Financial Mirror 2015 11 11

FinancialMirror JIM LEONTIADES

MOHAMED EL-ERIAN

Is Angela Merkel on her way out?

PAGE 7

After property crisis, America faces education bubble PAGE 16

Issue No. 1157 €1.00 November 11 - 17, 2015

Cyprus up in World Bank ‘doing business’ REFORMS AND MUCH-NEEDED CHANGES BOOST RANKING - SEE PAGES 8 - 11

Property price fall slows down in 3Q, says RICS survey

SEE PAGE 12

November 11 - 17, 2015

2 | OPINION | financialmirror.com

FinancialMirror What have you done for your country?

Published every Wednesday by Financial Mirror Ltd.

EDITORIAL

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Now that we have officially entered the election silly-season, voters should consider John F. Kennedy’s famous comment in his 1961 inaugural address before going to the polls next May – “Ask not what your country can do for you, ask what you can do for your country.”

So, the question is very simple: what HAVE the current deputies done for their country?

We all know what the country has done for the 56 members of parliament.

Apart from their privileges and fat salaries (plus benefits), the current parliament has been on automatic pilot for the past four and a half years, with the communists denying the crisis had anything to do with their incompetent regime and the ruling DISY hoping that a “deus ex machina” will get them re-elected. As for the smaller parties, well, let’s not waste any space or effort on them.

True, we cannot disregard the genuine efforts of perhaps a handful of deputies who have done good work, or at least have seemed to be doing so. And they deserve to be in the next parliament.

But the vast majority, who showed their “expertise” when their arrogance in March 2013 plunged us into the current economic crisis, do not deserve to be on the election tickets, let alone get re-elected.

They have yet to convince us that they are competent enough to handle legislations and draft new laws. For all we have seen from them is to amend proposed bills, simply to prove a point, and, in the worst case, delay crucial legislation, such as those that regulate foreclosures and insolvencies, that caused a chain reaction (inaction, rather) with the banks unable to restructure loans and recover debts, thus also not pouring desperately needed cash into the market.

The stage we are at, only those who have no party affiliations or friends and relatives in high places in government will be hunted down to pay up or hand over the keys to their homes. The rest will make sure that their greed will continue well into the next year and nothing is done before the May elections.

This is why voter apathy is expected to rise, especially among the youth, which is surely a mistake.

We are stuck with the incumbent President who was elected on the premise of a business-friendly attitude, whose record so far has been halfconvincing. At least, he may compensate for his inability to slash the vast numbers of civil service if there is true progress in the Cyprob, as he has let us believe in recent days.

So, in order not to be stuck with the same parliament we have today, voters should seriously consider going to the polls and making their frustration felt, by voting for any serious alternative.

Is there an alternative out there?

THE FINANCIAL MIRROR THIS WEEK 10 YEARS AGO

Laiki up on Serb news, CAIR unions moan Laiki Bank shares were up on news of the takeover of a Serbian bank, while unions at Cyprus Airways wanted to hike air fares by CYP 5 per leg to pay for their salaries, according to the Financial Mirror issue 644, on November 9, 2005.

Laiki in Serbia: Laiki Popular Bank shares rose more than 1% on news that it had agreed to buy Centrobanka in Serbia for EUR 38-45 mln in the first overseas takeover by a Cypriot bank. Centrobanka has five branches, three business units and 22 sub-

20 YEARS AGO

TC seek Istanbul listing, CSE record high Turkish Cypriot enterprises were considering privatisation and listing on the Istanbul exchange in order to raise fresh capital, while the Cyprus stock market surged to a record high and was among best emerging market performers, according to the Cyprus Financial Mirror issue 135, on November 8, 1995.

TC listing: Some 21 Turkish Cypriot banks and companies are considering listing on the Istanbul Stock Exchange as a way to raise capital and a form of privatisation, as the north suffers from triple digit

branches with a 1.6% market share on loans and deposits. Laiki officials rejected that Centrobanka’s past antics had any effect on the future. In 2002, senior officials had been convicted with setting up 586 dummy corporations for money laundering.

(Ed’s note: Hmmm…)

CAIR moaners: Cyprus Airways trade unions once again rejected the final draft of a rescue package submitted to the EU executive to secure a multi-million loan in the form of state-aid. The plan includes layoffs and cutbacks of CYP 22.5 mln, while union chiefs insisted on no more

than CYP 5 mln. On the contrary, they even proposed to hike air fares by CYP 5 per leg in order to raise revenue by CYP 4.5 mln and moving the head office to Larnaca to save a further CYP 5-6 mln.

Jobless down: Unemployment dropped by 854 persons to 10,695 or 3.0% of the labour force, but was up 532 compared to the year-earlier figure due to redundancies in construction and trade.

Fitch ratings: Fitch has reaffirmed Cyprus’ ratings at “A+” for long-term foreign currency with a ‘positive’ outlook, and “F1” for short-term foreign currency, with the long-term local currency rating at “AA” with a ‘stable’ outlook.

Card spending: Local credit card spending rose by 11% in the January-October period to CYP 522 mln, with the average spending per transaction at CYP 40.

Total overseas spending by Cypriots increased to CYP 94 per transaction.

inflation, chronic budget deficits, low foreign exchange earnings and constantly devaluing Turkish lira. Dinos Papadopoulos, president of the CSE Council said that any listing on the ISE does not mean a parallel listing on the Cyprus bourse.

CSE surges: The stock market continued on its major bull-run with year to date gains at just below 50%, driven mainly by the banking sector. Daily volume topped CYP 1.3 mln with the annual cumulative of CYP 100 mln. Andrea Leonidou of AL ProChoice Brokers said a growing interest by foreign investors and the opening of the

official exchange urged local investors to buy as well.

BOC profits: The Bank of Cyprus operating profits in the 9-month period rose 25% to CYP 27.3 mln, compared to the 12% rise in the year before.

IMF praise: IMF mission chief Demetris Demekas praised Cyprus for the steady growth rates and stability saying “deficits have been reduced, foreign debts has started to come down and foreign reserves are very strong.” However, structural problems need to be addressed, he warned.

Farms and wines: Agriculture contributed 5.5% to GDP and provided employment to 11.9% of the labour force, with crop production up 14.6% in 1994 and livestock increased by 3.7%. On the other hand, the four wineries of Loel, Sodap, Etko and Keo are to receive state aid to the tune of CYP 18 mln to help with their liquidity problems (no pun intended!).

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November 11 - 17, 2015

financialmirror.com | CYPRUS | 3

Wanted: investors from Jordan Embassy to open in 2016, twinning of Amman and Paphos

President Nicos Anastasiades has appealed to Jordanian investors to boost bilateral trade and consider taking part in the privatisation process of the ports, electricity and telecoms, while encouraging entrepreneurs to set up a Cyprus base and take advantage of the growing energy sector.

Addressing an event at the Amman Chamber of Commerce, where a memorandum of understanding was signed with the Paphos Chamber of Commerce in the presence of business people form both countries, Anastasiades said his administration’s top priority is to attract investments, “as they constitute the catalyst for economic growth, job creation and prosperity.”

“Cyprus is emerging stronger than ever from an unprecedented crisis”, having officially exited recession and is registering growth as of this year, he said.

The President said there are investment opportunities in commerce, tourism, privatisation of ports, electricity and telecommunications, shipping, real estate, large-scale development projects, education, health, research and innovation. The recent discovery of natural gas reserves in Cyprus’ Exclusive Economic Zone and the eastern Mediterranean creates excellent investment prospects in the energy sector and auxiliary

services.

Speaking on current trade levels with Jordan, the President noted that “they do not reflect the full potential of our relationship” and addressed the businesspeople to proceed with new business initiatives and identify new areas for future co-operation.

He added that initiating negotiations to conclude a double taxation treaty will significantly help to boost economic, commerce and investment opportunities, for the mutual benefit of the business communities and peoples of the two countries.

Earlier in the day, Anastasiades received Amman’s golden key and announced the opening of the Jordanian Embassy in Nicosia in 2016. During the ceremony, the Mayors of Amman and Paphos, Akel Beltaji and Phedonas Phedonos, also signed a twinning agreement.

Subsequently, the two mayors signed the twining agreement, in the presence of President Anastasiades, Foreign Minister Ioannis Kasoulides, Government Spokesman Nicos Christodoulides, the Minister of Water and Irrigation of Jordan Hazem Al-Naser, Metropolitan Venediktos of Philadelphia, members of the Municipal Council of Amman and Paphos and a delegation from the Paphos Chamber of Commerce and the

city’s bar association.

Meanwhile, President Anastasiades is expected to convey a message that the EU should support Jordan and Lebanon in addressing the refugee crisis during the upcoming informal European Council to be held in Malta on Thursday.

The Cyprus News Agency reported that Anastasiades would propose to his

counterparts in Valletta to financially support these countries in order to cope with their increased needs as it is estimated that Jordan alone has received 1.2 mln Syrian refugees.

President Anastasiades will travel to Malta on Thursday after his official visit to Amman while in the evening of the same day he will depart for Israel and Palestine where he will hold further contacts.

November 11 - 17, 2015

4 | CYPRUS | financialmirror.com

EC: Turkey commitment to a Cyprus solution ‘crucial’ Turkey’s commitment and contribution to a comprehensive settlement of the Cyprus problem remains crucial, the European Commission’s Turkey said as part of the 2015 enlargement package.

According to the report, Turkey has still not fulfilled its obligation to ensure full and non-discriminatory implementation of the Additional Protocol to the Association Agreement and has not removed all obstacles to the free movement of goods, including restrictions on direct transport links with Cyprus. In addition, the report noted that “there was no progress on normalising bilateral relations with the Republic of Cyprus”.

It noted that the conclusions on Turkey that were adopted by the Council and endorsed by the European Council in December 2006 remain in force.

“They stipulate that negotiations will not be opened on eight chapters relating to Turkey’s restrictions regarding the Republic of Cyprus and no chapter will be provisionally closed until the Commission confirms that Turkey has fully implemented the Additional Protocol to the Association Agreement”.

As regards the Cyprus issue, it noted that Turkey welcomed the resumption of the talks on a comprehensive settlement between the leaders of the two communities in May 2015, expressing its support for the UN Secretary General’s Special Advisor’s efforts and for the newly elected leader of the Turkish Cypriot Community.

“Turkey had however previously, from October to April, issued statements and engaged into actions challenging the Republic of Cyprus’s right to exploit hydrocarbon resources in Cyprus’s Exclusive Economic Zone for the benefit of all Cypriots”.

The Commission said that the EU has repeatedly stressed the sovereign rights of EU member states which include entering into bilateral agreements, and exploring and exploiting their natural resources in accordance with the EU

acquis and international law, including the UN Convention on the Law of the Sea. It also notes that the EU also stressed the need to respect the sovereignty of member states over their territorial sea and airspace.

It added that the process of granting the Committee on Missing Persons full access to all relevant archives and military areas needs to be expedited.

The Commission noted that Turkey continued to veto the Republic of Cyprus joining several international organisations, such as the OECD. The Commission also refers to the lack of communication between air traffic control centres in Turkey and Cyprus and notes that it “continues to seriously compromise air safety in the Nicosia flight information region. An operational solution needs to be found urgently to resolve this safety issue”.

In addition, it says that as long as restrictions remain in place on vessels and aircrafts registered in or related to Cyprus or whose last port of call was in Cyprus, Turkey will not be in a position to fully implement the acquis relating to this chapter.

As regards Turkey’s e-visa system introduced in 2013 it said that “the system continues to discriminate against de facto applicants from the Republic of Cyprus by referring to the country option Greek Cypriot Administration of Southern Cyprus.”

It adds that good progress has been made towards the opening of chapter 17 - economic and monetary policy – (blocked by France) which would underpin the envisaged high level economic dialogue.

At the same time, the report emphasises an overall negative trend in the respect for the rule of law and fundamental rights.

Significant shortcomings affected the judiciary as well as freedom of expression and freedom of assembly and Turkey

saw a severe deterioration of its security situation.

“The settlement process of the Kurdish issue came to a halt despite earlier positive developments on the issue. It is imperative that the peace talks resume,” the EC report underlined.

The Cyprus government said it is in general satisfied with the contents of the European Commission report for Turkey, adding that it will study in depth the contents of the report and will present its views in detail to the relevant EU institutions in view of the evaluation of Turkey’s accession process in December by the European Council.

Regarding the Commission’s intention to submit revised documents on chapters that Cyprus has blocked in 2009, the government pointed out that the reasons that it decided to block the chapters remain and according to what the Commission mentions in the report, the inclusion of revised documents does not prejudge the discussions in the Council nor the positions of member states.

Meanwhile, Commissioner Johannes Hahn told the European Parliament Foreign Affairs Committee on Tuesday that the refugee crisis has “reinforced the strategic case for close cooperation with the countries in south-east Europe”.

Presenting the annual enlargement package on the candidate and potential candidate countries, he also stressed that the focus on the rule of law and basic freedoms - “fundamentals first” - in the accession process shall continue to be the backbone of the enlargement policy. In the debate, MEPs stressed the need for sustained enlargement process.

