Financial Mirror 2015 12 02

FinancialMirror OREN LAURENT

RICARDO HAUSMANN

Is Putin playing Russian roulette with Turkey? PAGE

The import of exports a curse or necessity?

14

Issue No. 1162 €1.00 December 2 - 8, 2015

PAGE 17

The long road to Paris FROM GOOD INTENTIONS TO DEEP DECARBONISATION - SEE PAGES 10-11

Europe’s three fault lines

By Jean Pisani-Ferry - SEE PAGE 16

December 2 - 8, 2015

2 | OPINION | financialmirror.com

FinancialMirror

Cyprus important again, but for other reasons

Published every Wednesday by Financial Mirror Ltd.

EDITORIAL

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With the flurry of activity by VIPs from New World Order rivals visiting the island, one could not help to think that the Cyprus problem has been restored from the ‘boring’ category to one of ‘seeming interest’, in other words raised a notch, as the rating agencies would say. However, the stark reality is that Cyprus once again finds itself in the eye of the Middle Eastern storm that has been difficult to contain and for westerners harder to understand.

True, the island is an obvious oasis of peace in an area that has been plagued by revolts getting out of hand, frail “democracies” (as perceived by the West) falling apart and the new terror of the Islamic State overtaking the evil of Al Qaeda.

The U.S. and its allies have made a mess of things in Iraq and now Syria, finding it extremely difficult to regain the image of peacemaker in the region. The Russians found a window of opportunity to push through their own expansionist agenda, dating back to the Tsarist era, while East-West “ally” Turkey has failed to put a lid on a problem it created; it subsequently opened its floodgates to migrants and refugees headed to Europe, for which it is being rewarded with a 3 bln euro bonus and resumption of membership talks.

That leaves the five nations of the eastern Mediterranean almost on their own and in a need to cooperate closer – Cyprus has no military might, nor does Lebanon, with both struggling to get our natural gas projects off the ground in order to some

day boost state revenues and start reinvesting in the ‘social fabric’ and public services (health, education, jobs) that should in turn calm civil discontent. Jordan and Egypt have a somewhat significant force and, for now, are capable of maintaining their borders, but, too, seem unprepared for the waves of migrants-refugees. That leaves Israel as the only seemingly sane country in the area, but with too many internal problems of its own and a relationship with both the U.S. and Turkey that is odd at times, but uneasy for sure.

Cyprus should grab the opportunity of the LavrovKerry visits to take a leading role in regional diplomacy, where all other nations and their authoritarian rulers do not trust their neighbours. It is now evident that Federica Mogherini has a plateful and on her own is unable to cope with vast responsibilities of her portfolio, that has exploded in the past 12 months.

President Anastasiades and Foreign Minister Kasoulides should not wait to be asked how we can help, but must show initiative and leadership and take an active role in looking after European interests in the area, if our EU partners genuinely believe in showing true solidarity with fellow member states. Shuttle diplomacy and monitoring the flow of migrant-refugees is one critical matter where the EU should have a say, as are others, such as energy security, containing large-scale health issues, combating money laundering used by terror groups, as well as clamping down on the sale of stolen artefacts, that not only helps finance these rogue groups’ operations, but also destroys the heritage of nations and our region in general.

THE FINANCIAL MIRROR THIS WEEK 10 YEARS AGO

ECB to hike euro rates, JCC fined Euro rates are expected to go up by 25 basis points affecting at least CYP 1 bln worth of euro loans taken out by Cypriots, while the Competition Commission fined JCC CYP 373,000 for market abuse, according to the Financial Mirror issue 647, on November 30, 2005.

ECB rates: Borrowing rates are to rise by at least 25 basis points when the European Central Bank meets to contain inflationary pressure, in a move that is set to affect thousands of Cypriots who have borrowed CYP 1 bln, or 67% of all foreign

currency loans, with the rest comprising Swiss francs (21%), dollars (8.5%) and Japanese yen (3%).

MFS banned: The Greek authorities have banned the activities of Galaxias AEGA, the Greek insurance subsidiary of CSE listed MFS, linked to Lambros C h r i s t o p h i ’ s MarkeTrends.

Moody’s rating: Moody’s has kept Cyprus’ rating outlook and its credit quality rating in foreign currency at A2 (“medium”), supported by high per capita income and a manageable debt. For

2006, both the rating agency and the European Commission expect a fiscal deficit of 2.8% of GDP and public debt at 70.4% in 2005 and 69.1% in 2006.

JCC fined: JCC Payment Systems, the bank owned credit card clearing monopoly, was fined CYP 373,374 by the Price Competition Commission for abusing its dominant position in the market and for overcharging clients.

Ermes Peacocks: The Shacolas Group has added the Peacocks affordable family brand to its stable of high-street retail stores that now include Ermes, Debenhams, next and Adam’s.

Communist party chief Demetris Christofias was re-elected General Secretary of the main coalition partner AKEL, while Jeffrey Sachs was writing about “Changing Climate Change”.

Bank of Cyprus, saying only that the “soon” meant weeks or months and not years.

CSE official: Nontas Metaxas, Director of the newly created Cyprus Stock Exchange, said the Council has set March 1, 1996, as the launch date for the official Cypriot stock market, with the biggest hurdle

at present being the computerisation programme.

Paneuropean deal: The board of Paneuropean Insurance Co. announced that it has reached final agreement with the board of Philiki Insurance for the acquisition of the remaining 37.6% stake, after Paneuropean paid CYP 7.7 mln earlier in the year for the controlling 62.4% stake.

Cyprus-EU: Cyprus-EU membership talks will start in about two years’ time, according to Dutch EU External Relations Commissioner Hans van den Broek. This will assist Cyprus’ accession to the EU and contribute towards a solution to the Cyprus problem.

Free post: The government is considering liberalising the postal services in order to make them respond to the current needs and demands of the market, as well as the challenges of the future.

20 YEARS AGO

Universal to launch bank, CSE to start in March Universal Life insurance company has secured a banking license and is set to launch a retail lender subsidiary, while the official Cyprus Stock Exchange is set to operate on March 1, 1996, according to the Cyprus Financial Mirror issue 138, on November 29, 1995.

Universal Bank: Universal Life CEO Andreas Georghiou said the island’s leading life insurer secured a retail banking license from the Central

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December 2 - 8, 2015

financialmirror.com | CYPRUS | 3

Lavrov arrives for quick visit Russian Foreign Minister Sergey Lavrov arrived in Cyprus on Tuesday evening and will be received by President Nicos Anastasiades on Wednesday, a day before US US Secretary of State John Kerry also arrives on the island.

Lavrov will also have talks with Foreign Minister Ioannis Kasoulides and House President Yiannakis Omirou and is scheduled to meet the Archbishop Chrysostomos, before attending an event at the Russian Embassy to mark 55 years of diplomatic relations.

Lavrov arrived on a private jet at Larnaca airport and was greeted by the Chief of Protocol Marios Kountourides and the Russian Ambassador to Cyprus Stanislav Osadchiy.

In an earlier interview with the Cyprus News Agency, Lavrov said he looked forward to a series of constructive meetings on a wide range of issues, bilateral and international, as well as the assessment of the implementation process of the issues agreed between the Presidents of the two countries.

Furthermore, he expressed certainty that the outcome of his meetings will contribute to the further development of the bilateral relations and to the strengthening of trust in the European continent.

Lavrov expressed his country’s gratitude towards Nicosia’s position of principles after the downing of a Russian jet by Turkey, while, referring to the Cyprus issue, he reiterated Russia’s stance for a viable and just solution, based on the relevant UN Security Council decisions, with full respect of the interests of the two communities on the island.

His decision not to cross over to the north to meet with Turkish Cypriot leader

Mustafa Akinci has caused a stir, countered by a flash visit by Turkish PM Ahemt Davutoglu.

The police are on high alert due to the two officials’ visit, according to Justice and Public Order Minister Ionas Nicolaou.

In statements to the press, after signing with the US Ambassador to Cyprus Kathleen Ann Doherty an agreement on enhancing cooperation in preventing and combating serious crime, Ionas Nicolaou said that Doherty thanked “for the cooperation they have up until now with the police as regards the measures to be implemented, and in general for the cooperation that we’ve had in many issues until now.”

Asked about the security measures taken for Lavrov’s and Kerry’s visits, the Minister assured that “all necessary measures are being taken by the police and we expect everything to run smoothly.”

He said that the US Ambassador noted that the measures that have been taken are already obvious, both as regards the security of the US embassy and other venues, the airports and the crossing points.

He noted that Doherty expressed satisfaction that extra security measures are taken “irrespective of whether we have or not – and we do not have – any specific information.”

Washington lifts embargo on the sale of US defense weapons to Cyprus Nicosia has welcomed Washington’s decision to allow the sale of US defensive weapons to the Republic of Cyprus.

“This is a particularly important decision by the US Congress,” Government Spokesman Nicos Christodoulides said in statements to the press, on the sidelines of the Commonwealth summit in Malta over the weekend, pointing out that it proves in deeds the importance the US attach to Cyprus’ geostrategic role, especially in such a volatile region as the Eastern Mediterranean.

Invited to comment on the decision, he said “the government will handle this issue carefully and it is expected to be discussed at a meeting in Nicosia between the Foreign Minister Ioannis Kasoulides and his American counterpart, during his forthcoming visit this coming week.”

US President Barack Obama signed last Wednesday the US National Defence Authorisation Act, which includes an amendment allowing the sale of US defensive weapons to the Republic of Cyprus.

The amendment, co-sponsored by Congressmen David Cicilline and Gus Bilirakis, allows the sale of US defensive weapons, under the condition that the Secretaries of Defence and State submit a report to Congress assessing the impact of the embargo on Cyprus’ national security and counter-terrorism efforts.

The embargo, which dates back to 1992, bans the export of defensive weapons to the Republic of Cyprus, according to Congressman Cicilline. Bilirakis, Cicilline and Senator Robert Menendez tabled amendments in the House of Representatives and the Senate pointing out that the embargo is an anachronism which does not reflect the current upgraded relationships between Cyprus and the US, which are allies and strategic partners.

The embargo “fails to reflect the relationship Cyprus and the United States have today as allies and strategic partners in the global war on terror,” Cicilline said in a statement.

The Hellenic American Leadership Council Executive Director Endy Zemenides applauded the inclusion of the Cyprus amendment, noting that “this is an important step in the growing strategic partnership between Cyprus and the United States.”

“The reevaluation of the arms embargo required by this act will hopefully rectify the absurd status quo in which Turkey is allowed to occupy Cyprus with American arms but Cyprus has to look elsewhere to buy defensive weapons. Resolving this will allow Cyprus to step up even further as a front line state in the Western security infrastructure,” he concluded.

December 2 - 8, 2015

4 | CYPRUS | financialmirror.com

CBC Governor: “It will take 3-5 years for NPLs to fall to 10%” Central Bank of Cyprus (CBC) Governor Chrystalla Georghadji that based on the international experience, it will take three to five years with a growth rate of approximately 3% for non-performing loans (NPLs) to fall from 47% today to 10% of the total loan portfolio.

Briefing the House Finance Committee, Georghadji said that the CBC requested the assistance of International Monetary Fund (IMF) to examine how much time it will take to reduce NPLs at a low rate. She said that the IMF replied that it would take three to five years for NPLs to fall to 10% of the total loan portfolio.

However, she explained that in her opinion a growth rate of around 3% of GDP would be needed to see substantial reduction of NPLs. In relation with the growth rate, Georghadji said she expects that GDP will record an increase of 1.5% or bigger in 2015 and at least 2 % in 2016.

Pointing out that the upward trend of of non-performing loans has been reversed, she provided data according to which loan restructurings increased by 58% during the third quarter of 2015. Loans that have been restructured by September 2015 amounted to EUR 14 bln, of which 10.5 bln are still considered as NPLs according to the Directive of the European Banking Authority, saying that the restructured loans are calculated as NPLs for a year.

Regarding the allocation of new loans, she said that in

2015 business loans increased by 3.1%, while the granting of housing loans increased significantly.

Recalling that the lending rates were reduced by 1%, a fact that helped the demand for new loans to increase, she added however that demand remains weak. At the same time she stressed that high lending rates is a “Gordian knot”, and added that “we must not forget that we are a country that has

not regained the confidence, thus many of the loans are risky.” The aim, said Georghadji, is to further improve the speed and sustainability of loan restructures.

She also said that the CBC will soon post a digital platform on its website, which will allow borrowers to monitor their loans and communicate with the bank to request restructuring solutions.

Acknowledging that CBC needs reorganisation, restructuring and corporate governance, the Governor said that between December 2 and 10 an IMF team will be in Cyprus to provide technical assistance and recommendations on corporate governance.

Asked how her relations are with the President of the Republic, Georghadji said that her relations with the President are “very good.”

“And I am not aware of anything else that differentiates these good relations. I ought to have these good relations,” she said.

Last May, President Nicos Anastasiades said he would move to file an application for the dismissal of Central Bank (CBC) Governor Chrystalla Georghadji with the Supreme Court, after allegations that the Governor had altered her contract and that there was conflict of interest arising from her daughter representing ex-Laiki boss Andreas Vgenopoulos, while Georghadji was the head of the resolution authority that took over now defunct Laiki.

Energy Minister expects to hear from Total about EEZ exploration Energy, Commerce, Industry and Tourism Yiorgos Lakkotrypis said he expects some news this week about Total renewing its exploration license for block “11” of Cyprus’ Exclusive Economic Zone (EEZ).

In an interview with the Cyprus News Agency, Lakkotrypis said that “I hope that we will have some news this week. We are now waiting for the company to notify us officially whether it will renew its contract for block “11”, the first period of which expires in February 2016,” he said.

