Financial Mirror 2015 08 26

FinancialMirror MOHAMED EL-ERIAN

ANTONIS LOIZOU

Issue No. 1147 €1.00 August 26 - Sept 1, 2015

Oil’s new normal as crude prices plummet PAGE 20

Is now the right time to attract foreign investors? PAGE 13

SYRIZA sure of election win BETTING ON TSIPRAS POPULARITY, DESPITE PARTY SPLIT - PAGES 10-11

Coca-Cola’s misleading research downplays role in obesity epidemic SEE PAGE 14

August 26 - September 1, 2015

2 | OPINION | financialmirror.com

FinancialMirror

New chapter in Iran-EU relations

Published every Wednesday by Financial Mirror Ltd.

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The UK and Iran have concluded the final stage of resuming full diplomatic relations after Foreign Secretary Philip Hammond reopened the British embassy in Tehran, marking the new level of relations with the EU after the nuclear talks in Vienna reached a favourable outcome.

Cyprus has long had a diplomatic presence in Tehran, with Iran maintaining a significant embassy in Nicosia, as both missions have often mediated or assisted other states without a presence in the Iranian capital, with an aim to boost ties in the trade, transport, manufacturing and primarily in the energy sectors.

Our own Foreign Minister Ioannis Kasoulides has often visited Tehran and maintained very good relations with Iranian officials, as have other cabinet members in recent months, with the latest being Energy and Tourism Minister Yiorgos Lakkotrypis. As Tehran gradually moves out of its economic isolation and uses its financial might in the region, utilising its military and political ties for peace-building, Cyprus should try and once again become a launchpad for Iranian investments, either here or onwards to the rest of the EU. This is why Philip Hammond was adamant in

reaching a peaceful conclusion to the nuclear talks with Iran, as opposed to the hardline polemics expressed by some conservative western leaders, who have yet to understand the Middle Eastern psyche, which they think they can change just by pouring billions in foreign direct investments.

This expected move demonstrates not only the high value both countries place on having good bilateral relations but also a mature realpolitik strategy by UK. It has always been in the UK’s interest to have good relations with Iran and even more so now and into the future, bearing in mind Iran’s energy reserves and rapidly growing population and high objective need for foreign goods and expertise spurred by years of sanctions.

Since the 1979 revolution and even through the most difficult diplomatic spats and tensions, thousands of Iranian students have continued to study in British universities, for example.

Moreover, historically, Iran has and retains an undeniable geo-political presence in the Middle East, which is now pivotal in the fight against Daesh (ISIS/ISIL). Iran’s security needs and those of the West are becoming much more aligned by virtue of mutual self-interest.

As Winston Churchill said, ‘Jaw-jaw is better than war-war’.

THE FINANCIAL MIRROR THIS WEEK 10 YEARS AGO

Suitors bid for Emporiki, Helios aftermath Emporiki Bank of Greece was about to conclude a deal with investors to sell its 75% stake in the Cyprus subsidiary, while ten days after the Helios disaster, Cyprus and Greece aviation officials were wrangling over who to blame, according to the Financial Mirror issue 633, on August 24, 2005.

Emporiki bid: Two new investors, Hagop Keheyan and Perisles Manglis, have reached a preliminary deal with Emporiki Bank of Greece to take over the 75%

20 YEARS AGO

Elma to merge industries, Windows 95 is out The owner of Elma Holdings plans to merge four local manufacturers into an industrial powerhouse and to take on international competition, while across the Atlantic, Bill Gates announced that the DOS and Windows 3.1 operating systems would be replaced by Windows 95, according to the Cyprus Financial Mirror issue 124, on August 23, 1995.

Elma merger: Michalakis Ioannides, head of the Elma Holdings Group, said he was about to bring four separate industries under one roof – Silvex, Lemeco Paper, Lemeco Socks & Stockings, Covotsos Enterprises – to be able to compete with imports once

stake in the Cyprus subsidiary, at an estimated cost of CYP 15 mln and a further 5 mln cash injection. The bank has struggled to build up market share and was stuck at 0.6% of deposits and 1.2% of loans. If the bid fails, then Nasos Ktorides of Glory (with a 10% stake) may put in a fresh bid.

The other shareholders include Efthyvoulos Paraskevaides (105) and Dakis Stelios Ioannou (5%).

Helios blame: The Greek civil aviation authority refuted reports from Cyprus that paces all blame for the August 14 Helios crash that killed 121 passengers and crew on the Greek side.

Cyprus officials had claimed that the Greek authority

had failed to raise the alarm in time over the lack of communications with the plane. Officials in Athens returned the blame saying that their Cypriot counterparts shouldered most of the blame as they failed to inform Athens control that there was a problem with the Boeing 737-300. Helios, meanwhile, cancelled flights to Prague and Athens.

Stamp duty: Business is being diverted away due to cumbersome rules on stamp duty, according to the Cyprus International Business Association, which has called for a wide range of reforms, including taxation and immigration rules.

BOC shares: Bank of Cyprus shares trading in Greece revisited the all-time high last seen on August 9 at EUR 3.42 (CYP 1.96), bucking the declining trend on the Athens main market and ahead of the release of the first half results.

the GATT and the EUCyprus Customs Treaty come into force. With white collar jobs expected to go, the merged group is expected to report CYP 400,000 in annual profits.

Tourism down: Winter tourism from Britain, the largest market for Cyprus, is expected to be far below 1994 levels, while projections for 1996 are even gloomier.

With bookings down about 35%, major tour operators Airtours, First Choice and Thomson were pressing Cyprus hoteliers to bring own their rates.

Win95 debut: Windows 95, Microsoft Corp’s new

computer programme will make its global debut this week, including Cyprus, and is expected to revolutionise the personal computer market. The new operating system is a total replacement for both DOS and Windows 3.1 and Microsoft’s goal is to convince the estimated 70 mln users around the world to shift to the new programme, with 20 mln packages already shipped. The upgrade will cost CYP 90, plus VAT. 1996 budget: The government intends to curb public spending in line with EU indicators, as defined by the Maastricht Treaty. Finance Minister Christodoulos Christodoulou said the aim in the 1996 budget was to control public spending. The 1995 budget estimated CYP 1.38 bln in spending and CYP 922 in revenues.

Larnaca-Gaza: Cyprus will provide as from January 1996 an air link enabling Palestinians to travel out of the Gaza and the West Bank with small aircraft, but no cargo.

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August 26 - September 1, 2015

financialmirror.com | CYPRUS | 3

Cabinet to discuss ‘New Cyta’ framework Aim for split and privatisation plan to be revealed by December

The Cabinet is expected to discuss the framework this week for a new state-owned company that will take over the operations of the semi-government telecoms utility Cyta.

Deputy government spokesman Victor Papadopoulos said after a meeting President Nicos Anastasiades had with Cyta trade union officials on Monday that the new framework calls for the establishment of a limited liability company all of the shares of which will be held by the government.

The talks focused on ensuring that Cyta staff would not lose their jobs and that some would have the option to take a generous early retirement package, stay on with the new company or be absorbed into the already large civil service.

After the framework is passed by the House of Representatives, the new company will undertake all commercial operations currently owned or managed by Cyta, which, as a semi-government organisation (SGO) is controlled by the government only through its board, but regulated by parliament by approving its budget.

The new Cyta, which is likely to be sold off to private investors in accordance with the ‘prior actions’ demanded by the Troika of international lenders, will take over all commercial operations, such as the Cytamobile-Vodafone franchise, the Cytanet Internet provider and other profitmaking subsidiaries, such as Cyta Hellas and Cytaglobal in

the UK. It is yet not clear if the infrastructure and network owner will split from the current Cyta and remain a government entity.

The idea to split Cyta into two has been hovering for more than a decade, with the previous two administrations unwilling to clash with the vote-yielding trade unions.

However, the 10 mln euro bailout sought from the

BOCY slashes ELA dependence by €300 mln The Bank of Cyprus has paid back a further EUR 300 mln in Emergency Liquidity Assistance (ELA) in July, according to Central Bank of Cyprus data, thus lowering its dependence to the facility from EUR 5.9 bln in June to 5.6 bln. At the end of 2014, the ELA dependence had been EUR 7.4 bln.

The bank is expected to announce its first-half results later on Wednesday.

The central bank said that the dependence of the Cypriot banking system from direct financing from the European Central Bank fell in July by EUR 6 mln to 756 mln.

35 EoIs accepted for Limassol port privatisation A total of 35 expressions of interest have qualified for the three tenders with the aim of privatising the management and operation of Limassol port by mid-2016.

Cyprus Ports Authority Chairman and Ministry of Transport Permanent Secretary Alecos Michaelides said that 12 companies or joint ventures have been initially selected for the concession regarding the cargo terminal, ten for the inport marine services and 13 for the multi-purpose terminal.

In all, 33 companies have expressed interest but some companies had submitted bids for more than one concession.

Michaelides said the Ministry will now send out the tender documents and a draft contract for comment and the bidders will visit Limassol port.

Following the finalisation of the contract documents, the Ministry will call on the selected bidders to submit a final offer in December, with the highest bidder selected for each concession.

The process is expected to conclude in the first quarter of 2016 with the selection of the investor or investors, while the new port managers will operate in parallel with the CPA, probably for a transition period of 12 months.

The privatisation of Limassol port services is part of a wider privatisation plan that aims to raise about EUR 1.4 bln by 2018, as part of the EUR 10 bln bailout plan agreed with international lenders.

Next on the privatisation plan are the telecom provider Cyta, with a new framework discussed by the cabinet this week, and the Electricity Authority of Cyprus, that needs to be privatised by 2018.

Meanwhile, the CPA’s Michaelides said that lease agreements are expected to signed next month for 18 of a total 40 facilities at the old port, with tenders re-issued in summer after the preferred bidder for the whole complex withdrew, having submitted an annual bid of EUR 2.58 mln for ten years.

European Commission, the European Central Bank and the IMF imposed on the government to reduce its public sector payroll and privatise as many state service or assets as possible. The government is thus expected to raise about EUR 1.4 bln from the sale or outsourcing of Cyta, power utility EAC, the management of Limassol port and other holdings.

Finance Minister Haris Georgiades, who has spearheaded the privatisation package, said that negotiations will continue with the Joint Advisory Committee tasked with concluding a labour package, but that this process must end by December.

Spokesman Papadopoulos added, however, that the passage of the framework and the conclusion of a labour agreement and redundancy package will be considered during the next Troika review, that affording time to work out the details.

According to a preliminary plan, there will be a transitionary phase of 12 months where Cyta employees will have four choices: to transfer to the new company with private-sector contracts and a share package; to work in the new Cyta with a private sector but remain on the old Cyta workforce, without pay, in order to utilise their public benefits; to take the early retirement package; or, to be seconded to the government.

Negotiators resume talks, leaders to meet next week The chief negotiators of the Greek Cypriot and the Turkish Cypriot communities resumed their meetings on Tuesday and Andreas Mavroyiannis and Ozdil Nami continuing their contacts on a daily basis to pave the way for President ¡icos Anastasiades and Turkish Cypriot leader Mustafa Akinci to meet on September 1.

The UN mission in Cyprus said that negotiations picked up again at the Ledra Palace Hotel after a brief summer break.

In their previous meetings, the negotiators had contacts with the working groups for the economy, the property issue and EU matters.

According to press reports, the Greek Cypriot side insists on using the existing road that leads to the Turkish-occupied town of Famagusta within the framework of confidence building measures.

The Turkish Cypriot side has submitted a counter-proposal on an alternative route avoiding Deryneia, raising security concerns.

Almost three months ago, Anastasiades and Akinci announced the opening of two crossing points, one in Deryneia in the east and one in Lefka, in the west, as part of a series of confidence building measures.

The issue is being discussed by the relevant technical committee which has met

twice.

The Cyprus News Agency quoted sources as saying that “we don’t want to create false expectations that everything is going to happen tomorrow.”

The same source noted that “we are still in the beginning” after two meetings and that “these things take time.”

No deadlines for the opening of the crossings have been set, since a number of technical or other issues need to be tackled first.

On the crossing in Deryneia, the Greek Cypriot side disagrees with the alternative route, proposed by the Turkish Cypriot side, while expressing readiness to address possible security concerns the other side may have, within the framework of its proposal, to use the existing road that runs along Varosha, the fenced-off part of Famagusta.

On the Lefka crossing, the same source cited technical issues that need to be tackled, before the opening. The existing road may be used, which needs to be widened as it is very narrow for traffic.

Moreover, the area may need to be cleared of mines by the United Nations first, an issue which has also been raised at the technical committee.

August 26 - September 1, 2015

4 | CYPRUS | financialmirror.com

Gov’t posts €12.2 mln budget deficit as spending outpaces revenue The government posted a fiscal deficit of EUR 12.2 mln in the second quarter of the year, compared to a EUR 16.8 mln surplus in the same quarter of 2014 due to higher expenditure, according to the Statistical Service, Cystat.

The fiscal deficit in the first quarter stood at EUR 19 mln with the deficit for the first six months rising EUR 31.2 mln.

Based on the preliminary data on the General Government accounts for the April-June period, compiled in accordance to EU concepts and definitions (ESA 2010), total revenue amounted EUR 1,629.0 mln (1.4% increase as compared to the corresponding period of 2014), while total expenditure reached EUR 1,641.2 mln (3.3% increase).

Industrial turnover drops Industrial turnover dropped in May and in the first five months of the year, the Statistical Service said.

The Industrial Turnover Index for May reached 78.6 units (base 2010=100), recording a decrease of 1.4% compared to May 2014, Cystat said. It added that for the January-May period, the index showed a decrease of 2.7% compared to the same period of the previous year.

However, in Manufacturing, the index reached 80.6 units in May, an increase of 3.5% compared to May 2014.

Motor registrations up The registration of motor vehicles increased significantly in the first seven months of the year, compared to the same period last year. According to the Statistical Service, Cystat, total registrations of motor vehicles increased by 11.3% in January-July to 15,078, from 13,543 in the corresponding period of 2014.

The registrations of passenger saloon cars increased by 15,9% to 12,537, from 10,813 in January-July 2014.

Road transport down in 1Q National road transport decreased by 18.7% in the first quarter of the year, compared to the same period of 2014, according to Statistical Service data.

The main products for national road transport recorded in the January-March period were non-metallic mineral products (903,000 tonnes), food products, beverages and tobacco (692,000 tonnes), coke and refined petroleum products (567,000 tonnes).

International road transport decreased by 12.5% in January-March 2015, compared to the same period last year. The main products were food products, beverages and tobacco(1,890 tonnes) and agricultural, hunting and forestry products (1,385 tonnes).

Part of 1974 Noratlas fuselage and cockpit found Excavations at the Makedonitissa military cemetery in Nicosia have uncovered part of the fuselage and the cockpit of Noratlas, the Greek military transport plane that was shot down by friendly fire during the 1974 Turkish invasion, according to Presidential Commissioner for Humanitarian Issues Photis Photiou.

