Strong educational institutions, benign and beneficial government regulations and burgeoning entrepreneurial spirit make an ideal medium for growth. The wide brown land's proximity to Asia provides opportunity for companies to expand their reach and enter new markets. The start-up sector has a promising future, and Australia is well-positioned to become a powerhouse. The emphasis on specialisation and diversification will enable it to serve a variety of industries and global markets. Investor interest should draw in the resources that businesses need to expand and scale. Australia is playing an increasingly influential global role as it continues to invest, nurture innovation, and embrace the revolutionary potential of tech. i

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Winter 2023-2024 Issue

> Asian Development Bank:

Three Actions Governments Can Take to Help to Tackle Climate Adaptation By Declan Magee & Agnes Surry

mpacts of climate change are causing significant economic and social challenges, and there is an urgent need for good fiscal policy to prepare adaptation strategies.

Climate-related disasters in Asia and the Pacific have affected 800 million people and caused $400bn in losses recent years with developing countries the hardest hit. While progress was made at the 2023 United Nations COP28, data shows that adaptation to climate change is crucial to lives, livelihoods, and economies. Climate adaptation refers to economic and social adjustments to minimise losses and maximise opportunities. Low-income countries need stronger and better-financed adaptation strategies. The substantial investments required cannot be a simple add-on to fiscal policy — especially given that countries in Asia and the Pacific are finding their fiscal space squeezed by economic challenges, including higher borrowing costs. But there are ways that fiscal policy can be used to prioritise adaptation to climate change. Fiscal risk-assessment must be improved to identify, assess, and disclose the impact of climate and disaster risks via four main channels: macro-economic shocks commodity shocks, infrastructure disruption, and financial sector risks. Other things to be considered include reconstruction costs, the role of state-owned enterprises and public–private partnership liabilities. Adaptation needs, including infrastructure sectoral resilience, must be considered, as must poverty reduction, public healthcare, and education. The Philippines publishes an annual fiscal risk statement that includes a section on climate disasters. Policy makers should conduct multihazard climate- and disaster-risk assessments to analyse the average annual losses due to climate change. These will provide inputs for estimating the costs and benefits of investing in resilience and adaptation, inform investment decisions, and provide guidance on how to mitigate risk (through engineering design) or transfer risk (through insurance). Fiscal risk management must be strengthened by improving risk identification and management and targeting investment to ensure effective

Author: Declan Magee is a principal economist in the Climate

Author: Agnes Surry is the bank’s deputy head of capacity building

Change and Sustainable Development Department of the ADB.

and training and senior economist.

handling of climate- and disaster-related risks through preparedness, reduction, and risk transfer.

government to local government units and build resilience at all levels of the economy and society.

Bangladesh, Indonesia, and Nepal have developed climate budgeting systems to help tag climaterelated investments. Policymakers should integrate climate risk management into their public investment management systems. There must be an optimisation of resource allocation, financing, and investment. This allows fiscal policies to mobilise more domestic resources and leverage private finance for investment in climate action. It includes tools such as carbon taxes to generate revenue, the phasing-out of fossil fuel subsidies, and the redesign of sovereign funds. Mongolia is considering allocating a portion of its fund to invest in green bonds. These actions can be complemented by innovation. Resilient bonds can mobilise finance for investment in climate actions, while special-purpose vehicles can pool funds from multiple sources — including de-risking private investment in climate action and providing concessional capital. Debt-for-climate or debt-for-nature instruments could enable investment in appropriate action. In Ecuador, a debt-for-nature conversion (a $656m sustainability-linked loan) helped support the effective management of 60,000 square km of marine reserve in the Galapagos, generating $459m in conservation savings and $1.1bn in fiscal savings. The Philippines mobilised resources for the development of a targeted financing mechanism, the People’s Survival Fund. It provides grants to mainstream adaptation from the national CFI.co | Capital Finance International