He added that company officials, both in their visits in Cyprus, and during their meetings with President Nicos Anastasiades have expressed their interest in more blocks within the Cyprus EEZ. There is also interest, as he said, by other companies that operate in Cyprus’ EEZ or have bought the country’s geological data during the two licensing rounds for exploration rights in 2007 and 2012.

Cyprus’ government has issued exploration licenses for blocks 12 (Noble Energy), 10 and 11 (Total) and 2, 3 and 9 (ENI-KOGAS). But Total had abandoned its license for Block 10 as its exploratory drills came up dry.

However, Block 11 is adjacent to Egypt’s recent record finds in the Zohr gasfield.

Lakkotrypis also said that the entry of BG as a shareholder in Block 12 may accelerate and improve the development of the “Aphrodite” gasfield.

He said that this means that a potential buyer, who manages and owns one of the liquefaction terminals in Egypt, is now involved in the development of “Aphrodite”.

“Based on the development and production plan filed by the Noble-Delek consortium for “Aphrodite” a few months ago, the first production is expected in 2020”, he said.

He added however that BG is now expected to examine the development plan to see if it can bring any improvement that will allow the extraction of gas earlier and more

cheaply.

What is now expected and is under negotiation, said the Energy Minister, is the trade agreements between the partners in block “12”, the Cyprus Hydrocarbons Company and the potential buyers in the Egyptian market. The Minister stressed that as the Egyptians told the Cypriot side during a visit to the island a few weeks ago, their needs in natural gas are very high, despite the discovery of Zohr field in Egypt’s EEZ and that there are still interested in Cyprus’ deposits both for exports through their liquefaction plants, but also for their internal consumption.

Lakkotrypis also referred to the potential buyers of Cyprus gas.

“One is EGAS for Egypt’s internal consumption and the other is BG or Union Fenosa that manage the other exports terminal,” he said.

Furthermore, Lakkotrypis referred to the reassessment of the potential of Cyprus’ EEZ by the French consultants of the Government, in light of the new model formed after the discovery of Zohr field. As he said, the final results are expected in a few weeks.

Meanwhile, the cooperation between Cyprus and Israel continues, and is a strategic relationship, said the Minister, adding that “it is certainly not affected by the relations of other countries.”

Invited to comment on the relations between Turkey and Russia and whether this will push Turkey to turn to Israel for its energy needs, he said, “the interest of the Turkish companies for Israel’s gas market is not something new. We have seen it unfold in the past”, he said, adding that they will wait to see whether this crisis in Turkey-

Russia relations would be extended in their energy relations too.

Regarding the tourism sector and how it is affected by developments in the region, Lakkotrypis said that any new developments should be expected in the new year.

“This year we seem to have a flow of tourists in November, which was channeled, unfortunately, from Egypt to Cyprus. I say unfortunately, because we prefer our partners to be strong both economically and politically, and certainly we would not exchange this with several hundred tourists,” the Minister said.

As he said that after the incident in Sharm El Sheikh, there was an increased tourist flow in November compared to last year.

“For 2016 the contacts have just begun, and are intense particularly in the tourist sector, so as to see the interest and how this translates into tourist arrivals and revenue for Cyprus,” he said.

December 2 - 8, 2015

financialmirror.com | CYPRUS | 5

Hellenic Bank returns to profit in 3Q Hellenic Bank, the island’s third biggest lender that avoided a state bailout, posted a profit of EUR 6.2 mln in the third quarter, compared to a second-quarter loss of EUR 11.8 mln and a EUR 29.2 mln loss in the year-earlier quarter, based on adequate capital and increased income from “prudent investments in bonds.”

According to the financial statements approved by the board, net interest income increased by 25% from the previous quarter to EUR 35 mln, with total net income up 4% from the second quarter to EUR 57 mln.

Expenses rose 5% to EUR 37.3 mln due to a charge of the fourth quarter deposits special levy instalment, while impairment losses were down by almost two thirds to EUR 12.1 mln from EUR 33.9 mln in second quarter.

Liquidity also improved with the Group’s assets as at September 30 amounting to EUR 7.5 bln, and deposits rising by 1% to EUR 6.3 bln.

The bank said in a statement that its liquidity “remained comfortable” as its total cash and placements with banks amounted to EUR 3 bln, while gross loans reached EUR 4.4 bln with the net loans to deposits ratio at 50%.

It added that its non performing exposures had increased marginally to EUR 2.68 bln from EUR 2.56 bln at the end of 2014, with the ratio unchanged at 61%. The NPEs’ coverage ratio increased to 46%, and loan impairment provisions amounted to EUR 1.24 bln.

CEO Bert Pijls said that the improvement in the macro environment of Cyprus is a clear indication of the recovery of the economy, and he encouraged borrowers with nonperforming loans to “actively engage with the bank in a transparent manner in order to progress with sensible and equitable restructurings.”

Pijls said that the bank is making progress in the area of NPLs, which is indicated by the stabilisation of the NPL ratio, which in turn enabled the bank to have a profitable quarter.

Following the investment of the European Bank for Reconstruction and Development (EBRD) in Hellenic Bank’s share capital, the Group’s capital adequacy ratio is at 18.2%, the tier 1 capital ratio at 16.7% and the common equity tier 1 (CET1) ratio at 13.8%.

Online gaming giant Wargaming.net, one of the banks three major shareholders, trimmed its stake in the lender from 26.2% to 24.8%, according to a stock exchange filing in October.

The announcement said that Wargaming sold 49,213,490 ordinary shares to an unspecified buyer, but remains the second biggest investor after New York-based fund Third Point. Local investment fund Demetra is the third largest, while the EBRD acquired a 5.38% stake by purchasing Hellenic’s outstanding stock for EUR 20 mln.

The EBRD is already a 5% investor in biggest lender Bank of Cyprus having pumped in EUR 120 mln last year.

Hellenic Bank said that the Supervisory Review and Evaluation Process (SREP) conducted by the European Central Bank s currently in progress along with the on-site inspection.

“These processes are expected to be completed over the next few months; however, the Group’s capital adequacy is at a level which, should the bank decide to adopt ECB’s pre-draft comments and recommendations from their on-site inspection on credit quality, which are not expected to exceed EUR 70 mln, the Group currently has the capital capacity to absorb such and be in compliance with both its Pillar I and revised draft Pillar II add-on capital requirements.”

December 2 - 8, 2015

6 | CYPRUS | financialmirror.com

Qualco inaugurates Cyprus subsidiary, deals with HB and CCB Qualco, a leader in debt management, inaugurated the Qualco Cyprus Ltd. office, aiming to address the debt management challenge of financial institutions and other debt originators by capitalising on the Group’s international experience and business know-how.

Over the last 15 years, Qualco has been actively engaged in the debt management industry across different markets worldwide, formulating customer

centric policies, methodologies and blueprint strategies.

Qualco’s end to end offering ranges from technology to Business Process Outsourcing (BPO) services and advisory services based on advanced predictive modelling. T he aim is to bring measurable performance improvement to its customers’ portfolios.

During the inauguration event that took place at A. G.

Leventis Gallery in Nicosia, Orestis Tsakalotos, Qualco’s Group CEO, announced that the company has already initiated strategic partnerships with the Hellenic Bank and the Central Cooperative Bank, “and we are in the process of further strengthening our operational, executional and delivery capacity in Cyprus by engaging with local senior professionals and industry experts.”

IronFX faces record fine, settles €335,000 in cash Limassol-based IronFX, facing a flurry of complaints from trader clients that they were not allowed to cash-in on their investments, has been fined a record EUR 335,000 by the Cyprus Securities and Exchange Commission, which the company has settled and paid. However, this is not the end for the once-glorious forex trader, whose reputation had been tarnished by public comments and attacks by traders. It also opens the doors to legal recourse or individual settlement through the Financial Ombudsman’s office, all of which may lead to high legal costs and record settlement rewards.

The fine, the second biggest among a total of five imposed by the CySEC for a total EUR

1.33 mln, for violations of the regulations under which Cyprus Investment Firms (CIFs) operate on the island.

The other sanctioned CIFs that have not opted to settle are WGM Services Ltd. (EUR 340,000), Pegase Capital Ltd. (EUR 300,000), Depaho Ltd. (EUR 233,000) and Reliantco Investments Ltd. (EUR 123,000).

These are also some of the highest fines imposed by any European regulator and sends a clear message that CySEC will not tolerate violations, while also warning others who have so far been fined smaller amounts that they could face similarly hefty or even bigger penalties, depending on their violation, a CySEC official told the Financial

Mirror.

The IronFX case concludes a thorough investigation of nearly a year into hundreds of complaints from investors around the world. The violations for all five include obligations to protect clients, lack of control mechanisms and risk management, subcontracting operations to third parties, lack of corporate governance while providing services to clients or would-be clients, and the provision of services only for what the CIF had been licensed for.

CySEC said that regardless of the fine and or its settlement, all five CIFs are obliged to take corrective measures to improve their internal procedures, regulations and

UCY’s KIOS wins award for intelligent transportation networks A team from KIOS Research Center for Intelligent Systems and Networks at the University of Cyprus, won second place at the international competition organised by the Autonomic Road Transport Support Systems COST Action, aiming at increasing the resilience of road traffic support systems by the use of autonomics.

The competition, which was co-located with the 22nd ITS (Intelligent Transportation Systems) World Congress, was conducted in Bordeaux, France, on October 5. Eight research teams from European universities were selected to compete at the final stage of the competition, where they presented and demonstrated the autonomic systems they developed. Assessment criteria included the degree of resilience, degree of autonomicity, innovation, potential impact to future ITS and technical quality.

The KIOS team was composed of researchers Dr. Stelios Timotheou, Charalambos Menelaou and Dr. Panayiotis Kolios, as well as Professors Christos Panayiotou and Marios Polycarpou.

The team proposed a system for autonomic fault-

adaptive traffic state estimation under measurement faults.

The system is able to provide real-time estimation of the traffic conditions of different road links that is resilient to situations where a portion of the available measurement devices provide faulty information. In addition, the system can autonomically identify the faulty sensors and estimate the measurement fault magnitude.

Providing reliable real-time traffic state estimation is crucial in a plethora of applications which aim at improving the efficiency of transportation networks, including traffic signal control and dynamic route planning. Advanced technology in this area will result in substantial traffic congestion relief, leading eventually to the decrease of travel time, fuel consumption and greenhouse gas emissions, improving the quality of life in general.

This research work, conducted as part of the ERC Advanced Grant “Fault-Adaptive”, reflects KIOS’s efforts to be internationally recognised as a leading research centre in the area of fault-diagnosis in critical infrastructure systems, including intelligent transportation systems.

practices, and comply full with the law. They have a further two months to prove their compliance to the CySEC that will return for a follow-up inspection.

IronFX, that in the past had claimed it too was the victim of trading abuse by clients, was not immediately available for comment as to what this meant for the company and how, if at all, clients would be compensated.

Traders may now use the CySEC ruling and resort to either of two options: to appeal to the Financial Ombudsman http://www.financialombudsman.gov.cy for claims up to EUR 170,000, or take legal action in the Cyprus courts, where cases could drag up to 2-3 years.

December 2 - 8, 2015

CYPRUS | 7

EIMF workshop for fund custodians and administration The European Institute of Management and Finance (EIMF) is organising a unique programme next week that will give the tools to professionals that work in the sector to better understand the processes relating to fund administration.

In recent years, Cyprus has made an enormous effort towards the enhancement and completion of the national legal framework concerning investment funds. These legislations have been put in place in order to promote the island as in international fund jurisdiction, while the Cyprus Investment Promotion Agency has helped in establishing the Cyprus Investment Funds Association in order to help promote and build a profitable sector.

The “Fund Custodian and Administration Workshop” with David Loader will provide a clear understanding of the role and responsibilities of fund administration and offer participants the confidence to liaise with investment managers, fund sponsors, custodians, selling agents and investors. It will analyse the latest developments in managing and controlling fund administration processes and procedures, equip participants with the knowledge of how to value and price investment funds accurately, the expertise to identify and manage sources of risk in fund servicing, and the ability to maintain the fund’s compliance with regulatory and tax rules.

The workshop is addressed to professionals within the sector, including managing directors,

managers, auditors, financial controllers and compliance officers who that aim to equip themselves with the knowledge to offer high quality service within their field.

The EIMF, in its effort to provide relevant and unique content to the Financial and Professional Services Sectors, is offering this 3-day workshop on December 8-10.

David Loader is Managing Director of the London based Derivatives and Securities Consultancy Ltd (DSC). DSC provides various consultancy and educational services to a wide range of financial institutions globally. David has over thirty years’ experience in the finance industry, particularly in operations, gained in a number of major organisations including SG Warburg Group where he was Operations Director. He is heavily involved in financial education and training, as a Director of Computer Based Learning Ltd (providing e-learning solutions to the financial services industry), and as an author and presenter of training courses for The Securities and Investment Institute.

David is a member of The International Guild of Bankers, The Institute of Directors and The Securities and Investment Institute.

The Workshop is subsidised the the HRDA, offering a cost-efficient way to participate in this unique and exclusive experience.

For information and to register, contact the EIMF at 2227 4470 or via email to info@eimf.eu.

Managing stress discussed at European Healthy Workplaces Summit Upon the completion of this year’s European Week for Safety and Health at Work, Cyprus actively participated at the European Summit in Bilbao, Spain, where on November 3 and 4, the campaign events were concluded.

At the European Summit in Bilbao, Cyprus was represented by officials from the Labour Inspection Department of the Ministry of Labour, Welfare, and Social Insurance, as well as by representatives of the Pancyprian Council for Safety and Health and representatives of Social Partners.

