Financial Mirror 2016 01 27

FinancialMirror OREN LAURENT

RICARDO HAUSMANN

Fate of emerging markets hangs in the balance PAGE

Should business travel be obsolete? PAGE 20

14

Issue No. 1170 €1.00 January 27 - Febr. 2, 2016

Georgiades: ‘We can take it from here’ UCY MORE OPTIMISTIC ON RECOVERY IN 2016-2017

Bill and Melinda Gates: Promises to keep in 2016 SEE PAGE 16

PAGES 4 - 5

January 27 - February 2, 2016

2 | OPINION | financialmirror.com

FinancialMirror ‘Big names’ wanted for Iran deals Published every Wednesday by Financial Mirror Ltd.

EDITORIAL

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Now that the dust has settled after the removal of sanctions on Iran, it is clear that those who have maintained good and sincere relations with Tehran throughout the economic embargo, are the ones who will benefit most and immediately from new commercial deals.

Already, as regards tanker business and transport of crude oil and LNG, Iran has signed a trio of contracts with important clients in Japan, Russia and Greece.

This clearly shows that despite the initial enthusiasm, Cyprus companies need to join forces, either among themselves or with their international peers, if they ever want to get a slice of the action.

Despite several companies being active in northern Africa and in the Gulf, by international standards there are no ‘construction giants’ in Cyprus – that is why the biggest of the biggest developers and civil engineering companies have already failed to gain any contracts in the Iranian 5Year Plans sectors that included major infrastructure projects, such as building complete new towns.

They were certainly given the opportunity to bid, having participated at special “road show” events and meetings in Tehran over the past four years, but

have been regarded as being “just too small” to cope with the job sizes. For example, the new town projects start with the smallest requiring 5,000 dwelling units, going up to 50,000. Even the biggest Cyprus companies do not have the resources for builds of that scale, despite the likes of J&P, Cybarco, Medcon and others undertaking infrastructure projects, and in many cases as venture partners with others.

Cyprus company executives, as well as state officials visiting Tehran, have been told bluntly that they must stop thinking parochially and team up with larger consortia with at least one ‘big name’ in it, preferably northern European; then they will be taken seriously in Iran.

On the maritime side, Cyprus-flag vessels still suffer from the Turkish embargo that denies them entry to any of the ports, despite the so-called willingness of Ankara to open up on this aspect, in exchange for a more favourable stance when it comes to opening up negotiation chapters with the EU. Ironically, Germany’s foreign policy and excessive tolerance has mostly hurt the Germanowned shipping and ship management companies in Cyprus that would have liked to trade with Turkey, forcing many to register under other flags.

Perhaps, then, it is time that the Cyprus shipping industry also looked to joining forces with other giants in the sector, a development that would boost the island’s flag and status as a maritime centre.

THE FINANCIAL MIRROR THIS WEEK 10 YEARS AGO

BOC shares at 5-year high, IMC to reopen Bank of Cyprus shares continued their rally with an intra-day gain of 1.3% and reaching a 5-year high of CYP 3.05, while in other news, the IMC building is expected to reopen as a shopping centre after the CSE leaves the premises, according to the Financial Mirror issue 655, on January 25, 2006.

BOC record: Bank of Cyprus shares continued their spectacular advance breaking past the psychological level of CYP 3.00 with a year-to-date gain of 16%, targeting the CYP 3.38 level last seen in January 2001. In Greece, the stock traded at EUR 5.44

of heavy volume of EUR 8.27 mln.

IMC to change: The International Merchandising Centre, that will continue to house the CSE until May, will close for refurbishment and re-open in September as a home and office exhibition and supplies centre, according to owner Andreas Kaisis.

Tourism up: Tourist arrivals rose 5.2% to 2.47 mln in 2005, the highest figure in four years, with the strongest recovery from Ireland (+19%) and Russia (+16.4%).

Air controls: The air traffic control system will be reformed to include a separate national regulator body as part of its Eurocontrol obligations and EU plans to create a single European sky.

Marcos surprise: Marcos Baghdatis stretched his Grand Slam Cinderella story as he stormed into the semi finals of the Australian Tennis Open with a fiveset victory over 7th seed Ivan Ljubicic.

20 YEARS AGO

Cyprus to gain from GATT, ProChoice goes online Cyprus will benefit from the new GATT trade rules, according to conclusions of a conference cohosted by the Financial Mirror, while AL ProChoice brokers announced they would be the first to go online, according to the Financial Mirror issue 146, on January 24, 1996.