Policymakers should consider this broad range of instruments to build more climate-adapted economies — but how should they select the best options? All countries need to adapt, and their benefits will be the highest if adaptation is holistically integrated into development plans. To implement a structured approach, there must be funding and support for projects that target specific issues and provide wider benefits. This includes infrastructure, early warning systems, and new technologies. They should also remove hurdles to private investment by eliminating harmful subsidies, setting proper carbon prices, and sharing knowledge. Fair redistribution policies should be designed with compensation plans for communities forced to relocate due to rising sea levels. Once areas of intervention have been defined at the country level, cost-benefit analyses can be applied to adaptation programmes. Attention should be given to the distributional impacts to maximise the impact of spending while balancing efficiency and equity according to societal preferences and risk aversion. Such a method requires strong knowledge of adaptation solutions, available good-quality data, and support from development finance institutions. i

The views expressed are those of the authors and do not necessarily reflect the views of the Asian Development Bank, its management, its board of directors, or its members. 135

> Otaviano Canuto:

Belting Up - Xi Jinping’s Grand Plan Enters Its Third Phase, 10 Years On The Belt and Road Initiative (BRI), launched by Xi Jinping, passed its 10th anniversary in 2023. It has entered a third phase.

he initiative added a label to China’s financing and construction of infrastructure abroad, which had already totalled more than $400bn in the previous 10 years. In addition to the use of investment projects as part of Chinese “soft power”, the BRI has served to increase levels of usage of the country’s excess installed capacity. China’s economic rebalancing beyond its overinvestment-based growth model of the decades before the global financial crisis has been implemented gradually, with real estate and infrastructure construction bubbles allowing it to go through a very gradual slide in growth rates, from double-digit GDP growth rates to six percent in 2019, the last year before the pandemic. BRI fit like a glove.

Figure 1: China funds infrastructure, the World Bank funds social services.

Source: Miller, T (2023). Gearing up for Belt And Road 3.0, Gavekal Dragonomics, December 7.

CFI.co Columnist

In addition to offering a source of investment for developing countries in dire need of infrastructure, the BRI was set out as a platform with rapid implementation and without much due diligence in relation to environmental, social, or governance standards. The BRI would reinforce what we called at the time an “overlapping” or “parallel” globalisation to existing globalisation, based on Chinese industry in this case.

China has become the largest bilateral source of international development financing. By 2018, mainly directed towards infrastructure and the energy sector, China’s development loans to Latin America and the Caribbean reached levels greater than the sum of loans from the World Bank, the Inter-American Development Bank (IDB), and the Bank of Development of Latin America (CAF). The presence of such operations in the region came to be seen as a “competition for influence”. Something similar happened in Africa.

According to data collected by Boston University’s Global Development Policy Centre (Figure 1), the volume of loans from Chinese public development banks — Exim and China Development Bank — surpassed those from the World Bank in the period from 2008 to 2021, in areas including oil extraction and pipelines, transport, energy, and telecommunications. The World Bank maintained its lead only in health, education, governance, and agriculture, in addition to direct budgetary support. In total

Figure 2: Chinese infrastructure projects facing significant environmental, social, or governance risks, 2000-2021 (left) and canceled or suspended Chinese infrastructure projects, 2000-2021 (right).

Source: Parks, B. C., Malik, A. A., Escobar; B., Zhang, S., Fedorochko, R., Solomon, K., Wang, F., Vlasto, L., Walsh, K. & Goodman, S. (2023). Belt and Road Reboot: Beijing's Bid to De-Risk Its Global lnfrastructure Initiative. Williamsburg, VA: AidData at William & Mary.

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for the period, loan commitments made by the two Chinese public development banks reached $498bn, or 83 percent of the World Bank’s total ($601bn). From 2018, there was a change. Volumes fell and the BRI entered a phase that can be called a correction (Parks et al, 2023; Miller, 2023). A brake was applied by imposing more demanding approval standards and shifting financing from Chinese official development banks to stateowned commercial banks. The downside of the laxity of standards with respect to environmental, social, and governance risks became increasingly clear, and the number of cancelled or suspended infrastructure projects rose significantly (Figure 2).