The Summit focused on managing stress and psychosocial risks in the workplace, while representatives from different European member states presented good practices in this area. Participants had the opportunity to exchange ideas regarding strategies and programmes for the management of work-related stress and psychosocial risks, and they also discussed how relevant research evidence can be put into practice.

In Cyprus, within the framework of this year’s European Week for Safety and Health at Work which took place on October 19-23, officers of the Labour Inspection Department implemented a special programme that includes onsite visits to workplaces, participation in meetings of Safety Committees, discussion with employees and distribution of information material. Information was also disseminated through radio and television channels.

The Campaign website (www.healthy-workplaces.eu) features a wide range of practical tools to help businesses improve the level of management and employee participation in matters relevant to the European Week for Safety and Health at

December 2 - 8, 2015

8 | COMMENT | financialmirror.com

MEDITERRANEAN CUISINE? “Never heard of it”, says Patrick Skinner

FOOD, DRINK and OTHER MATTERS with Patrick Skinner 1 coffee cup of Pinolia (pine seeds/nuts) 2-3 tbsp sunflower oil 300 g Bulgar Wheat 60cl chicken stock Salt and Pepper

Method 1. Put the chicken pieces into a bowl.

2. Spoon in the Harissa and turn well until the chicken pieces are covered all over.

3. Heat the oil in a heavy non-stick pan and gently fry the chicken until brown on all sides (but not completely cooked – about 6 minutes).

Despite a moderate commonality of ingredients, the cuisines of the countries around the Mediterranean vary a lot. The main starch in a meal, for example. In several it is pasta, of which there is a huge variety; in others it’s the potato, or rice. Bread plays a greater or lesser role, according to where you are. What was put on a plate, of course, varied according to household income and it must be noted starchy foods are often less expensive than others.

From ancient times, until about 500 years ago, diet in the area was quite simple – far from exotic and with little variety. The growth of the Spice Routes changed all that, and for the better.

Consider Cyprus in the Middle Ages. A rather wild place, especially in the hills (some might say it still is!). A small local population was concentrated in the harbours of Larnaca, Paphos and Kyrenia. These harbours brought in sailing vessels from Turkey, Lebanon and Egypt with spices and other foodstuffs unavailable locally, to be welcomed by the traders and their customers.

Think back to the year 1600 AD, when similar trading patterns by sea had been observed for two thousand years. Seemingly, quite suddenly, over the next century or two, the culinary life of Cyprus changed dramatically, with the importation of exotic plants from the New World, notably Mexico and from the east. Imagine life before this sextet arrived: the tomato, the potato, maize, peppers, green beans and the chick pea. I am glad I wasn’t a food writer then!

Imagine cooking without tomatoes in sauces, stews and salads. Or, sweet corn, as street food or in recipes at home? The magnificent “Cyprus Potato”, fried or roasted? Peppers, stuffed with meat and rice, or as a “Pepperonata”? Hummus? The diet would be dull, to say the least.

So, we must be grateful for the good things brought to us by the people who visited us, enemies as well as friends. Our culinary history is a fascinating one. If you ask me: “Is there a Cyprus kitchen?” my answer is a firm “YES!”

Are Cypriots Egyptians trying to be Greeks?

A Cypriot lady once asked me this question and my reply was that to me Cyprus feels more Middle Eastern than European and that the cuisine was, and is, better and more varied than that of Greece. What we eat has been greatly influenced by the Ottomans, of course, whose kitchen was, in its time, second only to that of China for style, range and content. When I first tasted Koupes, they reminded me so much of the Kibbeh so beloved of Arab peoples. Its major ingredient, Bulgar Wheat, or “Pour Gourri” powers a number of great dishes, and I like it as a pilaff.

Those little light brown grains you buy in packets look like a very natural product. But human hands have had quite a part to play. Bulgar wheat, or Burghul, is made by parboiling wheat, and then drying it in heat, after which it is coarsely ground. The grains then have outer layers of bran removed by sprinkling them with water and then rubbing.

It is a very ancient foodstuff, and widely made in West Asia and North Africa. It is used for a number of varieties of Koupes/Kibbeh, in salads like the Arab Tabbouleh and, mixed with yogurt in our lightly fermenting Trahanas. It can be used in stews and casseroles and in this recipe, it supports Harissa Chicken.

Harissa, which hails from Tunisia, is a hot paste, made from chilli peppers, a sweet red pepper, onion, garlic, spices and flavourings, sold in small jars. A very good item to have in your herbs and spices cupboard.

4. Remove from pan and set aside.

5. Put the sliced onions in the pan and gently stirfry for a few minutes until cooked through.

6. Return the chicken to the pan, add the Bulgar Wheat and put on slow heat for a couple of minutes, stirring regularly.

7. Add the stock, stir, put the lid on and simmer on low heat for about 15 minutes or until the chicken is cooked and tender.

8. Serve with some crisp

Ingredients For four servings, you will need: 4 chicken thighs, skin and bone removed and cut into four pieces One medium onion, peeled and sliced 1 cup of chicken stock 1 peeled and chopped garlic clove 1 tbsp Harissa

green vegetables, such as sliced green beans.

9. Accompany with a fruity red wine such as Ayios Onoufrios.

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

December 2 - 8, 2015

financialmirror.com | COMMENT | 9

4 social media tips for the financial services industry

By Mariana Antonescu The financial industry had to overcome a lot of hardships in the past years. The banking crisis and the recession have led to increasing distrust in banks and the financial industry in general. In Cyprus, specifically after the unfortunate crisis of 2013 and the intense publicity surrounding it, financial institutions struggled with rebuilding their negative reputation among consumers.

As more customers turn to social media to inform their choice of financial products and voice their concerns there is an opportunity for financial services companies to improve their reputation and increase their client’s trust and satisfaction. Social media marketing allows banks and other financial institutions to communicate with existing and prospective consumers in a way that is personal and relative, while establishing and maintaining relationships.

With improved targeting, enhanced advertising, compliance support, developments in ROI tracking and more, social media now has the potential to play a meaningful role in your financial institution’s marketing plan.

So, how can the financial services industry better leverage social media to attract new clients and solidify relationships with existing ones while engaging online in a

compliant and safe manner? To answer this question we hosted a casual discussion with marketing professionals on the future of financial services and social media. We were fortunate enough to be joined by experts from the banking, insurance and analyst community as well. There were some fascinating debates and lots of practical examples of how banks, wealth management and insurance companies have made best use of social media.

Here are my takeaways from the event.

Secure and comply. By now, most advanced organisations have already integrated social media into their communications efforts. Yet others in the finance sector have held back. Executives are concerned about the security of social media accounts and making mistakes that could damage their reputation or result in negative financial consequences. With the right technology and policies in place, you can secure your social profiles, safeguard your brand and keep regulators happy. Social relationship platforms like Hootsuite have built-in compliance features to prevent your company from posting social media messages that could violate regulatory guidelines, along with security features to maintain control of your corporate social media accounts. However, technology is only part of the compliance equation. In order to avoid blunders, your FS company needs a policy that gives employees clear guidelines for business-related messages on social media.

Use data to inform decisions. There’s no question. People are talking about your FS

organisation on social media. But before you speak up, make sure you listen. Listening enables companies to understand what customers want, what they’re saying about the brand, and what they’re saying about competitors. In listening to what customers complain about or praise the organisation for, finance companies gain insights into what they can improve about their services or what drives customer decisions. Data can also be used to inform marketing campaigns.

For example the ING group discovered that their marketing campaigns were losing effectiveness as by the time they went out, many of them were no longer relevant to the bank’s customers. By implementing a centralised campaign management programme, with personalised offers in real time, delivered through multiple channels, ING increased average campaign response rates and expects to reduce its direct marketing costs.

Share relevant content. Social media is an excellent method for financial services companies to showcase their expertise and experience in different areas while still adhering to legal regulations. Research shows that investment customers and prospects are hungry for advice and tips that will help them take their next steps on the road to solid financial planning. So generate content – videos, blog entries, short white papers, case studies – that helps them solve a problem or increases their awareness on a topic in the industry. Doing so will position your company as an industry leader.

Build relationships that last. The wisest money you can spend is on customer

retention. Loyal customers are crucial to the long-term viability of your business, and in today’s competitive environment, building trust is key. I know that I would continue to use the advisor who understands me, who grows with me and who I believe looks out for my best interests over someone new and unproven who may claim offers of better coverage at a lower cost. How do you build and maintain trust with clients via social media? Engage, not just with content but with the audience as well. Respond to comments or participate in dialogue. Things you notice on social media might prompt you to pick up the phone or schedule a meeting. Social media, more than any other medium, provides the opportunity to establish and sustain relationships. What you choose to do with that opportunity is up to you.

With these four tips you’re better positioned to move your FS organisation’s social media programmes forward. As you take your next steps, watch what works and measure social’s impact on core business goals. If you put a strong foundation in place today – based on security, compliance and a focus on the social customer – your organisation will be able to confidently scale up its investments. mariana10antonescu@yahoo.com Mariana Antonescu (MBA) is a graduate of the European University Cyprus and a business consultant with a special interest in the field of Social Media Marketing. www.mari10.blog.com

Why working remotely is good for businesses and staff alike

The role of content in digital marketing

A recent report by REGUS confirms that already 50% of workers globally work outside the main office 2.5 days a week or more. Other evidence validates that flexible working is increasingly becoming the norm. A report by Citrix suggests that by 2020 the proportion of businesses offering mobile working will reach 89% and a study conducted by Vodafone showed that 86% of multinationals consider mobile flexible working as a medium or high priority.

Here are the ten main drivers of change that are disrupting the traditional 9-to-5 grind in the workplace.

1. Remote workers are less stressed People feel empowered to work in a way that suits them and suits the business. In a recent survey by FlexJobs 91% said it helps them take better care of themselves and 90% declare it would decrease their levels of stress.

2. Remote working provides choice Choice is very important. There shouldn’t be a technologydriven compulsion to work in a certain way. Clearly, workers are turning to flexible working as a way of avoiding burn-out and preserving their physical and mental well-being.

3. Commuting is bad for you Commuters have lower life satisfaction, a lower sense that their daily activities are worthwhile, lower levels of happiness and higher anxiety on average than non-commuters.

4. Remote venues are better than the office “Flexible working isn’t just office or home — there may be somewhere near home with better facilities,” said Katerina Manou, General Manager of Regus for the Balkans and Cyprus.

5. Reduction of underused office space One of the most tangible benefits for firms is the reduction of underused office space. Money saved on expensive leases and under-occupied space should be invested in growth initiatives.

6. Reduction of fixed overheads Reducing expensive fixed office space leasing arrangements is one of the key take-away learning from the recession.

7. Flexible working creates agile organisations Businesses are increasingly moving towards flexible working in order to create organisations that can respond to market changes by retracting or expanding rapidly.

In 2016 we will see an increased need for organic, tailored, personal content.

Content is king, and it is expected to play an even bigger role in 2016 digital marketing. Developments in publishing, creative and targeting technology have made content creation increasingly accessible for all marketers.

A strong strategy of creative, personal, interesting content is eclipsing the traditional departments of SEO management, advertising and creative.

By Spyros Tinis

“Content is the new ad”

8. Remote workers are well connected The prevalence of smartphones and social media mean you don’t have to be next to someone to communicate effectively.

And new business trends like remote administration, cloudbased project management, video conferencing, and BYOD are extending the effectiveness of remote work.

9. Remote workers are more engaged When you’re tweeting with people in your team close to midnight, it brings home that people are experiencing something beyond ‘doing work’ — they’re engaged in a different way.

10. The new agile workplace creates new jobs Flexible working is a key factor in keeping older workers in the economy and can help them extend their careers.

In Cyprus, Regus operates in Nicosia, Limassol and soon in Larnaca.

For more information, visit: www.regus.com.cy or call +357 22 503 000

“Marketing” doesn’t have to necessarily mean paid promotion or advertising, especially since content can be cheaper, less limiting and more efficient than many paid ad formats.

According to Marketing Insider Group, 2016 will be “the age of ad blocking” As more and more consumers download ad blockers on their computers and cell phones, marketers will start to see the futility of spending so much of their budgets on ads no one wants.

This will drive an increase in content marketing budgets. It will force more marketers to consider how to create and publish content their customers actually want.

Content is the new “SEO” With each update of Penguin, Google continues cracking down on SEO tactics in violation of their policy.

And with every algorithm update like Panda and Rank Brain, Google rewards high-quality content.

Traditional paid advertising still has its place in marketing, but content’s role is demanding an increasing share of marketing budgets for 2016.

Spyros Tinis (PhD) is Marketing and Communication Manager at Neapolis University Pafos s.tinis@nup.ac.cy

December 2 - 8, 2015

10 | COP 21 | financialmirror.com

From good intentions to deep decarbonisation

By Jeffrey D. Sachs, Guido Schmidt-Traub, and Jim Williams In the run-up to the United Nations Climate Change Conference (COP21) in Paris, more than 150 governments submitted plans to reduce carbon emissions by 2030. Many observers are asking whether these reductions are deep enough. But there is an even more important question: Will the chosen path to 2030 provide the basis for ending greenhouse-gas emissions later in the century?

According to the scientific consensus, climate stabilisation requires full decarbonisation of our energy systems and zero net greenhouse-gas emissions by around 2070. The G-7 has recognised that decarbonisation – the only safe haven from disastrous climate change – is the ultimate goal this century. And many heads of state from the G-20 and other countries have publicly declared their intention to pursue this path.

Yet the countries at COP21 are not yet negotiating decarbonisation. They are negotiating much more modest steps, to 2025 or 2030, called Intended Nationally Determined Contributions (INDCs). The United States’ INDC, for example, commits the US to reduce CO2 emissions by 26-28%, relative to a 2005 baseline, by 2025.