GATT benefits: Cyprus stands to benefit tremendously from the GATT accord for free trade, with Agriculture Minister Costas Petrides saying the agreement met complaints from pressure groups,

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but that the government was committed to going ahead and that benefits would be felt by the consumer, in his address to a conference organized by the Financial Mirror and the Polygon Group.

ProChoice online: The brokerage firm AL ProChoice announced it was expanding with offices in all towns and plans to be the first to go online, hosted by the LogosNet/Telerate

platform. The firm’s manager Andreas Leonidou said that 2-3 IPOs were already in the pipeline.

Budget approved: DISY, DIKO and AKEL joined to approve the 1996 state budget that expects CYP 1.55 bln spending and 1.02 bln revenues. Finance Minister Christodoulos Christodoulou came under harsh criticism from DIKO MP Tassos Papadopoulos as the deficit was no longer under control.

EU talks: The harmonisation process with the EU is on track with negotiations by the 21 committee set up a year ago expected to focus on beef and cheese imports.

Philoxenia change: MPs approved a government proposal to allow for the Philoxenia Hotel in Nicosia and the Conference Centre to become a state-owned Limited Company, with the assurance that the complex will not be sold to investors, for the time being.

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January 27 - February 2, 2016

financialmirror.com | CYPRUS | 3

Despite recovery, BOCY and Hellenic loan quality to remain weak in 2016 While the recovering economy is supporting loan recoveries and depositor confidence, Bank of Cyprus’ (deposits Caa3 stable, baseline credit assessment caa3) and Hellenic Bank’s (Caa2 stable; caa3) extremely weak loan quality will only gradually improve in 2016, Moody’s Investors Service said in a report on Tuesday.

“The economic recovery and a raft of new legislative measures to help lenders recover unpaid loans are improving Bank of Cyprus’ and Hellenic Bank’s restructuring prospects, funding conditions as well as their profitability. However, the large stocks of problem loans will take several years to work through, with the weak real-estate market hampering collateral sales,” said Moody’s analyst Melina Skouridou.

The rating agency said its report, “Bank of Cyprus,

Neofytos Neofytou joins Baker Tilly South East Europe Neofytos Neofytou has joined Baker Tilly South East Europe as a Senior Tax Consultant for Cyprus, Greece, Romania, Bulgaria and Moldova.

Neofytou, who came on board the firm this month, is a Fellow Chartered Accountant of England and Wales with 30 years of experience as a partner, as well as Head of Tax Services and partner in the International Tax Services Group in a Big 4 accounting firm. In 2013, he founded Redimus, a specialised tax consulting firm.

Neofytou has served as President of the Tax Committee of the Institute of Certified Public Accountants of Cyprus (ICPAC) and President of the VAT Committee of the same Institute. Currently a tax advisor to the ICPAC, he is also acting as special tax advisor to the Minister of Finance and tax advisor to the Cyprus Chamber of Commerce and Industry.

“Baker Tilly South East Europe operates in Cyprus, Greece Romania, Bulgaria and Moldova through a single senior management team. The presence of Neofytou as Senior Tax Consultant is an invaluable addition to our team, which will ensure that we continue to provide services of the highest standard to our valued clients in Cyprus, Greece and the surrounding region,” said CEO Marios Klitou.

Eurofast’s Damianou elected member of IFA Ukraine board Christodoulos Damianou, Executive Director of Eurofast Global Ltd. and Eurofast Ukraine has been supported by IFA Ukraine members to join the association’s board for 20162017.

Eurofast has been an active partner of IFA Ukraine for a number of years and Damianou’s election is seen as assisting the branch’s visibility internationally.

Eurofast Ukraine had become the link between Ukraine and south east Europe and the east Mediterranean as a regional business advisory organisation operating in 21 countries.

Hellenic Bank Peer Comparison: Despite Improving Restructurings and Funding, Weak Asset Quality Weighs on Credit Profiles” is an update to the markets and does not constitute a rating action.

Because of the increased economic activity and strengthening depositor confidence, customer deposits are starting to rebuild gradually.

Although steadily declining, Bank of Cyprus remains dependent on Emergency Liquidity Assistance, last estimated at EUR 4.3 bln, while Hellenic Bank faced fewer outflows during the crisis and maintains a stronger deposit-based funding profile, the Moody’s report said.