Photiou said this was a positive development, noting that work would continue until the whole fuselage was found, and the scientists and archaeologists would then proceed with the last part of the second phase, which is to discover any possible remains of the Greek airmen who were on board Noratlas.

“The work is being carried out very carefully. The ground is being scanned every 30cm and I hope that after the fuselage is found, we will also discover the remains and return them to the relatives, so that they are properly buried”, he said. Photiou said that the search was a slow process because there may have been explosives on board, and that National Guard experts were present at all times.

In the same quarter, taxes on production and imports rose by 2.8% year on year to EUR 615.8 mln, of which VAT revenue rose 3.3% to EUR 354.1 mln. Taxes on income and wealth declined by 6.7% year on year to EUR 274.6 mln, while revenue from sales of goods and services increased by 27.9% as compared to the same period of the previous year, reaching EUR 129.8 mln.

With regard to expenditure, the public payroll (including imputed social contributions and pensions of civil servants) declined by 2.2% year on year to EUR 517.2 mln, whereas social transfers reached EUR 659.2 mln, an increase of 2.8%.

Intermediate consumption declined by 6.5% reaching EUR 145.6 mln, Cystat concluded.

Tourist arrivals at 13-year high

January-July was a historic record, says CTO Chairman

The number of tourist arrivals in the first seven months of this year were the best since 2002, Cyprus Tourism Organisation Chairman Angelos Loizou said, as arrivals in the January-July period reached 1.45 million, up 6.5% from a year earlier and up 8.5% in July.

The figures confirm that the increase in the number of holidaymakers from the UK has far overtaken the drop in arrivals from Russia, affected by an economic crisis and sanctions due to the crisis in eastern Ukraine and Crimea.

Commenting on data released by the Statistical Service Cystat, Loizou said that this record is attributed to various factors such as the exchange rate of the pound sterling against the euro, which favoured arrivals from the UK, the operation of new flights to Cyprus, improved air access to the island despite the demise of Cyprus Airways, as well as the cooperation between all stakeholders in the tourist industry.

Tourist arrivals for the January-July period reached 1,450,427, an increase of 6.5% compared with 1,361,794 of the corresponding period of 2014.

Loizou noted that this is the first time that monthly tourist arrivals exceeded 400,000 which constitutes a record in the history of Cyprus’ tourism.

He pointed out however that there can be no complacency, noting “it is imperative that the cooperation between all stakeholders continues mainly to curb seasonality and maintain and further improve the tourism performance that has a direct impact on the economic indexes and affect positively the efforts to return to economic growth and economic progress.”

According to Loizou, arrivals from the United Kingdom rose by 16.5% year on year, from Germany by 28.6%, Israel by 53.7%, Greece by 44.5%, France 36.7% and Holland by 38%.

On the basis of the monthly Passenger Survey, Cystat said that tourist arrivals reached 414,527 in July compared to

381,955 in the same month last year, up 8.5%.

An increase of 22.5% was recorded in tourist arrivals from the United Kingdom, from 127,152 in July 2014 to 155,813 in July this year.

Arrivals from Israel leaped 65%, from 10,311 to 17,015, whereas arrivals from Greece increased 55.8%, from 10,127 to 15,780 this year.

On the other hand a decrease of 17.6% was recorded in tourist arrivals from Russia, which dropped to 96,085 in July 2015 from 116,582 in July 2014, a 1.5% decrease from Sweden (17,181 compared to 17,446) and a 12.8% decrease from Norway (9,618 compared to 11,029 last year).

Meanwhile, fewer residents of Cyprus travelled abroad in July compared to the same month last year, Cystat data showed.

On the basis of the results of the monthly Passenger Survey, 115,105 residents of Cyprus returned from a trip abroad in July compared to 129,602 in the corresponding month last year, a decrease of 11.2%.

Furthermore, in July there was a decrease of 4.8% of trips to Greece (53,487 in July 2015 compared to 56,195 in July 2014) and a 47.7% decrease of trips to the United Kingdom (13,716 compared to 26,227 last year).

Investment funds assets drop 2% in June Total assets of investment funds in Cyprus decreased by 2% in June, the Central Bank of Cyprus said.

Figures released by the central bank showed that in June the total assets of the 80 investment funds that submitted data, dropped to EUR 2,986 mln, from EUR 3,049 million in March. In June 2014, the 84 investment funds that submitted data had total assets of EUR 3,062.9 mln.

Investment funds on equity had assets of EUR 2.278,9 mln

in June, investment funds on bonds EUR 26.1 mln and mixed investment funds had total assets of EUR 383.2 mln.

Funds that invest in real estate had assets of EUR 184.4 mln, while other investment funds had total assets of EUR 113.5 mln.

Deposits and loans fell in June to EUR 253 mln from EUR 254 mln in March. In June 2014, the deposits and loans of the investment funds that submitted data were EUR 306.3 mln.

August 26 - September 1, 2015

financialmirror.com | CYPRUS | 5

Christiana Kyriacou appointed Country Manager for Pedersen & Partners

Limassol to host major European health psychology conference Europe’s leading conference on health psychology will be held in Limassol next week, with 700 delegates attending the European Health Psychology Society (EHPS 2015) congress taking place from September 1 to 5 at the Grand Resort.

According to the organisers, EHPS is a professional organisation formed to promote empirical and theoretical research in health psychology. Each year a four-day conference is organised at locations across Europe, with the aim to present the most important developments in the field.

The theme of EHPS 2015 is “Principles of behaviour change in health and illness” with presentations from world renowned researchers, professors and professionals.

Some of the keynote speakers include Prof. Howard S. Friedman, Prof. Susan Michie, Prof. Ronan O’Carroll and Prof. JoAnne Dahl.

The EHPS 2015 also includes ten parallel sessions with more than 300 oral presentations from a wide range within health psychology topics and hundreds of posters divided in three interactive sessions. EHPS 2015 is also expected to bring more expertise and innovative research through symposia, roundtables, participatory sessions, overview talks and workshops.

The conference is co-hosted by the University of Cyprus (Department of Psychology) and the Cyprus Psychologists’ Association. The conference co-ordinators are Easy Conferences.

Cypriot delegates who wish to attend EHPS 2015 can benefit from the reduced participation scheme, by contacting Easy Conferences (tel. 22591900, email: info@easyconferences.eu, web: www.easyconferences.eu).

Further information on EHPS 2015 is available at the conference official website www.ehps2015.org.

Retail trade volume up, value drops in 1H The volume of retail trade increased in the first half of the year, while the value of the retail trade during the same period decreased. According to the statistical service Cystat, on the basis of provisional estimates, the Turnover Volume Index of Retail Trade for June increased by 3.9% to 87.4 units (base 2010=100) compared to the corresponding month of the previous year.

For the January-June period, the index is estimated to have increased 2.8% compared to the same period of 2014.

On the other hand, the Turnover Value Index of Retail Trade for June decreased by 1.0% to 87.5 units (base 2010=100) compared to the corresponding month of the previous year.

For the January-June period, the index decreased by 0.7% compared to the same period of 2014.

Pedersen & Partners, a leading international executive search firm with 53 wholly owned offices in 50 countries, announced the appointment of Christiana Kyriacou as the Country Manager for Cyprus.

Kyriacou brings over 15 years of experience in human resources, talent acquisition & performance management.

According to a company announcement, she acquired strong functional executive search expertise while serving in key positions with several leading international and local boutique consultancy firms and has a proven track record in developing effective recruiting strategies, implementing training and development programmes and completing succession

planning projects.

Prior to joining Pedersen & Partners, Kyriacou worked as a recruitment manager for a global human resources consulting and advisory company. She was responsible for establishing the Cyprus branch of a leading international recruitment group, where she managed the full recruitment process and was responsible for developing and delivering recruitment strategies covering western and central Europe and the Middle East.

“As we further grow our regional business, we have been strategically strengthening our local presence,” said Iraklis Papadopoulos, Regional Consultant at Pedersen & Partners, overseeing the firm’s offices in Albania, Cyprus and in the Former Yugoslav Republic of Macedonia.

“Christiana’s accomplishments as a business strategist and senior advisor on human resources, talent acquisition and performance management attest to her dedication to this domain, and the competitive advantage, which she will be able to contribute in the region and worldwide. Christiana has comprehensive insight into a number of industry sectors, and we are pleased to have her join us in growing our achievement-oriented Cyprus team,” he added.

August 26 - September 1, 2015

6 | EUROPE | financialmirror.com

EU experts to discuss rail security on 9/11 An EU working group will meet on the symbolic date of September 11 to discuss road and rail security in the aftermath of the foiled terrorist attack of August 21, in which mass bloodshed on a high-speed train from Brussels to Paris was narrowly averted.

EU experts told journalists that the group will prepare for a ministerial meeting by the Justice and Home Affairs Council on October 8.

An expert said that prior to 9/11, there had been no EU transport security legislation. After the terrorist attacks in the US, the EU adopted security legislation concerning air transport, but no legislation exists for land transport, road or rail.

Another reason why no such legislation has been developed is that there is no international body to set rules on road or rail transport, such as ICAO, the International Civil Aviation Organisation.

The expert also said that the former Commissioner for Transport, Siim Kallas, had identified this as a lacuna, and has set up a group of experts to look into the matter. The group has so far met eight times.

However, issues such as metal theft from railway infrastructure had gotten most of their attention.

To transfer airline rules to railroads may be unworkable, experts said, warning against an overreaction to the August 21 train incident.

Russia orders retailers to withdraw foreign detergents Russian consumer safety watchdog Rospotrebnadzor has ordered retailers to withdraw detergents produced by foreign consumer groups.

The regulator said some products of Henkel, Procter & Gamble, ColgatePalmolive, and Clorox had to be removed from the marketplace because they did not meet Russia’s toxicological safety criteria.

Last year, Russia banned food imports from the European Union and United States in retaliation for sanctions over Moscow’s role in the Ukraine conflict. The list of affected countries was expanded this year and Russian regulators have also restricted Dutch flower imports, citing health risks.

Russian media reported that the extent of the withdrawal of foreign detergent brands would only affect some products rather than entire product lines.

Rospotrebnadzor said it was carrying out further tests on household chemicals and detergents of other producers, but did not elaborate.

Henkel said it had not received any notification from Rospotrebnadzor and that all its products had passed toxicological checks in Russia and had a state certificate of safety.

On August 12, Russia added Albania, Montenegro, Liechtenstein and Iceland to a list of countries from which it has banned most food imports in retaliation for sanctions.

Russia’s counter-sanctions, currently in place until August 5, 2016, previously covered the United States, Canada, Norway, Australia and the 28 EU member states, banning meat, fish, dairy products, fruit and vegetables.

Undetected, the gunman had brought an AK-47 assault rifle onboad, with 270 rounds of ammunition, enough to kill a significant number of the 554 persons on the train.

Passengers subdued him, including two off-duty US soldiers.

Issues such as the use of closed circuit TV cameras (CCTV), and security checks of luggage and passengers could be discussed, experts said.

Asked by journalists to explain what could be done at the EU level to improve the security of high-speed trains, experts

conceded that many things could be done at the national level, but that the same measures would take a very long time to be decided at the EU level, or would be rejected for being too costly.

In Spain, for example, following the bombing of the Atocha train station in Madrid on March 11, 2004, luggage is routinely checked for explosives.

Regarding the possible exchange of passenger name records (PNR) from the online reservations of the train services, EU experts said this could only be decided at national level. At EU level, the exchange of PNR data covers only the international flights, it was explained.

Asked by EurActiv about the possibility of having rail marshalls on high-speed trains, in the same way as air marshalls secure flights in certain countries, Commission experts said that unlike an airborne police force, a rail marshall would be out of his jurisdiction on foreign soil.

Three EU countries use air marshalls, one expert said, but refused to name them, as this is confidential information.

Regarding metal detection, the experts made it clear that there were more ways to secure railway passengers than the detectors used for airports. Such detectors could be designed to detect specific items, such as explosives or weapons.

“Technology is developing. The bottom line is if there is a market for products, the industry will manufacture it,” the expert commented.

Hungary slams ‘humiliating’ EU policy on migrants Hungary has called for more money from the European Union to handle a rising tide of migrants, as a new wave hit its southern border and further exposed the cracks in EU policy towards the worst refugee crisis since World War Two, according to the news and policy site EurActiv.

More than 100,000 migrants, many of them refugees from conflicts in the Middle East and Africa, have entered Hungary, part of Europe’s Schengen zone of passport-free travel, this year en route to the more affluent countries of western and northern Europe.

The influx ticked up on Monday to its highest daily rate this year - 2,093 - as many race to beat a fence that Hungary is building on its 175-km border with Serbia to keep them out.

A Reuters reporter was quoted as seeing hundreds stream unhindered into Hungary from Serbia, part of a larger movement in recent weeks whisked north by boat and bus as cash-strapped governments in Greece, FYROM and Serbia try to move them on as fast as they can.

A record 50,000, many of them Syrians, reached Greek shores by boat from Turkey in July alone. Greece, embroiled in a debilitating economic crisis, is ferrying them from overwhelmed islands to the mainland, from where they head north to Skopje and points beyond.

FYROM tried to keep them out last week with razor-wire and stun grenades, but gave up in the face of huge and determined crowds. The United Nations refugee agency, UNHCR, said it expected the influx to continue at a rate of 3,000 per day for months. Some 8,000 were estimated to be in Serbia, many spending the night in city parks.

Belgrade’s Lasta bus company said it increased its daily departures to the northern town of Subotica from seven to 24. “In the coming days we may expect an increase,” the company said.

Hungarian authorities are rolling out a

low, barbed-wire barrier along the border with Serbia, while construction crews race to complete a more substantial 3.5-metre-high fence.

Critics point out that the vast majority of migrants who enter Hungary do not linger, determined to reach the likes of Austria, Germany and Sweden where they join up with relatives and friends in search of work and security.

But the Hungarian government under right-wing Prime Minister Viktor Orban has taken a harder line than other EU states, saying such an influx carries risks of terrorism, crime and unemployment. He said the EU has failed to offer a coherent solution, and also faces pressure at home from far-right opponents.

Orban’s chief of staff, Janos Lazar, said Hungary should be given more money by the EU. The European Commission has pledged 8 mln euros in aid and various other measures. But Lazar told the daily Magyar Hirlap newspaper it was not enough.

“The European Union distributes border protection funds in a humiliating way. Old

member states have nicked the money from new members,” he was quoted as saying.

“If we do not take meaningful steps, we will become a lifeboat that sinks beneath the weight of those clinging onto it,” Lazar said.

Not since the wars of Yugoslavia’s collapse in the 1990s has the cash-strapped western Balkans seen such large movements of people. Germany said it expects a record 800,000 asylum-seekers to arrive this year, in a crisis overwhelming authorities in Europe from the Greek islands to the French port of Calais.

The European Commission has made clear its disapproval of the Hungarian fence, with its Cold War echoes in ex-Communist eastern Europe, but Hungary faces no sanction for building it.

On Monday, Commission President JeanClaude Juncker criticised bickering EU governments for “finger pointing” instead of confronting the migrant crisis with viable measures.