Though the fact that more than 150 INDCs have been submitted represents an important achievement of the international climate negotiations, most pundits are asking whether the sum of these commitments is enough to keep global warming below the agreed limit of 2 degrees Celsius.

They are debating, for example, whether the INDCs add up to a 25% or 30% reduction by 2030, and whether we need a 25%, 30%, or 40% reduction by then to be on track.

But the most important issue is whether countries will achieve their 2030 targets in a way that helps them to get to zero emissions by 2070 (full decarbonisation). If they merely pursue measures aimed at reducing emissions in the short term, they risk locking their economies into high levels of emissions after 2030. The critical issue, in short, is not 2030, but what happens afterward.

There are reasons to worry. There are two paths to 2030.

We might call the first path “deep decarbonisation,” meaning steps to 2030 that prepare the way for much deeper steps after that. The second path could be called the way of “lowhanging fruit” – easy ways to reduce emissions modestly, quickly, and at relatively low cost. The first path might offer

little low-hanging fruit; indeed, the low-hanging fruit can become a distraction or worse.

Here is the reason for worry. The simplest way to reduce emissions to 2030 is by converting coal-fired power plants to gas-fired power plants. The former emit about 1,000 grams of CO2 per kilowatt-hour; the latter emit around half of that.

During the coming 15 years, it would not be hard to build new gas-fired plants to replace today’s coal plants. Another low-hanging fruit is great gains in the fuel efficiency of internal combustion engines, taking automobile mileage from, say, 35 miles per gallon in the US to 55 miles per gallon by 2025. The problem is that gas-fired power plants and more efficient internal-combustion vehicles are not nearly enough to get to zero net emissions by 2070. We need to get to around 50 grams per kilowatt-hour by 2050, not 500 grams per kilowatt-hour. We need to get to zero-emission vehicles, not more efficient gas-burning vehicles, especially given that the number of vehicles worldwide could easily double by mid-century.

Deep decarbonisation requires not natural gas and fuelefficient vehicles, but zero-carbon electricity and electric vehicles charged on the zero-carbon electricity grid. This more profound transformation, unlike the low-hanging fruit eyed today by many politicians, offers the only path to climate safety (that is, staying below the 2C limit). By pursuing coal to gas, or more efficient gas-burning vehicles, we risk putting ourselves into a high-carbon trap.

The figure above illustrates the conundrum. The lowhanging-fruit pathway (red) achieves a steep reduction by 2030. It probably does so at lower cost than the deepdecarbonisation pathway (green), because the conversion to zero-carbon electricity (for example, wind and solar power)

and to electric vehicles might be more costly than a simple patch-up of our current technologies. The problem is that the lowhanging-fruit pathway will achieve fewer reductions after 2030. It will lead into a dead end. Only the deep-decarbonisation pathway gets the economy to the necessary stage of decarbonisation by 2050 and to zero net emissions by 2070.

The allure of the short-term fix is very powerful, especially to politicians watching the election cycle. Yet it is a mirage. In order for policymakers to understand what’s really at stake in decarbonisation, and therefore what they should do today to avoid dead-end gimmicks and facile solutions, all governments should prepare commitments and plans not only to 2030 but also at least to 2050. This is the main message of the Deep Decarbonisation Pathways Project (DDPP), which has mobilized research teams in 16 of the largest greenhouse-gas emitters to prepare national Deep Decarbonisation Pathways to mid-century.

The DDPP shows that deep decarbonisation is technically feasible and affordable, and it has identified pathways to 2050 that avoid the traps and temptations of low-hanging fruit and put the major economies on track to full decarbonisation by around 2070. The pathways all rely on three pillars: major advances in energy efficiency, using smart materials and smart (information-based) systems; zero-carbon electricity, drawing upon each country’s best options, such as wind, solar, geothermal, hydro, nuclear, and carbon capture and storage; and fuel-switching from internal combustion engines to electric vehicles and other shifts to electrification or advanced biofuels.

A key question for Paris, therefore, is not whether governments achieve 25% or 30% reductions by 2030, but how they intend to do it. For that, the Paris agreement should stipulate that every government will submit not only an INDC for 2030 but also a non-binding Deep Decarbonisation Pathway to 2050. The US and China have already signaled their interest in this approach. In this way, the world can set a course toward decarbonisation – and head off the climate catastrophe that awaits us if we don’t.

Jeffrey Sachs is Director of the Earth Institute and the UN Sustainable Development Solutions Network. Guido SchmidtTraub is Executive Director of the UN Sustainable Development Solutions Network. Jim Williams is Director of the Deep Decarbonisation Pathways Project.

Shipping supports global climate change deal Industry is committed to ambitious CO2 reduction led by IMO The global shipping industry, represented at the United Nations Conference in Paris by the International Chamber of Shipping (ICS), fully supports a global deal on climate change and is committed to ambitious CO2 emissions reduction across the entire world merchant fleet. This will best be guaranteed if further regulation continues to be led by the UN International Maritime Organisation (IMO), the ICS said.

Shipping is the lifeblood of the global economy without which intercontinental trade, the bulk transport of raw materials and the import/export of food and manufactured goods would not be possible.

About 90% of world trade is carried by sea and shipping is already by far the most energy efficient mode of commercial transport. Shipping is therefore part of the solution to preventing climate change.

Proportionate to its 2.2% share of the world’s total CO2 emissions, international shipping accepts its responsibility to contribute to the CO2 reduction measures being taken by the global community.

IMO data shows that shipping has already reduced total CO2 emissions by more than 10% since 2007. The share of the world economy’s CO2 emissions from

international shipping was just 2.2% in 2012 compared to 2.8% in 2007, while CO2 per tonne of cargo transported one kilometre by sea has fallen around 20% in the past ten years as a result of aggressive fuel efficiency measures.

“Mandatory regulations already adopted

by IMO will ensure that all ships built after 2025 will be at least 30% more efficient than ships operating today,” said ICS Secretary

General, Peter Hinchliffe, speaking at a special shipping event at the Pompidou Centre in Paris. “Combined with further technical and operational measures plus new technology, international shipping should be able to reduce its CO2 per tonnekilometre by 50% before 2050.”

“These dramatic further CO2 reductions will be genuine and real. We will have bigger ships, better engines, cleaner fuels and

smarter speed management.

The mandatory worldwide use by ships of low sulphur fuel to reduce air pollution will provide a further significant incentive to improve fuel efficiency,” Hinchliffe added.

With full industry support, IMO is now developing additional global measures. The next step will be the collection of CO2 emissions data from individual ships, which the industry would like to see mandatory as soon as possible.

“Despite further growth in maritime trade on which the prosperity of the world depends, the significant CO2 reductions achieved in recent years suggests that shipping is well on course for carbon neutral growth,” Hinchliffe said.

Recent data from the United Nations Conference on Trade and Development (UNCTAD) makes clear that developing and developed nations are equal beneficiaries of maritime trade, which is critical to the achievement of the UN’s Sustainable Development Goals. ICS asserts that IMO is the only regulatory body that can ensure that future CO2 measures are implemented on a uniform and worldwide basis that will support sustainable trade and the interests of developing economies.

December 2 - 8, 2015

financialmirror.com | COP 21 | 11

The long march to Paris

By Rana Kapoor, Johan Rockstrom, Khalifa Ababacar Sall, and Feike Sijbesma Over the next few weeks, Paris will once again dominate global headlines. This time, however, the news is likely to be positive, as world leaders come together to forge a meaningful agreement in the fight against climate change.

To be sure, at first glance, the United Nations Climate Change Conference taking place from November 30 to December 11 looks a lot like the 2009 conference in Copenhagen, when negotiators were unable to agree on an effective accord. And indeed, the desired outcome remains unchanged: an international deal that will reduce greenhouse-gas emissions and limit global warming to 2 degrees Celsius above preindustrial levels.

But there are notable differences this time around. The stiff economic headwinds that negotiators confronted six years ago have been replaced by a tailwind of opportunity.

No longer is the conversation limited to burden sharing and sacrifice; increasingly, there is talk of innovation and technological breakthroughs that make sustainable development possible. In short, the negotiations are taking place in an environment favorable to collective action, with support from the business community, financial institutions, civil society, religious leaders, politicians, and, indeed, the public at large.

Furthermore, the agreement to be reached in Paris is being built from the bottom up. It is clear that whatever shape the

agreement takes, it will not be totally topdown. So countries have been asked to propose what they think they can achieve in terms of reducing emissions after 2020, through so-called Intended Nationally Determined Contributions (INDCs). And while this solution may not yet be adequate to the challenge of heading off the consequences of climate change, it is a strong step forward.

Meanwhile, in the years since the Copenhagen summit, there has been a surge of concrete progress on the part of the “nonstate actors” whose cooperation will be needed to implement an international agreement.

An unprecedented number of scientists, business leaders, and subnational government politicians such as mayors and governors have made clear the need for a strong agreement in Paris. Broad support for a robust accord is reflected in the more than 10,000 commitments to combat climate change made by cities, regions, companies, and investors.

This emerging consensus was also reflected in May at the Business & Climate Summit and Climate Finance Day, where investors and business leaders pledged to lead the global transition to a low-carbon economy. Participants at the two events called for setting a price on carbon, phasing out fossil-fuel subsidies, more partnerships with governments, and the coupling of public and private finance to diffuse the risks of low-carbon investments.

And in July, more than 2,000 researchers meeting in Paris at a conference called Our

Common Future Under Climate Change concluded that ambitious efforts at mitigating carbon dioxide emissions would be economically feasible and have numerous knock-on benefits. This finding is fully in line with last year’s New Climate Economy report, which established that it is possible to combat climate change while promoting economic growth.

Gradually, funding is being channeled toward regions in need of assistance in the fight against climate change. The OECD estimates that the flows of public and private climate finance reached $62 bln in 2014.

And, in October, the World Bank pledged to increase its direct and leveraged climate financing to up to $29 bln annually.

Innovative financing is also becoming more important, especially in developing countries. In February, Yes Bank, India’s fifth-largest private-sector bank, issued the first ever “Green Infrastructure Bond.” In August, the International Finance Corporation issued a five-year “green Masala bond” on the London Stock Exchange.

Meanwhile, institutional investors have been snapping up a series of climate bonds focusing on water, affordable housing, smart cities, and an array of other mitigation and adaption projects.

Meanwhile, local-level politicians in cities and regions around the world are often well ahead of their national leaders. At the World Summit Climate & Territories in Lyon in July, 14 networks of subnational and local governments, representing 11% of the world’s population, committed to emission reductions equivalent to 15% of the effort needed to keep global warming below 2 Celsius.

What all these efforts have in common is a desire to compel negotiators in Paris to recognise the urgency of the climate challenge. Their participants want world leaders to understand that progress is not only achievable; it is already occurring. A global climate agreement remains vitally important. But forging one would no longer be a leap of faith. It would be a leap into open arms.

Rana Kapoor is Founder and CEO of Yes Bank. Johan Rockström is Executive Director of the Stockholm Resilience Centre. Khalifa Ababacar Sall is Mayor of Dakar, Senegal.

Feike Sijbesma is CEO and Chairman of the Managing Board at Royal DSM. © Project Syndicate, 2015. www.project-syndicate.org

The arc of climate justice

By Sherry Rehman It is a painful irony of climate change that those least responsible for the problem are often the most exposed to its ravages. And if any country can claim to be the victim of this climate injustice, it is Pakistan. As world leaders meet at the United Nations Climate Change Conference in Paris, the country is reeling from the aftereffects of devastating floods that damaged buildings, destroyed crops, swept away bridges, and killed 238 people.

Such weather-related tragedies are not new to Pakistan; what’s different is their frequency and ferocity. Deadly floods have become a yearly occurrence; in 2010, record-breaking rains killed nearly 2,000 people and drove millions from their homes. Even as Pakistan fights one of the world’s most pitched battles against terrorism, increasingly violent weather is pushing up the cost of food and clean water, threatening energy supplies, undermining the economy, and posing a potent and costly security threat.

There is little doubt that the country’s climatic woes are caused, at least in part, by the greenhouse-gas emissions that industrialised countries have pumped into the air since the beginning of the Industrial Revolution. Even today, Pakistan produces less than 1% of the world’s emissions. Meanwhile, Pakistan is consistently ranked among the countries that are most vulnerable to the harmful effects of climate change,

owing to its demographics, geography, and natural climatic conditions.

From 1994 to 2013, climate change cost Pakistan an average of $4 bln a year. By comparison, in 2012, terrorism in Pakistan resulted in losses of roughly $1 bln. When the country isn’t suffering from floods, it is subject to water shortages, ranking as one of the most water-stressed in the world, according to the Asian Development Bank. And climate change is compounding both problems, wearing away at the glaciers and snowpack that serve as natural regulators of water flow, even as increased erosion caused by flooding contributes to the siltation of major reservoirs.

Meanwhile, rising temperatures are increasing the likelihood of pests and crop diseases, jeopardising agricultural productivity and subjecting the population to increasingly frequent heatwaves. Rising sea levels are increasing the salinity of coastal areas, damaging mangroves, and threatening fish species’ breeding grounds. And higher ocean temperatures are leading to more frequent and dangerous cyclones, endangering the country’s coast.

The outlook for the future is no less alarming: worsening water stress, increased flash flooding, and the depletion of the country’s water reservoirs. By 2040, projections indicate that an average rise in temperatures of 0.5 degree Celsius could destroy 8-10% of Pakistan’s crops.

This burden must not be left for Pakistan to carry alone.

Thus far, progress at international climate-change talks has been incremental at best. Fossil-fuel lobbies, reluctant governments in industrialised countries, and disengaged electorates have delayed and obstructed the emergence of a robust agreement to reduce global greenhouse-gas emissions. But while expectations of a breakthrough in the

fight against climate change in Paris are optimistic, a push for equitable distribution of the costs of global warming must be made.