Bank of Cyprus, the dominant bank by market share, is ahead in terms of restructuring and recovering on problem

loans. As a result, its profitability, which also benefits from recoveries on the discounted assets it acquired when it took over Laiki’s domestic business in 2013, is recovering at a faster pace. However, both banks’ profits will remain modest the coming years as they build up their low levels of provisions.

Accounting for around 41% of problem loans, the banks’ loan loss provisions provide a limited buffer against losses from their high stock of non-performing loans which continues to pose risks to their capital levels. The ratio of non-performing loans to gross loans, which stood at 56.9% of total lending for Hellenic Bank and 52.5% for Bank of Cyprus as of September 2015, will remain high over the foreseeable future.

January 27 - February 2, 2016

4 | CYPRUS | financialmirror.com

UCy more optimistic than EC in 2016-2017 growth projections The Cyprus economy is expected to continue on its recovery path over the next quarters, with real GDP forecast to grow at a pace of 2.7% this year, according to a University of Cyprus outlook that seems far more optimistic than the European Commission projections.

The Economics Research Centre (CypERC) of the university said in its Economic Outlook for January that “the recovery of economic activity in Cyprus is forecasted to continue in the following quarters. Real GDP growth for 2015 is projected at 1.5%. Real output growth for the fourth quarter of 2015 is estimated at 2.8%. Growth is expected to gain momentum in 2016, as real GDP is forecasted to expand by 2.7%.”

The CypERC report detailed the main drivers of the projected increase in real activity as: - The growth rate (y-o-y) of real GDP and employment strengthened in the third quarter of 2015, and many domestic leading indicators continued to improve during the final quarter of 2015.

- The recent reductions in domestic lending interest rates, amid conditions of weak demand and high unemployment, as well as stronger normalisation tendencies in the banking system are facilitating the recovery.

- Domestic economic confidence strengthened in 2015, despite some short-lived setbacks related to developments in Greece; a further upturn in all domestic sentiment indicators in the fourth quarter of 2015 is found to have improved the outlook.

- Lower international oil prices, downward pressures to the domestic aggregate price level and low inflation in the EU are expected to assist recovery through their effects on real incomes and demand.

- Modest growth in the euro area and steady growth in the UK as well as further increases in European economic sentiment indicators support the recovery in Cyprus by creating favourable foreign demand conditions.

- The weakening of the euro against key currencies, most notably the British pound, is expected to boost domestic activity in the following quarters through exports, particularly tourism services.

- Reductions in the European lending interest rates during the second half of 2015 reflect the ECB’s

accommodative monetary policy stance, which is supportive of the recovery process in Cyprus.

Looking at the downside risks to the growth projections, the CypERC report said that “the high levels of nonperforming loans pose major risks to the stability of the banking system and to the outlook for the economy.

Ineffective implementation of the new insolvency and foreclosure legal framework could delay the resumption of healthy credit conditions and robust economic growth.”

The outlook added that “delays in the implementation of structural reforms agreed in the economic adjustment programme (e.g. public administration, privatisations, health system) may create risks to public finances, Cyprus’s market borrowing costs, especially after the end of the economic adjustment programme, and to activity.”

It concluded that a final risk factor was the “deterioration of the external economic environment for Cyprus due to (i) the recession in Russia, (ii) weaker than expected growth in the euro area and the UK, as a result of a slowdown in emerging markets, especially in China, and (iii) heightened

geopolitical tensions in eastern Mediterranean.”

On the upside, the CypERC outlook said that favourable factors include “a longer period of lower international oil prices leading to lower energy costs with positive effects on domestic activity,” as well as “investment decisions linked mainly to tourism and energy, as well as public investment efforts for the expansion and/or improvement of infrastructure.”

On the other hand, renewed recession in Greece is not likely to have negative effects on Cyprus due to the recent weakening of connections between the banking systems of the two countries.

“The worsening of the Greek economic outlook alone is not expected to reverse the recovery in Cyprus,” the CypERC report said.

CPI inflation in 2016 is projected at 0.3%, the report said, explaining that the low inflation projection is driven by the lower international oil prices and by price declines in the international prices of non-energy commodities combined with sluggish domestic demand.

Looking ahead, it said that “inflation is projected to pick up in the second half of the year as activity and demand will continue to firm up.”

The CypERC forecast for real GDP growth for 2015 is revised from 1.3% in the October issue to 1.5% in the January outlook, based on quarterly data available up to the third quarter of 2015 and monthly indicators for the fourth quarter of 2015.