Richard Howitt (S&D, UK), on behalf of rapporteur on Turkey Kati Piri (S&D, NL), confirmed his group’s commitment to EU enlargement while regretting “any slowdown” of the process. “The refugee crisis must not distort the enlargement”, he said before quizzing the Commissioner on the new negotiation chapters to be opened with Turkey referring particularly to chapters 23 and 24 of the EU acquis.

Commission revises 2015 growth to 1.2% Autumn report predicts 1.4% in 2016 and 2% in 2017 The European Commission seems optimistic of a recover as it has revised upward its growth forecasts for the Cyprus economy to 1.2% for this year, bringing it closer to the Finance Ministry prediction of a growth rate of 1.5%.

The Commission’s Autumn forecast predicts 1.2% growth for 2015 compared with 0.5% envisaged in its report for the completion of the seventh evaluation of the Cyprus memorandum and 0.5% downturn in the spring forecast in May. For 2016, the Commission predicts growth of 1.4%, while in 2017 a growth rate of 2%.

The Commission said in its report that after three years of recession, Cyprus’ economy grew in the first half of this year, driven by stronger private demand and supported by the euro’s depreciation and low energy prices. Real GDP growth in 2015 is expected to reach 1.2%, while unemployment is forecast to ease somewhat. Growth is forecast to gather strength and reach 2.0% by 2017, while public finances should also improve.

Investment growth turned positive, but this was mainly driven by new ship registrations and the positive impact on growth was offset by higher imports.

Exports are gathering momentum with help from the euro’s exchange rate and the flourishing tourism sector. However, lower export demand, particularly from Greece caused exports to decline in the first half of 2015.

Employment has picked up and the unemployment rate started to decline in the first half of 2015, from around 16%.

The unemployment rate is expected to fall to 15.6% in 2015, to 14.6% in 2016 and to

13.3% in 2017. As mentioned job creation is expected to increase, while unemployment is expected to decline.

Labour costs are expected to continue to decline, although at a slower pace than in 2014.

Inflation will continue to remain negative in 2015 at -1.6% due to the drop in energy prices and is expected to rise to 0.6% in 2016 and to 1.3% in 2017.

With unemployment still high and inflation expectations still subdued, wage developments are expected to begin warming up slowly in 2016 and 2017.

The primary balance for the general government is forecast to reach a surplus of 2.1% of GDP in 2015, corresponding to a headline deficit of 0.7% of GDP. The general government primary surplus is expected to increase to 2.6% of GDP in 2016 and to remain broadly unchanged in 2017.

Cyprus’ debt-to-GDP ratio peaked in 2014 and is projected to start declining this year from about 107% to about 95% in 2017.

According to the Commission’s report, the economic recovery in the euro area and the European Union as a whole should continue at a modest pace next year despite more challenging conditions in the global economy.

Against a backdrop of declining oil prices, accommodative monetary policy and a relatively weak external value of the euro, the economic recovery this year has been resilient and widespread across Member States. It has, however, remained slow.

The impact of the positive factors is

fading, while new challenges are appearing, such as the slowdown in emerging market economies and global trade, and persisting geopolitical tensions.

Backed by other factors, such as better employment performance supporting real disposable income, easier credit conditions, progress in financial deleveraging and higher investment, the pace of growth is expected to resist the

challenges in 2016 and 2017. In some countries, the positive impact of structural reforms will also contribute to supporting growth further.

Overall, euro area real GDP is forecast to grow by 1.6% in 2015, rising to 1.8% in 2016 and 1.9% in 2017. For the EU as a whole, real GDP is expected to rise from 1.9% this year to 2.0% in 2016 and 2.1% in 2017.

November 11 - 17, 2015

financialmirror.com | CYPRUS | 5

Cyprus to get €1.3 bln from EU MFF in 2014-2020 period Cyprus will receive EUR 1.3 bln in EU funds for the programme period of 2014-2020, rendering the island as a net recipient for the first time since its accession in 2004.

The EU Court of Auditors in Brussels presented its audit on the 2014 budget, marking the commencement of the new 2014-2020 Multiannual Financial Framework, in the context of which Cyprus will receive EUR 1.3 bln in EU funds.

According to data, the ratio of EU funding per citizen in Cyprus amounts to EUR 1,560 compared with the EU average of EUR 1,500.

Under the 2007-2013 MFF, Cyprus’ contribution to the EU budget in 2013 amounted to EUR 160 mlns. However, following a Gross National Product revision in 2014, Cyprus will pay an additional EUR 54 mln by the end of 2015. Cyprus and the Netherlands had the highest revision in their contribution to the EU budget in 2014 that amounted to an increase of 41%.

According to European Commission figures, Cyprus’ fund absorption capacity by October was 90%, slightly above the EUaverage of 87%.

Furthermore, in the ECA’s 2014 audit, Cyprus’ electronic public procurement system has been considered as a best-practises example.

The European Court of Auditors gave the EU accounts a clean bill of health for the eighth year in a row.

Both the revenue side and administrative expenditure are free from significant errors, it said, adding that the overall error rate in payments has declined for a second consecutive year, to 4.4% in 2014. The Court also, in its annual report on the implementation of the EU budget in 2014, stressed the progress made by the Commission to increase transparency and absorption concerning the

management of EU funds.

“EU money belongs to our citizens and we owe it to them that every euro is well-spent. We share with the Court the view that new realities require new action. We at the Commission are working to align the budget with priorities, focus on results and strengthen controls,” said Kristalina Georgieva, European Commission VicePresident in charge of Budget and Human Resources.

30-day T-bills oversubscribed The Public Debt Management Office at the Ministry of Finance received tenders for a total of EUR 296.7 mln during Tuesday’s auction of 30-day treasury bills.

This made the demand for the issue issue of EUR 50 mln oversubscribed by six times.

The PDMO said that the weighted average yield was 0.51%. The accepted yields ranged between 0.49 and 0.54%.

Yields have been successfully coming down, after a EUR 50 mln auction in September was oversubscribed just under three times and the PDMO had accepted yields ranged between 1.10% and 1.42% for a weighted average yield of 1.31%.

Just last week, the government sold EUR 100 mln worth of 13-week Treasury Bills with bids six times oversubscribed, pushing yields further down to 1.17%.

This follows last month’s successful return to the bond markets when Cyprus raised EUR 1 bln from a 10-year Eurobond (EMTN) with a yield of 4.25%.

This was the government’s third attempt since 2011 when it was shut out of markets due to the economy’s spiralling contraction that prompted a EUR 10 bln bailout rescue by the Troika of international lenders (ERC, ECB, IMF).

November 11 - 17, 2015

6 | COMMENT | financialmirror.com

VILLAGE VOICE REMEMBERED An email from a dear friend of our years in a hill village of Cyprus, talking of a well loved taverna keeper, the venerable mukhtar of many years’ standing and various other local personalities, brought back a flood of memories, some of them demonstrating the speed of change in the island in recent years. Others were heartwarming or amusing. I wrote about village life for some years in local magazines and newspapers under the banner of “Village Voice”. From those times, I offer two anecdotes that have never been published and one that was.

FOOD, DRINK and OTHER MATTERS with Patrick Skinner flowers and they don’t all develop at the same time. It is at the plump, pre-opening stage that they are in the best shape for pickling. Watch the pickers! Their eyes scan the plants and their hands skilfully miss the spikes on the stems as they pick only the plump buds. As they move on you’ll see they’ve left the small buds, as if saying, “I’ll come back for you in a few days”.

Yiannis and Koulla lived next door to the coffee shop in the village and they cooked up very good skewers of Souvla and mixed offal (“Kokoretsi”), on a proper old iron barbecue (pictured below). Standing around the yard of a winter’s Sunday morning, whilst enjoying hot and flavoursome meaty chunks, I spied an elderly man tottering down the steep street opposite.

He was only clad in thin cottons on a very cold day.

“That’s Christos”, we were told. “He’s 91”.

Furthermore, he lived alone in an unheated house, tended his goats in the field above the village every day and kept himself alive on his home-distilled Zivania. (See Note below). “He keeps warm by rubbing his legs, arms and body with Zivania and drinking a good half bottle a day”, said Yiannis. As I recall, he lasted a few more years after that.

Kokoretsi uses kidneys, heart, liver, lung and sweetbreads of lamb or kid. Cut into chunks, mixed and speared for cooking. The cleaned intestine is used like an edible ribbon wound round the skewered meats. It is not always cooked on a rotating spit. Sometimes it is heated from above, allowing gorgeous juices to be caught by a pan below. When cooked, the skewers are removed and the meat sliced for serving. This cooking method goes back into the mists of time.

Our friend, a Nordic, used to have a number of visitors (most of us did; we were a good holiday venue for relatives and friends from Europe’s northern climes). All, of course, were fascinated by the traditional ways of the somewhat remote village and the villagers. None more so than a woman of about 35, a catering manager from Norway. She loved the Mediterranean and had spent a few years living with a Greek man in Athens, where she learned the language. One sunny morning she walked with her hosts through the village, towards the coffee shop, outside of which the local gentry were putting the world to rights.

They looked up and passed various rude comments about the shape and disposition of her anatomy, unaware of her linguistic capabilities.

She heard all the comments, and stopped immediately in front of them and said in quiet, measured tones, words to the effect of: “Thank you, gentlemen – you disgusting, evil thinking old men”. Shocked, silence prevailed.

Zivania: what you buy now is a pale, factory made, shadow of the glorious, often dangerous, fire-water that used to be made in the villages. For centuries, very many village homes had their own stills. In the autumn, when the new, raw wine had been made in the huge “Pitharia” (clay pots), some would be taken off for distillation. There was no law against this at the time, and the alcohol levels were often very high, sometimes lethally so.

My then neighbour Maria’s Zivania was very clear, very clean and had its own special zing.

Quite often in the distilling season she would knock on our window and ask me to keep the fire under the still going and the spirits dribbling into the jars at a proper rate whilst she went to church or the village shop. My “pay” was a bottle or two of the good stuff.

Good as Maria’s Zivania was, the best was made by a lady of mature years who lived a few doors down the street from the then taverna, who had a good sized still, producing a stylish spirit, which people from Limassol, 40 kilometres away, would drive to buy.

In a Proper Pickle - Capers It’s a ritual you don’t see as often as you did a few years ago, but it is good to see the people doing it aren’t just old villagers. The ritual of which I write is the annual assault on the spiky wild plant that grows over so many of our hillsides – the Caper. City slickers often drive up into the hills and plunder the caper plants at the sides or just off the roads and pathways.

You don’t crop a caper plant like a vine. You have to have successive visits to it because what you need are the buds, which start small, plump up and then open into quite pretty

The caper is a Mediterranean shrub which is found wild in Cyprus but sometimes cultivated, notably in France which even has a town in Provence called Roquevaire which is known as “the caper capital”. Despite this, and the capers grown, pickled and bottled in Spain and Italy, I reckon there’s nothing to touch a Cyprus caper. They pickle them well here and they’re not too briny. They add flavour and zest to many cold dishes – potato salad, for example, or Salade Niçoise (a great, classic dish, immensely satisfying), and they can enhance grilled or fried fish and give life to a Village Salad, too. This said, a French epicure will disagree with me – in France it is the smallest buds that are most prized; concentrated flavour, probably.

It is strange that this Mediterranean bud is found in an old and famous English recipe, caper sauce. This is made with a Béchamel sauce which itself is made using half milk and half white (meat) or fish stock. As the stock is made (300 ml / 1/2 pint) a tablespoonful of caper juice or lemon juice is added, and just before serving a tablespoon of chopped capers is added and stirred in. It then accompanies steamed or grilled fish or roast lamb.

Those buds that avoid the pickers flower and then produce a fruit which looks very much like a gherkin. These, too, are picked and pickled – the taste is not heavy and similar to that of the buds. Some of the commercially produced jars you buy here contain both pickled buds and fruits.

Not grapes – capers! A close-up of lovely plump ones enhancing a salad of cooked potatoes, sliced onion and green leaves, dressed with olive oil, lemon juice, salt and pepper.

As well as the English Caper sauce and discreet sprinklings of them over salads, meat and fish, two famous sauces have them as an important ingredient: Sauce Tartare: Mayonnaise, mixed with finely chopped gherkins, capers and herbs (mint, parsley, chives). There are other variations which may add chopped olives and spring onions.

This is a lovely addition to fried fish or large fried shrimp.

Sauce Ravigote: This is a vinaigrette to which capers and chopped fines herbes are added, and, sometimes pounded hard-boiled eggs. Adds zing to salads.

For the wine lover, care has to be taken with the intake of fruits and vegetables pickled in vinegar or brine – too many can turn the taste-buds against the wine. A cardinal sin.

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

November 11 - 17, 2015

COMMENT | 7

Is Angela Merkel on the way out?

By Dr. Jim Leontiades Cyprus International Institute of Management Henry Kissinger’s question some years ago, “If I want to talk to Europe who do I call?” today has an answer. It is understood that Germany, and particularly Angela Merkel, is at the centre of whatever decision making can claim a European dimension. Forget Cyprus and the many other smaller countries. Their part in European decision making is largely “theoretical”.