Despite an increase in funding for climate adaptation and mitigation in the developing world, Pakistan’s share has remained tiny, relative to the disasters it has suffered in the last five years alone. By 2050, the average annual cost of climate-change adaptation in Pakistan will be $6-14 bln, according to the UN Framework Convention on Climate Change. Mitigation will run another $17 bln per year.

As climate change continues to take its terrible toll, Pakistan cannot allow the billions of dollars in damages it suffers at the hands of the world’s largest polluters to go uncompensated. Whatever the ultimate agreement in Paris, climate negotiators must ensure that the accrued losses resulting from global emissions are borne fairly and do not remain the sole burden of those suffering the greatest harm.

As one of the world’s smaller polluters, Pakistan is well within its rights in seeking resources and funds to cope with the impact of problems for which it is not responsible. So are many other countries. Our demand for a binding international mechanism to distribute the burden of climate change – a mechanism to ensure climate justice – must not go unheeded in Paris.

Sherry Rehman, formerly Pakistan’s federal minister of information and ambassador to the United States, is a senator, Vice President of the Pakistan People’s Party, and Chair of the Jinnah Institute. © Project Syndicate, 2015 - www.project-syndicate.org

December 2 - 8, 2015

12 | PROPERTY | financialmirror.com

Is it time for Real Estate Investment Trusts (REIT)?

By George Theocharides Cyprus International Institute of Management

problematic loans might be steps that could help the situation.

Here, I suggest that the establishment of a Real Estate Investment Trust (REIT) might be another proposed solution for this problem.

What is a REIT?

In the aftermath of the economic crisis, the sector that has been suffering for some time now is the real estate and construction industry. One could argue though that a major reason for the crisis is the overexpansion of this market (in the years between 2004-2010), the creation of a bubble in real estate prices, and when the bubble finally burst, the problems have transferred via the banking sector to the rest of the Cyprus economy. Banking was unfortunately heavily exposed to this market, and that was one of the reasons for the collapse of the banking system in March 2013. Since that time, we have seen an exponential increase in the nonperforming loans (NPLs) in the system, as loan holders are either unable or not willing to repay their obligations.

The latest data by the European Banking Authority (EBA) in 21 countries and across 105 banks in Europe shows the magnitude of the problem. Cyprus has the highest NPL portfolio (almost 50%), well above the second country (Slovenia at 28%) while the average is only at 10%.

Furthermore, the provisions made by our banks (at 32%) is the third lowest among all countries and well below the average (at 43%). In the past, I argued that the passage of securitisation for the selling of loans, or the introduction of an asset management company (AMC) that would handle the

This is an investment vehicle that is comparable to a mutual fund, i.e. pools money from investors and invests in real estate (apartment complexes, hotels, shopping malls, etc.), and can be traded on an organised exchange as an exchange-traded fund (ETF). It is basically an indirect way of investing in real estate.

REITs can be divided into two types: (1) equity REITs where investors taking part in this vehicle receive ownership of the property under the fund; and (2) mortgage REITs where the investment is in property mortgages (i.e. debt securities).

To induce participation in this investment vehicle, REITs offer special tax advantages and provide a high dividend yield – earnings from rent payments or from capital gains from selling property holdings in the case of equity REITs, and gains from the net interest margin, i.e. the difference between the interest received from mortgage loans and the cost of funding these loans.

It’s also important to note that both small and large investors are encouraged to participate in such a vehicle, with a minimum of at least 100 shareholders.

be set up either by the property developers who are finding it difficult nowadays to repay their loans, or by the bank themselves (if they end up taking ownership of some of the assets of problematic loan holders). This can help the economy in several ways: 1. It can bring much-needed liquidity to the real estate market, and the increased demand can halt the downward path of real estate prices. One of the characteristics (disadvantages) of real estate as an asset class is the lack of liquidity.

This problem is exacerbated in recessionary periods.

Trading of such a vehicle in an organised exchange can bring liquidity to the market as participants will be able to liquidate their investment quickly and at a price close to the fair market value, if needed.

2. The increased liquidity will then help the property owners to recover some of the lost value of their assets, or if those assets had already passed into the hand of the banks, can help the banking sector recover a bigger portion of the problematic loans.

3. Overall, there will be a positive impact for the economy as a whole – for the real estate market, for the banking sector, but also for the rest of the market participants as the problems of the banking sector are felt inevitably by all sectors of the economy.

George Theocharides is an Associate Professor of Finance at the Cyprus International Institute of Management (CIIM) and the Director of the MSc in Financial Services

How can it be useful?

Given the type of problems mentioned above, a REIT can

ciim@ciim.ac.cy www.ciim.ac.cy

PGS Lighting Electrical launches new reward scheme

BOCY sells “non-core” hotel properties in Greece for €9.6 mln The Bank of Cyprus announced that it has sold three non-core assets in Greece in deals worth a total EUR 9.6 mln. The hotels, two in Corfu and one in the exclusive Athens suburb of Glyfada, were offered in open bidding and the revenue is well within the bank’s expectations, despite the difficult sitaion of the Greek economy and the property market.

Thus, the bank said, it continues to reduce its exposure to the Greek market and deleveraging its balance sheet, adding that the sale of assets in Greece continues. As of September 30, the bank had in its possession a total of 637 foreclosed properties in Greece with a book value of EUR 192 mln, according to its financial statement.

Already, the bank has advertised the

sale of two commercial properties in the Attica area, a 7,500 sq.m. industrial property and another one of 19,500 sq.m.

Back in Cyprus, it has posted several housing and commercial properties for sale on its website http://propertiesforsale.bankofcyprus.co m/en-GB/ , including three supermarkets previously owned by Orphanides subsidiaries, a building along Limassol’s central Makarios Ave. (EUR 5 mln), the former Laiki-Grindlays 8-floor building on Makarios Avenue in Nicosia (EUR 8 mln), a 7-floor building on the corner of Makarios and Aphrodite (EUR 11 mln), the former Philiki/CNP Insurance building on Vyzantiou street in Nicosia EUR 3.5 mln) and various other properties, including plots.

PGS Lighting Electrical is rewarding customers through its new points collection scheme called My PGS. Cardholders will be able to collect points with every purchase from any of the 11 PGS Lighting Electrical stores around Cyprus. Points can be redeemed in-store, with customers receiving free products or services, gifts, discounts, gift vouchers, coupons and other benefits. The company, which has been working in the field of electrical supplies and lighting equipment for over 30 years, and with an expertise in energy saving, recently launched the new rewards’ scheme by treating its collaborators to dinner in Nicosia,

Limassol, Larnaca, Paphos and Paralimni.

PGS Lighting Electrical CEO Neophytos Neophytou pointed out that, since its establishment, the company has aimed to create and maintain strong relationships with its customers and collaborators.

“This scheme was developed as a way of saying thanks to all those who have shown a preference to our company, and we look forward to continuing the implementation of innovative ideas.”

For more information visit www.pgses.com

Dutch RMBS performance remained strong in September The Dutch residential mortgage-backed securities (RMBS) market remained strong during the three-month period ended September, according to the latest indices published by Moody’s Investors Service.

The 60+ day delinquencies of Dutch RMBS, including Dutch mortgage loans benefitting from a Nationale Hypotheek Garantie, continued to decrease to 0.73% in September from 0.81% in June. The 90+ day delinquencies also continued to decrease to 0.56% in September from 0.64% in June.

Cumulative defaults increased to 0.78% of

the original balance, plus additions (in the case of master issuers) and replenishments, in September from 0.70% in June. This compares to cumulative defaults of 0.49% in September 2014. Cumulative losses increased to 0.15% in September from 0.14% in June.

Moody’s has assigned definitive credit ratings to two new transactions since the last publication of the Index on September 9, including five classes of notes issued by STORM 2015-II B.V. and two classed of notes issued by Hypenn RMBS IV B.V.

December 2 - 8, 2015

financialmirror.com | PROPERTY | 13

Do we want foreign buyers or not? µy Antonis Loizou Antonis Loizou F.R.I.C.S. is the Director of Antonis Loizou & Associates Ltd., Real Estate & Projects Development Managers

I never cease to be amazed by what goes on in this country, despite having seen so much in my entire 40 years of experience and involvement in real estate.

Attracting foreign buyers in exchange for permanent residence visas or passports, started during the term of President Tassos Papadopoulos in 2007. After that, the Christofias administration was against the measure and despite our persistent efforts to implement the plan, we were told during a seminar organised by our office in 2011 with about 400 participants, including CIPA and officers of the Interior Ministry, that “the Ministry could not to approve more than ten applications a year” - basically due to the policy of the then government.

The successor to that government led by President Anastasiades came up with an imaginative set of measures that came in hand-in-glove to the efforts to boost the struggling economy and especially the property market. This was an imaginative plan from the Papadopoulos era, which the new administration enhanced with new incentives, additional tax breaks and other measures bringing us to the current enviable level where the potential of this package has yet to be fully utilised.

We subsequently have foreign investors who showed a keen interest in our banks and bonds (if they hadn’t been around to rescue the banks then the state would surely have defaulted and declared bankruptcy) and some others who bought hotels showing great interested and investing in some of our luxury properties (eg. Le Meridien, Amathus and others).

So, Interior Minister Hasikos said that our economy has benefited by around EUR 2.5 bln from this measure. And what was the reaction of the opposition parties? Instead of congratulating the government, they expressed their usual ‘reservations’ expecting some kind of apology from the Minister of Interior.

And yet, so far: • Two office buildings in Nicosia were sold in 2014 for EUR 12 mln to Belgian investors who bailed out the owner who had serious financial problems. So, apart from the owner, the banks too secured fresh capital.

• Three office buildings complexes, two in Nicosia and one in Limassol, were sold once again to foreign investors for the amount of EUR 25 mln, thus bailing the owner and helping the banks with fresh funds.

• Recently, the Land Registry building was sold to a foreign buyer for EUR 11 mln and again to the delight of the lenders and of course the owner.

• We also heard that the building housing the Ministry of Health, that had become a non-performing loan, was sold to the satisfaction of the creditors.

• In addition to these “high level investments” there have also been other smaller ones in the order of EUR 3-8 mln, which were mainly bought by European investors.

• And then we have the Chinese who bought and continue

to buy the lower cost homes and apartments mainly in Paphos for EUR 300,000 and helped to some extent a recovery among the town’s developers in effect saving them from total collapse which would have had a chain effect on the banks.

• And finally we have the Middle Eastern buyers who continue to show particular interest in inexpensive Larnaca apartments mainly for resales which have remained on the market for years.

• And let’s not forget the two shopping malls that were sold for around EUR 200 mln with a yield of around 7%. So, what’s the problem then? Surely, the banks that had difficulty to collect or recover their asset-backed mortgages and certainly the seller must be happy.

I have not yet understood what the problem could be, because these investors do not want to buy the entire island, but specific projects that offer a return on investment and which they cannot take away with them.

These investors are turn to high quality projects that guarantee a steady income with an initial desired yield of 6% (2013) on the capital invested, which has now been reduced to 4.5%. This is a very positive outcome, because it shows that the despite the reduced risk, these foreign investors accept lower yields than those of 2014.

Just as reference, the property investments in Greece carry an expected return of around 10% of the initial investment due to the higher risk involved, while in other European countries with stronger economies the yields range from 2% to 3%. When deposits do not earn more than 1% and even

Switzerland charges 0.5% for deposits, it is clear that there is interest to invest in real estate by foreigners who expect yields of 4.5%.

There are many others who have large loans and are waiting for foreign investors to save them from the exorbitant borrowing interest rates of 8-13%, as well as the embarrassment of going through the foreclosure process. So, instead, the opposition parties in the House congratulating the efforts of this government (and certainly the pioneer Tassos Papadopoulos), MPs remain somewhat defensive.

So I cannot understand how some people can continue to be embroiled in petty politics and do not care about the greater god of the country and its ailing economy.

Surely, these foreign investors cannot remove our properties and export them to their countries, as they will now be obliged to remain here and to manage their investments in such a way that suits them and will contribute to the local labour market, help promote Cyprus properties abroad, and continue to pump money into the economy as they are now permanent residents here.

These large-scale investors do not care about the land or throwing us out of our apartments as all they seek is a good yield and q quick return on their investment. What we should really be concerned about is the disposal of the “loan packages” and mortgages which I mentioned in my previous article. www.aloizou.com.cy ala-HQ@aloizou.com.cy

Recoveries on repossessed Spanish homes will rise further, since hitting bottom in 2013, says Moody’s As the stock of outstanding repossessed properties declines, recoveries will continue to improve, since bottoming out in 2013, Moody’s Investors Service said in a new report. Recovery rates on repossessed properties have risen in parallel with an improving economy and a 5.8% increase in Spanish house prices since 2013. Mortgage loan origination shot up by 13% in Spain during 2015-14.

“Given the favourable economic backdrop, we consider that Spanish securitisation vehicles will be able to sell their repossessed properties more easily,” said Carole Bernard, a Senior Analyst at Moody’s.

“Spanish mortgage loan defaults

increased following the financial crisis, driving a high volume of property repossessions since 2009. When those properties failed to sell at auction, it forced Spanish residential mortgage-backed securities (RMBS) transactions to hold them. So far, losses on repossessed houses remain within our assumptions for defaulted mortgage loans, we will continue to monitor the recoveries on repossessed properties,” noted Bernard.

The rating agency studied more than 14,000 repossessed and defaulted loans and analysed the sale prices of 5,008 repossessed properties in rated Spanish RMBS. Moody’s estimates that 43% of all repossessed properties in the Spanish RMBS included in

the study have been sold so far, compared with just 30% as of its previous study in 2013. The sales of repossessed properties averaged 34% of their original valuation.The corresponding decline in property value (66%) is greater than the peak-to-trough national house price index.