His deputy, Frans Timmermans, told Europe 1 radio on Tuesday that “Europe has failed. Europe has to get moving.”

August 26 - September 1, 2015

financialmirror.com | COMMENT | 7

Building a Russian version of Macau Investors are pushing forward with a multi-billion dollar gambling center near Vladivostok, hoping to lure up to 10 million visitors per year. About $2.2 bln will be invested in the gambling complex, which is expected to attract visitors from northern China, according to Rossiyskaya Gazeta.

Russia has signed agreements with investors, including gambling tycoon Lawrence Ho, on constructing a new casino center near the Far Eastern city of Vladivostok.

Investors are pushing forward with the multi-billion dollar gambling center, hoping to lure up to 10 million visitors a year to a Russian version of Macau.

The resort area’s first casino is set to open its doors this September. Investors are planning to plow a total of $2.2 bln into the gambling complex, which has been dubbed “Primorye” after the Russian name for the region.

“Considering the zone’s geographical location, we can assume that about 50% of all visitors will come from Asia, especially from China,” said Timur Nigmatullin, analyst at Finam investment company.

Analysts said that Primorye might benefit from being significantly closer to northern China than Macau, which is the largest gambling center in Asia and is situated on China’s southern coast near Hong Kong.

One of Primorye’s key investors is Melco International Ltd, a firm belonging to Lawrence Ho, one of the heirs to Stanley Ho’s gambling empire in Macau.

Apart from the Ho family, other large investors in the project include Diamond Fortune, which is preparing to begin the construction of a casino dubbed Golden Gate as early as the first half of 2016.

Royal Time Group, the project’s third investor, which is already heavily involved in the Azov-City gambling zone, is expecting to start the construction of its 250,000 sq.m.

Zhar-Ptitza (‘firebird’) casino and resort this summer.

The designers behind the project say the name was picked for a reason, since the future resort will mostly target Asian tourists.

The Zhar-Ptitza, or Phoenix as it is also known, is a mythical bird, which arises from the ashes, and is considered highly symbolic in some Asian cultures.

“The project’s entire infrastructure has a uniform Asiainfluenced style,” says Alexey Belinsky, head of the European division of Steelman Partners, an architectural company working on the project.

The original plan called for the casino to house 500 slot machines and 30 gambling tables. But the numbers are currently being reviewed and may reach 3000 machines and 150 tables.

Once completed, the 619- hectare space will include 15

hotels, 12 rental villas, a yacht club, a multifunctional trade fair complex and other recreational infrastructure.

The zone will eventually be able to compete with Macau for the title of Asia’s largest gambling center – and, according to Russian experts, it has several crucial advantages.

Primorye is closer to northern China than Macau, with Vladivostok located a two-and-a-half hour flight from Beijing and just a one-and-a-half hour flight away from Harbin, the capital and largest city of Heilongjiang province which borders Russia.

According to Russia’s Ministry for the Development of the Far East, the approximate revenues of the Primorye complex may amount to $1.2 bln, reaching up to $5.2 bln in ten years. The tax rates for the zone will be between 3% and 7% - significantly lower than Macau’s 39%.

Russia, which by national law prohibits gambling outside specially-established zones, has established gambling centers in other areas, including in the European-influenced exclave of Kaliningrad, the Altai Territory in Eastern Siberia and in the Russian Far East.

Analysts said Primorye has the best prospects of any gambling zone established by Russia so far.

“According to my estimates, given the project will likely receive some tax relief, the investments in the project should pay off in about 18 months to two and a half years after the construction is completed,” says Timur Nigmatullin, analyst at Finam investment company. “The Primorye gambling zone is the most promising project compared with other similar zones in Russia.”

Nigmatullin says the entertainment business — and gambling in particular — is traditionally cost effective and is considered to return on investment quickly. A weaker ruble will also make visiting the resort cheaper, he said.

August 26 - September 1, 2015

8 | COMMENT | financialmirror.com

It’s Retro Time!

Round a friend’s dinner table the other night, after having put the world to rights, the conversation got around to more important things, like food. These were well travelled people dining – “a lifetime in the Middle East”, “20 years in Lagos”, “A long spell in Tokyo” – but I was surprised at how often famous dishes of the 1960s which have survived on into many menus today were mentioned.

The two I “re-issue” here came top. In presenting them, though, I must stress the importance of buying the best ingredients. For example, cold water prawns, i.e. “North Atlantic” are essential for prawn/shrimp cocktail.

FOOD, DRINK and OTHER MATTERS with Patrick Skinner

Fino Liver Paté This is my take on the popular chicken liver paté, which I have given a taste lift by adding bacon, onion, mushrooms and garlic, with some Fino dry sherry.

Rather superior in my view.

Time was when I made it with KEO Fino Cyprus sherry.

Alas, due in my view to poor marketing, sales were small and this superb aperitif was withdrawn.

So, now we use a Spanish Fino.

Ingredients — for 6-8 servings as a starter 250g / 8oz of chicken livers.

1 medium onion (about 75g, peeled), finely chopped.

A good handful of button mushrooms, sliced (about 120 g).

3-4 rashers of smoked streaky bacon (about 60 g).

1 good clove of garlic peeled and very finely chopped.

100 g butter.

Pinch of fresh thyme, 1 coffee spoon dried ginger, a pinch of allspice, salt and pepper.

2 tbsp of a good dry sherry (“FINO”) Still Top of the Pops in countless restaurants (where, all too often it is made with cheap warm water far eastern prawns), this dish is often neglected at home. But it’s a regular at our table.

Ingredients for 4 servings 300g/11 oz of de-frosted prawns.

2-3 small cucumbers, peeled and thinly sliced.

Section of a hearty lettuce, finely sliced.

Sauce Rose: 4 des-spn mayonnaise, 4 des-spn tomato ketchup, 2 pinches of garlic powder, 1 des-spn sunflower oil, sprinkling of black pepper.

Method 1. De-frost prawns, pat dry on kitchen paper or cloth.

2. In four fruit bowls or small soup plates, sprinkle the finely sliced lettuce over the base.

3. Arrange the sliced cucumber around the edges.

4. Share out the defrosted prawns on to the four bowls.

5 Make the Sauce Rose (simply whisk together all the ingredients very well) and spoon equally on to the four portions of prawns.

6. Grind a little black pepper over the top and decorate the prawns with a couple of black olives, otherwise a little chopped parsley or snippets of chives, as in my picture.

7. Serve with brown bread and butter or slivers of toasted or griddled Pitta Bread and a glass of chilled Chardonnay.

Method

Patrick’s Paté, oat biscuits, pickled cucumber and a glass of 1. Trim all fat and gristle Fino – marvellous! away from the chicken livers.

If the chicken hearts are attached, let them be, they will add to the flavour. Slice coarsely.

2. In a medium frying-pan, heat 30 grams of the butter until sizzling and add the onions, garlic, bacon, herbs, spices and mushrooms. Stir regularly and cook until beginning to turn brown. Remove and put into your food processor.

3. Put another 30 g of butter into the pan and fry the livers for around 5 minutes until cooked through (“pinky”), remove, and put into the food processor.

4. Put remaining butter and sherry, salt and pepper, into food processor and whiz until smooth and creamy.

5. Spoon into a medium bowl or individual ramekins. Pour a little melted butter over the top to add a final rich touch.

6. Refrigerate for at least three hours.

Serve with “Fino”, or a very dry white wine.

Go to www.eastward-ho for more recipes, food and wine news and notes.

Limassol gets ready for the annual Wine Festival Limassol is preparing to host the 54th Wine Festival, which will take place in the municipal gardens from August 27 to September 6, attracting thousands of visitors from Cyprus and abroad.

The emblem of the Festival, which celebrates the production of wine on the island, is a giant statue of a Cypriot village winegrower in his traditional outfit of baggy trousers (the national ‘vraka’). This was already been placed at his spot earlier this month with the Ariones choir accompanying him

with wine making songs.

The theme of the wine festival is “Drink wine and be healthy”.

This year about 60 kiosks will offer traditional tidbits, food and souvenirs.

The Minister of Energy, Commerce, Industry and Tourism Yiorgos Lakkotrypis will open the Festival.

Wineries participating in this annual event will be offering free wine to all visitors.

August 26 - September 1, 2015

financialmirror.com | COMMENT | 9

The better corporation

By Lucy P. Marcus Around the world, the corporate governance landscape is shifting, as efforts to improve business practices and policies gain support and momentum. The wave of reform has become visible everywhere – from tough new regulations in Japan to sovereign wealth funds like Norway’s Norges Bank Investment Management taking a more active approach to their investments – and it is certain to continue to rise.

Three factors are driving these developments. First, today’s deep economic uncertainty has broadened ordinary people’s awareness of the influence that companies have on politics, policy, and their own daily lives. And, as I have noted previously, people are not only paying greater attention; they also have more power than ever before to make their voices heard.

Second, there has been a burgeoning awareness among governments that economic growth requires a proactive regulatory approach. Robust and resilient economies need strong businesses, and to build strong businesses, governments must play a role in ensuring high-integrity oversight of business activity. Company stewardship and country stewardship are increasingly linked, and authorities now recognise that paying to ensure good governance now is far less costly (both financially and politically) than paying for the consequences of bad governance later.

In Japan, the Financial Services Agency enacted a Stewardship Code in 2014, with a Corporate Governance Code from the Tokyo Stock Exchange entering into force this June. By creating a more equal environment among shareholders, ensuring more disclosure and transparency, specifying the responsibilities of company boards, and requiring outside independent directors on company boards, the codes enshrine changes that make Japan more attractive for foreign investors. More generally, Prime Minister Shinzo Abe has emphasised that good corporate governance is critical to long-term economic growth and prosperity.

Toshiba’s recent accounting scandal – the company was found to have inflated its profits by JPY 151.8 bln ($1.2 bln) over several years since 2008 – presents an opportunity for Japan’s government to demonstrate its seriousness about the new regulations. Toshiba CEO Hisao Tanaka and other senior executives have had to resign; the interim CEO apologised to Abe’s office; Norio Sasaki, the company’s vice chairman and

The athletes earning the most from endorsements Athletes are projected to earn over $836 mln through endorsements in 2015, a 13 percent increase on last year, according to Opendorse based on Forbes data.

Tennis star Roger Federer is the world’s highest-paid athlete endorser, set to make $58 mln this year. Much of his success can be attributed to long-term deals with top brands such as Nike, Mercedes and Credit Suisse.

Even though Tiger Woods is struggling to restore his former dominance, his lucrative deals with Nike, Rolex and many others will still net him $50 mln this year.

Phil Mickelson, another golf star, jointly rounds off the top three with Lebron James on $44 mln. Mickelson’s list of endorsement partners includes the likes of Rolex and Exxon Mobil. (Source: Statista)

former CEO, has quit his posts on government panels; and the former chairman of Toshiba’s audit committee has stepped down from the government accounting panel.

In the United States, the Securities and Exchange Commission enacted a rule at the beginning of August requiring public companies to disclose the pay gap between workers and CEOs. Corporate behaviour and governance has emerged as a campaign issue for US presidential candidates.

Hillary Clinton gave a speech at the end of July decrying “quarterly capitalism” that chases short-term growth at the expense of sustainable business development, as well as addressing the exponential growth of CEO pay, and the need for a minimum-wage increase.

The European Union and its member states are also taking an increasingly active approach to corporate governance, including regulations concerning boardroom diversity. Italy, France, Spain, Norway, and others have all enacted boardroom gender quotas, with companies required to fill 30-40% of independent board seats with women. The latest example can be found in Germany, where, after much debate, new quotas require that from 2016 large companies fill 30% of non-executive board seats with women.

The third, and perhaps most important, factor underpinning recent changes in corporate governance has been the sharp rise in cross-border investing. Sovereign wealth funds, pension funds, global investment banks, and hedge funds do not invest only in their own backyard. They scour the planet looking for places to put their money, and they expect companies that receive it to play by rational rules.

The Olympus scandal of 2011-2012 – when investigations in Japan, the United Kingdom, and the US revealed that company executives falsified accounts to hide losses of JPY 117.7 bln – is a watershed example of a traditional closed corporate culture coming up against international scrutiny.

As the full extent of the cover-up was revealed, foreign investors, like GIC Private Limited (Singapore’s sovereign wealth fund), rebelled.

Singapore sold nearly all of its 2% stake almost immediately, and other foreign investors and analysts reacted similarly. It was a turning point for Japan, as the country’s clubby investment culture came up against global transparency and accounting standards. Things have not been the same since, either for Japan or for companies’ understanding of the expectations and influence of international investors.

International investors are in a unique position to encourage, or even enforce, global best practices in corporate governance. If such investors show that they are willing to withdraw financing, they will gain real influence in bringing about sustainable change – to the benefit of us all.

This is especially true if investors are guided by principles that go beyond financial returns. Global funds that uphold high ethical standards concerning labor practices and environmental protections are safeguarding the global ecosystem on which they, and the rest of us, depend. As they establish and implement such principles, the resulting momentum has been changing corporate governance and behavior across industries and regions.

This is evident from several high-profile examples.

CalPERS (the California Public Employees’ Retirement System), a $300 bln pension fund, has published its corporate governance principles, which include boardroom diversity, fair labour practices, and environmental protection.

Norges Bank Investment Management, Norway’s $870 bln sovereign wealth fund (the largest in the world), has also pushed for changing governance rules, including separating the role of chief executive and chairman and better reporting by companies on how they are addressing climate change.

The shift in emphasis on best-practice corporate governance is real, and it is here to stay. It comes from people finding and raising their voices, from politicians recognising the importance of corporate governance for sustainable economic growth, and from influential investors putting genuine pressure on companies to change their behaviour.

Companies and boards ignore this trend at their peril.

Lucy P. Marcus is CEO of Marcus Venture Consulting. © Project Syndicate, 2015 - www.project-syndicate.org

August 26 - September 1, 2015

10 | GREECE | financialmirror.com

SYRIZA confident of election win Breakaway Popular Unity tries to utilise time to gain public support

The radical left SYRIZA party, that came to power on an anti-austerity platform but later backtracked on its pledges, is confident that it can win a snap election next month.

Energy Minister Panos Skourletis, a senior member of the SYRIZA-led government which resigned on Thursday, also said the nation must avoid deadlock leading to a second round of elections – a scenario that politicians are already debating even though a first round has yet to be called.

SYRIZA, which during its seven months in power took Greece to the brink of financial collapse and exit from the euro, is confident but remains beset by internal divisions even after it formally split last week.

“An absolute majority in parliament for SYRIZA is achievable,” Skourletis said, playing down the possibility of a postelection deal with the main pro-bailout groups – the conservative New Democracy, centrist To Potami or the socialist PASOK. “For collaborations to be politically credible, they must be based on an existing convergence of programmes, a common ground,” he said. “I do not see this political credibility with the forces of New Democracy, Potami or PASOK.” President Prokopis Pavlopoulos has so far tasked two opposition parties – New Democracy and SYRIZA offshoot Popular Unity – with trying to form a new government after Prime Minister Alexis Tsipras quit and sent SYRIZA into turmoil.