Angela Merkel is the de facto leader, not only for the Eurozone but the entire European Union. Whether it is the latest Greek crisis, Crimea, Ukraine or refugees, Angela (or “Mum” as she is known) has shepherded Europe’s widely diverse countries into some semblance of a common front, for the most part successfully. But there is a limit. European crises are becoming more frequent and more serious.

Undoubtedly the most challenging is the recent wave of refugees from the Middle East toward Europe.

Frau Merkel’s hasty promise to admit 800,000 such refugees into Germany this year was a daring commitment heard around the world, particularly in the Syrian refugee camps. German citizens also heard the invitation, prompting an unprecedented slide in her popularity. German politicians heard it initiating a spilt between her party and her political allies. Shortly after the announcement, the head of the German department processing these migrants resigned, with 360,000 asylum applications still pending.

SHORT TERM THINKING The problem might still be manageable if the current influx were the end of it. Clearly it is not. The European response to the refugee problem appears to be a case of short term thinking to what promises to be a long term problem.

Syria, the source of most asylum seekers today, is a relatively small country of roughly 22 mln (before the exodus). Its migrants have nevertheless threatened to overwhelm the ability of Germany and other EU countries to absorb them.

The UN predicts that next year will see more of the same.

That is certainly not the end of the story. Sectarian conflict is spreading throughout the Middle East. The potential for future migrations is by no means limited to the present national sources. To cite just one example, Egypt with a population more than four times that of Syria is

perilously close to the sort of sectarian conflict behind the present wave of refugees.

The current news has been all about the migrants coming through Turkey. There is less focus now on migrants coming across the Mediterranean from North Africa to Italy. The long term potential for migrants along this route is enormous.

Improving roads, transport and communications now enable an increasing number of young persons, discouraged with their own governments and prospects to see Europe as the promised land. These are long term trends. New border fences and transit centres are not a long term solution.

A WEAKNESS OF GOVERNANCE Angela Merkel has shown not only leadership but humanity in defending the influx of refugees. Her skill in treading the thin line between reconciling German voters with the crises and changes buffeting the EU has been legendary. But, she is now vulnerable. The ability of German refugee services, budgets and educational facilities are under enormous strain. Fairly or not, she will bear the political cost of the populist backlash which appears to be gathering strength. Already, her popularity in the polls has dropped by an unprecedented 8 percentage points. She has been in office through most of the recent crises. What happens if she goes?

There is no obvious successor.

WEAK EU GOVERNANCE Yes, there is an EU Commission and an EU Parliament that were designed to lead Europe. They are bureaucracies which have proved unequal to the task. They have done what bureaucracies usually do. What they have not done during these past few years is provide the sort of leadership “Mum” has demonstrated. Even she could not have achieved what she did if she had been the leader of one of the smaller countries.

Is it likely that Malta, Belgium, Slovenia (can we mention Cyprus) could have provided the European leader? Not even if these countries had someone with the necessary personal characteristics would this be a realistic possibility. What the past years of turmoil have demonstrated is that only a national leader who can commit the resources of a powerful member state can provide the necessary leadership.

Since Germany is the largest and economically most powerful and stable EU country, any new European leader will most likely be of that nationality. This is not a very satisfactory situation. It means the lives of the 506 mln EU citizens will be heavily influenced by a leader representing only a small percent (16%) of the total EU population. An even smaller percentage if the new leader were to come from France or Italy.

Muted global growth for another two years undermines resilience to negative shocks Global growth will be lacklustre over the next two years as the slowdown in China and other emerging markets continues to weigh on the world economy, Moody’s Investors Service said in a report.

Moody’s forecasts that G20 GDP growth will average 2.8% in 2015-17, only 0.3 percentage point higher than in 201214 and below the 3.8% average recorded in the five years before the global financial crisis. The rating agency’s latest forecasts are broadly unchanged from its last quarterly Global Macro Outlook in August.

“Muted global economic growth will not support a significant reduction in government debt or allow central banks to raise interest rates markedly,” said the report’s author Marie Diron, Senior Vice President, Credit Policy. “Authorities lack the large fiscal and conventional monetary policy buffers to protect their economies from potential shocks.”

G20 GDP growth is forecast to rise

slowly to 2.8% in 2016 and 3% in 2017 from 2.6% in 2015. Emerging markets’ contribution to G20 GDP growth in 201517 will fall to the lowest levels since the early 2000s. The combination of persistently low commodity prices and subdued global growth will maintain disinflationary pressures, weigh on revenues and hamper attempts to deleverage.

The main risks to the economic outlook would stem from a bigger than expected global fallout from the Chinese slowdown and a larger impact from tighter external and domestic financing conditions in other emerging markets.

“The direct effects on the global economy from both of these potential risks would likely be limited,” Diron added. “However, advanced economies would be unable to do much to shore up global growth, given policymakers’ limited room for manoeuvre on fiscal and

monetary policy and the high leverage we’re seeing in a number of sectors and countries.”

In China, Moody’s forecasts GDP growth of just under 7% in 2015, 6.3% in 2016 and 6.1% in 2017. The gradual economic slowdown reflects a trade-off between further reforms - aimed at lessening the economy’s dependence on investment and credit and increasing the influence of market mechanisms — and the risk of jeopardising employment and social stability.

Commodity prices are unlikely to rise significantly in the next few years. A large inventory build-up, a slow supply response and muted demand from China and other key importers will all weigh on prices.

Moody’s expects no significant rise in prices for energy, metal and mining commodities in the next two years. For commodity producers, the economic

effects of low commodity prices will spill over into other sectors through supply chains and weaker growth in household income. As well as weaker commodity prices, a range of country-specific factors will contribute to lower growth in emerging markets and could lead investors to reassess growth and return prospects in some countries. For example, political uncertainty will be a negative factor in Brazil and Russia and infrastructure shortages will hamper growth in South Africa.

Slow growth in emerging markets will not derail growth in advanced economies, where the economic outlook is likely to be supported by more accommodative monetary policy in the years ahead.

Growth is expected to be broadly stable in the US, Europe and Japan. For 2015-17, Moody’s forecasts average GDP growth at around 2.5% in the US, the UK and Korea and 1.5% for the euro area.

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Norway is world’s most prosperous country Cyprus moves up 1 place, but 7 behind rival Malta among Eurozone members

By Douglas McIntyre According to private bank Legatum, Norway is the world’s most prosperous country, or more specifically it is at number one on the 2015 Legatum Prosperity Index. One of Legatum’s goals is to restore faith in capitalism. Norway is a socialist nation, but that seems to be beside the point.

Many other lists created to showcase the countries that are the best governed, with the best quality of life for its citizens, and that provide the best environment for businesses to succeed put the Scandinavian nations in the top spots. Legatum is no different. Its top ten include Denmark, Sweden, The Netherlands and Finland.

Although the Legatum research yields some of the same “best nations” as other lists do, the organisation believes its overall approach is different. It is not based on just the ability to be rich and live in a country that favours the rich. Like Gallup, it considers “well being” (even though Panama is number one on the Gallup list, Denmark and Sweden are found in its top ten). The Legatum analysis focuses on personal freedom, health, safety, entrepreneurship and “opportunity” along with well being.

Norway gets good marks for education, its economy and what Legatum calls “social capital” (well being and income as they are associated with social networks and relationships).

The countries at the top of the Legatum list should not be a surprise, given the organisation’s faith in capitalism. The media alway notes the lack of the U.S. presence on any such top 10 list. The United States is, however, 11th out of 142 on the Legatum list. Canada is fifth and Australia sixth.

Combine these two with the United Kingdom in 15th place, and the former British Empire ranks nearly as well as the Scandinavians.

Cyprus ranks 39th globally in the 2015 Prosperity Index, having risen by one place since last year and 15th out of 19 in the eurozone, seven behind rival Malta, three ahead of Greece. Ironically, Germany is ranked last.

Cyprus’s best performance is in the Governance subindex, where it ranks 26th in 2015. Cyprus’s lowest rank is in the Social Capital sub-index, where it ranks 86th in 2015.

China is 52nd on the list, which is only reasonable for an analysis based largely on developed capitalist countries.

Russia, another foe of capitalism, ranks 58th.

The long-term presence of certain countries on all these

lists, no matter what methodology is used, that are considered the “worst” or “bottom” fall into certain regions.

Legatum’s analysis shows that the most troubled countries in Africa are not homes to functioning capitalism or well being. Zimbabwe holds the 128th spot, Liberia is at 132nd, Sudan at 134th, Chad at 139th and the Central African Republic is in the 142nd and last position. It does worse even than Afghanistan, which is just above it in the ranking.

Among the things that the Legatum survey and other reports like it do not need to point out is that living in Norway is better than surviving in the Central African Republic.

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financialmirror.com | COMMENT | 9

Singapore is the best country for ‘doing business’ Cyprus improves in World Bank annual report, mainly on much-needed reforms Singapore is once again the best country for doing business, with a swift and transparent judicial system, just 150 days to resolve commercial disputes and since early last year, litigants and lawyers have been able to file cases, exchange documents, schedule hearings, and hold conferences entirely online, according to the World Bank’s annual review.

But other countries have been catching up with significant reforms and regulations that enhance business activity, according to the “Doing Business 2016: Measuring Regulatory Quality and Efficiency”, with Cyprus mentioned several times for the significant improvements and changes it has implemented from June 2014 to June this year.

While the best countries to do business are also the wealthiest and economically mature, an unlikely FYROM has made it into the top ten, based purely on its efficient and quick processes for new business and utilising online services.

On the other hand, half of the worst ten are also among the richer in the world as regards natural resources, where obviously national wealth is not re-invested in building infrastructure and transparent public procedures.

The World Bank’s latest “Doing Business” report concluded that it takes roughly 20 days to start a business on average globally, but in some nations it can take four or five times as long.

The 13th report rated 189 economies in ten separate areas of business regulations, including starting a business, permits, getting electricity, property registration, access to credit, and taxes.

As regards Singapore, a streamlined construction process also contributes to the city state’s favourable business climate. It takes only 26 days to get a construction permit in Singapore, the quickest proceedings of any country.

As Dr. Rita Ramalho, lead author of the Doing Business 2016 report explained, relatively simple and efficient legal procedures such as these do more than just support the businesses they regulate.

“Countries with simpler business processes tend to have a higher level of firm creation and a higher level of job creation,” she said. In other words, when regulations allow entrepreneurs to function and be creative, the whole economy improves.

Wealth typically coincides with a supportive business environment, and while this is not always the case, Singapore residents are quite wealthy. Each resident earns $51,150 annually on average. By contrast, the United States has a gross national income (GNI) per capita of $55,200.

The World Bank report found that entrepreneurs in 122 economies saw improvements in their local regulatory framework last year, documenting 231 business reforms to reduce the complexity and cost of regulatory processes.

Cyprus and nine other nations (Costa Rica, Uganda, Kenya, Mauritania, Uzbekistan, Kazakhstan, Jamaica, Senegal and Benin) are among the economies that improved the most implementing 39 regulatory reforms making it easier to do business.

Sub-Saharan Africa alone accounted for about 30% of the regulatory reforms making it easier to do business in 2014/15, followed closely by Europe and Central Asia.

This year’s report adds indicators of quality to four indicator sets: registering property, dealing with construction permits, getting electricity and enforcing contracts. In addition, the trading across borders indicators have been revised to increase their relevance.

As regards insolvency reforms, three of the ten top improvers reformed their contract enforcement system,

while both Cyprus and Kazakhstan introduced fast-track simplified procedures for small claims.

Most other insolvency reforms focused on introducing new reorganisation procedures or improving the existing reorganisation framework. Chile and Cyprus introduced court-supervised reorganisation procedures.

Several insolvency reforms recorded in 2014/15 were aimed at facilitating the continuation of the debtor’s business during insolvency proceedings. Cyprus and Rwanda introduced provisions allowing the invalidation of preferential and undervalued transactions concluded by the

debtor before the commencement of insolvency proceedings.

However, Cyprus has a lot to learn from Azerbaijan that was among those making the biggest improvements in the ease of dealing with construction permits and establishing a construction sector one-stop-shop.

The “Doing Business” report recorded 22 reforms making it easier to get electricity in 2014/15. Most of the reforms reduced the number of days required to complete a certain procedure, including those in Botswana, Cyprus, Taiwan, CONTINUED ON PAGE 10

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Singapore is the best country for ‘doing business’ CONTINUED FROM PAGE 9

China, Togo and Vietnam. However, Cyprus still has a long way to go on this matter.

Elsewhere, credit bureaus in Cyprus and the Kyrgyz Republic began distributing both positive and negative credit information on borrowers — and the one in Cyprus (Artemis) began reporting five years of credit history on both borrowers and guarantors to banks and other financial institutions.

Cyprus was among 24 economies improving the most across three or more “Doing Business” topics in 2014/15. It fared well in getting electricity, getting credit, paying taxes, enforcing contracts and resolving insolvency.

The World Bank report said that “the utility in Cyprus [EAC] made getting electricity easier by reducing the time required for obtaining a new connection.

“Cyprus improved access to credit information by allowing credit bureaus to collect and report positive credit information and to report credit histories for both borrowers and guarantors.

“Cyprus made paying taxes easier for companies by facilitating online payment of corporate income tax. At the same time, Cyprus raised the contribution rate for social insurance paid by employers, lowered the tax brackets for the social contribution fund, raised the rate on interest income and increased the vehicle tax.