(Figure 3, right panel). About 80 percent of China’s loan portfolio is in countries currently experiencing financial difficulties. In 2021, 58 percent of Chinese loans were bailouts, with less than a third for new infrastructure projects. More than half of the loans to low- and middle-income countries took the form of currency swap lines with China’s central bank or from the external reserve manager: the State Administration of Foreign Exchange Reserves. This year Argentina avoided defaulting with the International Monetary Fund thanks to the credit line between its central bank and the Chinese central bank.

restructuring processes on its own terms (which rarely include repayment of principal), without fully participating in multilateral processes, means that the resolution of the debt distress that developing countries are grappling with is expected to drag on for several years. But after the peak (2014-17) and correction (from 2018) phases, the BRI seems to have entered a third phase, judging by the statements made by Chinese authorities during the Third BRI Forum in Beijing in October 2023. The focus will now be on smaller, smarter projects, in co-ordination with the country’s clean-energy industrial policies.

With many borrowing countries entering debtdistress situations, China’s central bank also opened emergency lines of credit. Most of the resources since 2020 went to emergency loans to prevent several low- and middle-income countries from having to default on the service debt of previous projects, rather than to the financing of new projects (Figure 3, left panel).

More than half of China’s official BRI loans have already entered their principal repayment periods, with the share expected to reach 75 percent by 2030. This means that China’s debtors are beginning to make large repayments at a time when interest rates have risen, the US dollar has appreciated, and global economic growth is slowing. As Parks et al (2023) put it, China is now transitioning from being the world’s largest bilateral development creditor to “the world’s largest official debt collector”.

The BRI will now want to expand markets for Chinese solar and wind-energy manufacturers, in addition to ensuring access to critical minerals for its battery production value chain. Given the context of technological rivalry — including in clean energy — between China and the US and its allies, a comparable reaction to the BRI in its third phase, if any, has yet to be seen. i

Total debt owed to China by low- and middleincome countries is between $1.1tn and $1.5tn

China’s emergence as the world’s largest bilateral creditor and its insistence on bilateral debt

A previous version was published by the Policy Center for the New South.

2021 (right). Source: Parks, B. C., Malik, A. A., Escobar; B., Zhang, S., Fedorochko, R., Solomon, K., Wang, F., Vlasto, L., Walsh, K. & Goodman, S. (2023). Belt and Road Reboot: Beijing's Bid to De-Risk

Its Global lnfrastructure Initiative. Williamsburg, VA: AidData at William & Mary.

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Figure 2: Percentage of China's portfolio of loan commitments supporting countries in financial distress, 2000-2021 (left) and cumulative official financial flows from China to the developing world, 2000-

> Women’s Brain Project Takes to the

Davos Stage for 2024

By Dr Antonella Santuccione Chadha Co-founder and CEO of WBP & Christine Bahls Communications and Content Lead of WBP

In the ever-evolving world of healthcare, precision medicine has taken centre stage — and for good reason...

he Women’s Brain Project (WBP) has created a foundation to support a research institute for sex- and genderprecision medicine.

It took to a global stage to announce the development: the World Economic Forum held in Davos, Switzerland. The new institute will engage experts from various areas for collaboration on the project. The objective is to incorporate sex and gender considerations in the advancement of precision medicine. The WBP has initiated a fund-raising campaign to get the ball rolling. Davos: Dr Antonella Santuccione Chadha (left) at the World Economic Forum 2024