With parties deeply divided over the bailout and its tough conditions, New Democracy has already failed to find coalition partners.

Popular Unity leader, Panayiotis Lafazanis, has already admitted defeat and is using his three-day presidential mandate merely to win air time for his anti-bailout message.

Once his mandate expires on Wednesday night, President Pavlopoulos is expected to make a final attempt to achieve a compromise among the parties, which is also certain to fail, after which he will appoint a caretaker premier and call elections within 30 days.

No opinion poll has been published since July 24, well

before Tsipras resigned and SYRIZA split. Pollsters say it is hard to muster a representative sample when many voters are on holiday.

However, most are now returning to the cities and polls are expected to start appearing shortly.

SYRIZA is banking on the assumption that Tsipras remains popular for standing up to the eurozone and IMF creditors, even though he eventually caved in and accepted their demands for more austerity and economic reforms in return for 86 bln euros in bailout loans.

Some 43 out of the 149 SYRIZA MPs rebelled earlier this month by refusing to back the bailout in Parliament. But only 25 left to form the Popular Unity, meaning Tsipras has to deal with a sizable number of anti-bailout deputies within SYRIZA, include the speaker of parliament Zoe Constantopoulou and former Finance Minister Yanis Varoufakis.

Popular Unity appealed to SYRIZA doubters to defect.

“Being pro-bailout and anti-bailout in the same party cannot

go on,” said Costas Lapavitsas, a former SYRIZA lawmaker who joined the breakaway group and an economist who argues Greece would be better off leaving the euro.

Panayiotis Lafazanis, the former energy minister who broke away to spearhead the Popular Unity, formerly the ‘left platform’ within SYRIZA, called for the vote to take place after September 20 and for the parties to agree to proportional representation.

However, the leader of the third-largest parliamentary group, has to return the mandate on Thursday, which means elections could still be held on September 20. There also appears no prospect of the electoral law changing.

The mandate was relinquished by New Democracy leader Evangelos Meimarakis on Monday after he used it for the full three days allowed. Meimarakis insisted that a new coalition government could be formed from the current Parliament but blamed his lack of success in this direction on Tsipras for not meeting him over the weekend.

Lafazanis also asked for a meeting with Tsipras, which the SYRIZA leader declined.

Instead, the latter addressed a meeting of SYRIZA’s political secretariat to discuss the party’s strategy for the upcoming election contest. The message Tsipras sent out at the meeting was that he is not open to an election cooperation with the parties representing Greece’s establishment.

His comments, aimed at New Democracy and PASOK, are part of SYRIZA’s strategy to drum up support and ensure it does not lose floating voters to other parties.

Tsipras is expected to have a hands-on role in drawing up SYRIZA’s candidate list, which is expected to include figures who are not party members. The leftist leader suffered a blow Monday when party secretary Tassos Koronakis announced his resignation and declared his displeasure with the government’s actions.

Meanwhile, pro-bailout and centrist To Potami leader Stavros Theodorakis has challenged the outgoing Prime Minister and New Democracy leader Meimarakis to a televised debate.

“Having the parallel monologues of 7 or 8 political leaders produces no results,” the party said in a statement.

The responsibilities of the ‘partners’ and the politics of austerity Since the EU (and Germany in particular) established that the “obsolete” structures of the Greek economy (and society) are not compatible with those of the EU, it ought to intervene to gradually bring them in-line with the current system. This obligation is not an economic one but rather a political and certainly a social one. The opportunity was present with the introduction of the first Memorandum of Understanding (MoU), since the “Institutions” found the resistance of the Greek state in the reforms.

The policies of austerity, which in practice only brought recession and social upheavals to Greece, are continually being followed today. Surely, we would have had a different situation altogether if, from the outset, installment payments were linked to the progress of institutional changes and the creation of the ‘correct’ structures in the society. Their substitution with the pressing tax enforcement measures are the sources of depression that have been accumulated in recent years. This mistake is of strategic importance, something that is already clearly evident.

The Troika, knowing in depth the fundamental problems of the Greek political system should have taken ownership of the

By George Mountis programme so that Greece could reach a European level, mainly in terms of correct public structures with the imposed reforms.

There is now a belief entrenched in the 18 that the Greek crisis can coexist harmlessly within the Eurozone. Today, the country is collapsing since it’s not making substantial reforms.

It is widely accepted by almost all stakeholders (including the IMF) that Greece’s debt is not sustainable, and can only be reduced and lengthened so that the government can ‘gradually’ repay it. To this end, it needs to establish the confidence that the country can produce fiscal surpluses.

Unfortunately, it will be proven in practice of how easy it is to ask from an economically and socially distraught nation to implement the toughest austerity and adjustment measures. Let’s not forget the millions of unemployed (about 75%

unemployment in young people under 30 years) and the huge percentage of population who are dependent on their families (the economically active population does not exceed 2.5 million). The only excuse of the Troika as to their stance is that they cannot find credible reformist proponents in the country, on which they can rely on for the implementation of these reforms. All the parties and the vast majority of people have been trapped in their interests and obey (in part) the “law of inertia”.

If there is a silver lining and if everything develops more favourably (mainly to restore confidence in the banking system) there will likely be a few billion of euros injected into the Greek economy for growth.

A prerequisite to this is for these funds to be diverted into the private and real economy.

The country’s political class, amongst the ruins of the national economy, must finally make decisions that promote growth through the small and medium sized businesses of Greece. The current situation is a bet with little chance of success as the same political entities will be required to manage development packages (funds from the EU/IMF). People with a strong political

bias or preconception towards entrepreneurship and with the entrenched perception that the state should overshadow the private sector.

Finally, the EU forces should understand that the European experiment has to be flexible and adaptable to new circumstances of the economies and societies that compose instead of being left at the mercy of the richest countries’ taxpayers. Greece has forever changed the way in which small European countries see the Eurozone and the “European” Union.

The lesson from Greece should be studied in depth by Cypriot politicians. As was the case in March 2013, the insignificant Eurozone economies will be in serious trouble if they ever need help (again). Europe’s Wolfgang Schäuble removes the democratic control of the countries not only in terms of monetary policy, as hitherto, but also with fiscal policy. This “de-democratisation” will cause reactions, the initial effects of which are already evident in Greece.

Dr. George Mountis is the Managing Partner of Delfi Partners & Co. www.delfipartners.com

August 26 - September 1, 2015

financialmirror.com | GREECE | 11

A new approach to Eurozone sovereign debt

By Yanis Varoufakis

Greece’s public debt has been put back on Europe’s agenda. Indeed, this was perhaps the Greek government’s main achievement during its agonising five-month standoff with its creditors. After years of “extend and pretend,” today almost everyone agrees that debt restructuring is essential.

Most important, this is true not just for Greece.

In February, I presented to the Eurogroup of eurozone finance ministers a menu of options, including GDP-indexed bonds, which Charles Goodhart recently endorsed in the Financial Times, perpetual bonds to settle the legacy debt on the European Central Bank’s books, and so forth. One hopes that the ground is now better prepared for such proposals to take root, before Greece sinks further into the quicksand of insolvency.

But the more interesting question is what all of this means for the eurozone as a whole. The prescient calls from Joseph Stigltiz, Jeffrey Sachs, and many others for a different approach to sovereign debt in general need to be modified to fit the particular characteristics of the eurozone’s crisis.

The eurozone is unique among currency areas: Its central bank lacks a state to support its decisions, while its member states lack a central bank to support them in difficult times.

Europe’s leaders have tried to fill this institutional lacuna with complex, non-credible rules that often fail to bind, and that, despite this failure, end up suffocating member states in need.

One such rule is the Maastricht Treaty’s cap on member states’ public debt at 60% of GDP. Another is the treaty’s “no bailout” clause. Most member states, including Germany, have violated the first rule, surreptitiously or not, while for several the second rule has been overwhelmed by expensive financing packages.

The problem with debt restructuring in the eurozone is that it is essential and, at the same time, inconsistent with the implicit constitution underpinning the monetary union.

When economics clashes with an institution’s rules, policymakers must either find creative ways to amend the rules or watch their creation collapse.

Here, then, is an idea (part of ‘A Modest Proposal for Resolving the Euro Crisis’, co-authored by Stuart Holland and James K. Galbraith) aimed at re-calibrating the rules, enhancing their spirit, and addressing the underlying economic problem.

In brief, the ECB could announce tomorrow morning that, henceforth, it will undertake a debt-conversion programme for any member state that wishes to participate.

The ECB will service (as opposed to purchase) a portion of every maturing government bond corresponding to the percentage of the member state’s public debt that is allowed by the Maastricht rules. Thus, in the case of member states with debt-to-GDP ratios of, say, 120% and 90%, the ECB would service, respectively, 50% and 66.7% of every maturing government bond.

To fund these redemptions on behalf of some member states, the ECB would issue bonds in its own name, guaranteed solely by the ECB, but repaid, in full, by the member state. Upon the issue of such a bond, the ECB would simultaneously open a debit account for the member state on whose behalf it issued the bond.

The member state would then be legally obliged to make deposits into that account to cover the ECB bonds’ coupons and principal. Moreover, the member state’s liability to the ECB would enjoy super-seniority status and be insured by the European Stability Mechanism against the risk of a hard default.

Such a debt-conversion programme would offer five benefits. For starters, unlike the ECB’s current quantitative easing, it would involve no debt monetisation. Thus, it would run no risk of inflating asset price bubbles.

Second, the programme would cause a large drop in the eurozone’s aggregate interest payments. The Maastrichtcompliant part of its members’ sovereign debt would be

restructured with longer maturities (equal to the maturity of the ECB bonds) and at the ultra-low interest rates that only the ECB can fetch in international capital markets.

Third, Germany’s long-term interest rates would be unaffected, because Germany would neither be guaranteeing the debt-conversion scheme nor backing the ECB’s bond issues.

Fourth, the spirit of the Maastricht rule on public debt would be reinforced, and moral hazard would be reduced.

After all, the programme would boost significantly the interest-rate spread between Maastricht-compliant debt and the debt that remains in the member states’ hands (which they previously were not permitted to accumulate).

Finally, GDP-indexed bonds and other tools for dealing sensibly with unsustainable debt could be applied exclusively to member states’ debt not covered by the programme and in line with international best practices for sovereign-debt management.

The obvious solution to the euro crisis would be a federal solution. But federation has been made less, not more, likely by a crisis that tragically set one proud nation against another.

Indeed, any political union that the Eurogroup would endorse today would be disciplinarian and ineffective.

Meanwhile, the debt restructuring for which the eurozone – not just Greece – is crying out is unlikely to be politically acceptable in the current climate.

But there are ways in which debt could be sensibly restructured without any cost to taxpayers and in a manner that brings Europeans closer together. One such step is the debt-conversion program proposed here. Taking it would help to heal Europe’s wounds and clear the ground for the debate that the European Union needs about the kind of political union that Europeans deserve.

Yanis Varoufakis, a former finance minister of Greece, is a Member of Parliament for Syriza and Professor of Economics at the University of Athens. © Project Syndicate, 2015 - www.project-syndicate.org

Varoufakis: Greek deal was a coup d’état

By Aline Robert EurActiv France Ignoring the will of the people by pursuing unpopular austerity policies plays into the hands of Europe’s extreme right, according to Yanis Varoufakis and Arnaud Montebourg.

“Fakis, Fakis,” the militant socialists chanted in Frangy-en-Bresse, in France, on Sunday. The annual ‘Fête de la Rose’, a gathering regularly attended by France’s former finance minister Arnaud Montebourg, has taken place since 1972.

It is traditional for this gathering of French socialists to invite one special guest; Francois Hollande, Segolene Royal and Pierre Moscovici, the current European Commissioner for Economic Affairs, have been guests of honour in the past. But this year the event broke with tradition and invited a European personality. After considering Daniel Cohn-Bendit, the organisers decided to invite Greece’s charismatic former finance minister, Yanis Varoufakis.

Once the scourge of the Eurogroup, the rock star economist Varoufakis was visibly delighted to be in the village of Frangy (dubbed Frangis in his honour), despite the rain, and to launch a fresh attack on European leaders and the current Greek government.

“What happened on 12 July was a real coup d’état and a defeat for all Europeans,” the former finance minister said, referring to Greece’s acceptance of the harsh conditions

Yanis Varoufakis and Arnaud Montebourg at the Fête de la Rose

attached to the latest aid package. A package that also cost him his job as the country’s minister of finance. Similarly, Arnaud Montebourg lost his job as French Minister of the Economy exactly a year ago, after openly criticising the French government’s austerity policies at the last year’s Fete de la Rose.

Varoufakis stood down as the Greek finance minister at the beginning of the summer and has since been a vocal opponent of the extra austerity measures imposed on Greece by the country’s creditors. Eurogroup finance ministers accepted a new aid package for Greece on August 14, on the condition that Greece privatises more of its public sector industries and increases taxes. But Varoufakis, a professor of economics, believes these measures will do nothing to rescue the ailing Greek economy.

“I do not believe the September elections can lead to an alliance that will create the

conditions for an economic policy that works for Greece,” Varoufakis warned. He said he was ‘torn’ by the splitting of the Syriza party, although he was not officially a party member.

Some 25 Syriza MPs announced on Friday that they would form a new party, following the resignation of the Prime Minister, Alexis Tsipras, who hopes the elections will give him a larger majority and a stronger mandate to enact his plans.

The two ex-ministers strived to highlight the dangers of continued austerity in Greece.

“Without political union, the Economic and Monetary Union (EMU) is a big mistake.

Now that we have it, we must repair it. What we need today is a real common investment policy, and a real banking union,” the Greek economist said.

Varoufakis told EurActiv that the emergence of an allied European left, in opposition to the current system, was a possibility.

“I believe that an alliance of Europeans from across the political spectrum, who share one radical idea, the idea of democracy, is possible,” he joked. “For 20 years, the principle of democracy has been trampled on in Europe. But it remains a common idea. If we want to make the transition to a democratic Europe, we need to empower the citizens, rather than the current cartel of lobbies.”

This view was shared by his host. Arnaud Montebourg said, “Power is held by an oligarchy in Europe.”

The organisers of the Fete de la Rose had hoped that the occasion’s European outlook would lead to the emergence of a new European movement. But not a single MEP or representative from the radical left party was present. Even the French “rebels”, who openly criticise the government, preferred not to appear alongside Yanis Varoufakis.

For Varoufakis, the Greek government made a serious mistake in agreeing to sell off assets and implement regressive austerity measures. He believes that the “Athens Spring” was crushed by the bankers, just as the Prague Spring was crushed by tanks.

“In 1929, there was a financial crisis after the Wall Street Crash, which led to the loss of the gold standard. Voters abandoned the left because they were afraid. You know what happened next. In 2008, we had the Wall Street crisis, which brought about a financial crisis and a eurozone crisis. But the leaders keep applying the same economic policies.

This crisis must not be allowed to result in the rise of the extreme right,” Varoufakis warned, adding that the neo-Nazi Golden Dawn party represents a serious threat in Greece.