“Cyprus made enforcing contracts easier by introducing a fast-track simplified procedure for claims worth less than EUR 3,000. Cyprus made resolving insolvency easier by introducing a reorganisation procedure as well as provisions to facilitate the continuation of the debtor’s business during insolvency proceedings and allow creditors greater participation in important decisions during the proceedings.”

The report did not record and impediments or regulatory obstacles in setting up or maintaining a business.

THE BEST COUNTRIES FOR DOING BUSINESS 1. SINGAPORE * Cost of starting a business (as pct. of income): 0.6% * Total tax rate: 18.4% * Income per capita: $51,150 Despite making no significant reforms, Singapore is once again the best country for business. It is notable for its swift and transparent judicial system. The average commercial dispute takes just 150 days to resolve, the shortest turnaround worldwide. Moreover, since early last year, litigants and lawyers have been able to file cases, exchange documents, schedule hearings, and hold conferences entirely online.

A streamlined construction process contributes to the city state’s favourable business. It takes only 26 days to get a

construction permit in Singapore, the quickest proceedings of any country. Additional hurdles to owning property are fairly low. Business owners are charged on average just 0.3% of their property’s value in construction-related fees, one of the lowest such compliance costs in the world. Business owners also pay an effective tax rate of just 18.4%, one of the lowest rates worldwide.

2. NEW ZEALAND * Cost of starting a business: 0.3% * Total tax rate: 34.3% * Income per capita: $43,837 New Zealand is home to 4.5 mln people, and its economy depends largely on agriculture, manufacturing, and tourism.

It has one of the best environments in the world for business and ranks highest in the world in ease of starting a business, obtaining credit, registering property, and protecting minority investors. An entrepreneur can start a business in half a day, with no minimum capital required. By contrast, it takes five times as long to start a business in Australia.

With the exception of Singapore, no other country has more ideal conditions for doing business. And conditions continue to improve. Since last year, regulators in New Zealand have improved payment monitoring and confirmation processes, ultimately reducing the time it takes to establish an electricity connection.

3. DENMARK * Cost of starting a business: 0.2% * Total tax rate: 24.5% * Income per capita: $61,310 Since June 2014, Denmark has implemented an online platform to facilitate simultaneous business and tax registration for entrepreneurs. Under the improved conditions, it takes three days to start a business. Though the Scandinavian country ranks 29th in the world for ease of starting a business, its handling of international trade is the most business friendly in the world. With no fees for documentation or border compliance for imports and exports, along with a documentation time that can be measured in minutes, no nation makes it easier, or cheaper, for businesses to trade with other nations.

With conditions so conducive to doing business, Denmark’s people are relatively prosperous and the national economy is growing modestly, up 1.1% and 1.6% in the last two years, respectively.

4. SOUTH KOREA * Cost of starting a business: 14.5% * Total tax rate: 33.2% * Income per capita: $27,090 No country in the world has better access to reliable electricity than South Korea. It takes just 18 days for a typical enterprise to establish a new connection, tied for the fastest time in the world. For businesses, loss of electricity often

leads to a significant loss of revenue. Not only do businesses in Seoul lose power very rarely, they also receive compensation for outages that last longer than five minutes.

South Korean businesses are also protected by one of the most efficient judicial systems in the world. Court cases are filed and conducted entirely online, one of only a few nations where this is the case, while the typical commercial dispute is resolved in just 230 days. Despite being generally conducive to business, South Korea has a comparatively high cost of entrepreneurship. The average cost of starting a business is 14.5% of the country’s GNI per capita.

5. UNITED KINGDOM * Cost of starting a business: 0.1% * Total tax rate: 32.0% * Income per capita: $42,690 Bureaucratic and regulatory conditions are among the most business friendly in the world. The country scores within the 75th percentile in eight out of ten measures of ease of doing business. Entrepreneurs have a significant advantage in the U.K. – with no capital, an entrepreneur can start a business in under five days.

In particular, the U.K. has improved its tax system in the past year, reduced the corporate income tax rate and decreased the contributions to social security that employers are required to pay. Other changes were not as beneficial.

Court fees associated with enforcing contracts went up in the U.K over that time.

6. UNITED STATES * Cost of starting a business: 1.1% * Total tax rate: 43.9% * Income per capita: $55,200 The United States is the largest economy in the world and the sixth best for doing business. Other than New Zealand, no country has a better credit framework. All American adults are covered by a credit bureau and have some of the most extensive legal rights in the world. The U.S. legal framework also supports recoveries from total financial ruin. The country boasts multiple success stories whereby soon after declaring bankruptcy, a previously insolvent company reemerged with a new corporate structure and focus. Kodak, Marvel, and Fruit of the Loom — today major multinational corporations — all returned to profitability partly due to the U.S.’s favourable reorganisation and refinancing laws.

Starting a business in America, however, is not as easy as it is in other business-friendly countries; it is a six-step process, and the procedure takes about six days.

7. SWEDEN * Cost of starting a business: 0.5% * Total tax rate: 49.1% * Income per capita: $46,219 Like other Scandinavian countries, Sweden is one of the best nations for business. It performs well in every measure

November 11 - 17, 2015

financialmirror.com | COMMENT | 11 of business ease and particularly well in infrastructure measures. Establishing a new electricity connection is a three-step process and takes just 52 days compared to the five steps and 90 days in the U.S. Since last year, the Swedish government also made starting a business much easier by requiring its business registration office to process registrations within five days. Now, starting a business is a three-step process and takes an average of seven days to complete. These steps are also relatively cheap to do, costing around $230 or just 0.5% of GNI per capita.

8. NORWAY * Cost of starting a business: 0.9% * Total tax rate: 39.5% * Income per capita: $103,050 Norway is one of the richest countries in the world and wealth often coincides with a healthy business environment.

While companies in many countries register their businesses by mail, Norway established in the past year an online system for entrepreneurs to register their businesses and bank accounts. The new system likely helped reduce the time required to start a business. Now, it takes just four steps and four days on average to start a company compared to the five steps and seven days two years ago. While property registration is still done by mail, it is a one-step process that typically takes just three days. The country is currently developing an online property registry.

9. FINLAND * Cost of starting a business: 1.0% * Total tax rate: 37.9% * Income per capita: $47,380 No country has a better legal framework to assist failing companies than Finland. It takes 11 months on average for a company gone bankrupt to regain solvency, and investors typically recover about 90% of assets. By contrast, bankruptcy proceedings in the U.S. take 18 months, and investors recover 80.4% of assets, on average. Finnish law allows some bankrupt companies to take on new loans while insolvent, and all parties involved are permitted to participate in corporate reorganisation. It also has far more early screenings for insolvency cases, allowing for speedier proceedings. Over the past year, Finland reduced its corporate income tax rate and increased the social security contributions employers are required to pay, making taxes for businesses less costly overall. Each year, companies pay around 38% of profit in taxes on average.

10. FYROM * Cost of starting a business: 0.1% * Total tax rate: 12.9% * Income per capita: $5,070 Based on ten measures of a country’s regulatory climate, FYROM is the tenth best country for doing business. In particular, it is easier to start a business than it is in all countries other than New Zealand – it is a one-step, one-day process, whereby entrepreneurs can register all necessary documents in an online filing system accessible 24/7. This recently established process eliminates the need for notary services and reduces the time, cost, and procedures for starting a business. A similar system is in place for construction permitting, whereby all necessary documents are available online, accompanied by a comprehensive list of steps and requirements, and reviewed by a certified architect, receiving nearly the best possible rating for building quality control.

THE WORST COUNTRIES FOR DOING BUSINESS 1. ERITREA * Cost of starting a business: 38.1% * Total tax rate: 9.2% * Income per capita: $530 Eritrea is one of the poorest countries in the world.

Government regulation, when it exists, is also the farthest removed from what most consider best practices with no regulations or policies at all regarding new building construction. While regulations slowing international trade can hurt business, too little regulation can as well. Eritrea has no documentation or broader compliance procedures in place for imports and exports.

2. LIBYA * Cost of starting a business: 26.9% * Total tax rate: 22.0% * Income per capita: $7,920 Although wealth often coincides with supportive business

environment, Libya is an exception. The oil-rich country’s GNI of $7,920 per capita is far higher than other countries ranked as poorly for doing business. It is the lack of regulation that makes it one of the least hospitable countries in the world for business. There are no procedures in place for property registration and no official means of obtaining construction permits. Additionally, it takes 118 days to establish electrical connectivity in a new building, one of the longest turnarounds worldwide.

3. SOUTH SUDAN * Cost of starting a business: 330.1% * Total tax rate: 6.9% * Income per capita: $960 Gaining independence from Sudan in 2011, South Sudan is one of the youngest nations in the world. It is also one of the worst countries for business. The 23 procedures required to obtain a construction permit take about 124 days to complete, making it one of the most complex and timeconsuming in the world. Additionally, infrastructure is so poor that it often takes well over a year to connect a building with electricity, while there are no restrictions on overtime work and no paid vacation for workers.

4. VENEZUELA * Cost of starting a business: 88.7% * Total tax rate: 9.9% * Income per capita: $12,820 Under the rule of former President Hugo Chavez, a large share of the nation’s economy has been nationalised, including the oil and gas industry — the cornerstone of the Venezuelan economy. Starting a company equires 17 separate procedures — the second most of any nation measured — and it takes 144 days, longer than any country reviewed. Also, a lawyer is required for legal assistance when incorporating a company, which can cost nearly 90% of the country’s GNI per capita.

5. CENTRAL AFRICAN REPUBLIC * Total tax rate: 0.0% * Income per capita: $330 CAR is one of the poorest countries in the world and the fifth worst for doing business. The country’s internal conflict and poor infrastructure combined with inefficient, low quality business regulations are some of the obstacles businesses face. It takes nearly 100 days to establish a new electricity connection, and it costs close to $5,000. Once established, the connection is one of the most unreliable electricity sources in the world. Businesseses reported losing about one-fourth of their revenue due to power outages.

6. CONGO, DEM. REP. * Cost of starting a business: 29.3% * Total tax rate: 27.5% * Income per capita: $410 One of the least business friendly countries in the world, it ranks especially poorly in getting electricity and enforcing contracts. It costs about $63,000 to connect a building with electricity, and enforcing contracts costs an average of 80.6% of the claim. Despite an expansive list of obstacles to doing business, conditions have improved in some areas. Since June 2014, the country has made it easier for entrepreneurs to start a business by reducing the minimum capital

requirement and simplifying the registration process.

The nation is home to abundant resources, which were the focal point of a five year war involving multiple countries.

The war resulted in an estimated 6 mln deaths.

7. CHAD * Cost of starting a business: 150.4% * Total tax rate: 31.3% * Income per capita: $1,010 Africa’s fifth-largest nation is one of the worst in the world to do business. Poor infrastructure and recurring internal conflict since it gained independence in 1960 have hurt residents and businesses. It takes 67 days and nearly $8,000 to establish an electricity connection, far longer and relatively expensive compared to other countries. Once established, the connection is one of the least reliable worldwide.

Despite its unsupportive business environment, Chad has made regulatory improvements in the past year by lowering its property transfer tax, making it easier for entrepreneurs to trade land and real estate.

8. HAITI * Cost of starting a business: 235.3% * Total tax rate: 23.8% * Income per capita: $830 The economy and public welfare in the poorest nation in the Western Hemisphere have been hindered by years of dictatorship as well as a 7.0 earthquake that devastated the capital, Port-Au-Prince. These obstacles have likely contributed to the nation’s poor business climate.

Formal registration of a company is so complicated that the process cannot be completed without using the services of third parties – lawyers and notaries. It also takes nearly 100 days to start a business, close to five times the global average.

When considering the fact that the expenses of starting a business are more than double the country’s GNI per capita, it is not surprising that there are only six registered private companies per 100,000 working-age adults compared to 1,507 per 100,000 in New Zealand.

9. ANGOLA * Cost of starting a business: 22.5% * Total tax rate: 21.7% * Income per capita: $5,300 The sub-Saharan nation is one of the least business friendly countries in the world. It would cost an entrepreneur 22.5% of the country’s GNI per capita and take over a month to start a business. While the process is expensive and time consuming, it has improved since last year. Since June 2014, the country has made it easier to start a business by improving the registration process and reducing registration fees. The corporate tax rate has also been reduced since.

10. EQUATORIAL GUINEA * Cost of starting a business: 99.4% * Total tax rate: 20.7% * Income per capita: $13,340 The Central African nation is resource-rich which has led to a great deal of wealth. The country’s GNI per capita is the highest of any nation on the continent. This prosperity, however, has not translated into improved welfare for the population. According to the UN, nearly one in ten children do not live to the age of five, and less than 50% of the population has access to clean drinking water.

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Vilanos finds investor interest in China Chinese investors are showing great interest in the Cyprus property sector, as evidenced during the international property exhibition held recently in Shanghai, the largest city and port of China considered as one of the most important financial centres.

Taking part at the at the 10th Overseas Property and Immigration Investment Exhibition at the Shanghai International Convention Centre, where around 30,000 visitors arrived, was Vilanos Real Estate Agents, the only real estate agency from Cyprus with little aid from the Ministry of Energy, Trade, Industry and Tourism.