At Davos 2024, numerous relevant conversations were held over the five-day event. Doctor Antonella Santuccione Chadha, co-founder and CEO of WBP, participated in a number of them. The Davos Alzheimer’s Collaborative (DAC) and WBP hosted a meeting on Alzheimer’s. The attendees, including Chadha, discussed creation of a global Brain Health Ambassadors network to promote inclusion of brain health at the primary-care level. “Today, we better understand what enables brain resilience and what can prevent Alzheimer’s,” said George Vradenburg, founding chair of the collaborative. “Using that knowledge to foster brain health across the lifespan is pivotal to stopping Alzheimer’s.” Evidence shows that differences between men and women with regard to the disease: how it presents and progresses, and the treatments have varying effects. As women are better communicators, said Chada, the disease is more easily picked up later. “The scales are different,” she said. Men, she said, might present with more aggression, whereas women appear more depressed. Women are then told by their physicians that they are suffering from depression or stress, and prescribed antidepressants rather than focused treatments. The latest treatments for Alzheimer’s also work seem to be more effective for men, she said. “We need to understand why — because it’s biology. In the end, it is about (getting) the right 138

drug for the right patient at the right time,” because such specific treatments would save money. Arguments about the difficulty in studying women and female animals in a preclinical setting are moot, Chada said. “What about the hormonal cycles of males?” she asked. “It is as complex as the women’s.” DAC also announced the formation of a global network of brain health ambassadors from various specialised sectors to work with healthcare providers. One in three people globally has a brain disorder. In May 2023, in a Lancet neurology editorial, it was highlighted that in the US and Europe alone, the annual cost of neurological disorders amounts to $1.7tn. At another event, entitled Redesigning Healthcare with Women in Mind, hosted by Life Sciences consultancy Kearney, the WBP and Kearney signed an open letter to address the female health gap. It has garnered nearly 60 signatures. Another discussion, A Roadmap to Sustainable Health and Better Wellbeing in the Workforce and Society, was a joint University of Sankt Gallen Executive School and Forbes Women event. It focused on the UN’s Sustainable Development Goals (SDGs) — and specifically SDG 3 (worldwide health and wellbeing). Since 2017, when the Women’s Brain Project Association was founded by Chadha and other neuroscientists, WBP has published evidence of difference in diagnosis, progress and treatment of neurological disorders. CFI.co | Capital Finance International

WBP’s work has been published in 100 scientific and policy publications, and sparked collaborations with researchers and policymakers around the world. World leaders are prioritising women’s health. At Davos 2024, the McKinsey Health Institute released a report about the need to close the health gap — noting the huge financial cost of inaction. The WBP is concerned about the lack of sexbased data in clinical trials; 73.5 percent do not include sex-based analysis. A meta-analysis by WBP found that only seven of 56 studies reported sex-stratified information. In reality, two of every three Alzheimer’s patients are women. One consequence of this bias is the notion that neurological drugs work the same way for both sexes. This is not so: Women are twice as likely as men to experience side effects. A new study shows a six-year longevity gap between the sexes — the largest in 27 years. Women also live more years with ill health and disability. This is known as the morbiditymortality paradox: Women are sicker, but tend to live longer. As WBP has reported, age and the incidence of brain disorders increase in lockstep. Sex- and gender-based differences have long neglected; this has negatively impacted access to health and clinical development. Over the past six years, the WBP has published work on the biological, societal, and economic differences that exist between genders. i

> UNCDF on Weathering Unpredictability:

The Case for Parametric Insurance in the Pacific Islands

n 2022, Tropical Disturbance TD03F, which intensified into a tropical depression, caused sustained winds and heavy rainfall. The tropical depression led to heavy rainfall in Fiji's western, central, and eastern divisions. The estimated losses due to the event stood at $50m. Smallholder farmers, fishers, and market vendors were among the most acutely impacted, given the vulnerable nature of their livelihoods and the lack of capacity to bear the financial impacts of weather-induced disasters. In 2021, Fiji marked a milestone with the introduction of its first-ever parametric-based insurance. This initiative, led by local insurers, agriculture, and farmer agencies, as well as mobile network operators, received support from the Pacific Insurance and Climate Adaptation Programme (PICAP). This multi-dimensional partnership helped accelerate claim payments through mobile money platforms during the tropical disturbance. However, parametric insurance was designed to provide coverage for losses associated with rainfall and wind damage from cyclones. Losses incurred due to tropical depressions (not classified as cyclones) were excluded from coverage. After one year of designing, testing, and fine-tuning the product, the programme reflected on the future direction to take and realised the need to restructure the products to meet the needs of target population segments. PARAMETRIC INSURANCE Parametric insurance offers fast claim payouts through pre-agreed triggers or parameters without the need for on-site verification of losses. This reduces administrative costs and improves the transparency of insurance products, leading to an efficient sign-up, trigger, and payment process. Despite its advantages, parametric insurance suffers from an inherent flaw — a mismatch between actual losses and predicted losses, known as basis risks. Basis risks not only affect the pricing of insurance products but also lower their significance as consumers feel their needs were not adequately met the last time they qualified for a payment. Basis risk arises from two distinct sources: zonal (idiosyncratic) risk and design risk. Zonal 140