Moody’s research shows that repossessed properties sold in Catalunya, where repossession volumes are large, depreciated the most. Repossessed properties sold in Murcia, Valencia and Castilla-La-Mancha, where unemployment remains high, depreciated by more than 67% of their initial valuation. The volume of repossessed properties continues to be significantly lower than the corresponding decline in the

regional house price index of the Spanish Statistical Institute (INE).

The Mediterranean Coast, Andalucia and Castilla-La-Mancha have the largest differential between the repossessed property sale price and the corresponding index valuation, at more than 50% below the property indexed valuation for those regions.

Northern Spain had the lowest deviation between recovery on repossessed assets and regional indexation. Coincidently, regions in northern Spain had the lowest volume of cumulative repossessions brought to court.

Recovery rates on repossessed properties improved the most in the Canary Islands, the Balearics, Castilla-La Mancha and Cataluna since 2013.

December 2 - 8, 2015

14 | MARKETS | financialmirror.com

Is Putin playing Russian roulette with Turkey?

By Oren Laurent President, Banc De Binary

Vladimir Putin is known as a strategic planner. Most every expansionary action he takes is calculated, decisive and incendiary. Whether or not a Russian fighter jet strayed into Turkish territory is inconsequential at this point. The actions that were taken by the Turkish air force cannot be undone – a fighter pilot is dead and the other one was rescued by Russian and Syrian forces. Turkey maintains that it sent out all necessary communication to the pilots, and within 17 seconds it was game over.

Questions and comments have been flying thick and fast in both directions: Is Turkey to blame? Is Russia to blame?

Does it really matter? These are all important questions that need to be answered with a cool head and an eye to the deescalation of the conflict. Unfortunately, neither man in Tayyip Erdogan or Vladimir Putin is likely to back down from a challenge. Already though, a sharp war of words has ensued between both countries with promises of punitive sanctions being imposed on Turkey by the Russian government.

What led to the incident and why is a spat ensuing between Turkey and Russia?

Turkey is a NATO country and Russia isn’t. Turkey is supporting forces seeking the ouster of President Bashar alAssad. Russia by contrast has dropped anchor in Syria with an impressive and formidable military arsenal. Vladimir Putin is a close personal friend of the Syrian dictator, and he’s doing everything in his power to prevent him from being toppled by anti-government forces, separatists and ISIS. As such, the Russians have been flying hundreds of sorties every week against enemy forces – much to the chagrin of NATO countries like Turkey, the US and others in the region.

The Russians are less concerned about destroying ISIS than they are about propping up Assad. The tit-for-tat tension between Turkey and Russia has been going on for quite some time, and it appears that when the Russian fighter jet strayed into Turkish airspace, tensions boiled over and the decision was made to shoot it down within 17 seconds. Putin and colleagues contend that no advance warning was given to the Russian jet and that it was an unprovoked act of aggression which Turkey should pay dearly for. However, Vladimir Putin has stopped short of calling for military action against Turkey.

Geopolitical tensions have been ratcheting up between these two countries in the wake of this highly contentious issue. Russia recently suffered the loss of one of its passenger jets that was reportedly blown up by the terrorist group ISIS. With both these men taking centre stage, it’s easy to see how a rush of blood to the head could cause irreparable damage between the countries. As it stands, Turkish exports to Russia make up 4.3% of total exports, while Turkish imports from Russia comprise 6.5% of total imports. These are significant figures, and Russia remains one of the prime trading partners

of Turkey. If we turn our attention to the currency cross exchange rates between the TRY and the RUB, there’s nothing in it. There has been a 1.46% appreciation of the Turkish lira over the past month. That hardly indicates a sharp downturn in economic fortunes for either country as a result of the brewing conflagration.

How Can Russia Apply Economic Pressure to Turkey?

Turkey is fortunate in that it receives an estimated 3 mln Russian tourists annually. In terms of overall trade with Turkey, Russia ranks second. The slight volatility that has been evident in the TRY/RUB of late is negligible. On Friday, November 27, the TRY/RUB pair was trading at 22.7142. In the days preceding that, the Turkish lira was markedly stronger, which indicates that there has been a strengthening of the ruuble since the incident. It is minor however. The Russians have not wasted any time implementing measures to show Turkey who is running the show. They have deployed batteries of S-400 anti-aircraft missiles throughout Syria. These are the most advanced anti-aircraft systems in the world and very few aircraft can avoid the radar of the system. Only a select few American jets have this capability.

It is capable of firing up to 72 missiles with near-100% success at 11,000 mph with a 10-second response time. This defensive system is a game-changer; it is precisely what the US and its allies do not want to have in the hands of the enemy since it all but assures aerial supremacy for Syria and Iran. It can also hit ICBMs at an altitude of 30km. All Russian bombers will now be accompanied by fighter jets in Syria.

There are several economic measures that the Russians are contemplating at the moment, including the following: - Financial and commercial restrictions for investment and bilateral trade; - Russia plans to put a halt to the natural gas pipeline

beneath the Black Sea, as well as a stop to the nuclear power plant that is being built for Turkey; - Russia has already instructed travel agencies across the country to stop selling packages to Turkey, which is worth an estimated $2.7 bln annually; - Russia also plans to place stricter controls on the agricultural imports from Turkey, which it says are substandard; - Russia will now slow the rate at which Turkish trucks can enter into the country, forcing them to undergo more stringent tests, regulations and customs controls.

Russia Seeks to Turn the Screws on Turkey for a Slow Roast These tit-for-tat measures are similar in part to the constraints that were placed on Russia when it invaded the Crimean peninsula. Turkey will balk at these measures since Russia is a major trading partner and a major supplier of energy. The more likely outcome is a repair in the rift that has taken place recently, with an eye to the de-escalation of the conflict.

Please note that this column does not constitute financial advice.

The Financial Markets Interest Rates Base Rates

LIBOR rates

CCY USD GBP EUR JPY CHF

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

Swap Rates

CCY/Period

1mth

2mth

3mth

6mth

1yr

USD GBP EUR JPY CHF

0.24 0.50 -0.17 0.04 -0.85

0.33 0.54 -0.13 0.05 -0.85

0.42 0.57 -0.12 0.07 -0.83

0.66 0.73 -0.05 0.12 -0.80

0.98 1.03 0.04 0.22 -0.72

CCY/Period USD GBP EUR JPY CHF

2yr

3yr

4yr

5yr

7yr

10yr

1.01 0.95 -0.13 0.10 -0.97

1.25 1.11 -0.07 0.10 -0.91

1.44 1.26 0.04 0.12 -0.79

1.59 1.41 0.17 0.16 -0.64

1.83 1.63 0.45 0.26 -0.35

2.09 1.85 0.85 0.45 0.01

Exchange Rates Major Cross Rates

CCY1\CCY2 USD EUR GBP CHF JPY

Opening Rates

1 USD 1 EUR 1 GBP 1 CHF 1.0597 0.9437

100 JPY

1.5087

0.9725

0.8123

1.4237

0.9177

0.7666

0.6446

0.5384

0.6628

0.7024

1.0283

1.0897

1.5514

123.10

130.45

185.72

0.8353 119.71

Weekly movement of USD

CCY\Date

03.11

10.11

17.11

24.11

01.12

CCY

Today

USD GBP JPY CHF

1.0965

1.0690

1.0604

1.0572

1.0532

0.7107

0.7075

0.6990

0.6986

0.6976

132.18

131.59

130.74

129.63

129.30

GBP EUR JPY

1.0810

1.0724

1.0712

1.0757

1.0795

CHF

1.5087 1.0597 123.10 1.0283

Last Week %Change 1.5110 1.0690 123.10 1.0032

+0.15 +0.87 +0.00 +2.50

December 2 - 8, 2015

financialmirror.com | MARKETS | 15

When to reduce the volatility of an equity portfolio

By Charles Gave Having worked as a money manager with mandates that allowed me the freedom to move at will between cash, bonds and equities, while still being measured against the world equity index, my key asset allocation decision was always when to reduce the portfolio’s volatility below that of the benchmark—and which tool to use in pursuit of this goal.

This problem is something of a holy grail for money managers and anybody who thinks they have found a permanent solution should be dispatched with due haste back into a research position. That said, it is as a researcher that I offer up a suggestion to this old problem. I will start with a few statements that are easily verifiable by observation: (i) in an inflationary period, government bonds and equities have a positive correlation, (ii) when interest rates decline, the stock market rises. Not so in a deflationary period: when interest rates decline, the stock market declines as the implication is that the economy is falling out of bed.

Hence, a long-dated bond is a good hedge against a deflationary bust as has been shown in almost every bear market since 1987. This, of course, requires the long-bond not to be stupidly overvalued as is now the case in Europe, with 30-year bunds yielding 1.30%. Remarkably, this is just below the yield offered on 30-year Japanese government bonds. In fact, long-dated bonds in Japan and Germany offer risk with no return—never a good bet. This means that it will

be hard to protect against deflation risk in Japanese or German equity portfolios using their respective long-bonds.

In the US things are different as 30-year treasuries yield 3%, putting them in the middle of the range of my valuation model. Should a deflationary shock hit (then) yields could quickly fall to German or Japanese levels, implying a capital gain of up to 50%, which, if enough protection is in place, should offset a big fall in equities. So the idea that 3% longbond yields are “too low” to defend against a deflationary bust is just plain wrong. It happens to be a view of those who have been expecting US growth to rebound strongly and for inflation to come back.

I conclude that if an equity portfolio is to be protected from a deflationary bust, the only effective tool left on the rack is the 30-year US treasury. The next question is how this tool should be used. One option is to keep a constant 50:50 allocation in the style of late 19th century institutional investors which, in fact, defaulted to a 60:40 mix favoring bonds as the overall climate was unambiguously deflationary. For those minded to time their moves, a more dynamic system is needed.

What is clear is that a balanced portfolio generates superior returns than a long-only equivalent comprised of just bonds or equities, and offers much lower volatility (incidentally bonds beat the hell out of equities, pretty much going back to 1982). And to make this portfolio as usable as possible I have eschewed my preferred 30-year US zerocoupon bond in favour of the Merrill Lynch government bond index, with duration exceeding ten years. This, I believe, is a “buyable” proposition.

Those more inclined to time the market may choose to apply a bond hedge only when the danger of a deflationary bust appears. As such, my “new” US recession indicator

Marcuard’s Market update

by GaveKal Dragonomics may be a useful tool. In the chart above, shaded areas denote periods when the recession indicator is below 0 (currently it is at -5). History suggests that performance could have been significantly improved by keeping a 100% weighting in equities during periods when the indicator is positive and then shifting to a 50:50 position when it turns negative.

Since the beginning of last summer the indicator has been in negative territory and hence on the basis of historical experience, this should be a period when a hedge is warranted. Such reasoning runs contrary to the generally bullish commentary surrounding the US economy’s trajectory, but I am deeply skeptical of these arguments and would tend to have greater faith in a tool that has consistently delivered results.

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

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

18070 1.5087 1.8453 25.4933 7.0398 14.7648 1.0597 2.38 292.95 0.6632 3.2582 0.4051 19.9 8.6679 4.0243 4.2065 66.2985 8.6885 1.0283 23.9

AUD CAD HKD INR JPY KRW NZD SGD

0.7288 1.3329 7.7522 66.54 123.1 1157.91 1.5022 1.4099

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

0.3773 7.8061 29980.00 3.8714 0.7090 0.3044 1513.00 0.3850 3.6408 3.7526 14.4060 3.6728

AZN KZT TRY

1.0498 307.51 2.8975

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 ASIA

www.marcuardheritage.com

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.

Azerbaijanian Manat Kazakhstan Tenge Turkish Lira

Note:

* USD per National Currency

December 2 - 8, 2015

16 | WORLD | financialmirror.com

Europe’s three fault lines

By Jean Pisani-Ferry Ten or 20 years ago, the existential question facing the European Union was whether it still had a purpose in a globalised world. The question today is whether the EU can respond effectively to major external shocks.

Europe’s neighbourhood is poor and dangerous. South of Gibraltar, income per capita drops more than fivefold. War has recently raged in Ukraine. The Israel-Palestine conflict has continued for more than 50 years. And the war in Iraq barely ended before the mayhem in Syria commenced.

For several decades after World War II, Europe could afford to overlook what went on beyond its borders: security was the business of the United States. But things have changed. The US retreat from Iraq signaled the limits of its engagement, and the problems in the EU’s immediate neighbourhood – not just in Syria, but also to the east and the south – are now knocking on its door. So it would seem that the EU’s top priority should be to protect itself and help stabilise its environment.

Yet three internal fault lines are making it difficult for the EU to achieve these ends. Britain is wondering whether it should exit. Western and Eastern Europe are at odds over the refugee crisis. And France and Germany differ on priorities.

Britain’s torment over EU membership is rooted in history: In 1946, Winston Churchill famously advocated a United States of Europe – but without Britain. Yet there is little substance to British Europhobia: nothing fundamental separates the United Kingdom from the rest of the continent.

Tellingly, the British Foreign Office’s rigorous review of how the EU operates did not deliver an agenda for the repatriation of competences.

The only significant demand expressed by Prime Minister David Cameron in his recent letter to the EU concerns internal migration. Britain, the erstwhile champion of labour mobility, has now become wary of foreign workers and wants to limit their access to social benefits. This is a potential sticking point in the UK-EU relationship; but it is hardly a reason to end a four-decade-old partnership.

Polls suggest that Britain’s referendum on continued EU membership, which Cameron has promised to hold by the end of 2017, will be a close call. But it would be both a blunder and a tragedy were Britons to vote for “Brexit” as a form of protection against tumult on the continent.