On the sidelines of the exhibition, veteran real estate consultant Alekos Vilanos held contacts in Shanghai, during which it was once again reaffirmed that Cyprus remains a reliable business hub because of its strategic position in the Mediterranean, with quality services and an ideal location for investment, mainly in Limassol district.

The property and investment show saw 110 exhibitors from 23 countries, including the US, England, Italy, Spain, Turkey, Australia, Germany, Belgium and Greece. Almost all the countries that took part in the exhibition, received an important subsidy from their governments, whereas in the case of Turkey, the government sponsored 80% of the cost of participation in the exhibition, according to Vilanos.

“Everyone who passed by or visited the Cyprus pavilion showed particular interest, sending, at the same time, encouraging signs for the real estate sector on the island.

Some expressed a desire to visit Cyprus soon,” Alekos Vilanos said.

The representatives of Vilanos Real Estate Agents advised visitors on the services provided by the company showing interest in small houses and apartments of two and three bedrooms, as well as for large investments in real estate.

In addition, the visitors of the exhibition were informed about both programmes regarding the granting of permanent residence to nationals of third countries, and the plan for the exceptional naturalisation of non-Cypriot investors and entrepreneurs.

“China is an important economic partner and the

government, relevant ministries and agencies, should find solutions in order to facilitate investments by China in Cyprus,” Vilanos said upon his return to Cyprus.

“One way is to expedite the procedures for granting visas to Chinese citizens. Our company believes that an important milestone in strengthening and developing the relations between Cyprus and China in the financial, tourism and

investment sector, as well as in finding solutions that will pave the way for China’s investment in Cyprus, was the official visit of President Nicos Anastasiades to China last month where an announcement was made that several visa processing centres will be established in China by the end of 2016 to assist the embassy with the consular services,” Vilanos said.

Property price fall slows down in 3Q Apt prices down 0.4%, houses -0.5%, says RICS survey During the third quarter of he year, the economy showed some signs of stability, with the performance being better than expected and tourism mildly outperforming forecasts, effectively helping to slow down a fall in property prices.

Given prevailing economic conditions and a continued turbulence in the banking system, there were few transactions during the quarter although volume was higher on a year-on-year basis, according to the latest survey by RICS Cy[prus.

Local buyers in particular were the most discerning as unemployment is at high levels and the prospects of the economy maintained the lack of interest. Furthermore, those interested are trying to access bankfinance.

The RICS Property Price Index recorded falls in most towns and asset classes while the rate of decrease is slower than previous quarters. In addition, certain districts have shown signs of stability as Paphos, Larnaca and Famagusta are progressively bottoming out.

Across Cyprus, movements in property prices appear mixed as residential prices for flats fell by 0.4% and 0.5% for houses. The biggest drop was in Famagusta (-1.2% for flats) and in Limassol -3.2% for houses. A decrease of 0.3% for houses was noted in Nicosia.

Values of retail properties fell by an average 0.6%, offices were stable at the same level, and warehouses increased by 1.1%.

Compared to Q3 2014, prices dropped by -1.9% for flats, -1.3% for houses, -4% for retail, -2.7% for offices and -1.8% for

warehouses. On a quarterly basis, rental values increased by 0.3% for apartments, +1.5% for houses and +2.6% for offices. A decrease of -1.1% for retail units was noted and -0.1% for warehouses. Compared to Q3 2014, rents dropped by -1.5% for flats, -0.5% for houses, -4% for retail, -2.5% for warehouses and -0.2% for offices.

The majority of asset classes and regions continue to be affected, with areas that had dropped the most early on in the property cycle now nearing or at the trough. Paphos and Famagusta are showing some signs of price stability. Paphos is the only district with positive returns in all asset classes when compared to Q3 2014.

At the end of Q3 2015 average gross yields stood at 3.9% for apartments, 2% for houses, 5.2% for retail, 4.3% for warehouses and 4.5% for offices. The parallel reduction in capital values and rents is keeping investment yields relatively stable and at low levels (compared to yields overseas). This suggests that there is still room for some repricing of capital values to take place, especially for properties in secondary locations, said the RICS Cyprus report.

“The economy, that was an upgrade by Fitch, is gradually recovering, despite the non-performing loans and unemployment remaining problems that require time and serious effort,” said RICS Cyprus board member Jennifer Petridou Sharpe.

“Despite the smaller number of transactions in the third quarter, trade volume was up on an annual basis as the fall in prices has created new interest in the market,” she added.

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financialmirror.com | PROPERTY | 13

Retiring to the countryside and rural investments µy Antonis Loizou Antonis Loizou F.R.I.C.S. is the Director of Antonis Loizou & Associates Ltd., Real Estate & Projects Development Managers

As the upcoming Christmas holidays start to creep up on us and we’re all in a travelling mood, I visited Platres, which brings out its particular graces during the winter months. Its slow but steady development, upgrading of services and infrastructure, such as the new sports and cultural centre, the Adventure Park, etc, have much to contribute in making the place more attractive. However, the village remains subdued in terms of attracting tourists and visitors. Gone are the times when vacationers from the major towns would move there for 2-3 months in summer. Now, is limited to the weekends, with same-day visitors and to some extent holidaymakers who benefit from the social insurance grants.

Unfortunately, this imaginative project for ‘social tourism’ conceived during Archbishop Makarios’ presidency, which was designed to support mountain resorts has almost disappeared from the mountain areas, as gradually the operators of the seaside hotels also moved in and eventually grabbed the bulk of this group of subsidised holidaymakers.

Since then, the hotels in themountain resorts have generally suffered because of the preference for beach hotels whereas the region’s flagship hotel, the Forest Park, despite the best efforts of its owners, is showing signs of aging and diminishing glory of the past. To this end, it is a shame to see the traditional hotels in Troodos, Platres, Kakopetria and Pedoulas take a turn for the worst and close down.

The property market for the mountain resorts is made up chiefly from Nicosia (50%), Larnaca (20%) and Limassolians (30%). Vacationers in terms of holiday homes are mainly in the area of Moniatis/Saittas (15%), Platres (10%), Kyperounta (5%) and the remaining areas of Pedoulas, Kalopanayiotis, Prodromos and other villages account for 70%. Investors or buyers of mountain resorts are mostly aged over 60, relatively affluent and coming from the business and professional sectors. The aim is mainly to buy traditional houses for restoration, or the purchase of land (500-plus sq.m.) to build a holiday home. Old houses in the heart of the villages have seen increased demand from Cypriots, albeit there is a some demand from foreign buyers, but very limited, mainly due to a supply shortage. Super-luxury homes have been built mainly in the Moniatis-Saittas area and to a lesser extent in Platres, while the other mountain resorts have rather average-quality homes.

The distance from urban centres has played a major role in the development of the mountain resorts. The new Limassol-Saittas road (expected to be completed around 2020) will add to the demand in the area and might also increase the interest for retirement homes by Cypriots and foreigners, but the present economic situation makes the year 2020 deadline very doubtful. Unlike foreigners, very few Cypriots have dared to retire to the mountain resorts, while

those who tried, abandoned the effort after a while. This failure derives from several reasons.

• Cypriots love company and cannot be alone for long.

Unlike foreigners, who might relax with reading a book, listening to music, studying nature and various traditional handicrafts, tours of the area, etc., these are not issues of particular interest to the Cypriot.

• The close relationship a family has with its children and grandchildren, even the limited business activities, limit the time spent at the retirement home.

• The lack of services such as, doctors, supermarkets, car mechanics, technicians, general repairs, etc., does not help either.

• Depending on the age of the buyer, the inevitably many levels of the yard or the house does not help and the installation of a lift is a must, while the lack of proper maintenance, is another matter, as are general maintenance costs.

Despite all these obstacles, and some villages which survive on a core number of locals, there is potential for a better life to retire to the mountain resorts. Having discussed the issue with several Cypriots who have retired to the mountain resorts coming mainly from the towns, allow me to present the following ‘tips’ for future retirees: • Dispose of your house in town, otherwise you will be living in both your houses. If you have a large house in town and want a presence there, downsize your property selling the house and in exchange buy a similar sized apartment for your town visits only.

• Investigate who else has retired to the area you like, to see if there is a potential of “good company.”

• Find out if there are restaurants or other places that are open throughout the year. The village itself might not have one but a nearby village might have a big selection, as is the case of the area between Platres and Omodos.

• Explore the nature trails, local monasteries where you can seek friendships that might even develop into spiritual conversations.

• Take an interest in forestry and nature gardening, fishing

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in the dams, find out and take part in the local cultural and other traditional activities.

The mountain resorts are not necessarily inexpensive when it comes to the property market. Plots, if available, in Moniatis are around EUR 100- 120/sq.m., in Platres EUR 300/sq.m., in Pedoulas EUR 170/sq.m., etc. As regards the construction cost, this will vary drastically, depending on the altitude and the levels or incline of the land.

When estimating the cost for a home, you must also calculate about EUR 2,000/sq.m. if you have gradients of if you need a retaining wall, including the cost for heating and possibly a garage.

Finally, I would like to indicate that the Prodromos and Platres areas are more restrictive than others, while the lack of good-sized local population have reduced the demand for more “permanent” residents for retirement. Unfortunately, Prodromos village failed to attract new investors, not just because of changing climatic conditions, such as the lack of snow, but also the efforts by the German owner of the Columbia, who bought the Berengaria Hotel to turn it into a super-luxury hotel spa was faced with all sort of obstacles mainly due to the lack of water and the inability of the authorities to assist. Mr Sheller eventually sold it and thereafter the Berengaria remains a ruin, a monument to Cypriot narrow-mindedness and the total absence of governmental interest.

A similar fate awaited the proposal by the HadjiIoannou family to set up a university in Pedoulas. Perhaps if these two projects were successful, retiring to the countryside would be easier.

Regardless of all the above, I take my hat off to the president of the Kalopanayiotis council who has upgraded the image of this village (photo above) with quality investments in an area that is becoming popular by attracting visitors, albeit on weekends. The flowers in the streets, the glass elevator and the new spa, as well as agrotourism are only some of the projects that the village should be proud of. An example to b followed by others, I hope. www.aloizou.com.cy - ala-HQ@aloizou.com.cy

November 11 - 17, 2015

14 | MARKETS | financialmirror.com

Booming US economy gives Fed confidence

By Oren Laurent President, Banc De Binary

It’s all about the Fed. At least that’s what market analysts, currency traders, bankers and investors are focusing on heading into the Fed FOMC meeting on December 15/16. In the run-up to the final Fed pow-wow of the year, all manner of economic data will be considered before any interest-rate decision is announced. We have seen from the October meeting of the Federal Reserve that conditions on the ground had improved dramatically, but not quite to the point where a rate hike could be justified.

The October statement was significant in that no mention was made of China weakness or emerging market economies. All obstacles have effectively been cleared so that the only determinants of a rate hike will be the strength of US data. Janet Yellen and other Fed policymakers have not minced their words in their determination to raise interest rates gradually as opposed to sharp and erratic hikes. On Wednesday, November 4, Yellen offered testimony in Washington DC where she outlined plans for a possible December rate hike.

TARGETS WITHIN RANGE The Fed has several economic targets in mind, including a 4.9% unemployment rate and 2% inflation. Both of these measures are on track to being achieved, but are not quite

there yet. On Friday, November 6, the figures for non-farm payrolls came in. The consensus estimate was 180,000, but the actual number of NFP jobs increased by 271,000. This figure marks the steepest gain since January. NFP jobs increased between January and February, then plummeted in March and gradually built up again. The decline began in May when 260,000 jobs were added and continued through to September when the number of NFP jobs added was 137,000.

The present month saw a spike of over 134,000 jobs between September and October.

The data is typically released on either the first or the last Friday of the month and has a significant impact on the USD. The US dollar index was trading at 99.15 for a gain of +1.9% after the news, close to the 52-week high of 100.39.

By the end of the trading week, the effect of the NFP jobs report helped the major indices to finish in the black. The Dow Jones Industrial Average closed at 17,910.33 for a gain of 1.4% for the week, the NASDAQ index closed at 5,147.12 for a gain of 1.8% for the week, and the S&P 500 index closed at 2.099.20 for a gain of 1% for the week.

As a result of the NFP, unemployment moved from 5.1% to 5%. The Fed target is well within range now, and this makes the likelihood of a rate hike in five weeks’ time a real possibility. That the US unemployment rate is at a 7.5 year low is significant and it shows that quantitative easing policies have worked in the US. In order to protect the economy from disinflation, and to retain a strong dollar, the Fed will likely move sooner rather than later. Of equal importance is the increase in hourly earnings, with a $0.09 increase recorded.

The Fed effectively considers the current unemployment rate consistent with full employment. The figures that were released recently counterbalance the weakness of the

previous two months.

REACTION TO NFP REPORT Markets didn’t waste any time reacting to the positive NFP report. The USD surged against a basket of currencies, and emerging market currencies plunged accordingly. It is becoming increasingly more evident to investors and currency traders everywhere that a rate hike is imminent.

Such was the bullish sentiment in the futures markets that a 70% likelihood of a rate increase in December was recorded.