risks inherent to diverse groups imply that the loss due to a particular event may impact one beneficiary more than another. Further, the risk is confined to either region or occupation. Due to their unsystematic nature, idiosyncratic risks are expensive to manage, and tackling them would impact the overall cost of insurance. To make insurance cost-effective, idiosyncratic risks are generally ignored without impacting the overall cost of insurance. This is applicable, especially for a mass product designed for lowand medium-income segments. The lack of an ideal index that takes the covariant risk into account is what causes the design risk. By testing the contract parameters, a robust product design reduces basis risk. CFI.co | Capital Finance International

TACKLING BASIS RISK Designing index insurance involves ascertaining the essential parameters to target the key shocks that affect the financial resilience of the user. The quantitative model for designing parametric insurance requires actuaries to define additional parameters (trigger value, exit value, etc.) in order to set up the formula for a claim event and claim size, which are allowed to be based on a single or on various weather indexes. Meeting the requirements of remote and diverse communities through index insurance products is an enormous challenge. Focusing on social equity helps to consider how social differences and associated inequalities may affect differently capacitated people in the same disaster event. This requires the designers

Winter 2023-2024 Issue

and implementers of index insurance to recognise a social responsibility to acknowledge the heterogeneity of communities and actively consider the ground situation faced by the beneficiaries. Reiterating the importance of stakeholder engagement to improve the insurance trigger points, the PICAP team reached out to endusers through their grant partners, associations, and co-operatives to understand the scenarios where beneficiaries did purchase insurance and suffered losses — but did not receive the payouts. The UNCDF team realised that the target beneficiaries faced economic loss in the event of continuous heavy rainfall, despite the event not turning up as a cyclone or catastrophic event. The original parametric insurance covered heavy rainfall in cases of tropical cyclones (TCs) falling in category 2 (refer to the Figure 1) and above. Another insight from the data analysis of tropical cyclones occurring in Fiji highlighted the increased frequency of tropical depressions in the region, which do not convert to cyclones. These events caused damage to the fishing community, MSME owners, and growers. By developing a deeper understanding of the users’ contexts and preferences for parametric insurance, the PICAP and re/insurance providers evaluated and redesigned the coverage. The revised parametric insurance was designed to cover the losses arising due to high rainfall (continuous for a period of five days) using CHIRPS data. The new product provided

cover against rainfall even if the event was not declared a tropical cyclone. Along with Fiji, the PICAP took a similar approach to engaging multiple stakeholders to design comprehensive coverage for parametric insurance in other Pacific countries. When there was a trigger event in January that resulted from heavy rainfall in the Western division of Fiji, the outcome of the product refinement was obvious. The rainfall cover ensured that beneficiaries were eligible for payouts. The insurers disbursed their first pay-out, amounting to over $50,000, via digital wallets and bank payments to 559 beneficiaries, of whom 41 percent were women and 37 percent were persons with disabilities (PWDs). Subsequently, an additional 454 payouts were made, amounting to $50,500 for the excess rainfall events in February and March, mostly through mobile wallets (73 percent). In the same year, Vanuatu experienced two cyclones between March 1 and 5, 2023 (TC Judy and Kevin), which triggered cyclonic wind-related payments. The insurance resulted in 84 payouts amounting to over $25,000. More than 50 percent of these payments were done digitally, through bank accounts. LEARNINGS FROM PICAP Unlike indemnity-based products, parametric insurance needs continual refinements to address the impacts of climate change. The product refinement should further support the Pacific Islands in developing their economic activities around the oceanic and coastal sectors.