August 26 - September 1, 2015

12 | PROPERTY | financialmirror.com

Fewer building permits in Jan-May, value up Building permits issued in JanuaryMay this year dropped 3% to 2,034, compared to the same period last year, the Statistical Service Cystat said, constituting a leading indicator of future activity in the construction sector.

On the other hand, the total value of these permits increased by 21.0% and the total area by 17.9% Cystat said, adding that the number of dwelling units increased by 21.8%.

The Statistical Service announced that the number of building permits authorised by the municipal authorities and the district administration offices in May stood at 434.

The total value of these permits reached EUR 123.4 mln and the total area 90,800 sq.m. These building permits provide for the construction of 276 dwelling units.

Aristo’s Pearl Park: a luxury development and an investment opportunity in Paphos If there’s one outstanding feature of this luxury development, it’s the breath-taking, views of Paphos and the enchanting sun as it dapples on the sparkling Mediterranean coast.

Owning a property at Pearl Park Residences also makes perfect sense from an investment point of view. The development has been designed by an elite team of acknowledged and respected architects, which is reflected in both the aesthetic and functional superiority of the project. Then of course there is the location, which in property terms is always vital. Located on a hilltop, on the outskirts of the town, Pearl Park is only five minutes from a surplus of amenities and services, a delightful variety of Paphos’ Blue Flag beaches, and 15 minutes from both the airport and the acclaimed Venus Rock Golf Resort.

As for the development itself, Pearl Park will include luxury facilities such as a large, communal swimming pool, children’s paddling pool, and private gym with Jacuzzi and sauna and gender specific ablution

conveniences.

The spacious apartments and condominiums, ranging from 2 and 3 bedrooms, are designed over five blocks and are thermal insulated, keeping interiors cool in the summer and warmer in the winter months. The condominiums also boast magnificent roof gardens with kitchenettes

and storage areas, providing the perfect ambiance for entertainment with panoramic town and sea views sweeping below.

Whichever way one looks at it, investing in Pearl Park makes perfect sense, from any point of view.

For information visit www.aristodevelopers.com

Lending land to enhance life celebration of this rich mosaic; cultural preservation initiatives (that could be viewed as something of a luxury in a developing country) are viewed as taking place ideally in the context of vital human development projects.

By Kati Roumani House of Life is an innovative agricultural initiative whose implications are broad and resonate acutely with current world events; set in the specific context of Moroccan human development needs and cultural history, the model thus created could be replicated throughout North Africa, the Middle East and beyond.

The term House of Life denotes a traditional name for a Jewish cemetery. It was therefore particularly appropriate for the Governor of the Al Haouz Province, Younes Al Bathaoui, to employ the phrase in respect of the project, led by the High Atlas Foundation (HAF) in the Kingdom of Morocco and endorsed by the Clinton Global Initiative (CGI) in three provinces.

The uniqueness of the scheme lies in its intercultural aspect. House of Life facilitates the free loan of land adjoining Jewish burial sites, in order to establish organic tree and medicinal nurseries for the benefit of neighboring Muslim farming communities.

Aided by the creation of HA3 (the High Atlas Agriculture and Artisanal social enterprise), a complete process from farm to table is envisaged, thus addressing existing gaps in the organic agricultural entrepreneurial system. Organic certification, fair trade prices and wider markets – national and international - are secured for local farmers, whose communities go on to benefit from reinvestment in further projects. The initiative forms part of HAF’s One Billion Tree Campaign, itself one of several different human development schemes implemented by the foundation. All HAF projects aim towards environmental consciousness, socio-economic self-sufficiency and sustainability. They include organic agriculture, clean water and energy as well as programs addressing the particular vulnerability of women and youth and enhancing cultural diversity.

Evolution of an idea The House of Life pilot project was established at Akrich, Al Haouz province, a rural area outside Marrakesh, in 2012.

The locally-managed nursery was established by HAF on land lent by the Jewish community of Marrakesh-Essaouira, adjacent to the tomb of Rabbi Raphael HaCohen, one of over 600 Jewish burial sites dotted across the country, in rural as well as urban areas.

In February 2015, at a ceremony presided over by the Governor of Al Haouz, Mr. Younes Al Bathaoui, 30,000 seeds and saplings were planted and a further 30,000 two-year-old trees – olive, fig, pomegranate and lemon – were set aside for

The High Atlas Foundation: for sustainable prosperity

distribution to local farmers.

At the same time, the proposed extension of this scheme across the entire Kingdom was announced, five further contracts having been put in place. Thereafter, in June, discussions were finalized resulting in the endorsement by the CGI of the project in Azilal, Essaouira and Ouarzazate provinces in the context of a proposal to plant a million organic fruit seeds at Jewish sacred sites.

“This initiative will give more life to these regions and will reinforce the hopes and perspectives of their inhabitants,” noted Governor Al Bathaoui.

The Moroccan context Rural Moroccans comprise 43 per cent of the country’s 32 million population, with 75% of rural households earning less than the national average (IFAD, 2013).

Currently, farmers rely primarily on revenue from barley and corn; while these staples are planted on more than 70 per cent of agricultural land, they account for only 10 to 15% of agricultural revenue, according to Morocco’s Agency for Agricultural Development. Farmers therefore are making the transition to planting cash crops, typically fruit trees and plants, to generate greater income.

One billion trees and medicinal plants are needed as part of the process of overcoming subsistence agriculture, which is at the root of rural poverty. Their establishment would also help offset severe environmental challenges facing the Kingdom, particularly soil erosion, desertification and deforestation.

Modern Morocco is comprised of several cultures including its Jewish community, present in the region for two thousand years and possessing an important architectural legacy. The Kingdom is committed to the

A Moroccan-US non-governmental organisation, HAF, based in Marrakesh, Morocco, was founded in 2000 by former Peace Corps Volunteers, including HAF President Dr. Yossef Ben-Meir.

The foundation uses a democratic, participatory approach to enable marginalised, mostly rural, Moroccan communities to determine what they most need and to facilitate project success.

The broad goals are twofold: to cease subsistence agricultural practices that trap communities in a vicious cycle of rural poverty and to develop the local and national economy through a variety of green growth business initiatives, overseen initially by the foundation.

Rural cooperatives are created as a necessary mechanism for business activity; HAF - through HA3, its subsidiary corporate service - ensures a fair market price, enabling farmers to receive greater income. A significant added value is achieved when the produce is marketed as organic, fairtrade and environmentally and socially responsible.

Profits are reinvested in further projects prioritised by the communities themselves, in education, health, water infrastructure and small business development particularly for women and young people.

All of this is conducted in the context of a zero waste strategy. HAF anticipates using the walnut and almond shells and hulls to produce low emission fuel briquettes.

Ultimately, the aim is to export Moroccan fair-trade, organic produce to the US and EU markets.

Recently, HAF’s work has expanded beyond Morocco and its ethos and methodology hold the potential to benefit communities worldwide.

In Moroccan terms, HAF’s sustainable development vision, as shared with CGI, mirrors the Kingdom’s vision for itself, with the House of Life project, linking Morocco’s Muslim farming families and Jewish communities, ably embodying a multiplicity of goals.

Kati Roumani, based in Marrakesh, works in the field of intercultural understanding and Jewish history and assists the High Atlas Foundation in its communications.

August 26 - September 1, 2015

financialmirror.com | PROPERTY | 13

Attracting foreign investors µy Antonis Loizou Antonis Loizou F.R.I.C.S. is the Director of Antonis Loizou & Associates Ltd., Real Estate & Projects Development Managers

We have started to see with hope the prospect of a solution to the Cyprus problem after 40 years because the present circumstances are probably unlikely to reappear in the future.

So, let’s see where this momentum for a solution is based and what the greater benefits would be or their impact on the economy: • We have a President who firmly believes that now is the time for a settlement. This adds to the prospect of foreign investment.

• We have the opposition party AKEL that is coherent as regards only the Cyprus problem, and both parties (ruling DISY and communist AKEL) disagreeing at various levels and other minor issues such as the economy, but they could keep their disagreements at lower tones.

• We have two respectable presidents of both the AKEL and DISY parties, who, unfortunately, are unable to control some of their noisier MPs, resulting in a confrontation, that in turn causes an uncertain climate in the economy.

• However, adding to this uncertainty has been President Anastasiades himself when it comes to the economy, who has failed to continue with his initial determination to confront those hell-bent on destroying the economy – none other than the trade unions. Thus, with the National Health Scheme reaching its final preparation stage, with the first threat of a strike the project of national importance was postponed to meet the interests of the trade unions and to quote the former Health Minister Philipos Patsalis “th implementation of the NHS will be postpone for another 40 years.”

• Having already dished out EUR 1 mln per porter at Limassol port whose management will be privatised in 2016, some of theme are claiming more in additional compensation. Was their compensation not enough?

• Without any hesitation from the opposition (driven mainly by AKEL but other also follow) strikes are held at the port of Limassol just as we are seeking foreign investors. On the other hand we have seen what happened to the Port of Piraeus leased out to the Chinese company Cosco, which has also shown interest in Cyprus: the company has tripled its

turnover in Piraeus and is now seeking additional space to expand its operations, with tremendous benefits to the local economy, the labour sector and the property market.

• Just as we have started to get our heads out of the cesspool of the economy, we have already started talking about a new consensus for more pay rises of 2-4% demanded by the trade unions and this regardless of the high level of unemployment. Is this not a provocation on behalf of the unions and the highly paid civil servants with the tolerance of the government? And yet, in Britain from where we have asked for expertise to reform our public administration, there is a system whereby every five years salaries of the public service are compared to the private sector as a result of which wages increased or reduced. This is the right way to do it and not the present system in Cyprus which is expected to continue and will keep on dividing the private and public sectors, while everybody else is struggling to get a cushy job in the public sector with fewer hours and multiple benefits.

Thus, the uncontrolled government system directly affects the private sector and officials at all levels pursuing to join the public service. Even Pasidy trade union boss Glafkos Hadjipetrou blurted out that he “will not allow a further reduction of public servants and wages.” With this audacity, it seems he has appointed himself the new Governor of Cyprus to succeed Sir Harding.

They demand pay increases linked to the increased cost of living. Well, now that we have deflation and a reduction in the cost of living, will salaries remain unchanged or will they decrease? God forbid if anyone dares to suggest this, less than a year from the next parliamentary elections.

• Press reports suggest that taxi drivers from Paralimni / Ayia Napa want to abolish the public transport between the two municipalities which now ends at 12 midnight

COMMERCIAL BUILDING PLOT FOR SALE IN NICOSIA Suitable for retail/office construction. Located in a very desirable location, opposite Marks & Spencer and within 50 mtrs of Acropolis Park.

Plot Area: 556 sq.m.

Max. Building Cover: 50% Max. Building Height: 24 meters Max. No. of Floors: 6 Road Frontage: Approx. 24 meters Price: €650,000 For more info please contact us at: 99317468

(previously it was all night) and to reduce this service to end by 9pm. Why, so that these mafiosi taxi drivers continue to charge EUR 8-12 for a 12 minute drive? Cheap transportation will help both resorts and so the tourists have the choice to move around between both municipalities, either by bus or evn by (expenseive) taxi, if they wish. What does the Association of Hoteliers have to say about this? Well, unsurprisingly nothing, coming from the group that wants everything for itself and without much concern for others.

• Now let’s talk about the measure to liberalise mortgage from buyers who repaid their dues, where once again we have an incomprehensible postponement on behalf of the political parties. I mention this because the more I think about it, the delay seems to serve the interests of a handful of politicians and the last-minute transactions or deals by major financiers or developers.

• And then came the commendable Jean Claude Juncker, President of the European Commission, who offered to provide us with EUR 500 million in aid packages. And what was the stupid reaction of some parties? “He wants to buy us off with money!”

• Discussing the relations between Greece and Cyprus, parliamentary speaker Zoe Konstantopoulou decided to remind us of the sacrifices Greeks made for Cypriots. What, then, about the sacrifices that Cypriots made for Greece? Had she forgotten our contribution from the independence struggles of 1821, to the Balkan wars, and then the first and second world wars with 50,000 Cypriot enlisted in the British army of a population of 600,000 and therefore saved Britain from mass enlistments. The sacrifices of Cypriots for Greece, unfortunately, do not count, nor that of the two Cypriots (a Greek Cypriot and a Turkish Cypriot) who joined Greek partisans in 1942 to blow up the railroad bridge and cut off the enemy-controlled route between Thessaloniki and Athens.

Just because we aim to attract foreign investors, does not mean that these foreigners are ignorant, who do not study the history and culture of the place, read about the political stability or the common (if any) economic policy and strategies.

We need to pay a lot more attention and express love for our country, while the critics of our current economic situation are, perhaps, our only hope to correction the ills of the past and to attract foreign investors to the benefit and prosperity of the country. www.aloizou.com.cy ala-HQ@aloizou.com.cy

August 26 - September 1, 2015

14 | MARKETS | financialmirror.com

Coke’s misleading research downplays role in obesity epidemic

By Oren Laurent President, Banc De Binary

The soda industry has been struggling to generate positive PR for a while now. With countless studies pointing to the links between weight gain and the consumption of sugary soda beverages, the public is slowly recognising the hazard and a new Gallup survey found that more than 60% of Americans attempt to avoid the drink.

What should the world’s largest soda producer do when it is faces with such a predicament? Generate scientific evidence that will counter the growing anti-soda trend. CocaCola did just that in order to fight off negative press. The New York Times recently reported that the beverage conglomerate joined forces with prominent scientists for the sake of downplaying the significance of a healthy diet in the quest for weight loss, only to highlight the importance of exercise “in medical journals, at conferences and through social media,” The Times reported.

The bottom line is that The Coca-Cola Company wants the public to believe that one can drink Coke and still lose weight. Using scientists to get this message across, of course, gives this PR move an undeniably more “serious” spin.

Health researchers have reacted quite badly to this reveal, and claim that Coca-Cola is carelessly misleading the public under the pretense of science. While exercise is clearly beneficial, eating healthy remains the key component to weight loss, Rutgers University diet and behaviour expert Charlotte Markey said to Scientific American.

The New York Times’ story revealed that last year Coca-Cola donated $1.5 million to help start the Global Energy Balance Network and contributed an extra $4 million in funding to

two of the organisation’s founding members. What makes this story even more problematic is that Coca-Cola is listed as the administrator of the group’s website, which is registered to Coca-Cola’s Atlanta headquarters. These ties, of course, show any research performed by this network in an exceptionally bad light. On its website, The Global Energy Balance Network claims that “there’s really virtually no compelling evidence” that sugary drinks, fast food, overeating is to fault for the world’s obesity epidemic.

In an attempt to battle the backlash, Coca-Cola responded to this explosive story in a column in USA Today in which the company’s CTO, Ed Hays, said the story by The Times “created confusion.” While Hays declared that Coca Cola has “always operated under the fact that a healthy, balanced diet and regular exercise are key ingredients for a healthy lifestyle.” However, he did not address so much as a single

claim that was brought up in the Times’ story. Hays did claim that Coca-Cola now plans to be more transparent about the research it funds.