Just a day earlier, that figure was 58%. So substantial was the NFP number for October that anything over 150,000 would have been considered grounds for raising the interest rate for the first time in nine years. Even those who opposed the rate hike, such as Chicago Federal Reserve Bank President Charles Evans, are now commenting that the US economy is substantially better. During September, a survey by Reuters found that 71% of banks dealing with the Fed expected a December rate hike, but that figure has now jumped to 88% of banks. If we are to go by market sentiment, it is clear that the trajectory for a liftoff is just ahead of us.

Please note that this column does not constitute financial advice.

Why analysts are chasing Facebook shares higher

By Chris Lange Facebook Inc. (NASDAQ: FB) won on earnings through explosive mobile usage, and as a result the stock is cruising near alltime highs. Just looking around these days, it is evident that most people use their smartphones for social media, whether it’s posting pictures of their lunch to Instagram or hitting up Facebook Messenger at a red light. The obsession is very real, especially on the mobile platform. Analysts have seen evidence of this and are raising their ratings and targets to new highs, reflecting not only the strong earnings from this quarter but also the equally strong outlook as well.

Facebook reported that revenue was $4.501 bln, up from $3.203 bln last year and above the $4.37 bln consensus estimate from Thomson Reuters. The adjusted earnings per share (EPS) was $0.57, versus $0.43 a year ago and the consensus estimate of $0.52.

Of the $4.501 bln in revenues, some $4.299 bln was in advertising, up 45%.

Facebook’s total costs and expenses rose by 68% to $3.042 bln. Excluding the impact of year-on-year changes in foreign exchange rates, the company showed that total revenue would have increased by 51%.

The metrics that matter were as follows: - Daily active users (DAUs) were 1.01 bln in September, up 17%.

- Mobile DAUs were 894 mln, up 27% y-o-y.

- Monthly active users (MAUs) were 1.55 bln, up 14%.

- Mobile MAUs were 1.39 bln, up 23%.

What is shocking about these statistics is that with a global population of roughly 7.4 bln, DAUs total 13.6% and MAUs total nearly 21% of the entire global population.

Considering this global exposure, Facebook is easily the largest media stock out there, with a market cap of over $300 bln. The next largest media stock would be Disney with a market cap of roughly $190 bln.

Making such a monumental move to new

highs, Facebook is drawing analyst calls like moths to a flame. While most firms have Buy or Outperform ratings, many price targets were hiked: - Merrill Lynch (Buy) increased its objective to $125 from $115.

- BMO Capital Markets raised its target to $105 from $94.

- Stifel Nicolaus (Buy) raised to $120 from $108.

- RBC Capital (Outperform) raised to $130 from $105.

- Morgan Stanley (Overweight) raised to $120 from $110.

- Credit Suisse (Outperform) raised to $135 from $115.

- Barclays (Overweight) raised to $140 from $105.

- FBR (Outperform) raised to $125 from $118.

- Pivotal Research (Buy) raised to $134 from $127.

- Nomura reiterated a Buy rating with a $115

target.

Shares of Facebook were recently trading up nearly 6% at $110.06, after hitting a new all-time high. The stock has a consensus analyst price target of $112.73 and a 52-week trading range of $72.00 to $110.65.

Facebook’s growth rates may slow, particularly as its penetration efforts reach areas without Internet connectivity or where literacy levels necessary to use the social network are very low. CEO Mark Zuckerberg would like to solve the Internet penetration problem by creating technology that will cover the world in connectivity. However, his most recent efforts in India, the world’s second largest nation by population, have met some resistance. The level of pushback may increase the odds against his long-term “Internet everywhere” plan.

Zuckerberg’s problem, among others, is that critics believe his desire to increase the Internet population is only a means to create a larger audience for Facebook. While that

could be true, it does not argue that people should be deprived of the Internet because Zuckerberg might, and only might, add them to his empire. Spreading the Internet has benefits in and of itself, not the least of which is giving hundreds of millions of people access to the outside world via news, entertainment and social sharing.

Whether Zuckerberg can expand Internet availability widely, he does not need it as a means to reach short-term earnings goals.

Facebook has over $15 bln in the bank, which should support any efforts to drive the company’s audience higher, although user expansion apparently takes care of itself.

There is no evidence that Facebook “buys” users. The social aspect of the social network works well enough on its own. Growth of other social networks supports that.

Could Facebook’s user base reach 2 bln even without universal Internet coverage? As quickly as it is growing, Facebook has a chance. (Source: 24/7 Wall St.com)

November 11 - 17, 2015

financialmirror.com | MARKETS | 15

The limits of Xi Jinping’s grand plan Some projects will bolster China’s economic security or bring much-needed development to impoverished areas.

Others will be about little more than geopolitical bribery, and will require policy banks to throw away money. And as Chinese firms have already found to their cost in Africa, Myanmar and Sri Lanka, such investments can backfire.

Even so, the Belt and Road is a bold strategy that must be taken seriously. It may prove a useful long-term stimulus in underdeveloped markets that badly need better infrastructure. But the sums involved are probably neither sufficient to save Chinese industries suffering from overcapacity nor large enough to pull commodity prices out of the gutter.

It is a light in the darkness, but the gloom remains.

Marcuard’s Market update

by GaveKal Dragonomics As China’s growth slowdown deepens, making even the government’s reduced growth target of 6.5% a year for the rest of this decade look less and less realistic, policymakers are increasingly pinning their hopes on Beijing’s muchtouted “Belt and Road Initiative”.

Not only do they hope that the plan to build new trading networks across Central Asia and the Indian Ocean will boost China’s flagging exports, but that the demand for commodities and capital goods generated by the project will push up prices, rescuing China’s indebted industrial sector from debilitating producer price deflation, which in October was running at -5.9% year-on-year.

However, while we are cautiously optimistic about the benefits of the Belt and Road, the official rhetoric emanating from Beijing severely exaggerates the potential impact of President Xi Jinping’s grand project.

As we detail in the latest edition of the China Economic Quarterly, the Belt and Road envisages building roads, railways, pipelines and industrial corridors across some 67 countries, all linked to upgraded ports across Asia, the Middle East and Eastern Europe. It will require billions of tons of steel and cement, hundreds of thousands of workers, tens of thousands of cranes and diggers, and dozens of new dams, power stations and electricity grids. This explains why, far from being discouraged by China’s soft economy, Beijing is keen to press ahead.

The Belt and Road is China’s second big overseas investment push, following the “Go Out” policy launched in 1999. Then, the goal was for Chinese state enterprises to acquire overseas energy and mining assets. This time, the aim is to create new markets for Chinese construction firms and capital goods makers. Beijing portrays the plan as an international project, designed to create economic linkages across borders.

But there is a significant domestic component: every province in China has its own Belt and Road investment plan and for local governments looking to stimulate flagging growth, it makes sense to jump on the bandwagon.

Policymakers talk about the Belt and Road — short for the Silk Road Economic Belt and 21st Century Maritime Silk Road — as if they were clearly defined projects, but they are no such thing. What actually gets built will depend on individual deals struck between Chinese firms and their foreign partners. Because Chinese policy banks lend to their own, the biggest beneficiaries will be Chinese state-owned construction firms. But projects financed by the multilateral Asian Infrastructure Investment Bank will be open to competitive bidding, so there will also be opportunities for foreign construction firms and capital goods exporters.

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

Beijing has conjured up vast sums to support the Belt and Road: up to $100 bln for the AIIB, another $100 bln for the New Development Bank (formerly the BRICS Bank), and $40 bln for its Silk Road Fund. Yet we calculate that the working capital of these three new funds will actually be just $40 bln, one-sixth the headline figure. By the early 2020s, the AIIB and NDB combined will lend out at most $20 bln a year.

Throw in the $2 bln or so in annual equity investments from the Silk Road Fund, and the projected annual flow from China’s three new finance entities will only be a quarter of global multilateral development finance.

The relatively modest scale of the new China-led multilaterals refutes US fears that China is building a credible alternative to the Bretton-Woods system. For the most part, these institutions will create more competition by stirring other lenders, such as Japan and the Asian Development Bank, into action. This might discomfit the incumbents, but that competition will be welcomed by borrowers looking for cheaper financing.

In truth, though, a lack of funds is not the root cause of Asia’s infrastructure deficit. The real problem is a shortage of bankable projects. The optimum level of infrastructure investment for any country depends on its potential growth rate, structure of growth, commodity prices and quality of governance. History is littered with examples of overoptimistic projections of future needs. China has plenty of cash, but it may struggle to find worthwhile projects to invest in.

There is much that can go wrong. Planners envisage the Belt and Road crossing some of the wildest terrain on earth, with investments in such volatile states as Syria, Iraq, Afghanistan, Pakistan, Yemen, Egypt and Ukraine.

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

17630 1.5109 1.8231 25.209 6.9554 14.5903 1.0725 2.36 292.23 0.65536 3.2194 0.4003 19.85 8.6812 3.9599 4.1512 64.4612 8.678 1.0046 22.65

AUD CAD HKD INR JPY KRW NZD SGD

0.7049 1.3274 7.751 66.3075 123.25 1156.52 1.5297 1.4222

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

0.3772 8.0103 29957.00 3.9225 0.7080 0.3039 1513.90 0.3850 3.6393 3.7497 14.3667 3.6729

AZN KZT TRY

1.0481 306.73 2.9218

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

Swap Rates

CCY

CCY/Period

1mth

2mth

3mth

6mth

1yr

USD GBP EUR JPY CHF

USD GBP EUR JPY CHF

0.20 0.51 -0.14 0.05 -0.78

0.27 0.54 -0.10 0.05 -0.78

0.36 0.58 -0.08 0.07 -0.77

0.60 0.74 0.00 0.11 -0.73

0.93 1.05 0.09 0.22 -0.64

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

CCY/Period USD GBP EUR JPY CHF

2yr

3yr

4yr

5yr

7yr

10yr

0.96 1.02 -0.06 0.10 -0.92

1.26 1.24 0.01 0.10 -0.87

1.48 1.42 0.12 0.12 -0.74

1.67 1.56 0.25 0.16 -0.63

1.95 1.79 0.56 0.27 -0.32

2.22 2.00 0.95 0.46 0.04

Exchange Rates Major Cross Rates

CCY1\CCY2 USD EUR GBP CHF JPY

Opening Rates

1 USD 1 EUR 1 GBP 1 CHF 1.0725 0.9324

100 JPY

1.5109

0.9954

0.8114

1.4088

0.9281

0.7565

0.6588

0.5370

0.6619

0.7098

1.0046

1.0774

1.5179

123.25

132.19

186.22

0.8151 122.69

Weekly movement of USD

CCY\Date

13.10

20.10

27.10

03.11

10.11

CCY

Today

USD GBP JPY CHF

1.1310

1.1278

1.1012

1.0965

1.0690

0.7384

0.7286

0.7171

0.7107

0.7075

135.41

134.63

132.63

132.18

131.59

GBP EUR JPY

1.0880

1.0770

1.0791

1.0810

1.0724

CHF

1.5109 1.0725 123.25 1.0046

Last Week %Change 1.5356 1.1012 120.44 0.9799

+1.61 +2.61 +2.33 +2.52

November 11 - 17, 2015

16 | MARKETS | financialmirror.com

America’s education bubble

By Mohamed A. El-Erian Αuthor of When Markets Collide

One of the fundamental purposes of government is to advance important public goods. But, if not handled carefully, the pursuit of significant social goals can have unfortunate economic and financial consequences, sometimes even leading to systemic disruptions that undermine more than just the goals themselves.

This happened a decade ago in the United States, with the effort to expand home ownership. It has been playing out more recently in China, following an initiative to broaden stock-market participation. And it could happen again in the US, this time as the result of an attempt to improve access to funding for higher education.

In the first case, the US government eagerly supported efforts to make mortgages more affordable and accessible, including the creation of all sorts of “exotic” lending vehicles.

The approach worked, but a little too well. The surge in debtenabled demand drove up real-estate prices, while banks’ greater willingness to lend led many people to purchase homes they couldn’t afford. The collapse of the subsequent bubble – a major contributor to the 2008 global financial crisis – nearly tipped the world economy into a multi-year depression.

In China’s case, the government hoped that broader stock-market participation – achieved through efforts to bolster equity prices and promote lending for investment – would make citizens more open to pro-market reforms.

Again, the approach proved too effective, and a bubble formed. Now, the government is trying to counter the risk of a disorderly deleveraging that would damage the Chinese economy and produce significant knock-on effects for the rest of the world.

America’s effort to expand access to student loans – a fundamentally good initiative, aimed at enabling more people to pursue higher education – carries similar risks.

Fortunately, there is still time to do something about it.

No one doubts that investment in education is vital.

Numerous studies have shown major returns for individuals and societies alike. Higher levels of educational attainment improve overall economic wellbeing and prosperity, lower retirement burdens, and enhance social mobility and satisfaction. The unemployment rate for college graduates in the US, at 2.5%, is roughly one-third the rate for those without a high social diploma.

What policymakers must determine is how to invest in education in ways that maximise these benefits, without creating new risks. This is where the US risks falling short.

Over the last ten years, the combination of higher tuition

fees, more student enrollment, and greater reliance on loans has caused the stock of outstanding student debt nearly to triple. It now stands at well over $1.2 trln, more than 60% of which is held by the bottom quartile of households (those with a net worth of less than $8,500).