Payout Structure Wind Speed (FJD) Max Wind Speed Range (km/h) — TC Category*

Distance to the Eye of the Cyclone (km)

Cat 1[91-125)

0-25 $75

25-50 $0

50-75 $0

75-100 $0

Cat 2 [126-166)

$200

$100

Cat 3 [167-225)

$400

$250

$100

Cat 4 [226-280)

$550

$450

$300

$150

Cat 5 > 280

$750

$650

$500

$300

Figure 1: Parametric insurance coverage (2021-2022)

CFI.co | Capital Finance International

Even within the Pacific Islands, countries have varied economic activities and hazard profiles, implying tailor-made insurance products for each country. To ensure sustainability in the programme, country-level stakeholders at the macro (government departments and regulators), meso (insurance providers, risk modelling agencies, banks), and micro (owners and associations of MSMEs, farmers, fishing communities) levels must appreciate the importance of product refinement. They must also have adequate technical capacities to design, develop, and refine the insurance-based solutions. PICAP has conducted studies on the protection gap in the Pacific countries to improve the financial preparedness of households, communities, and small businesses. It has developed and launched insurance products in Fiji (August 2021), Tonga (November 2022), and Vanuatu (October 2022), and more recently in Samoa (October 2023) and Papua New Guinea (December 2023). During the product development and roll-out stage, PICAP ensures it includes multiple stakeholders and builds their capacity for sustained business cases for insurance providers and aggregators and value propositions for insurance users. PICAP has initiated the expansion phase, which will run from 2023 to 2025. It is proposed to cover Fiji, Tonga, Vanuatu, Samoa, the Solomon Islands, Kiribati, Papua New Guinea, Tuvalu and Timor-Leste. The UN Capital Development Fund (UNCDF), the UN Development Programme (UNDP), and the UN University-Institute for Environment and Human Security (UNU-EHS) jointly implement the PICAP. The programme receives financial support from the governments of New Zealand, Australia, and the UK. The governments of India and Luxembourg (through the India-UN Development Partnership Fund, overseen by the UN Office for SouthSouth Co-operation) are the only sources of funding for the Fiji component of the Scaling Climate Disaster Risk Financing Framework and Parametric Insurance project. i 141

> Jim O’Neill:

With the latest monthly inflation data in the eurozone, the United Kingdom, and the United States coming in higher than expected, markets are nervous and analysts are considering whether, and how, to revise their forecasts. But, despite much uncertainty, the evidence still supports cautious optimism.

ast month, I wrote about the central role of inflation trends in the outlook for the world economy in 20F24 and beyond. Of course, there are many additional risks, which is why the forecasting community is hedging its projections with sensible caveats about various “known unknowns.” Chief among these are the ongoing conflicts in the Middle East and Ukraine, the uncertainty about China, and looming elections in Europe, the United States, and elsewhere. With respect to inflation, I offered a cautiously optimistic outlook based on recent reports showing that many underlying indicators appeared to be moving in a promising direction. Since then, however, the latest monthly inflation data (for December) in the eurozone, the United Kingdom, and the US have surprised on the upside. That has given pause to many policymakers, investors, and analysts after weeks of markets pricing in large interest-rate cuts this year.