Thus, the growth forecast for 2016 is revised upward from 1.5% to 2.7% due to a higher than forecasted real GDP growth rate in the third quarter in Cyprus, modest growth rates in the EU, as well as from further improvements registered in a number of domestic leading indicators during the final quarter of 2015.

The forecast for CPI inflation in 2016 is revised upwards from -0.4% in the October issue to 0.3% in January. The upward revision resulted from a slower contraction of the general price level in the final quarter of 2015 compared to the third quarter of 2015 and from the pickup of domestic demand.

The forecasts for 2015 and 2016 suggest that real activity will continue to improve. The growth forecast for 2015 is in line with the projection of the Central Bank of Cyprus; it is, however, more optimistic than the forecast of the European Commission.

“Furthermore, the forecast for 2016 points to faster growth than the rate projected by the Central Bank of Cyprus and the European Commission,” the CypERC report said, concluding that “the econometric analysis based on the currently available data suggests that the economic recovery in Cyprus will continue at a similar pace in 2017.”

January 27 - February 2, 2016

financialmirror.com | CYPRUS | 5

Growth resumes on eve of bailout exit Georgiades: “We can take it from here” Cyprus, bailed out by the Troika of international lenders in 2013, is about to exit the ‘adjustment programme’ in March, just as the economy has resumed its growth path, Finance Minister Haris Georgiades said after briefing the European Parliament on Monday.

Speaking after a meeting with the EP Committee on Economic and Monetary Affairs, where he briefed members on the economic and financial situation in Cyprus, Georgiades said that with Cyprus having completed the programme, the country will no longer be included in the list of EU problems but will be in a position to contribute to joint Union goals.

He said that what he is presenting is “a story of economic recovery, of optimism and prospect.”

“We have come a long way, we have a second chance and we are determined to make the best of it”, Georgiades said.

Referring to the EUR 10 bln bail-out, he said that Cyprus will be “able to complete the ESM/IMF programme on time, by this coming March.”

We have not utilised the full amount, he noted, pointing out that “more that 2 of the 9 billion [euros] of ESM funds will not be drawn.”

“We shall not be requesting a new programme and we shall not be needing a conditional credit line”, he assured MEPs, adding that “we can take it from here.”

At the same time Georgiades highlighted the fact that “the effort is far from over.”

Cyprus, he said, “has proven to be a resilient and competitive economy, an attractive destination for new business and new investment,” he noted, adding that “at the same time we know that we can do even better.”

He referred to the ongoing efforts for structural reform, noting that the government has already implemented ambitious welfare reforms, a tax administration reform and a public financial management reform.

“We now want to continue with an equally ambitious public administration reform”, he said, adding that “privatisation and concessions also remain high on our agenda.”

Conditional to the bailout funds was that Cyprus needed to raise some EUR 1.4 bln from privatisations or from denationalisation, to lower the burden on the taxpayer and make the economy more competitive.

So far, the government has concluded the work to issue a casino license, is in the final process of negotiating with bidders who will take over management of Limassol port, is about to ‘unbundle’ the state-controlled Electricity Authority (EAC) with a view o creating two separate entities, and plans to privatise the state-owned telco Cyta. All of these have seen a bumpy ride as the government delayed the privatisation process and is now facing vociferous opposition from political parties and trade unions, leading up to the May parliamentary

elections.

Georgiades also said the administration would be tackling the problem of undue bureaucracy.

Referring to the banking sector he said that it has been completely revamped and is now “much smaller and healthier.”

He acknowledged the high levels of non

performing loans, pointing out however that they are one of the leftovers of the crisis and what we need is time and effort to see them come down.

Replying to MEP questions, Georgiades stressed that Cyprus is definitely not a tax haven since it has a corporate tax rate of 12.5%.

Referring to the effort to reunite the island, divided since the Turkish invasion of 1974, under a federal roof, he said that with reunification all rules of EU governance, banks supervision should apply without exception.

Asked about the prospects of revenues from natural gas discovered in the Cyprus exclusive economic zones (EEZ) adjacent to Israeli and Egyptian waters, he noted that Cyprus chose not to take into consideration such eventual income so that it can achieve its goals without counting on future income.

Any such revenues will have to be managed keeping in mind future generations, he noted.

The first offshore gasfield, Aphrodite, within the Block 12 concession operated by US-based Noble Energy, BG and Israel’s Delek and Avner, has estimated reserves of about 3 trillion cubit feet, a tenth of what was discovered by ENI in the Egyptian gasfield Zohr in late-2015, and is expected to come on stream by 2019-2010.