The second fault line appeared alongside the refugee crisis. By 2014, the EU’s “big bang” enlargement in 2004 could be hailed as a success story, having contributed significantly to swift and peaceful economic and political transition in central and eastern Europe. True European unification seemed to be in the making.

Yet the refugee crisis has revealed that the EU’s western and eastern members do not share the same concept of a nation. Most western European countries have converged, at least de facto, on a non-ethnic, non-religious definition. Most are home to significant ethnic and religious minorities. This has not been an easy transformation, and there are differences in countries’ perceived ability to absorb more immigrants; but the change is irreversible.

Most central and eastern European countries, however, object. Hungarian Prime Minister Viktor Orbán has developed a fierce anti-Muslim rhetoric. His Slovak counterpart, Robert Fico, announced in July that his country

would accept only Christian refugees. Earlier this month, Czech President Milo? Zeman addressed a group called the Bloc Against Islam, telling its supporters that they were “not extremists.” And Poland’s new European affairs minister, Konrad Szymanski, did not wait 24 hours after the Paris attacks before using them to denounce Europe’s flaws.

This is not a disagreement over policies. It is a divide over principles – the very principles of the EU’s treaties and Charter of Fundamental Rights. In Germany, especially, any person persecuted on political grounds has a constitutional right to asylum. Contrary to common misperceptions, German Chancellor Angela Merkel acted on the basis of moral values, not demographic self-interest, in letting in about one million refugees this year.

Germany rarely expects solidarity from its European partners. At the height of the migrant crisis, it hoped, for once, to receive some. The public, categorical rejection of Germany’s silent plea by countries that continue to benefit massively from European solidarity will not be easily forgotten.

The third fault line lies between France and Germany.

Since the November 13 attacks in Paris, security has become the overriding French objective. Meanwhile, Germany is focused on organising the reception and settlement of a massive influx of refugees.

This divide is more circumstantial than essential.

Terrorism may spread to Germany, and refugees may move across borders. Yet, at least for the time being, public concerns and government priorities differ.

Both Merkel and French President François Hollande have expressed a commitment to mutual support. France will

welcome some refugees, and Germany will dispatch some troops to Mali. But symbolic gestures are not enough. The risk remains that each country feels that it has been left alone at a critical juncture.

More ambitious initiatives have been proposed. Sigmar Gabriel and Emmanuel Macron, the German and French economy ministers, recently called for a common fund to address Europe’s refugee and security challenges and to finance joint policies. The fund would serve as a concrete risk-sharing mechanism and would be a modest, yet meaningful step toward overcoming the deadlock over EU initiatives, if not toward mutualising defense and security, as some scholars recommend.

Whatever form it takes, greater boldness is clearly needed.

Otherwise, the failure to address common risks and challenges may well result in citizens placing exclusive faith in the nation-state, rejecting solidarity, and calling for the permanent restoration of national borders.

It is no accident that the EU’s three fault lines have appeared at the very moment when it is confronted with unprecedented challenges. External pressures reveal internal weaknesses. Europe can either overcome them or succumb to them. The EU’s twin refugee and security crises constitute its moment of truth.

Jean Pisani-Ferry is a professor at the Hertie School of Governance in Berlin, and currently serves as CommissionerGeneral for Policy Planning for the French government. © Project Syndicate, 2015 - www.project-syndicate.org

German companies see refugees mainly as unskilled labour German companies see the greatest employment potential for refugees as unskilled workers, according to a survey by the Munich-based Ifo Institute.

“About 41% of firms see significant potential for refugees to be recruited in their own branch as unskilled workers. But 59% rate their chances as narrow”, said Gabriel Felbermayr, one of the study’s authors.

Some 37% believe that there is a potential for recruiting refugees as trainees, as opposed to 63% that do not; 22% of firms can imagine recruiting refugees in their

branch as skilled workers, versus 78% that cannot. Only 3% of companies see leadership potential in the refugees, versus 97% that does not.

Almost 92% of survey participants cited a lack of language skills as a barrier to employment, 71% cited a lack of qualifications, while 59% mentioned labour law requirements and 32% reported the minimum wage as a constraint.

“The survey finding regarding the minimum wage isn’t really surprising, since the question of adequate

remuneration only arises for those jobs in which language, skills and bureaucracy barriers can be overcome,” explained Felbermayr. The minimum wage in particular is considered a recruitment barrier in construction in eastern Germany (55%) and in the distribution sector (62%).

Over 3,000 companies from manufacturing (49%), construction (25%) and distribution (26%) participated in the survey. 85% are located in western Germany and 15% in eastern Germany.

December 2 - 8, 2015

financialmirror.com | WORLD | 17

The import of exports - curse or necessity?

By Ricardo Hausmann Should a country’s development strategy pay special attention to exports? After all, exports have nothing to do with satisfying their people’s basic needs, such as education, health care, housing, power, water, telecoms, security, the rule of law, and recreation. So why give precedence to satisfying the needs of distant foreign consumers?

That, in a nutshell, is what many opponents of free trade and economic globalisation – as well as many on the right who believe that all industries should be treated equally – want to know. But there are no right answers to wrong questions. It is precisely because governments care about their own people that they should focus on exports.

To see this, consider what a market economy is all about.

Some, including Pope Francis, would say that it is about greed – a system in which everybody cares only about herself.

But a market economy should be understood as a system in which we are supposed to earn our keep by doing things for other people; how much we earn depends on how others value what we do for them. The market economy forces us to be concerned about the needs of others, because it is their need that constitutes the source of our livelihood. In some sense, a market economy is a gift-exchange system; money merely tracks the value of the gifts we give one another.

As a result, a market economy encourages specialisation: We become very good in a narrow set of skills or products, and exchange them for millions of other things we have no clue how to do or make. As a consequence, we end up doing remarkably few things and buying everything else from others.

This observation is as true about an individual as it is about a place, whether the place is a neighborhood, a town, a state or province, or a country. Every town has grocery stores, beauty parlors, gas stations, and movie theaters that serve the local community. Economists call these “non-

tradable activities,” because they are not undertaken with distant customers in mind.

But the town’s people would also want access to things that nobody in the city even knows how to make. For example, most towns and cities do not produce food, cars, gasoline, medicines, TVs, or films. So they need to “import” these goods from elsewhere. To pay for what they want from out-of-towners, they must sell them some of the things that they do know how to make.

Of course, the out-of-towners have the option of buying from somewhere else. This is why the goods and services that a place can sell to non-residents have a disproportionate impact on its quality of life – and even its viability. A mining town becomes a ghost town when the mine closes, because the grocery store, the pharmacy, and the movie theater no longer have the capacity to buy the “imported” food, medicine, and films they need.

In contrast to non-tradable activities, a place’s export activities need to be pretty good to convince out-of-town customers – who have ample other options – to buy from local producers. That means that exports must have an attractive quality/cost ratio.

One way to increase this ratio is to improve quality and productivity. Another is to lower wages. The higher the productivity and the quality of export activities, the higher the wages they can pay and still remain competitive. If employment in the export industry is significant, as is true in most places that do not rely on oil revenues, the wages that the export sector can afford will affect the wages of everybody in town. Everyone thus has an interest in improving their export sector.

Because they are subject to greater competition, export activities tend to undergo faster technological and productivity improvements than other parts of the economy.

They are constantly under threat from innovation and new competitors that could disrupt their business. Consider the iPhone’s devastating impact on Finland’s once-dominant national champion Nokia, or the effect of the shale-oil revolution on OPEC. Successful places tend to move from a few technologically simple industries that are competitive enough to export their products to a greater number of industries that are

increasingly complex. For example, in 1963, 97% of Thailand’s export basket was composed of agricultural and mineral products such as rice, rubber, tin, and jute. By 2013, these represented less than 20% of the total, while machinery and chemicals accounted for 56%.

A similar transformation can be seen in every successful non-OPEC developing country. The success of a place is very much related to its people’s ability to accomplish this transformation, as exemplified by places such as Singapore, Turkey and Israel.

So what should countries, provinces, and cities do?

Skeptics might say that they should just focus on fixing the things that locals care about, such as education or infrastructure, or improve everybody’s “business environment.” Exports will take care of themselves.

But life is more complicated than this. The needs of export activities are often quite distinct. The specific rules, infrastructure, skills, and technological mastery that export activities require tend to be different from those needed for the non-tradable activities that usually generate the bulk of a place’s employment. While diversification into new areas is always challenging, it is particularly difficult for tradable activities, which have to face foreign competition from the start. By contrast, pioneers in non-tradable activities start with a captive market. Moreover, exporters need particularly strong connections to knowhow found elsewhere on the planet, thus making them more sensitive to foreign investment, migration, and international professional links.

To survive and thrive, societies need to pay special attention to those activities that produce goods and services they can sell to non-residents. Indeed, the need to act on new export opportunities and remove obstacles to success is probably the central lesson from the East Asian and Irish growth miracles.

Non-tradable activities are akin to a country’s sports leagues: different people like different teams. Those engaged in tradable activities are like the national team: we should all root for them – and organise ourselves to make sure they succeed.

Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist of the Inter-American

M&A appetite strongest in six years 2 in 3 companies actively pursue acquisitions, 50% plan to buy assets outside their sector The recent wave of mergers and acquisitions (M&A) is set to continue with 59% of global companies now planning to acquire in the next 12 months, according to EY’s 13th Global Capital Confidence Barometer, a survey of more than 1,600 executives in 53 countries. This is the highest appetite to acquire recorded by the survey in its six-year history.

The Barometer finds an M&A market buoyed by record values in 2015 set for further growth in the next year. With global deal value up 35% on 2014 and more $10 bln+ megadeals already announced in 2015 than in any previous year, the prospect of further growth in the M&A market looks certain. Four out of five executives (83%) expect activity to increase.

These positive sentiments are fueled by their own burgeoning pipelines – which continue to expand, with 55% of companies now having three or more deals under consideration.

“With modest increases in global GDP, organic growth alone is not enough for companies to expand and reshape at the pace they need. Technology and changing consumer preferences are disrupting business models and blurring sector boundaries. In that context, the search for growth is lifting deal-making to record highs – and executives are focusing on M&A to secure innovation, competitive advantage

and market share for the foreseeable future,” said Pip McCrostie, EY Global Vice Chair, Transaction Advisory Services.

The current deal environment is fostering M&A intentions. Executives are more confident than at any time in the past six years about the quality and number of deal opportunities and the likelihood of closing acquisitions.

Despite the high appetite to acquire, any fears about an overheating market can be tempered by strong rigor around deals.

Executives are judicious about how they use M&A – almost three quarters (73%) have walked away from deals in the past 12 months because they were not fully aligned with their strategy.

“Executives are taking a long-term view and evaluating deals more carefully than ever before. They are stepping back when necessary. This is not ‘a deals for deals sake mentality,’” said McCrostie.

The continuing convergence of industries looks set to accelerate dealmaking, with almost half (48%) planning cross-sector investments.

Companies are looking to seize competitive advantage as new technology impacts everything from production to services.

Acquisitions into manufacturing segments were the most cited. Second was retail and wholesale, followed by government and public services

acquisitions.

The sectors with the highest level of M&A intent are oil and gas (69%), consumer products (67%), mining and metals (67%), diversified industrial products (66%), and power and utilities (65%).

Cross-border acquisitions look set to dominate the deals market, with 70% of respondents looking at non-domestic deals.

Almost a third (29%) plan to focus on crossborder deals close to home, while 41% are looking further afield.

Compared to six months ago, more respondents (40% versus 35%) now plan to allocate at least 10% of acquisition capital to emerging markets. However, the majority of acquisition capital will be invested in developed markets. There is a significant increase (26%) in the number of executives now looking to acquire in the Eurozone.

“Mature markets continue to drive M&A activity,” said McCrostie. “With the majority of potential acquirers looking beyond their own domestic borders, there is a marked strengthening among executives around doing deals in the Eurozone. This is down to increased confidence in the stability of the region. The Eurozone also has a good supply of high-quality assets and attractive pricing due to currency fluctuations.”

The US, UK, Germany, China and India are the overall top five investment destinations of choice. Brazil, the US,

France, Germany, Australia and the UK look set to be the prominent acquirers.

Despite significant market volatility during the survey period, companies remain confident about dealmaking in the current macroeconomic environment. Economic confidence is steadfastly robust, identical to six months ago, with 83% of executives optimistic about the global economy. Longterm prospects for growth – albeit modest – are shaping views.

That is supporting strong corporate confidence, which is now more upbeat about creating new jobs, with almost half (45%) looking to hire talent compared to a third (29%) six months ago.

Companies do remain vigilant to potential challenges, including potential economic headwinds. A third (29%) of respondents view increased global and regional political instability as the biggest business risk. A quarter (24%) cite uncertainty associated with volatility in commodities and currencies. Interestingly, a greater number of executives (24%) see the economic and political situation in the Eurozone as a bigger risk than slowing growth in emerging markets (18%).

One danger that is almost universally recognised is cybersecurity around deals, with more than 90% of respondents viewing this as a significant risk to their deal processes.

December 2 - 8, 2015

18 | WORLD | financialmirror.com

Worker protection in the Gig economy Laura Tyson and Lenny Mendonca Today’s labour markets are undergoing radical change, as digital platforms transform how they operate and revolutionise the nature of work. In many ways, this is a positive development, one that has the potential to match workers with jobs more efficiently and transparently than ever before. But the increasing digitisation of the labour market also has at least one very worrying drawback: it is undermining the traditional employer-employee relationships that have been the primary channel through which worker benefits and protections have been provided.

The ecosystem of digital labour platforms is still in its infancy, but it is developing rapidly. Large popular platforms like LinkedIn have so far mainly been used to match highskill workers with high-end jobs. But these platforms are already expanding to accommodate middle-skill workers and jobs. Nearly 400 million people have posted their resumes on LinkedIn, and in 2014 the site facilitated more than one million new hires worldwide.