Final Thought

Finally, I concluded by mentioning that it would be a pleasant surprise if wage gains in many countries persisted, despite the improving inflation outlook, without contributing to a fresh, more sustained rise in prices. Of course, most economists and central bankers would put little store in this scenario unless there was clear evidence of a much-needed uptick in productivity across the Western world (and beyond). Without additional productivity, they would warn, real (inflation- adjusted) wage gains cannot be sustained without becoming inflationary. Nonetheless, I find myself holding on to the same hope I had last month. After all, productivity data arrive with a lag, so it would be quite risky for central bankers to react too strongly to continued wage gains, such as by declaring that they will maintain a more restrictive monetary policy than they otherwise would have done. Specifically, there are three good reasons to adopt a wait-and-see posture. First, although forecasters failed to anticipate the persistent weakness in productivity over the past two decades, it is only recently that they seem to 142

"Will the improvement in inflation be sustained? Though the December inflation figures came in higher than expected, the preceding months had shown sharper-thanexpected declines. If one examines the smoother underlying measures of trend inflation, as well as surveys of inflation expectations, the outlook remains quite promising." have given up signaling an expectation that it will start to recover. Second, there are obvious reasons for thinking that productivity will eventually improve, even if most have given up hope. Just look at the big developments in artificial intelligence, the shift to alternative energies, the change in working patterns since the start of the pandemic, and policymakers’ renewed focus on initiatives explicitly designed to boost productivity. True, the data have yet to show that these developments are bearing fruit; but, again, the gains from new technologies often take time to work their way through the economy – and into official statistics. The third reason to hold off on monetary tightening concerns the social and human aspects of the wages and productivity issue. As we know from debates about the sources of growing anxiety and economic insecurity across many democracies, median real wages have performed poorly in recent decades. This trend has clearly played a big role in the public’s growing disillusionment with “capitalism” and “globalisation,” and in the rising support for more radical and populist political parties and movements. It follows that an increase in real wages would help to moderate political attitudes. Repressing wages simply because of a belief that they are unjustified would be dangerous. Will the improvement in inflation be sustained? Though the December inflation figures came in higher than expected, the preceding months had shown sharper-than-expected declines. If one examines the smoother underlying measures of trend inflation, as well as surveys of inflation expectations, the outlook remains quite promising. CFI.co | Capital Finance International

As for the other cyclical factors, three things stand out to me as we approach the end of January. First, Chinese economic data and financial-market performance remain generally disappointing despite stronger efforts by the authorities to support a robust recovery. Second, in the US, most (though not all) economic indicators continue to come in stronger than expected. That is a relief, even if it isn’t alleviating the uncertainty among many commentators who worry that the recent positive trends may not be sustainable. Markets, too, have had a jittery start to the year. According to the so-called five-day rule (whereby a net gain for the S&P 500 in the first five trading days of January bodes well for the next 12 months), there is only a 50% chance that this will be a positive year for stocks. Yes, this is far from a scientific truth. But, as I have noted previously, a positive start has predicted a positive year more than 85% of the time, going back decades. Lastly, despite the worrying issues in the Middle East and Ukraine, commodity-price volatility has remained remarkably subdued. Perhaps there are some odd technical supply-demand factors that account for this. But whatever the case, the relative stability is discernible across many markets. Most key commodities, as well as the recognised major commodity indices, are down compared to a year ago. That, too, is slightly reassuring. i ABOUT THE AUTHOR Jim O’Neill, a former chairman of Goldman Sachs Asset Management and a former UK treasury minister, is a member of the Pan-European Commission on Health and Sustainable Development.

Decode Risks. Unlock Opportunities. Trusted ESG insight that provides a more holistic understanding of risk. moodys.com /esg

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Winter 2023-2024 Issue

The others just travel

WHERE OTHERS SIMPLY DRIVE A CAR, THE MASERATI GRANTURISMO GOES FOR GRAND TOURING.

A B C D E F G

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Fuel consumption combined (l/100 km): 10.2 // CO 2 emissions combined (g/km)*: 230 // Energy efficiency category: G * CO 2 is the main greenhouse gas responsible for global warming; Average of all new cars registered in Switzerland enrolled in 2023: 129 g/km. The CO 2 target value is 118 g/km (WLTP). CFI.co | Capital Finance International