While this is obviously a PR stunt that backfired, it is interesting to note that the soda industry seems to be headed in a questionable direction. This is certainly not the first time that a cooperation whose products are dangerous has come up with a way to contradict evidence against them by funding research that will suit their needs. Both the tobacco industry and the gun lobby know all about creating controversies and diverting the public discourse in order to shift the focus from evidence that is hazardous to their interests.

When it comes to Coca-Cola, things get even trickier – especially since the company’s argument isn’t false. Exercise is, and will always be, a major part of weight loss. The problem with the information that the company is spreading is that it is never going to be an either/or situation. There is a dominant consensus about the dangers of soda beverages that is irrefutable and no amount of exercise will ever change that fact. Changing the discourse and confusing the public with contradictory data and research might work for a while, but as the soda industry struggles to keep its head above water in an increasingly health-aware world, Coca-Cola and companies like it will have to come up with tactics that do more than simply spin already known and proven truths.

Please note that this column does not constitute financial advice.

Gold, USD, EMs under pressure as oil sinks to $40 Markets Report b

By Jameel Ahmad, Chief Market Analyst at FXTM

Global markets are facing severe pressure and extending losses with sentiment being weighed down by a wide variety of different factors with this including China uncertainty, resumed concerns over the pace of the global economy, depressed commodity prices and increased tensions over whether these factors are going to encourage the Federal Reserve to delay raising US interest rates this year.

Now that the price of WTI has fallen below its critical support at $42 with this inspiring an inevitable move below $40 we are looking at the commodity market selling continuing and for this to further weigh on market sentiment. The potential for Greece risks to steal headlines once again have also returned following the announcement of a snap-election in September and when you combine all of the above risks, the markets are exposed to further vulnerabilities and it is difficult to expect a rebound anytime soon.

Gold: Gold continues to power through and build on its impressive rally following the shocks from China and the uncertainty that this could encourage the Fed to distance itself away from its repeated commitment to begin raising rates in 2015. Gold has jumped by $70 in under two weeks and stabilised above the critical $1,100 area. This has been a significant rebound for Gold, which would have raised investor sentiment and interest from buyers while also erasing concerns that the metal had lost its safe-haven appeal after failing to budge when the Greece risks intensified a month ago.

GBPUSD: The Pound sentiment seems stable following the recent above expectations core inflation reading that allowed the GBPUSD to finally extend above 1.56. The move to 1.57 late last week was a strong technical move and suggests that the GBPUSD can begin building on this and set a new trading range to what was limited to the

high 1.56 since the middle of July. As long as investors do not begin taking profit on recent gains, the GBPUSD could begin to target a new range between 1.57 and its yearly highs just below 1.60.

While the UK economy is slightly more sheltered than others when it comes to China risks, the Pound would be vulnerable to withdrawing gains if the FTSE 100 continues to decline at the same pace seen last week. While the UK currency is relatively stable and less exposed to risks than others, it is going to require further USD profit-taking for the GBPUSD bulls to build up the courage to target the 2015 highs.

Emerging Markets: The emerging market currencies are falling at a pace that is somewhat similar to major global indices, with no floor in selling due to sentiment being continuously pressured by different directions. The outlook for these currencies remains for further falls with economic pressures furthering due to the price of oil falling to fresh milestone lows and China risks set to continue until at least the remainder of the current quarter.

The question of central bank intervention is going to remain a popular topic, but the truth is that the majority of these pressures that are pulling down these currencies are external and there is very little that central banks can

do to end the punishment for a meaningful period of time.

Policymakers might start following the recent lead set by the PBoC/China and the Yuan by weakening their currencies to defend export competitiveness. These markets need to adapt to the fact that commodity prices are set to remain depressed for a long time, and also that trade with China is more than likely to continue declining.

Weakening currencies would limit potential exposure to a further decline in exports at a time when these markets are already hurting due to weak commodity prices and the improving US economic outlook.

Despite the USDMYR already exploding from 3.80 to 4.17 in under a month, it is inevitable that the currency is going to weaken to 4.20 against the USD. This is inevitable now that the price of WTI has extended below $40 and it could happen as early as this week. There really is no floor to Ringgit weakness, and if WTI continues to spiral to the low $30s, the USDMYR will target at least 4.30. The Malaysian currency couldn’t even benefit from the USD weakness over the past few days, which shows a great deal about how weak the investor sentiment towards the Ringgit is at the moment.

The Indonesian Rupiah is another emerging market currency suffering from a bleak outlook, and it could hit further lows against the USD over the remainder of the current quarter. The Indonesian economy will be hurt by both the free-falling commodity prices and weakening trade from China, and this is at a time when the economy is already suffering from GDP targets being missed. The Rupiah could be the next emerging market currency to catch the eye with sudden weakness, and we might begin learning about further government initiatives, such as raising import taxes and restricting corporations using anything other than the domestic currency to prevent the Rupiah from sliding any further.

For information, disclaimer and risk warning visit: www.ForexTime.com FXTM is an international forex broker regulated by the Cyprus Securities and Exchange Commission (CySEC), and FT Global Limited is regulated by the International Financial Services Commission (IFSC)

August 26 - September 1, 2015

financialmirror.com | MARKETS | 15

China’s broken directional signal making, or a free agent that acts in its own self-interest without regard to the consequences for anyone else? Again, it is very hard to say. Until these directional signals are made clearer, any policy action that Beijing takes—no matter how technocratically well intentioned—is likely to be viewed with mistrust, and to cause even more volatility in unsettled markets.

Marcuard’s Market update

by GaveKal Dragonomics Rightly or wrongly, much of the recent tumult on global financial markets has been blamed on China. Many of the market’s substantive worries (economic collapse, financial collapse, competitive devaluation) are overblown. But markets trade as much on policy signals as on economic reality, and there has clearly been a breakdown of communication between Beijing and the rest of the world.

The underlying dilemma is that the policies that are good for China are bad for the rest of the world — at least in the short run — and vice-versa. The signaling problem is that the Chinese authorities have not made clear whether they want to do what’s right for China, what’s right for the rest of the world, or neither.

Let’s start with what would be good for China. Everyone knows that the Chinese economy has depended too much and for too long on extensive investment in heavy industry and residential property. It requires a more balanced growth model based on services, consumer spending and hightechnology manufacturing. To achieve this, capital must increasingly be allocated by market mechanisms, rather than by state fiat; support for bloated state-owned enterprises must be withdrawn; and local governments must be reoriented away from debt-financed infrastructure spending and toward the provision of social services.

Over the past three years, Beijing has tried to orchestrate this transition, but only fitfully. It has cut back credit growth and reined in excessive investment. But the broader promises of deregulated markets, a severely reduced role for SOEs, and fully marketised pricing of capital and other key inputs (such as energy) remain unfulfilled.

We are increasingly of the view that this mediocre result arises not because a bold and visionary reform programme has broken up on the reefs of political opposition, but because the main aims of China’s leader Xi Jinping are political and geo-strategic, while his economic goals are contradictory. The lack of clarity in economic vision was evident in the November 2013 Third Plenum reform roadmap — which called for markets to have a “decisive role” in resource allocation, but also reaffirmed the “dominant role” of the state sector.

This basic indecisiveness about how to balance the roles of state and market has been exposed by the policy gyrations of the past six months. First the government egged on an unsustainable stock-market bubble; then when the bubble popped, it intervened massively to prop up prices; and this week it abandoned its intervention and let the market crash downward. On the exchange rate, Beijing paired its -1.9% devaluation with a statement that henceforth the renminbi rate would be determined mainly by the market; since then it has intervened massively in both onshore and offshore

www.marcuardheritage.com

WORLD CURRENCIES PER US DOLLAR CURRENCY

CODE

RATE

EUROPEAN

Belarussian Ruble British Pound * Bulgarian Lev Czech Koruna Danish Krone Estonian Kroon Euro * Georgian Lari Hungarian Forint Latvian Lats Lithuanian Litas Maltese Pound * Moldavan Leu Norwegian Krone Polish Zloty Romanian Leu Russian Rouble Swedish Krona Swiss Franc Ukrainian Hryvnia

markets to prevent the market from pushing the exchange rate down further. China now gets the worst of both worlds: it is roundly denounced for a competitive devaluation that it has done its best to prevent; and these preventive efforts are denounced as a betrayal of its promise to let the market rule.

So far so bad; but now let us look at what the rest of the world would like from China.

It wants, first, a more balanced Chinese economy that does not rely so much on infrastructure spending. On the other hand, it wants China to keep infrastructure spending as high as possible, in order to keep commodity prices high. It wants China to deleverage so that it can have more sustainable growth, but it also wants massive monetary and fiscal stimulus — more leverage — so that global growth will not be impaired. It wants China to have a market-driven exchange rate, but only if the market pushes the renminbi higher.

Clearly, China cannot give the rest of the world what it wants today — more infrastructure spending, more leverage, and an exchange rate that only goes higher — without grievously damaging its own prospects for tomorrow. It would be reasonable for Xi Jinping and his colleagues to point out that since 2009 they have done more than enough to sustain global demand, first through the world’s biggest stimulus program, and then by swallowing a 14% real currency appreciation in the past year, as Europe and Japan merrily tried to devalue their way back to prosperity.

But Xi & Co. are not in a position to make that argument, because they have failed to articulate a policy direction that encourages the rest of the world to view China as a credible and trustworthy partner. Are they for a more open, marketoriented China, or a closed empire of state-owned national champions? Impossible to say. Do they want China to be a constructive participant in joint global economic decision

BYR GBP BGN CZK DKK EEK EUR GEL HUF LVL LTL MTL MDL NOK PLN RON RUB SEK CHF UAH

17700 1.5794 1.6927 23.4019 6.4606 13.5446 1.1551 2.404 270.52 0.60839 2.9888 0.3716 19 8.1471 3.6588 3.8381 69.7292 8.2846 0.9413 21.7

AUD CAD HKD INR JPY KRW NZD SGD

0.7201 1.3216 7.7511 66.225 119.54 1195.25 1.5376 1.3977

BHD EGP IRR ILS JOD KWD LBP OMR QAR SAR ZAR AED

0.3774 7.8140 29566.00 3.8606 0.7080 0.3011 1508.00 0.3850 3.6414 3.7505 13.1052 3.6729

AZN KZT TRY

1.0414 238 2.9290

AMERICAS & PACIFIC

Australian Dollar * Canadian Dollar Hong Kong Dollar Indian Rupee Japanese Yen Korean Won New Zeland Dollar * Singapore Dollar MIDDLE EAST & AFRICA

Bahrain Dinar Egyptian Pound Iranian Rial Israeli Shekel Jordanian Dinar Kuwait Dinar Lebanese Pound Omani Rial Qatar Rial Saudi Arabian Riyal South African Rand U.A.E. Dirham

Disclaimer: This information may not be construed as advice and in particular not as investment, legal or tax advice. Depending on your particular circumstances you must obtain advice from your respective professional advisors. Investment involves risk. The value of investments may go down as well as up. Past performance is no guarantee for future performance.

Investments in foreign currencies are subject to exchange rate fluctuations.

Marcuard Cyprus Ltd is regulated by the Cyprus Securities and Exchange Commission (CySec) under License no. 131/11.

ASIA

Azerbaijanian Manat Kazakhstan Tenge Turkish Lira

The Financial Markets

Note:

* USD per National Currency

Interest Rates Base Rates

LIBOR rates

CCY USD GBP EUR JPY CHF

0-0.25% 0.50% 0.05% 0-0.10% -0.75%

Swap Rates

CCY/Period

1mth

2mth

3mth

6mth

1yr

USD GBP EUR JPY CHF

0.20 0.51 -0.11 0.05 -0.79

0.27 0.54 -0.06 0.08 -0.76

0.33 0.59 -0.03 0.09 -0.73

0.52 0.75 0.05 0.13 -0.68

0.83 1.05 0.16 0.24 -0.57

CCY/Period USD GBP EUR JPY CHF

2yr

3yr

4yr

5yr

7yr

10yr

0.81 1.02 0.09 0.13 -0.71

1.09 1.23 0.17 0.14 -0.63

1.33 1.40 0.28 0.17 -0.51

1.53 1.54 0.40 0.22 -0.39

1.84 1.74 0.65 0.34 -0.11

2.12 1.91 0.99 0.55 0.19

Exchange Rates Major Cross Rates

CCY1\CCY2 USD EUR GBP CHF JPY

Opening Rates

1 USD 1 EUR 1 GBP 1 CHF 1.1551 0.8657

100 JPY

1.5794

1.0624

0.8365

1.3673

0.9197

0.7242

0.6726

0.5297

0.6332

0.7314

0.9413

1.0873

1.4867

119.54

138.08

188.80

0.7874 126.99

Weekly movement of USD

CCY

Today

137.20

GBP EUR JPY

1.0728

CHF

1.5794 1.1551 119.54 0.9413

CCY\Date

21.07

28.07

04.08

11.08

25.08

USD GBP JPY CHF

1.0766

1.1022

1.0886

1.0915

1.1494

0.6916

0.7078

0.6980

0.7011

0.7286

133.78

136.04

134.85

136.02

1.0371

1.0589

1.0546

1.0739

Last Week %Change 1.5706 1.1060 124.27 0.9763

-0.56 -4.44 -3.81 -3.58

August 26 - September 1, 2015

16 | WORLD | financialmirror.com

The UN at 70

By Jeffrey D. Sachs The United Nations will mark its 70th anniversary when world leaders assemble next month at its headquarters in New York. Though there will be plenty of fanfare, it will inadequately reflect the UN’s value, not only as the most important political innovation of the 20th century, but also as the best bargain on the planet. But if the UN is to continue to fulfill its unique and vital global role in the 21st century, it must be upgraded in three key ways.

Fortunately, there is plenty to motivate world leaders to do what it takes. Indeed, the UN has had two major recent triumphs, with two more on the way before the end of this year.

The first triumph is the nuclear agreement with Iran.

Sometimes misinterpreted as an agreement between Iran and the United States, the accord is in fact between Iran and the UN, represented by the five permanent members of the Security Council (China, France, Russia, the United Kingdom, and the US), plus Germany. An Iranian diplomat, in explaining why his country will scrupulously honor the agreement, made the point vividly: “Do you really think that Iran would dare to cheat on the very five UN Security Council permanent members that can seal our country’s fate?”

The second big triumph is the successful conclusion, after 15 years, of the Millennium Development Goals, which have underpinned the largest, longest, and most effective global poverty-reduction effort ever undertaken. Two UN Secretaries-General have overseen the MDGs: Kofi Annan, who introduced them in 2000, and Ban Ki-moon, who, since succeeding Annan at the start of 2007, has led vigorously and effectively to achieve them.

The MDGs have engendered impressive progress in poverty reduction, public health, school enrollment, gender equality in education, and other areas. Since 1990 (the reference date for the targets), the global rate of extreme poverty has been reduced by well over half – more than fulfilling the agenda’s number one goal.