Today, seven out of ten post-secondary students graduate with debt, with the total volume exceeding debt from credit cards and auto loans combined. Moreover, student loans constitute 45% of federally owned financial assets.

Making matters worse, the return on investment in education is falling, because the economy is growing slowly and changing rapidly, making it difficult for some graduates to secure employment that takes advantage of their knowledge and skills. Universities are often slow to adapt their curricula to the economy’s needs, while new technologies and business models are exacerbating the winner-take-all phenomenon.

If the return on investment in education continues to decline, the servicing of student loans will tend to crowd out other consumption and investment outlays, especially given that student debt has considerable seniority in the capital structure. In this scenario, the risks of default and delinquency would rise, along with financial insecurity and general instability, all of which would exacerbate the inequality trifecta (income, wealth, and opportunity).

The good news is that, though some 10% of borrowers already face repayment problems, the macroeconomic and financial tipping points remain some way off. But this is no excuse for complacency; it merely provides time for a concerted effort to implement measures that will ameliorate the destructive trends stemming from student loans.

First and foremost, US politicians need to take full responsibility for economic governance, seeking not only to boost growth, but also to avert a reduction in long-term growth potential. After depending on unconventional monetary policy for far too long, the US Congress needs to adopt a more comprehensive approach, with measures aimed at improving worker training and retooling, modernising education curricula, and incorporating transformational technologies more effectively into the economy. Increased

infrastructure investment, better corporate-tax policies, and an updated budgetary approach are also needed.

For their part, universities – which have benefited considerably from the wide availability of student loans – should rein in their costs, while offering more direct financial aid funded through philanthropy. Some universities have already adopted “no loan” policies; students’ demonstrated financial need is met entirely with grants financed by the university and other donors. Not all universities need to go this far – and most can’t, because they lack large enough endowments to cover the costs. But a broader move in the direction of non-debt financing of higher education is needed.

Efforts could also be made to encourage households to save more, starting earlier, for education. Student loan disclosures should be made more transparent, thereby enabling applicants to make responsible decisions, with lower-cost two-year community colleges serving as a useful stepping stone to a traditional college education. And more could be done to expand income-based repayment schemes.

None of these measures will be easy. But if implementation continues to lag behind realities on the ground, the challenges will be far greater down the road. As borrowers’ growing debt burdens limit their financial flexibility and productive contribution to the economy, the policy emphasis will shift from mitigating future risks to reducing indebtedness directly through loan forgiveness and bailouts. That would raise thorny issues of fairness and misaligned incentives, and could ultimately have the perverse effect of reducing educational access.

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

Why gender parity Laura Tyson and Anu Madgavkar The high cost of gender inequality has been documented extensively. But a new study by the McKinsey Global Institute estimates that it is even higher than previously thought – with far-reaching consequences.

The McKinsey study used 15 indicators – including common measurements of economic equality, like wages and labor-force participation rates, as well as metrics for social, political, and legal equality – to assign “gender parity scores” to 95 countries, accounting for 97% of global GDP and 93% of the world’s women. Countries also received scores for individual indicators.

Unsurprisingly, high scores on social indicators correspond with high scores on economic indicators.

Moreover, higher gender-parity scores strongly correlate with higher levels of development, as measured by GDP per capita

and the degree of urbanisation. The most developed regions of Europe and North America are closest to gender parity, while the still-developing region of South Asia has the furthest to go. Within regions, however, there are significant disparities, owing partly to differences in political representation and policy priorities.

One overarching conclusion of the McKinsey study is that, despite progress in many parts of the world, gender inequality remains significant and multi-dimensional. Forty of the countries studied still exhibit high or very high levels of gender inequality in most aspects of work – especially labor-force participation rates, wages, leadership positions, and unpaid care work – as well as in legal protections, political representation, and violence against women.

The costs of this inequality are substantial. If women matched men in terms of work – not only participating in the labour force at the same rate, but also working as many hours and in the same sectors – global GDP could increase by an estimated $28 trln, or 26%, by 2025. That is like adding another United States and China to the world economy.

Closing the gender gap in labour-force participation would deliver 54% of those gains; aligning rates of part-time work would provide another 23%; and shifting women into higher-

productivity sectors to match the employment pattern of men would account for the rest.

Given recent rates of progress, it is unrealistic to expect full gender parity in the world of work in the foreseeable future. But countries could match gains in the bestperforming economy in their region. That would add up to $12 trln to global GDP by 2025, boosting GDP by 16% in India and about 10% in North America and Europe.

To achieve this, the McKinsey study recommends that governments, non-profits, and businesses emphasise progress in four key areas: education, legal rights, access to financial and digital services, and unpaid care work. As these critical and mutually reinforcing efforts boosted women’s economic standing, they would naturally help to improve women’s social position, reflected in better health outcomes, increased physical security, and greater political representation.

The first step is improved education and skills training, which have been proven to raise female labour-force participation. Smaller differences in educational attainment between men and women are strongly correlated with higher status for girls and women, which helps to reduce the incidence of sex-selective abortions, child marriage, and

November 11 - 17, 2015

financialmirror.com | WORLD | 17

A step forward for sovereign debt

By Joseph E. Stiglitz and Martin Guzman Every advanced country has a bankruptcy law, but there is no equivalent framework for sovereign borrowers. That legal vacuum matters, because, as we now see in Greece and Puerto Rico, it can suck the life out of economies.

In September, the United Nations took a big step toward filling the void, approving a set of principles for sovereigndebt restructuring. The nine precepts – namely, a sovereign’s right to initiate a debt restructuring, sovereign immunity, equitable treatment of creditors, (super) majority restructuring, transparency, impartiality, legitimacy, sustainability, and good faith in negotiations – form the rudiments of an effective international rule of law.

The overwhelming support for these principles, with 136 UN members voting in favour and only six against (led by the United States), shows the extent of global consensus on the need to resolve debt crises in a timely manner. But the next step – an international treaty establishing a global bankruptcy regime to which all countries are bound – may prove more difficult.

Recent events underscore the enormous risks posed by the lack of a framework for sovereign debt restructuring.

Puerto Rico’s debt crisis cannot be resolved. Notably, US courts invalidated the domestic bankruptcy law, ruling that because the island is, in effect, a US colony, its government had no authority to enact its own legislation.

In the case of Argentina, another US court allowed a small minority of so-called vulture funds to jeopardise a restructuring process to which 92.4% of the country’s creditors had agreed. Similarly, in Greece, the absence of an international legal framework was an important reason why its creditors – the troika of the European Commission, the European Central Bank, and the International Monetary Fund – could impose policies that inflicted enormous harm.

But some powerful actors would stop well short of establishing an international legal framework. The International Capital Market Association (ICMA), supported by the IMF and the US Treasury, suggests changing the language of debt contracts. The cornerstone of such proposals is the implementation of better collective action clauses (CACs), which would make restructuring proposals approved by a supermajority of creditors binding on all others.

But while better CACs certainly would complicate life for vulture funds, they are not a comprehensive solution. In fact, the focus on fine-tuning debt contracts leaves many critical issues unresolved, and in some ways bakes in the current system’s deficiencies – or even makes matters worse.

For example, one serious question that remains

“In Greece, the absence of an international legal framework was an important reason why its creditors – the troika of the European Commission, the European Central Bank, and the International Monetary Fund – could impose policies that inflicted enormous harm” unaddressed by the ICMA proposal is how to settle conflicts that arise when bonds are issued in different jurisdictions with different legal frameworks. Contract law might work well when there is only one class of bondholders; but when it comes to bonds issued in different jurisdictions and currencies, the ICMA proposal fails to solve the difficult “aggregation” problem (how does one weight the votes of different claimants?).

Moreover, the ICMA’s proposal promotes collusive behaviour among the major financial centers: The only creditors whose votes would count for the activation of CACs would be those who owned bonds issued under a restricted set of jurisdictions. And it does nothing to address the severe inequity between formal creditors and implicit ones (namely, the pensioners and workers to whom sovereign debtors also have obligations) who would have no say in a restructuring proposal.

All six countries that voted against the UN resolution (the US, Canada, Germany, Israel, Japan, and the United Kingdom) have domestic bankruptcy legislation, because they recognise that CACs are not enough. Yet all refuse to accept that the rationale for a domestic rule of law –

including provisions to protect weak borrowers from powerful and abusive creditors – applies at the international level as well. Perhaps that is because all are leading creditor countries, with no desire to embrace restrictions on their powers.

Respect for the nine principles approved by the UN is precisely what’s been missing in recent decades. The 2012 Greek debt restructuring, for example, did not restore sustainability, as the desperate need for a new restructuring only three years later demonstrated. And it has become almost the norm to violate the principles of sovereign immunity and equitable treatment of creditors, evidenced so clearly in the New York court’s decision on Argentine debt.

The market for credit default swaps has led to nontransparent processes of debt restructuring that create no incentive for parties to bargain in good faith.

The irony is that countries like the US object to an international legal framework because it interferes with their national sovereignty. Yet the most important principle to which the international community has given its assent is respect for sovereign immunity: There are limits beyond which markets – and governments – cannot go.

Incumbent governments may be tempted to exchange sovereign immunity for better financing conditions in the short run, at the expense of larger costs that will be paid by their successors. No government should have the right to give up sovereign immunity, just as no person can sell himself into slavery.

Debt restructuring is not a zero-sum game. The frameworks that govern it determine not just how the pie is divided among formal creditors and between formal and informal claimants, but also the size of the pie. Domestic bankruptcy frameworks evolved because punishing insolvent debtors with prison was counterproductive – a prisoner cannot repay his debts. Likewise, kicking debtor countries when they’re down only makes their problems worse: Countries in economic free-fall can’t repay their debts, either.

A system that actually resolves sovereign-debt crises must be based on principles that maximise the size of the pie and ensure that it is distributed fairly. We now have the international community’s commitment to the principles; we just have to build the system.

Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute. Martin Guzman, a postdoctoral research fellow at the Department of Economics and Finance at Columbia University Business School, is a co-chair of the Columbia Initiative for Policy Dialogue Taskforce on Debt Restructuring and Sovereign Bankruptcy and a senior fellow at the Centre for International Governance Innovation (CIGI). © Project Syndicate, 2015 - www.project-syndicate.org

matters violence from an intimate partner. Women who enjoy parity in education are more likely to share unpaid work with men more equitably, to work in high-productivity professional and technical occupations, and to assume leadership roles.

To reinforce such progress, legal provisions guaranteeing the rights of women as full members of society should be introduced or expanded. Such provisions have been shown to increase female labour-force participation, while improving outcomes according to several social indicators, including violence against women, child marriage, unmet need for family planning, and education.

Improved access to financial services, mobile phones, and digital technology is also linked to higher rates of female labor-force participation, including in leadership roles, and decreased time spent doing unpaid care work. And, as it stands, women spend a lot of time on such work, accounting for 75% of it, on average, worldwide.

Unpaid care work – which includes the vital tasks that keep households functioning, such as looking after children and the elderly, cooking, and cleaning – obviously amounts to a major hurdle to more active participation in the economy. If men shared such responsibilities more equitably, businesses adopted more flexible and “care-

friendly” work schedules, and governments provided more support for childcare and other family-care functions, female labor-force participation rates could rise significantly.

It is certainly in the interest of companies to do more to support gender equality, which expands the pool of talent from which they can select employees and managers.

Moreover, more women mean more insight into the mentality of female customers. And, perhaps most important to a company, a growing body of evidence suggests that the presence of women in executive and board positions can increase corporate returns.

One of the highest barriers to gender parity, however, may be deeply held beliefs and attitudes. As Anne-Marie Slaughter

emphasises in her recent book, both men and women undervalue care work relative to paid work outside the home. Likewise, surveys indicate that sizeable shares of men and women worldwide continue to believe that children suffer when their mothers work.

And numerous studies document continued implicit biases against women in hiring and promotion processes, triggering growing interest in Silicon Valley startups that use technology to mitigate such biases throughout their human-resources operations.

Clearly, reaching gender parity will be no easy feat. But it remains vitally important, both to improve outcomes for women and girls, and to advance economic development and prosperity for all.

Laura Tyson, a former chair of the US President’s Council of Economic Advisers, is a professor at the Haas School of Business at the University of California, Berkeley, and a senior adviser at the Rock Creek Group. Anu Madgavkar is a senior fellow at the McKinsey Global Institute. © Project Syndicate, 2015 - www.project-syndicate.org

November 11 - 17, 2015

18 | WORLD | financialmirror.com

Fifty years of climate dithering

By Stefan Rahmstorf

In November 1965, US President Lyndon B. Johnson was presented with the first-ever government report warning of the dangers that could result from burning large amounts of fossil fuels. Fifty years is a long time in politics, so it is remarkable how little has been done since then to address the threat posed by carrying on with business as usual.

In remarkably prescient language, Johnson’s scientific advisory committee warned that releasing carbon dioxide into the atmosphere would lead to higher global temperatures, causing ice caps to melt and sea levels to rise rapidly. “Man is unwittingly conducting a vast geophysical experiment,” warned the scientists. “Within a few generations he is burning the fossil fuels that slowly accumulated in the earth over the past 500 million years…The climatic changes that may be produced by the increased CO2 content could be deleterious from the point of view of human beings.”