January 27 - February 2, 2016

6 | CYPRUS | financialmirror.com

Diplomacy has role to play in Europe’s energy security Foreign Minister Ioannis Kasoulides told members of parliament that Cyprus can play an important role in Europe’s energy security due mainly to four factors, which need to co-exist.

Speaking before the Parliamentary Committee on Energy, Trade, Industry and Tourism, Kasoulides said that Europe is seeking a permanent solution to the issue of energy supply, after the crisis of Gazprom with Ukraine and the Ukrainian crisis.

He noted that diplomacy has a major role to play as regards energy security, adding that Cyprus’ role to the reinforcement of energy security cannot be considered solely on the basis of geostrategic criteria.

Kasoulides said that there are four factors which boost Cyprus’ position and its role as regards the European energy security.

The first is the increased possibility of discovering

First Cyprus-Greece-Israel meeting on Thursday The first tripartite meeting between the leaders of Cyprus, Greece and Israel will take place in Nicosia on Thursday, with the participation of President Nicos Anastasiades, Greek Prime Minister Alexis Tsipras and Israeli Prime Minister Benjamin Netanyahu, will be accompanied by members of their cabinets.

Government Spokesman Nikos Christodoulides said on Tuesday that the main issues on the agenda will be energy, economy and tourism.

He said that the leaders will adopt the Declaration of Nicosia which will outline the way the cooperation will advance until the next tripartite meeting within six months.

As regards the ongoing UN-led Cyprus talks, Christodoulides said that on Friday President Anastasiades and Turkish Cypriot leader Mustafa Akinci will hold one more meeting, during which they will discuss issues relating to property and the territory.

As regards the guarantees issue, he said that he does not believe this to be one of the most difficult issues on the negotiation table, noting that it is clear that in 2016 military guarantees or guarantees for an EU member state are out of the question.

“The content of the solution, the fact that the Republic of Cyprus is an EU member state, and will continue to be after the solution of the Cyprus problem, is the best guarantee as regards the solution of the problem,” he said.

Improvement in doing business as Cyprus climbs 13 places in World Bank rankings The business environment registered significant improvement in Cyprus last year, according to the World Bank’s annual “Doing Business Report 2016” presented by the Cyprus Investment Promotion Agency (CIPA), in the presence of Undersecretary to the President Constantinos Petrides.

The World Bank evaluated a total of 189 economies on the basis of ten different indicators covering the entire life cycle of a company. This is the seventh consecutive year that Cyprus has been included in the report.

According to this year’s survey, Cyprus climbed 13 places in the world rankings as regards the ease of doing business compared to last year (from 60th to 47th) and was ranked among the ten economies with the most notable improvement in upgrading the business environment. A significant change from the previous year was the breadth of participation in the survey, since there were more participants from the Public Service.

CIPA Chairman Christodoulos Angastiniotis said that the increased participation of the Public Service in the survey made it possible for the government machine to identify possible weaknesses and give a clearer direction to the more general reform effort underway, based also on the recommendations and conclusions of the World Bank.

Referring to the importance of attracting investments, Angastiniotis stressed: “We have no other choice but to press ahead with strategic reforms and improvements.”

more reserves in Cyprus’ Exclusive Economic Zone, after the discovery of the Zohr gasfield in Egypt, which has revived interest among oil companies.

The second factor are Cyprus’ synergies and partnerships with countries of the region. Kasoulides said that Cyprus has acted in an exemplary manner as regards its cooperation with Egypt, Israel and Jordan, strengthening its role in the EU. He cited as a third factor Cyprus’ EU membership, and noted two major projects in which Cyprus as a member has an important role. The first is the EuroAsia Interconnector, which concerns the supply of Europe with electricity produced in Israel, which will be channeled via a cable, and the second is the Estern Mediterranean pipeline (Eastmed) which is the pipeline for the Israeli natural gas.

The fourth factor, according to the Minister, concerns

Cyprus’ geopolitical position and the extent of its EEZ, as the Israeli and the Egyptian natural gas will have to pass through the Cypriot EEZ. Kasoulides clarified that Cyprus is ready to look into the possibility of a pipeline that will pass through Turkey if the Cyprus problem is solved.

He noted that no pipeline can pass through the Cypriot EEZ and connect the gas fields of Israel and Turkey, without the consent of the Republic of Cyrpus, for both legal and political reasons.