Inspired by the MDGs’ success, the UN’s member countries are set to adopt the Sustainable Development Goals (SDGs) – which will aim to end extreme poverty in all its forms everywhere, narrow inequalities, and ensure environmental sustainability by 2030 – next month. This, the UN’s third triumph of 2015, could help to bring about the fourth: a global agreement on climate control, under the auspices of the UN Framework Convention on Climate Change, in Paris in December.

The precise value of the peace, poverty reduction, and environmental cooperation made possible by the UN is incalculable. If we were to put it in monetary terms, however, we might estimate their value at trillions of dollars per year – at least a few percent of the world economy’s annual GDP of $100 trln. Yet spending on all UN bodies and activities – from the Secretariat and the Security Council to peacekeeping operations, emergency responses to epidemics, and humanitarian operations for natural disasters, famines, and refugees – totaled roughly $45 bln in 2013, roughly $6 per person on the planet. That is not just a bargain; it is a significant underinvestment. Given the rapidly growing need for global cooperation, the UN simply cannot get by on its current budget.

Given this, the first reform that I would suggest is an increase in funding, with high-income countries contributing at least $40 per capita annually, upper middleincome countries giving $8, lower-middle-income countries $2, and low-income countries $1. With these contributions – which amount to roughly 0.1% of the group’s average per capita income – the UN would have about $75 bln annually with which to strengthen the quality and reach of vital programmes, beginning with those needed to achieve the

SDGs. Once the world is on a robust path to achieve the SDGs, the need for, say, peacekeeping and emergency-relief operations should decline as conflicts diminish in number and scale, and natural disasters are better prevented or anticipated.

This brings us to the second major area of reform: ensuring that the UN is fit for the new age of sustainable development.

Specifically, the UN needs to strengthen its expertise in areas such as ocean health, renewable energy systems, urban design, disease control, technological innovation, public-private partnerships, and peaceful cultural cooperation. Some UN programs should be merged or closed, while other new SDGrelated UN programmes should be created.

The third major reform imperative is the UN’s governance, starting with the Security Council, the composition of which no longer reflects global geopolitical realities. Indeed, the Western Europe and Other Group (WEOG) now accounts for three of the five permanent members (France, the United Kingdom, and the US). That leaves only one permanent position for the Eastern European Group (Russia), one for the Asia-Pacific Group (China), and none for Africa or Latin America.

The rotating seats on the Security Council do not adequately restore regional balance. Even with two of the ten rotating Security Council seats, the Asia-Pacific region is still massively under-represented. The Asia-Pacific region accounts for roughly 55% of the world’s population and 44%

of its annual income but has just 20% (three out of 15) of the seats on the Security Council.

Asia’s inadequate representation poses a serious threat to the UN’s legitimacy, which will only increase as the world’s most dynamic and populous region assumes an increasingly important global role. One possible way to resolve the problem would be to add at least four Asian seats: one permanent seat for India, one shared by Japan and South Korea (perhaps in a two-year, one-year rotation), one for the ASEAN countries (representing the group as a single constituency), and a fourth rotating among the other Asian countries.

As the UN enters its eighth decade, it continues to inspire humanity. The Universal Declaration of Human Rights remains the world’s moral charter, and the SDGs promise to provide new guideposts for global development cooperation.

Yet the UN’s ability to continue to fulfill its vast potential in a new and challenging century requires its member states to commit to support the organization with the resources, political backing, and reforms that this new era demands.

Jeffrey D. Sachs, Professor of Sustainable Development, Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University, is also Special Adviser to the United Nations Secretary-General on the Millennium Development Goals. © Project Syndicate, 2015 - www.project-syndicate.org

August 26 - September 1, 2015

financialmirror.com | WORLD | 17

Does capitalism cause poverty?

By Ricardo Hausmann Capitalism gets blamed for many things nowadays: poverty, inequality, unemployment, even global warming. As Pope Francis said in a recent speech in Bolivia: “This system is by now intolerable: farm workers find it intolerable, laborers find it intolerable, communities find it intolerable, peoples find it intolerable. The earth itself – our sister, Mother Earth, as Saint Francis would say – also finds it intolerable.”

But are the problems that upset Francis the consequence of what he called “unbridled capitalism”? Or are they instead caused by capitalism’s surprising failure to do what was expected of it? Should an agenda to advance social justice be based on bridling capitalism or on eliminating the barriers that thwart its expansion?

The answer in Latin America, Africa, the Middle East, and Asia is obviously the latter. To see this, it is useful to recall how Karl Marx imagined the future.

For Marx, the historic role of capitalism was to reorganise production. Gone would be the family farms, artisan yards, and the “nation of shopkeepers,” as Napoleon is alleged to have scornfully referred to Britain. All these petty bourgeois activities would be plowed over by the equivalent of today’s Zara, Toyota, Airbus, or Walmart.

As a result, the means of production would no longer be owned by those doing the work, as on the family farm or in the craftsman’s workshop, but by “capital.” Workers would possess only their own labor, which they would be forced to exchange for a miserable wage. Nonetheless, they would be more fortunate than the “reserve army of the unemployed” – a pool of idle labour large enough to make others fear losing their job, but small enough not to waste the surplus value

that could be extracted by making them work.

With all previous social classes transformed into the working class, and all means of production in the hands of an ever-dwindling group of owners of “capital,” a proletarian revolution would lead humanity to a world of perfect justice: “From each according to his ability, to each according to his needs,” as Marx famously put it.

Clearly, the poet and philosopher Paul Valéry was right: “The future, like everything else, is no longer what it used to be.” But we should not make fun of Marx’s well-known prediction error. After all, as the physicist Niels Bohr wryly noted, “Prediction is difficult, especially about the future.”

We now know that as the ink was drying on the Communist Manifesto, wages in Europe and the United States were beginning a 160-year-long rise, making workers part of the middle class, with cars, mortgages, pensions, and petty bourgeois concerns. Politicians today promise to create jobs – or more opportunities to be exploited by capital – not to take over the means of production.

Capitalism could achieve this transformation because the reorganisation of production allowed for an unprecedented increase in productivity. The division of labor within and across firms, which Adam Smith had already envisioned in 1776 as the engine of growth, allowed for a division of knowhow among individuals that permitted the whole to know more than the parts and form ever-growing networks of exchange and collaboration.

A modern corporation has experts in production, design, marketing, sales, finance, accounting, human resource management, logistics, taxes, contracts, and so on. Modern production is not just an accumulation of buildings and equipment owned by Das Kapital and operated mechanically by fungible workers. Instead, it is a coordinated network of people that possess different types of Das Human-Kapital. In the developed world, capitalism did transform almost everyone into a wage laborer, but it also lifted them out of poverty and made them more prosperous than Marx could have imagined.

That was not the only thing Marx got wrong. More surprisingly, the capitalist reorganisation of production petered out in the developing world, leaving the vast majority of the labour force outside its control. The numbers are astounding. While only one in nine people in the United States are self-employed, the proportion in India is 19 out of 20. Fewer than one-fifth of workers in Peru are employed by

the kind of private businesses that Marx had in mind. In Mexico, about one in three are.

Even within countries, measures of wellbeing are strongly related to the proportion of the labor force employed in capitalist production. In Mexico’s state of Nuevo Leon, twothirds of workers are employed by private incorporated businesses, while in Chiapas only one in seven is. No wonder, then, that per capita income is more than nine times higher in Nuevo León than in Chiapas. In Colombia, per capita income in Bogota is four times higher than in Maicao.

Unsurprisingly, the share of capitalist employment is six times higher in Bogota.

In poverty-stricken Bolivia, Francis criticized “the mentality of profit at any price, with no concern for social exclusion or the destruction of nature,” along with “a crude and naive trust in the goodness of those wielding economic power and in the sacralised workings of the prevailing economic system.”

But this explanation of capitalism’s failure is wide of the mark. The world’s most profitable companies are not exploiting Bolivia. They are simply not there, because they find the place unprofitable. The developing world’s fundamental problem is that capitalism has not reorganised production and employment in the poorest countries and regions, leaving the bulk of the labor force outside its scope of operation.

As Rafael Di Tella and Robert MacCulloch have shown, the world’s poorest countries are not characterised by naive trust in capitalism, but by utter distrust, which leads to heavy government intervention and regulation of business. Under such conditions, capitalism does not thrive and economies remain poor.

Francis is right to focus attention on the plight of the world’s poorest. Their misery, however, is not the consequence of unbridled capitalism, but of a capitalism that has been bridled in just the wrong way.

Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist of the Inter-American Development Bank, is Professor of the Practice of Economic Development at Harvard University, where he is also Director of the Center for International Development. © Project Syndicate, 2015 - www.project-syndicate.org

Local innovation for local problems

By Muhammad Hamid Zaman As we learn more about the threat from substandard and counterfeit medicines, it is becoming clear that it is a far greater problem than previously thought. It is also a scourge that is most acutely felt in developing countries, where fake and low-quality pharmaceuticals kill more than 500,000 people a year and affect millions more by contributing to the emergence of diseases that are resistant to existing treatments.

Compounding the problem is the approach taken by policymakers in the developing world, who are far more likely to look for solutions abroad than at home. This shortsightedness is a grave mistake that impedes innovation and progress. When it comes to tackling high-impact health challenges like the proliferation of fake or inferior drugs, local solutions and local innovations are not only likely to be central to any successful effort; they have the potential to provide benefits that go far beyond the scope of the original problem.

Throughout the developing world, but most evidently in Africa, two groups are interested in finding tools to combat the menace of bad drugs. One group, comprising students, entrepreneurs, and researchers, seeks solutions that are local, original, and tailored to the needs of their societies. Its members are quick to share ideas and eager to collaborate.

While this group has produced some innovative solutions – for example, the Ghanaian entrepreneur Bright Simmons is

using mobile technology to address the counterfeit-drug problem – many more passionate local inventors and entrepreneurs must get involved.

The other group is made up of government officials, including regulators. They, too, are deeply concerned about the scourge of low-quality and fake drugs, but they are reluctant to rely on local innovation. In their minds, the solutions already exist, in the form of high-end technology designed and developed in the world’s richest countries. The challenge, for this group, lies in finding the financial resources to import these technologies.

For developing-country leaders, the effort needed to create an ecosystem that supports innovation simply appears too great, and the return on investment too little. At countless conferences and symposia, ministry officials and government personnel insist that funds must be found to import solutions, à la carte. Research and innovation, or engagement with local entrepreneurs and inventors, is, unfortunately, never on the agenda. There simply is little interest in tapping into the enormous pool of intellect, passion, and energy at home.

Officials would be wise to reconsider. There is mounting evidence that sustainable solutions must have local support and local partners. Raising funds to import solutions from abroad addresses just one part of the challenge.

Many countries lack the resources to install, operate, and maintain equipment that has not been designed locally. As misuse and neglect causes equipment to malfunction, more funds become required or the program simply dies. Not only does this approach fail to nurture local ecosystems of innovation, which is deeply frustrating; it also fails – repeatedly – to solve the problem at hand.

While some solutions in the area of drug-quality testing have come from African entrepreneurs like Simmons, such

examples are extremely rare, and many are developed in the diaspora with the support of organizations from outside the region. For the most part, such initiatives never engage local students. Local curricula do not focus on local challenges or promote local innovation.

And yet local talent is critical for solutions that are both original and sustainable. Indeed, by nurturing an inclusive culture of research, local innovation has the potential to provide benefits that extend far beyond the specific problem that is being addressed.

Nurturing the participation of underrepresented groups and creating opportunities for education and learning not only creates goodwill and promotes transparency and accountability. Building a stable foundation for future research also enables more productive public-private partnerships and stronger links between academia and domestic industry, thereby promoting economic growth.

Foreign organisations, such as aid agencies or pharmaceutical companies, do have a role to play in boosting local innovation. They can support it financially, create new partnerships, and encourage policymakers to give it more credence.

The international community has a role to play as well.

This year, the United Nations will adopt the Sustainable Development Goals, marking the start of the next phase of global efforts to eradicate poverty and improve health. As the example of developing countries’ ongoing fight against counterfeit and low-quality medicines shows, success will depend – far more often than not – on local innovation.

Muhammad Hamid Zaman is a professor of biomedical engineering at Boston University. © Project Syndicate, 2015 - www.project-syndicate.org

August 26 - September 1, 2015

18 | WORLD | financialmirror.com

India’s deadly cities

By Asit K Biswas and Kris Hartley

China and India are driving Asia’s population and urbanisation trends. According to a 2010 McKinsey study, the two countries are expected to account for 62% of the growth in the continent’s urban population between 2005 and 2025, and a staggering 40% of such growth worldwide.

Statistics like these underscore the urgency of urban planning and growth management. But it is equally important to acknowledge the critical differences between the two countries. Variations in their urban growth paths, as well as differences in their approaches to environmental policy, are likely to make India’s population challenges far more difficult to address.

China may be home to 20% of humanity, but for more than two decades its fertility rate has been lower than the “replacement” level (that required to maintain the current population), with population growth expected to turn negative within the next two decades. As a result, India, where population growth is projected to remain positive for the foreseeable future, is poised to become the world’s most populous country. Most projections have India’s population exceeding that of China by 2022.

Indeed, over the next 35 years, India is expected to add more than 400 million urban residents (more than the entire population of the United States), while China will add just 292 million. For the first time, the majority of Indians will be living in cities – a significant transformation for a country whose rural population currently constitutes two-thirds of the total.

India’s two largest urban centers – Delhi and Mumbai – are often described as emerging global megacities. Delhi is already the world’s second most populous city, and it is expected to close the gap with Tokyo, the world’s largest city, almost entirely by 2030.

When population growth on this scale is combined with rapid urbanisation, the associated environmental and social impacts become a formidable policy challenge. In 2014, the World Health Organisation (WHO) determined that Delhi has the world’s worst air quality (based on concentration of fine

particulate matter), with Indian cities occupying the top four spots and 13 of the top 18.

China has been frequently – and often justifiably – criticised for poor environmental policies. But, according to McKinsey, China has been more proactive than India in planning for rapid urbanisation, demonstrating that it has the capacity and the resources to address environmental challenges. In new cities across the country, urban plans already take into account such concerns, with riparian greenways and urban nature reserves complementing infrastructure projects that have environmental benefits (for example, extensive mass-transit networks).

By contrast, India’s cities have grown haphazardly, with little consideration of the functioning of urban systems as a whole. The country’s urban areas often lack adequate regional transport networks, for example. Large swaths of informal settlements have emerged in vacant inner-city districts and suburban peripheries, compromising environmental conditions, public health, and personal safety.

Land-use patterns interweave industrial and residential districts, exposing vulnerable (and growing) populations to a host of negative spillover effects.

The differences between urban development in China and India are clear not only in the substance of policy, but also in the two countries’ governance styles. China’s leaders are placing heavy emphasis on pollution control. In advance of the 2022 Winter Olympics in Beijing, the authorities are pushing for a regionally integrated plan to balance economic growth with environmental management, including the greening of manufacturing processes and the elimination of “excess capacity” in energy production.