The committee’s foresight is not surprising; the existence of the greenhouse effect had been known to science since the French physicist Joseph Fourier suggested in 1824 that the earth’s atmosphere was acting as an insulator, trapping heat that would otherwise escape. And in 1859, the Irish physicist John Tyndall carried out laboratory experiments that demonstrated the warming power of CO2, leading the Swedish physicist and Nobel Laureate Svante Arrhenius to predict that burning coal would warm the earth – which he saw as a potentially positive development.

Johnson’s advisers were not so Pollyannaish. Their report accurately predicted that the amount of CO2 in the atmosphere would increase by close to 25% over the course of the twentieth century (the actual number was 26%). Today, the atmospheric concentration of CO2 is 40% higher than it was at the beginning of the Industrial Revolution – by far the highest it has been during the past one million years, as we know from drilling into the Antarctic ice.

Furthermore, Johnson’s scientific committee rebutted objections that continue to be used today by those who deny the dangers of climate change, including the claim that natural processes might be behind the rise in CO2 levels. By showing that only about half of the CO2 produced by burning fossil fuels remains in the atmosphere, the

committee proved that the earth acts not as a source of greenhouse gases, but as a sink, soaking up half of our emissions.

What Johnson’s advisers could not do was offer specific predictions for how much the rise in atmospheric CO2 would affect global temperature; they said they would first need better models and more powerful computers.

Those calculations formed the basis of the next landmark report, the 1979 “Carbon Dioxide and Climate: A Scientific Assessment,” prepared by the US National Academy of Sciences. Widely known as the Charney Report – after its lead author, Jule Charney of MIT – it is a model of careful scientific deliberation.

Charney’s report estimated that doubling the amount of CO2 in the atmosphere would warm the earth by about 3 degrees Celsius – a number that is well confirmed today. It also predicted that the heat capacity of the oceans would delay warming by several decades.

Both findings are consistent with the global warming observed since the report’s publication. “We have tried but have been

unable to find any overlooked or underestimated physical effects that could reduce the currently estimated global warming … to negligible proportions,” the report concluded. Since then, the scientific evidence has only gotten stronger; today, the basic findings laid out in these two early reports are supported by more than 97% of climate scientists.

And yet, despite 50 years of growing scientific consensus, the warming of the earth continues unabated. Well-funded lobby groups have sowed doubt among the public and successfully downplayed the urgency of the threat. Meanwhile, geopolitics has impeded the development of an effective global response. The international climate negotiations that are expected to culminate in an agreement at the United Nations Climate Change Conference in Paris in November and December have been hampered by the requirement of consensus among the 195 countries participating.

If action is not taken, billions of people will suffer the consequences of drought, crop

failure, and extreme weather. Eventually, rising sea levels will flood large coastal cities and destroy entire island states. The hottest years since record-keeping began in the nineteenth century were 2005, 2010, and 2014, and last year’s record will almost certainly be broken again this year.

It is time that world leaders put an end to 50 years of dithering. They must seize the opportunity in Paris, set aside their shortterm interests, and finally act decisively to avert a looming planetary catastrophe.

Stefan Rahmstorf is Professor of Physics of the Oceans at Potsdam University, visiting professorial fellow at the University of New South Wales in Sydney, and Department Head at the Potsdam Institute for Climate Impact Research. © Project Syndicate, 2015. www.project-syndicate.org

Climate change could push 100 mln into poverty

By Douglas McIntyre A new study by the World Bank claims that climate change could do more than cause rising ocean levels and higher temperatures across the global. The trend also could drive 100 mln people into poverty, which is just shy of a third of the total population of the United States.

The World Bank’s Climate Change and Development Series has added a new study titled “Shock Waves: Managing the Impacts of Climate Change on Poverty.”

The study tackles two issues. The first is that rising temperatures will trigger “higher agricultural prices”

that may affect food security. The worst of the affect will be in poor areas, such as sub-Saharan Africa and South Asia. The other problem is that climate change will increase the incidence of flooding.

According to the study’s authors: “Climate change also will magnify many threats to health, as poor people are more susceptible to climate-related diseases such as malaria and diarrhea. As the report points out, poverty reduction is not a one-way street. Many people exit or fall back into poverty each year. The poor live in uncertainty, just one natural disaster away from losing everything they have.”

Additionally: “We need good, climate-informed development to reduce the impacts of climate change on

the poor. This means, in part, providing poor people with social safety nets and universal health care. These efforts will need to be coupled with targeted climate resilience measures, such as the introduction of heat resistant crops and disaster preparedness systems.”

The report shows that without this type of development, climate change could force more than 100 mln people into extreme poverty by 2030. But with rapid, inclusive development that is adapted to changing climate conditions, most of these impacts can be prevented.

Reports of this sort have a history of being ignored.

There is no reason to believe this one will be any different.

(Source: 24/7 Wall St.com)

November 11 - 17, 2015

financialmirror.com | WORLD | 19

A carbon price-and-rebate plan

By Pierre-André Jouvet Christian de Perthuis So far, international climate talks have failed to find a mechanism that will successfully reduce global greenhouse-gas emissions. The 1997 Kyoto Protocol attempted to use a system of tradable quotas to establish a price on carbon-dioxide emissions, but foundered after the United States and several emerging countries refused to join.

The 2009 Copenhagen Climate Change Conference introduced a pledge-and-review process, in which countries unilaterally decided how much they would cut. As a result, the US and several emerging economies made commitments to reduce emissions for the first time. But this system, too, is badly flawed. What it does not do is resolve the classical freerider problem or guarantee reductions in developing countries.

Indeed, some countries may have been encouraged to do less than they otherwise would have in order to maintain a strong negotiating position.

As world leaders meet in Paris from November 30 to December 11 for the United Nations Conference on Climate Change, they will have a new opportunity to forge an effective agreement. To encourage governments to act in concert, it is essential to work toward a system of carbon pricing that is both straightforward and transparent. We propose a carbon “priceand-rebate” mechanism, which simultaneously sets a price on emissions above a certain threshold and defines how the

revenues raised should be used.

Studies ahead of the Paris conference suggest that international cooperation could allow for rapid reduction of greenhouse gases. They also highlight the knock-on benefits that taking quick action on climate change could have, including reduction of local pollution, greater energy and food security, and faster innovation. To accelerate the move toward a low-carbon economy, an international agreement must be applicable to all countries; include a common and consistent system for monitoring, reporting, and verification; and provide strong economic incentives at a global scale.

Our price-and-rebate mechanism is inspired by the “bonus/malus” scheme in France, in which buyers of new cars are taxed or given a bonus depending on the vehicle’s CO2 emissions. In our system, a country exceeding the worldwide average for per capita emissions would pay a specified amount on every ton of CO2 (or its equivalent) above a set threshold.

Countries with lower-than-average emissions would be compensated for polluting less.

This system would initially benefit countries with the lowest per capita emissions, meaning that most of the funds would flow towards the least-developed countries. Once it is fully operational, the price-and-rebate mechanism would encourage all countries to reduce their per capita emissions, thereby reducing the gap between payments and rebates.

The ideal carbon price would depend on the objectives of the agreement. A price of $1-2 per ton would generate $14-28 bln, enough to fund the deployment of the monitoring, review, and verification process in developing countries. The Copenhagen Accord included a commitment by rich countries to spend $100 bln a year after 2020 to help underdeveloped countries

mitigate and adapt to climate change. A rate of $7-$8 per ton would generate enough revenue to deliver on this promise, with the money flowing to countries with low per capita emissions. Of that $100 bln, a little over $60 bln would come from Western countries and Japan, and just under $20 bln would come from hydrocarbon-exporting countries (Russia and Saudi Arabia in particular) and high-growth Asian economies (including China and Korea). The introduction of a price-and-rebate system would thus redistribute funds among countries in conformity with the principle of “common but differentiated responsibilities and respective capabilities.”

A price-and-rebate system would be both efficient and fair.

Every citizen in the world would have the same right to emit greenhouse gas, and every country would face the same incentives at the margin to reduce emissions.

The main obstacle to be overcome in establishing such a system will be to convince donor countries’ governments to pay for their carbon emissions. This cost will be modest relative to the size of their economies, and any successful climatechange agreement will require similar commitments. If rich countries are unable to agree to pay even a modest price for carbon, the talks in Paris will surely be judged a failure.

Pierre-André Jouvet is Professor of Economics at the University of Paris-Ouest-Nanterre-la Défense and the scientific director of the Climate Economics Chair at Paris-Dauphine University.

Christian de Perthuis is Professor of Economics at ParisDauphine University and Head of the Climate Economics Chair.

They are co-authors of the recently published book Green Capital: A New Perspective on Growth. © Project Syndicate, 2015 - www.project-syndicate.org

Chinese don’t care about climate change

By Douglas McIntyre All governments around the world must come to terms with the negative effect of climate change, both individually and collectively. However, China’s citizen’s barely care at all based on new research done

by Pew Global Research Global Attitudes and Trends. This information is troubling since China is among, or is the leader in, the production of air pollution.

According to the authors of the study: “As a new Pew Research Centre survey

illustrates, there is a global consensus that climate change is a significant challenge.

Majorities in all 40 nations polled say it is a serious problem, and a global median of 54% consider it a very serious problem.

Moreover, a median of 78% support the idea of their country limiting greenhouse gas emissions as part of an international agreement in Paris.”

And, “climate change is not viewed as a distant threat. Across the nations surveyed, a median of 51% believe people are already being harmed by climate change and another 28% think people will be harmed in the next few years. More than half in 39 of 40

countries are concerned it will cause harm to them personally during their lifetime (the United Kingdom is the exception), and a global median of 40% are very worried this will happen.” Some 74% in Latin America said “climate change is a serious problem”.

The figure was 61% in Africa.

However, that number is lower in China and the U.S., the two largest greenhouse gas emitters. For instance, just 18% of Chinese and 45% of Americans say climate change is a very serious problem, compared with a global median of 54%. Similarly, while fourin-ten around the world are very worried that global warming will harm them personally,

just 15% in China and 30% in the U.S. share this fear. Overall, people in countries with high levels of carbon dioxide (CO2) emissions per capita tend to express less anxiety about climate change than those in nations with lower per-capita emissions.

Concerns in the U.S. are much greater among Democrats and the young, and greater among Catholics than Protestants.

The upcoming conference about climate change to be held in Paris will not yield much in terms of real change if China and the U.S. refuse to acknowledge the seriousness of the problem. (Source: 24/7 Wall St.com)

November 11 - 17, 2015

20 | BACK PAGE | financialmirror.com

China concerns dampen global sentiment Markets Report by Forextime Ltd

By Lukman Otununga, Research Analyst at FXTM

Reoccurring concerns over the global economy and the most recent developments in emerging market weakness has been a key factor in encouraging the Organisation for Economic Cooperation and Development (OECD) to downwardly revise 2015 global forecasts to 2.9%. This has contributed to downward pressures on global markets, to which the recent weak economic data from China has weighed further on market sentiment. Sentiment towards the global economy has received another jab following the weak data from China over the past two days, including another astonishing decline in China imports at 19% and a weaker than expected inflation reading. Falling inflation provides further scope for the People’s Bank of China (PBoC) to unleash further monetary stimulus and expectations remain high that the PBoC will ease policy further.

Lower commodity prices have dragged down inflation prospects in China, while its own economic slowdown has weighed heavily on the commodity markets due to the economy not importing anywhere near as heavily as it has done in the past. Overall, the recent string of soft economic data will continue to reinforce anxieties market participants have about the China economy, which will impact on those economies that have become reliant on trade from China.

The anxieties over slowing growth in China have had an impact on Asian equities, with most major Asian markets venturing back into red territory. Both European and American equities are also suffering losses, which aside from China can also be correlated to a sense of nervousness around whether the Federal Reserve will raise US interest rates next month. If the recent weakness in the emerging markets continues to escalate into wider fears over the global economy and the China concerns remain elevated, equity markets can remain under pressure.

Whilst an air of anxiety lingers around the equity markets, this has not encouraged any gains in Gold. The metal has been sold off heavily on the renewed optimism that the Fed could begin raising rates next month and unless this changes, Gold is looking vulnerable to further pressure. Gold

declined over eight consecutive days last week and now that prices have fallen below 1100.00 support and its appeal to investors is waning, there may be potential for a further decline towards the 1080 level.

USDCAD: The bolstered prospects of a December US rate hike has instilled USD bulls with upwards momentum. The USDCAD is technically bullish and as long as prices can keep above the 1.3050 support, there may be an incline to the 1.3450 level.

GBPAUD: The Sterling has been left weakened following the BoE’s dovish tone on the UK economy. The GBPAUD is

currently in a tug of war because both the GBP and AUD are somewhat weak. Technically this pair slowly turns technically bullish. A breakout above 2.1700 may open a path to 2.2100.

EURJPY: The increasing expectations that the ECB may further QE in the future may enforce downwards pressures on the EUR. The EURJPY is technically bearish and the next relevant support is based at 130.50.

For information, disclaimer and risk warning note visit: www.ForexTime.com

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