The legal reasons have to do with international law and the Law of the Sea, according to which there must be bilateral agreements for a cable to be able to pass through the Cypriot EEZ. The political reasons, he added, have to do with Israel’s engagement that it will not proceed with an agreement with Turkey, if it does not have the consent of Cyprus.

Slow growth in 2016, USD to weaken vs G10 currencies The Wealth, Brokerage and Asset Management Division of the Bank of Cyprus organised the “Wealth Management Forum: Global Markets Outlook 2016” that took place on January 20 at the bank’s head offices.

The forum provided useful and insightful information to the wealth management community. International market experts, from major fund houses, supported the event with their views and forecasts.

Peter Vincent, Head of Alternative Sales, Europe at Franklin Templeton discussed how the world economic growth is expected to slow in 2016 and inflation is expected to stay muted, with the world economy likely avoiding both recession and outright deflation. Additionally, he explored the reasons behind the rapid growth in these new investments and discussed the role they could play within a diversified investment programme.

John Botham, Product Director at Invesco, presented his views on global equities including a brief review of 2015, the outlook for 2016, valuations, sector and regional views.

Mohamed Rashid, Investment Specialist, Global Corporate Credit at BNP Paribas, gave a short overview of the macroeconomic environment as pertains to fixed income markets, namely European and North American as well as an analysis of 2015 performance followed by a brief outlook for 2016 including main performance drivers and risks.

Alexandros Scountjos, Director at HSBC, talked about the USD and on how it is set to weaken against G10 currencies this year.

Georgios Lampros, Manager Asset Management and Investment Strategy & Energy, at Bank of Cyprus analysed the investment themes of the BOC Investment Strategy Team for the year ahead and depicted views on major trends and investment ideas that are expected to be materialised in 2016.

The event was chaired by Costas Argyrides, Director of the Wealth, Brokerage & Asset Management Division of Bank of Cyprus. John Hourican, CEO of Bank of Cyprus, delivered a

welcome address and a keynote speech on the Cyprus economy, its current state and future prospects was delivered

by Sofronis Clerides, Associate Professor of Economics at University of Cyprus.

January 27 - February 2, 2016

COMMENT | 7

1 mln benefit from Erasmus+ “More and better opportunities to support Europe’s future generations” In its first year, Erasmus+, the enhanced EU programme for education, training, youth and sport with a budget of over EUR 2 bln, has already offered more than 1 mln people the opportunity to take part in 18,000 funded projects.

More flexible opportunities for collaboration across sectors are also helping Europe’s education, training, youth and sport systems to try out innovative practices and contribute to reform and modernisation, the European Commission announced in Brussels.

Cyprus, too, has benefited generously from the programme, with nearly half of the EUR 5.52 mln for studying, training or volunteering abroad allocated to higher education, while cooperation projects absorbed a further EUR 2.73 mln, representing 14 strategic partnership and 79 organisations.

Of the nearly 3,600 people who studied, volunteered or trained abroad, the majority ended up in Greece, Spain, UK, Belgium and Italy, while Cyprus also received students from Poland, Germany, France, Lithuania and Greece.

Compared to the predecessor “Erasmus exchanges” programme, over the past seven years the numbers have more than doubled for outgoing and incoming students, as well as staff.

“During the first year, Erasmus+ has proved a true success. The impressive number of participants is proof that the programme is making a difference in improving young people’s employment prospects, helping them acquire new skills and experiences and supporting the modernisation of Europe’s education, training and youth systems,” said Tibor Navracsics, EU Commissioner for Education, Culture, Youth and Sport.

“We will continue to build on this popularity to reach out to more people with

different interests, profiles and social backgrounds.”

The figures reveal that in 2014, Erasmus+ already benefited more people through a wider range of opportunities. In its first year, the programme supported a record 650,000 mobility grants for students, trainees, teachers, volunteers and other young people and paved the way for the first student loans for a full Master degree provided abroad.

For the first time, the programme also funded policy support projects involving public authorities and international organisations and provided funding for projects in the field of sport.

A strengthened Erasmus+ is also delivering stronger support to its beneficiaries.

This can be seen in improved recognition of studies abroad once students return to their home countries.

Moreover, teacher and staff mobility is being integrated better into professional development strategies backed by their home institutions.

The new Erasmus+ is also more open, with a strong focus placed on promoting social inclusion, active citizenship and tolerance. To achieve this, more financial support than ever has been made available to participants with fewer financial means or those with special needs.