Such multi-jurisdictional efforts require strong coordination and a stable vision, which China’s hierarchal governance system provides. In India, by contrast, the central government has no role in managing air pollution, which is a state-level responsibility. Whatever Prime Minister Narendra Modi’s administration decides to do, state governments under the control of different parties are likely to oppose his policies, or fail to devote adequate attention and resources to them.

According to the WHO, of the 4.3 million annual deaths resulting from “indoor air pollution” (burning of solid fuels), nearly one-third (1.3 million) occur in India. A recent report argues that more stringent environmental regulation would add 3.2 years to Indians’ life expectancy. This tangible welfare gain would also include economic benefits. The resulting

addition of more than two billion “life years” represents a significant amount of human productivity, creativity, and uncompensated contributions to families and society. By failing to address the impacts of rapid urbanisation adequately, India is leaving these benefits unclaimed.

A good-faith, well-publicised official declaration would signal to India’s citizens and the world that the country intends to save its growing population from the lifeshortening effects of urban environmental degradation. It would also provide a roadmap for improving the quality of life in India’s cities, benefiting local residents both directly and indirectly (by inducing foreign investment).

India’s competitive advantages in the new global economy are well known. But transformative social progress will be possible only if the country launches a more comprehensive effort to address pathologies long brushed off as the unavoidable collateral damage of economic growth.

Asit K. Biswas is Distinguished Visiting Professor at the Lee Kuan Yew School of Public Policy, National University of Singapore. Kris Hartley is a doctoral candidate at the Lee Kuan Yew School of Public Policy, National University of Singapore. © Project Syndicate, 2015 - www.project-syndicate.org

Good fences make safe species Christian Lambrechts

African countries are often criticised for failing to meet their environmental challenges. Observers often cite loss of habitat in the face of population growth, land degradation, and industrialisation. And then there is the most frequent charge of all: that an increase in poaching is endangering species such as elephants and rhinos.

In Kenya, however, an innovative and extensive conservation project is underway.

Begun in the Aberdare mountains in central Kenya, “Rhino Ark,” originally conceived to protect the highly endangered black rhino from the ravages of poachers, is supported by the very people who might have resisted it: the local communities in some of the country’s most productive farming areas.

In 1988, conservationists decided to finance and build an electrified fence to protect an area of the Aberdare National Park bordering smallholder farms. The fence was designed to prevent intrusion from the human population and degradation of the park’s habitat. But it also protected the farmers, whose crops were regularly being

destroyed by marauding elephant and other wildlife. Local farmers welcomed the initiative, which influenced the decision to expand the fence to surround the perimeter of the entire Aberdare range.

The Aberdare Mountains, encompassing 2,000 square kilometres of indigenous forest and vital water catchment areas, as well as a national park, are vital to Kenya. Four of the country’s largest rivers, flowing north, west, east and south, begin there, providing water and power to seven major towns, including the capital, Nairobi. On the mountains’ lower slopes, four million farmers benefit from rich soil and plentiful rainfall. In the foothills and high slopes, 30% of Kenya’s tea and 70% of its coffee are produced.

For 21 years, the fence around the Aberdares was painstakingly built, supported mainly by Kenya’s corporate sector, individual donors, and innovative fundraising exercises such as the Rhino Charge, an off-road motor event that has captured the Kenyan public’s imagination and annually raises more than $1 million.

But, by the time the fully electrified fence was completed, in 2009, the government, under then-President Mwai Kibaki, had become an essential partner, with the Kenya Wildlife Service (KWS) and the Kenya Forest Service (KFS) deeply involved in the project.

With Kenyan government backing, Rhino Ark has been able to turn its attention to

other forested but degraded areas – such as Mount Eburu in the Mau Forests Complex, overlooking Lake Naivasha, and Mount Kenya, a World Heritage Site that has been heavily affected by human-wildlife conflicts.

The 45-km Mount Eburu fence was completed last year. The Mount Kenya fence, at 450 kms, will be longer than the Aberdares’ project and is now making rapid progress, with 80 kms completed.

Of course, building a fence is just the beginning. Fences must be managed and maintained (some of the original fence posts in the Aberdares, for example, have had to be replaced), wildlife corridors must be developed, and local communities require support. All areas are kept under surveillance by air and foot patrols along the fence line – a constant monitoring process with considerable cost implications.

The benefits, however, are significant. The fences keep the authorities fully alert to any incidents of poaching – particularly of elephant, rhino, and exceptionally rare species such as the Mountain Bongo antelope, which now exist only in the Aberdares, Mount Kenya, and the Mau Forests Complex, including Mount Eburu.

Local communities are involved in all areas of fence and forest maintenance. In effect, they are the guardians of the fences, keeping them clear of vegetation and repairing damage caused by wildlife and

other factors – and learning new skills in the process.

The longer-term goal is the protection of these critical forests in perpetuity. To achieve this, endowment funds are being established as public-private partnerships, bringing together the Rhino Ark, the KWS and the KFS, and representatives from local communities. So-called trust deeds, set up locally, will manage these funds, which will eventually pay for the fences’ maintenance.

The Aberdare Trust Deed became effective last October.

The region’s hard-working farmers can now see added value in co-existing with the fence. Since the completion of the Aberdares fence, the value of local farmers’ land has quadrupled. They can work their fields in peace for the first time in more than a century, their children can walk to and from school without fear of being attacked by wild animals, and conservation is now part of the curriculum.

The main lesson is straightforward: Good fences are good for everyone.

Christian Lambrechts, a former policy and program officer at the United Nations Environment Programme, is Executive Director of the Rhino Ark Charitable Trust. © Project Syndicate, 2015. www.project-syndicate.org

August 26 - September 1, 2015

financialmirror.com | WORLD | 19

The authoritarian temptation

By Nina L. Khrushcheva Twenty-four years ago this month, Soviet hardliners, desperate to stop the country’s nascent democratic transition, arrested Mikhail Gorbachev and declared martial law.

In response, millions of protesters poured into the streets of Moscow and towns across the Soviet Union. Key elements of the army refused to accept the coup, and it soon collapsed – with the Soviet Union soon to follow.

Even though economic conditions were dire in the USSR’s final months, people could see the freedoms that were coming and, unlike today, were willing to stand up for them. Indeed, in the early years of the democratic transition that followed, most post-communist voters did not succumb to the temptation to elect extremists who promised to end the hard times they were enduring. Instead, they usually chose the most sensible candidate available.

Russians, for example, rejected Vladimir Zhirinovsky, a clownish Donald Trump-like nationalist and anti-Semite, in favour of Boris Yeltsin, who had stared down tanks during the failed 1991 coup and recognised that his country’s future lay with democracy and the West. In Romania, the extremist poet Corneliu Vadim Tudor lost to a succession of corrupt pragmatists, beginning with Ion Iliescu, who had led the ouster of the country’s last communist leader, Nicolae Ceausescu.

Since then, the world has been turned upside down. As life has gotten easier, with people’s material expectations largely met, voters have increasingly favoured neoautocrats who promise to “protect” the people from this or that threat. Russian President Vladimir Putin, of course, leads

Turkey dominates global Twitter censorship In the first half of 2015, there were 1,003 requests from courts and government agencies to remove content from Twitter. Out of this, 72% came from the Turkish authorities. Twitter removal requests leads to tweets no longer being displayed in individual countries rather than being deleted altogether. In the United States, there only 25 requests in the first six months of the year. The number of content removal requests is soaring. In the second half of 2014, 13% of these requests were successful; between January and June, it was higher – 42% of requests were granted. (Source: Statista)

this group, but there are also Hungarian Prime Minister Viktor Orban and Czech President Milos Zeman. And the trend extends beyond the former communist countries to include, for example, Turkish President Recep Tayyip Erdogan.

The French philosopher Jean-François Revel saw the rise of violent dictatorships in the twentieth century as driven by a “totalitarian temptation.” What we are witnessing today is something a bit less sinister – call it an “authoritarian temptation.” But it is a growing threat not only to democracy, but also to global stability. After all, the one thing today’s autocrats have in common with their totalitarian predecessors is contempt for the rule of law, both domestically and internationally.

One cause for this shift toward authoritarianism is that many countries no longer view the United States as a beacon of democracy and a model of stability and prosperity to be emulated. Putin’s claim that democratisation is actually an American plot “to gain unilateral advantages” resonates with many societies following the disastrous invasion of Iraq and revelations about the National Security Agency’s spying on citizens and leaders worldwide.

But even before these developments, the Cold War’s winners – and especially the US – were showing a boastfulness that probably alienated many. When even allies are treated with disrespect – recall George W. Bush’s infamous shout of “Yo, Blair,” as if thenBritish Prime Minister Tony Blair were some cowhand – people naturally wonder whether their country, too, is deemed subservient.

Rising “soft” dictators – what the journalist Bobby Ghosh calls authoritarian democrats – have used these feelings of unease and alienation to attract votes. Their supporters do not want to be oppressed, but they do want stability and national sovereignty – desires that their leaders fulfill

partly by limiting opposition.

Given the reach of today’s mass media and social networks, only a few people must be targeted to cow the rest of society into conforming to the leader’s vision. So, instead of building gulags, neo-authoritarians launch criminal cases. The defendants range from political opponents and critics in Russia – such as the oil oligarch Mikhail Khodorkovsky and the anti-corruption lawyer Alexei Navalny – to independent journalists in Erdogan’s Turkey.

Citizens seem convinced. At least 70% of Russians agree with Putin that this kind of “managed democracy” is superior to the chaotic version practiced in the West. Almost half of Hungary’s citizens find membership in the European Union, whose liberal values Orban mocks, unnecessary. And more than 70% of Turks have a negative view of the US, which Erdogan blames for the rise of social media (the “worst menace” facing Turkey today – trumping, it seems, even the Islamic State’s deadly attacks in Turkish cities).

When the Berlin Wall fell in 1989, people did not understand the link between capitalism and democracy. Many wanted a Western lifestyle, with access to the kinds of jobs and goods available in the US, but seemed not to recognise that access to that lifestyle requires increased economic and personal freedom – precisely the kind of freedom that underpins democratic societies.

If, in the current environment, Western powers attempted to point this out to the people of Russia, Hungary, or Turkey, they would likely stoke even greater resentment.

The better option would be to work on the countries’ leaders. If the Putins, Erdogans, and Orbans of the world want to continue to benefit economically from the open international system, they cannot simply make up their own rules.

The power of such an approach can be seen in Russia, where Western sanctions, imposed following Putin’s annexation of

Crimea, are the main factor limiting the proRussian rebels’ incursion in eastern Ukraine.

Putin’s efforts to reclaim “great power” status for Russia may find support among his people; but that support will probably dwindle if Russians face the prospect of losing all of the comforts derived from the relatively open economy that their country has had for more than two decades.

At a time when more and more Russians are being denied passports to travel outside the country, those tempted by authoritarianism would do well to recall the elementary point made by John F. Kennedy in his Berlin speech in 1963. “Freedom has many difficulties, and democracy is not perfect,” Kennedy said. “But we never had to put up a wall to keep our people in.”

Nina L. Khrushcheva is a dean at The New School in New York, and a senior fellow at the World Policy Institute, where she directs the Russia Project. © Project Syndicate, 2015. www.project-syndicate.org

August 26 - September 1, 2015

20 | BACK PAGE | financialmirror.com

Oil’s new normal

By Mohamed A. El-Erian Αuthor of When Markets Collide Oil prices have been heading south again, with a barrel of US crude recently falling below $42 – the lowest level since March 2009, the nadir of the global financial crisis. And, while last year’s sharp price drop was heavily influenced by two large supply shocks, the current decline also has an important demand dimension.

At the same time, oil markets are discovering what it is like to operate under the regime of a new swing producer: the United States. As a result, the price formation process is much clumsier nowadays, with considerably longer adjustment lags.

The dynamics of the energy markets changed notably as shale-oil production came onstream at a market-moving scale in 2013-2014. With this new source meeting more of world energy demand, particularly in the US, energy users were no longer as dependent on OPEC and other oil producers. In the process, they also became less vulnerable to geopolitical concerns.

Adding to the supply-side changes was Saudi Arabia’s subsequent historic announcement that it would no longer lead OPEC in playing the role of swing producer. It would no longer lower production when prices fell sharply, and increase output in response to large price surges.

That decision was both understandable and rational.

Playing the role of swing producer was coming at a growing cost to both current and future generations of Saudi citizens.

Non-traditional suppliers had increased their market influence, non-OPEC producers continued to plan high output, and some OPEC members failed to adhere to their production ceilings. Given all this, Saudi Arabia could no longer be expected to incur the growing short- and long-term cost of being the stabilising market force that it had been for decades.

Such fundamental changes in the supply side of the

market naturally drove oil prices lower – a lot lower. Prices plummeted by more than half in a period of just a few months last year, catching many oil traders and analysts by surprise.

Oil prices stabilised after a somewhat temporary overshoot, trading increasingly robustly for a while on the back of two conventional market reactions. First, the large price drop caused massive supply destruction, as some energy producers, from both the traditional and nontraditional sectors, became unprofitable. Second, as consumers reacted to lower energy costs, demand adjusted only gradually.

But a new factor soon disturbed this relative stability, pushing oil prices even lower: Evidence that the global economy was weakening, and that much of the weakening was occurring in relatively energy-intensive countries such as China and Brazil, as well as Russia (itself an energy producer).

Today, indicators of this global slowdown are to be found everywhere – from underwhelming retail and trade data to unanticipated policy responses, including China’s surprise currency devaluation (which coincides with its leaders’ commitment to a long-term shift toward a more marketbased exchange-rate regime).

The impact is not limited to economic performance and financial-market movements. Slower global growth is also amplifying political pressures and, in some countries, adding to social strains – both of which tend to constrain policy responses.

It is hard to see the global oil market’s current configuration of supply and demand rapidly changing any time soon. As for the new swing producer, the US has a much slower (and leakier) reaction function relative to that of Saudi Arabia and OPEC. Over the next few months, the US will indeed alter its supply and demand conditions in a way that puts a floor under oil prices and enables a gradual recovery in the market.

But, unlike the previous swing producer, this will result from traditional market forces, not policy decisions.

Indeed, we should expect an even sharper reduction in US energy output as persistently low prices increase the pressure on domestic producers. From the shutdown of additional rigs

to the curtailment of new investment in exploiting shale resources, the US will likely experience a fall in its absolute energy production, as well as in its share of world output.

But, while demand will increase, this will not have much of an immediate effect on oil prices. Yes, US consumers will be tempted to buy more trucks and bigger cars, drive more miles, and fly to more places. But the creation of this demand will be very gradual, especially given all the leakages in the transmission of lower energy-input costs to consumer fuel prices.

At the end of the day, no swing producer controls the fate of today’s oil prices. A sustained price recovery requires a healthier global economy that combines faster inclusive growth and greater financial stability. And this will not occur quickly, especially given the policy shortcomings in both advanced and emerging countries.

Mohamed A. El-Erian, Chief Economic Adviser at Allianz and a member of its International Executive Committee, is Chairman of US President Barack Obama’s Global Development Council and the author, most recently, of When Markets Collide. © Project Syndicate, 2015 - www.project-syndicate.org

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