Meanwhile, other types of digital platforms are emerging, linking workers with customers or companies for specific tasks or services. Such platforms play a growing role in the market for “contingent” or “on-demand” workers, broadly defined as workers whose jobs are temporary and who do not have standard part-time or full-time contracts with employers. Well-known digital platforms that link contingent workers directly to customers include Lyft, TaskRabbit, Uber, and Angie’s List. Freelancer.com and Upwork are examples of platforms that help companies find and hire contingent workers for a range of specialised tasks such as software or website development. Freelancer.com has more than 17 million users worldwide.

The trouble is that even as these sites provide new opportunities for workers and companies, they are bypassing the traditional channels through which the US and many countries deliver benefits and protections to their workforce.

In the US, in particular, the “social contract” has long relied on employers to deliver unemployment insurance, disability insurance, pensions and retirement plans, worker’s compensation for job-related injuries, paid time off, and protections under the Fair Labor Standards Act. Although the Affordable Care Act has made it easier for workers to acquire health insurance on their own, most workers continue to receive health insurance through their employers.

With the proliferation of digital job platforms, the social safety net for workers in the US – threadbare to begin with – is at risk of unraveling for a growing share of the workforce.

This is because most individuals who find work through digital job platforms operate as independent contractors, leaving them without the benefits and protections provided in standard employment contracts for full-time and part-time workers. The difference between the cost of a full-time employee with benefits and an independent contractor can be 30% or more, so there is a strong incentive for companies to replace workers on standard full-time employment contracts with independent contractors as long as companies can attract the talent they need.

Digital job platforms also make it easier for businesses to hire and fire workers on temporary contingent contracts.

This creates the potential for a race to the bottom, with employers competing on labor costs through regulatory arbitrage.

Unless policymakers act, the US will continue to drift toward a two-tier labor market. One tier will be populated by fully employed high-skill workers with generous employerprovided (and tax-advantaged) benefits, as well as high-skill individuals who finance their own benefits from high incomes earned as independent contractors or from selfemployment. The other tier will include a large pool of contingent middle- and low-skill workers without the benefits, income, or security on which a robust and resilient middle class depends.

New policies are needed to provide workers in contingent employment relationships access to benefits, and new institutions are needed to deliver them. There is growing support for the view that benefits should satisfy at least three conditions. They should be portable, attached to individual workers rather than to their employers. They should be

universal, applying to all workers and all forms of employment. And they should be pro-rated, linking employer benefit contributions to time worked, jobs completed, or income earned.

Two recent proposals incorporating these conditions call for the creation of “individual security accounts” analogous to US Social Security accounts, but encompassing portable benefits that would be available to all workers, regardless of employment status, and would accrue via pro-rated automatic payroll contributions.

A group of strange bedfellows – “gig” employers, labor organisations, venture capitalists, and bipartisan think tanks – recently issued a letter calling for a stable and flexible safety net based on these conditions. Meanwhile, in Congress, forward-looking policymakers like Senator Mark Warner of Virginia are seeking ways to get ahead of the issues and create momentum for bipartisan solutions.

Much remains to be done before a new safety net for all workers is in place: determining which benefits and protections to include, how to pay for them, and how to deliver them to workers. Labor groups, including unions or new types of labor organisations like Coworker.org and the Freelancers Union, could fill the gap, providing benefits as

unions have done in the construction industry and guilds have done in the entertainment industry. In Silicon Valley, where thousands of contractors and freelancers are hired every week, new private companies like MBO Partners are emerging to handle the benefits of contingent workers who work for many employers.

The McKinsey Global Institute estimates that digital labor platforms could increase US GDP by 2.3% and US full-time equivalent employment by 2.7% by 2025. But realising these economy-wide gains while providing a secure and portable safety net for all workers will require new ways of thinking by companies and policymakers.

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, a senior adviser at the Rock Creek Group, and a member of the World Economic Forum Global Agenda Council on Gender Parity.

Lenny Mendonca is a former director of McKinsey & Company. © Project Syndicate, 2015 - www.project-syndicate.org

December 2 - 8, 2015

financialmirror.com | WORLD | 19

Can apps prevent human trafficking?

By Julia Muraszkiewicz Technology, the saying goes, is a double-edged sword. But when it comes to human trafficking, that has yet to be proven. There is evidence that mobile phones, social media, instant messaging, and other modern forms of communication have given traffickers new tools for recruitment, coercion, and exploitation. But can technology – and apps in particular – help prevent vulnerable people from being lured and help victims?

Apps have penetrated nearly every area of modern life, from the consumption of news and entertainment to the management of health and finances. The European Union’s Human Trafficking Directive encourages the use of the Internet for “research and education programmes…aimed at raising awareness and reducing the risk of people, especially children, becoming victims of trafficking in human beings.”

Apps seem like a natural tool for raising awareness, providing information on destination countries, and offering opportunities to report human trafficking.

Indeed, developers have already created apps that can do just that. For example, Travel Safely, an application developed by the Romanian Ministry of External Affairs, was designed to provide Romanian nationals with information while they are abroad. Users can learn about conditions in the country to which they are traveling, including whether any travel alerts are in place. They can also use the app to alert the nearest Romanian consular mission in case of emergency, as well as quickly find out what to do in case of accident, illness, or the loss of documents. By opening a clear channel of communication, the app can help a trafficked person reach safety quickly.

Another example is Ban Human Trafficking, which uses a game to educate young people about trafficking and instructs them on how to recognise potentially dangerous situations.

It also gives them an opportunity to report human trafficking when they encounter it. Human traffickers benefit from their

victims’ lack of knowledge about working conditions in other countries and their ignorance of their rights while abroad.

Education efforts that are accessible and interesting have the potential to undermine that advantage.

Other apps, such as CrimePush, allow victims of human trafficking to upload evidence: photos, audio files, or text, as well as report crimes as they happen.

And yet, no matter how well designed and potentially helpful these apps might be, it is important to ask whether they are effective in practice. Given the complexities of trafficking, can apps like these truly provide the assistance their users may need?

For starters, there is the question of whether the information provided by anti-trafficking apps reaches those

who need it most. To be sure, potential victims of trafficking are as likely as anybody to have access to the Internet or a smartphone. But will those who are at risk of exploitation be aware of the existence of an app that can provide information about where they can seek help? Would someone heading abroad for work use an app that would alert them to signs that they may be about to be trafficked?

Then there is the fact that there is already a lot of information on the Internet and elsewhere about the risks of human trafficking. And yet, every day, people make the potentially risky choice of moving from their home to accept a job under questionable conditions. How likely is it that an app that does nothing to improve the material conditions in which people live (which is what drives them to take risks) will encourage potential victims to consider their options more carefully? Without addressing these conditions, can awareness-raising technologies make a difference?

Finally, apps can be undermined by the coercion that often accompanies human trafficking. To be sure, one advantage of apps is that they can be quickly removed from a phone. But victims of human trafficking are often too fearful of repercussions to use the avenues of communication available to them to report the crimes being committed against them.

But perhaps apps can overcome such obstacles. The impact of new technologies on clandestine crime can rarely be predicted, and more research is needed to determine whether apps can be considered effective tools in the fight against human trafficking.

Given their relative cost-effectiveness and the wide diffusion of mobile technologies, apps do provide a promising avenue for exploration. Better marketing strategies and improved privacy protection, for example, might just help apps reach their intended targets, enabling them to avoid or even break free from the coercive control of human traffickers.

Julia Muraszkiewicz is a researcher on the EU-funded TRACE (Trafficking as a Criminal Enterprise) project. © Project Syndicate, 2015 - www.project-syndicate.org

US regains ‘top nation brand’ position from Germany After being pushed off the number one position last year by Germany, the USA has this year taken back its position at the top of the Anholt-GfK Roper Nation Brands Index (NBI). UK, in third place, edges closer to the top and is followed by France. Further down the ranking, Ukraine and Russia achieve large reputation gains, while Greece stands alone in suffering a steep drop.

The study measures global perceptions of 50 developed and developing countries - and is unmatched in the level of detail on which the nation ranking is judged. The study asks questions about 23 different national attributes, which are then combined into six overall dimensions on which the national image is based. Those are: exports, governance, culture, people, tourism and immigration/investment.

“This year’s results stand as a reminder that, although the images of countries are incredibly stable, changes can and do take place - particularly when people around the world sense that countries are contributing noticeably more or less to humanity and the planet. It’s their perceived impact on the world that affects countries’ reputation far more than their assets or achievements,” said Professor Simon Anholt, the independent policy advisor who created the Nation Brands Index in 2005.

“Despite its continued perceived leadership in Europe, Germany has fallen back to second place, largely as a result of losing the gains it made last year. On top of that, Germany also lost ground on ‘governance’ (which incorporates both

international and domestic behaviours) following its high-profile stance on European challenges such as immigration and struggling Eurozone economies. In particular, Russia’s perceptions of Germany’s governance dropped significantly, following Germany’s support of anti-Russian sanctions.”

The rest of the top ten ranking remains in the same order as last year, but with certain nations continuing to close in on the one ahead.

UK, steady in third place, has moved closer to the top nations and is followed by France in fourth and Canada in fifth. Japan and Italy, who hold sixth and seventh places, respectively, also showed stronger than average performance, increasing the pressure on the top five nations.

Greece, a nation facing chronic economic issues, struggles to maintain its image, with notable falls across all indices. This means

that it has slipped one place to 21st position in the overall ranking, while Brazil moves up to 20th.

Looking outside the top 20 nations, both Russia and Ukraine have seen impressive gains on all six indices that make up the overall NBI ranking.

Russia has risen from 25th last year to 22nd this year, overtaking China, Singapore and Argentina, while Ukraine has moved from 48th to 46th, overtaking Kenya and Qatar. This change follows a slowing of the Ukraine-Russia conflict, with both nations seeing their greatest boosts coming from their governance scores and - in particular - improved perceptions of their behavior in the areas of international peace and security.

In fact, the conflict’s easing appears to be improving the image of the region as a whole: the Czech Republic (30th last year, now 28th) has edged ahead in the rankings. And Poland (steady in 26th place) and, to a lesser extent, Hungary (28th last year, now 29th due to being overtaken by Czech Republic) also raised their scores somewhat. Turkey increased its rating, but not enough to prevent it being overtaken by two Asia-Pacific nations, Thailand and Taiwan,

so that it now holds 34th place.

“A country’s global reputation can make a critical difference to the success of its business, trade and tourism efforts, as well as its diplomatic and cultural relations with other nations,” explained Vadim Volos, GfK’s senior vice president of public affairs and consulting and head of NBI. “Our clients depend on the NBI study because it is unbeaten in the depth of information that is included in forming the ranking - making it the most thorough and robust monitor of national reputation available.”

December 2 - 8, 2015

20 | BACK PAGE | financialmirror.com

GBPUSD bounces to seven-month low below 1.50 Markets Report by Forextime Ltd

By Lukman Otununga, Research Analyst at FXTM

Sentiment towards the Sterling/Dollar hit a new low on Monday after the currency pair dropped below 1.50 for the first time since April and fell to a fresh seven-month low at 1.4993. While part of the reason for the decline in the GBPUSD has been due to the resumption of USD strength throughout the currency markets, sentiment towards Sterling has also been punished by Bank of England Governor Mark Carney dealing another blow to buyers by once again seeming to backtrack on the possibility of a UK interest rate rise anytime soon.

It now appears that BoE policymakers are beginning to get hesitant towards even discussing any potential timeframe for an increase in UK rates. While non-existent inflation is diluting any pressure on the central bank to act and this is pushing back expectations, it is also possible that traders are curious to see whether the BoE might wait even longer to increase rates depending if the European Central Bank eases monetary policy further. This would simply be because the UK economy is vulnerable to EU weakness and a further depreciation in the EURGBP due to interest rate differentials could place UK export competiveness at risk.

After such an aggressive fall in the GBPUSD over the past couple of days it is possible that the pair will try to recover some momentum. However, investor attraction could be reduced due to the latest news of the UK Prime Minister calling for a vote on Wednesday for airstrikes in Syria. Such a scenario can promote a risk-off environment from investors, which we have previously seen hurt the Sterling on multiple occasions throughout the past couple of months.

From a technical standpoint, the GBPUSD is heavily bearish as there have been consistent lower lows and lowers highs on the charts. The pair has respected the bearish channel and the extension below psychological support at 1.50 invites the potential for a further decline to 1.49 in the future. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. As long as bears can defend the new 1.5180 dynamic resistance, this bearish daily outlook remains valid.

Yuan introduced to SDR basket: Elsewhere, sentiment towards China received an uplift on Monday following confirmation from the IMF that the Yuan has been included in the Special Drawing Rights (SDR) basket of currencies.

While the inclusion of the Yuan into the SDR has a low immediate impact on the economy of China, markets were surprised to see the Yuan receive a weighting of 10.92% after previous expectations that it might only receive as little as 1%. The highly symbolic gesture from the IMF to introduce the Yuan into the SDR illustrates how powerful China has become within the global economy, and the potential of the Yuan when it comes to trading in the future. Even though the Chinese economy is slowing down, and with future data likely to continue highlighting reduced growth as well as the instability seen over the past couple of months in China, this has done nothing to prevent the Yuan joining the SDR

basket.

The remainder of the week is still set to be a volatile one for the financial markets with high-risk announcements scheduled throughout the week. Market participants will be waiting for the ECB decision on Thursday and the highly anticipated US non-farm payroll (NFP) for November on Friday. Although the Fed fund futures currently illustrate a near 80% likelihood of a US rate rise in December, an unexpectedly weak NFP could sabotage these plans and expose the USD to weakness.

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

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