A further EUR 13 mln has also been committed for 2016 to fund projects tackling issues like social inclusion of minorities and migrants and other disadvantaged social groups.

The programme has also strengthened initiatives to improve young people’s employment prospects and facilitate their transition from education to work. This has seen an increase in traineeship and apprenticeship opportunities in the programme.

Spain, Germany and France still top destinations for students In a separate report, the Commission also published the statistics on student and staff mobility for the final academic year (20132014) of the former Erasmus programme for higher education, which formed part of the umbrella Lifelong Learning Programme. The data reveals that a record number of students (272,000) and staff (57,000) took part compared to any previous year. Spain, Germany and France remained the three most popular destinations for Erasmus students to study or train abroad in 20132014.

In addition, a new Erasmus Regional Impact Study confirms that while

undertaking an Erasmus student exchange significantly improves young people’s chances of securing high quality, managerial jobs, this is especially true for students coming from Southern and Eastern Europe.

The seven year programme (2014-2020) of the Erasmus+ has a budget of EUR 14.7 bln - a 40% increase compared to previous spending levels, reflecting the EU’s commitment to invest in these areas.

Erasmus+ will provide opportunities to over 4 mln Europeans to study, train, gain work experience and volunteer abroad.

For the first time, the programme also offers dedicated funding for actions in the area of sport to contribute to developing its European dimension and tackle major crossborder threats such as match fixing and doping. The programme also supports the development of teaching and research on European integration through Jean Monnet actions.

Roivas: Keep your focus on services Small countries like Estonia and Cyprus need to focus on services in order to be wealthy and prosperous, the Baltic state’s visiting Prime Minister, Taavi Roivas, said during a lecture at the University of Cyprus.

In his lecture on “A road ahead: The secure and digital future for Europe,” Roivas said the five pillars on which a country’s economic growth should be based are national security, international integration, public finances (fiscal prudence), the business climate and egovernment.

He said that the web-based free-call company Skype was created in Estonia and has created hundreds of jobs in the country.

“In the European Union if you want to grow faster than the EU average, you have to do something different and you need to be clever and be attractive to investors.

So, in order to do so you have to work hard to make the

business climate as favourable as possible for investors,” he pointed out.

In Estonia, he added, “the income tax rate is a flat one, with very few exemptions”, noting that “there is no greater good for an economy than fair competition and by taxing companies equally you make the competition situation fairer.”

As he said, “the unique thing about the Estonian system is that if you reinvest the company’s profit, you don’t pay any corporate income tax”.

He noted that “today, if you want to start a company in Estonia it will take you a few hours. The record that we have is 18 minutes”, adding that “visiting state offices or all kinds of tax authorities physically should be yesterday’s business”.

“If you have a very good digital system, you do not need to interact with the government physically, you can

do it digitally”.

He also said that “in order to declare your annual income tax you do not need weeks or months. In Estonia it takes just five minutes to declare your income tax through your iPad or laptop or any other computer device.

“The secret behind that is that the government should not ask you what they already know”.

During his speech, the Prime Minister referred to electronic voting and digital IDs as well as the use of digital technology in other areas of everyday life such as the health sector.

He concluded said that during his visit here he had witnessed a clear political will and commitment on behalf of his interlocutors to adopt e-government in Cyprus, noting that digital technology is the solution for many challenges ahead.

January 27 - February 2, 2016

8 | COMMENT | financialmirror.com

Jimmy’s Kitchen offers “food from the heart” and easy lunch menu Jimmy’s Kitchen, the dream-come-true of manager and chef Jimmy Demetriou, is the café restaurant along 28 October Ave. in Makedonitissa that has established the “food from the heart” concept, with the proud owner discovering new flavours and creating dishes almost every week.

Having operated for nearly a year, Jimmy’s Kitchen has a simple menu to accommodate every food lover and budget, while the new concept of the Easy Lunch menu features a starter and one main course from a selection of four at 8.90 euros a head.

Realising that the, albeit, short winter months are a cause for warmth, Jimmy, who has dabbled for years in the hotel industry, has introduced a selection of delicious homemade soups, often changing at day or night, or depending on what’s available in the market, with his most popular being the signature minestrone soup.

FOOD, DRINK and OTHER MATTERS

Some of the easy lunch specials have included lentils in tomato sauce and chicken in carrot sauce, while Jimmy often prepares his signature lasagne. More recently, one of his creations included seafood spaghetti made with a mix of seafood cooked in pink tomato sauce, simple yet delicious.

The wine list is good and affordable, but best to call and find out what the dish or soup of the day may be. Tel. 22 355580.

Spectus offers Bordeaux Re-Collection 2006 anniversary case Wine and spirit merchants Spectus are offering a limited “Re-Collection” of Bordeaux 2006 sets, of which only 300 sets have been produced in the world.

This collection was created as a celebration of ten years of The Best Bordeaux Terroir and Know-How. “This Bordeaux Re-Collection Case 2006, which will be numbered, contains the very best that the vineyard has to offer in the 2006 vintage: great wines which combine richness, tannic strength, freshness and depth in the epitome of the classic Bordeaux style,” said George Hadjikyriakos.

The case contains 9 bottles, composed of one of each of the following wines: - Château Mouton Rothschild - Château Margaux - Château La Mission Haut-Brion - Château Haut-Brion

- Château Ausone - Château Lafite Rothschild - Château Cheval Blanc - Petrus - Château d’Yquem The Bordeaux Re-Collection 2006 case is available at EUR 9650 plus VAT. In order to prevent from counterfeit and to certify the authenticity of each Bordeaux Re-Collection Case 2006, the case will also have a sophisticated traceability system.

Spectus is also offering its “Cellaring Service” to all customers with the possibility to cellar their wines in a temperature controlled cellaring facilities for free up to a period of three years.

For information call 25370027 or visit www.spectus.com.cy

January 27 - February 2, 2016

financialmirror.com | COMPANY NEWS | 9

Toyota launches Hybrid RAV4, new models in 2016 Lexus Centre gets facelift and set 30% annual sales growth target Having celebrated its 50th anniversary in the Cyprus market last year, the local Toyota distributor plans to reach new milestones in 2016, a year marked by gradual economic recovery, as well as challenges and opportunities, according to Managing Director Dickran Ouzounian.

Already, 2016 has started well for the company, with the launch of the new RAV4 in three variants, including the Hybrid, as well as the introduction of the new Lexus Centre in Nicosia.

Starting from EUR 23,400, the new RAV4 model range marks the introduction of Toyota’s first hybrid compact SUV to the highly competitive European C-SUV segment.

“The new car market results in 2015 showed a growth of 22% over 2014 to a level of 11,500 units sold. However, the market is still at the levels of the early 1980s and we don’t expect much positive movement in 2016 due to the uncertain global conditions and the regional troubles,” Ouzounian said.

“On a positive note, banks seem to be back in the market with a willingness to provide loans for purchases of vehicles to clients who are of relatively good standing.

Furthermore, with buoyant tourism, the fleet rental car market has started to recover although many operators are struggling to find the necessary funding to renew and upgrade the quality of their ageing fleets,” he added.

The company is also anticipating the delivery of a unique Toyota Aygo, designed by a lucky winner as part of last year’s “Aygo Wrap & Drive” competition.

Also looking ahead, Ouzounian said that the fourth generation Prius will be launched, a new commercial van called Proace and the new rugged Hilux 4WD, while towards the end of the year, motorists will get a glimpse of the CH-R, currently a hybrid concept car.

Inaugurating the new Lexus Centre, two new hybrid models were introduced – the new RX and the RC Coupe. Also present at the event was Alain Uyttenhoven, Vice

Open lecture at CIIM: “New trends in ICT and their application in e-Government” The Cyprus International Institute of Management (CIIM) is hosting a lecture on “New trends in information and communication technologies (ICT) and their application in e-Government” is organized by, on Wednesday, at 5pm at the CIIM premises in Nicosia (21 Akademias Avenue, Aglandjia).

This part of the CIIM “Public Lecture” series and is open to the public.

The main speaker will be Costas Agrotis, Director IT Services, Government of Cyprus, President of the Board of the Cyprus Computer Society and a member of the Association of Business and Administrative Computing The lecture will cover Cloud computing and the related security issues, the use of cloud to innovate in business, Big Data and analytics – understanding the business environment by the use of both – use big data and analytics to transform the business. Topics such as Internet of things, Mobile Computing, Data Centres and Re-thinking security in the new era of computing – cloud, internet of things, mobile computing- and their impact on e-Government and how they are changing the way we transact the business of government will also be covered.

The lecture sponsors are Marks & Spencer/Voice La Mode and the Cyprus Computer Society (CCS).

For information contact 22 462246 or visit the website www.ciim.ac.cy.

President of Lexus Europe, who commended the Cyprus team for the commitment shown to the brand.

This is the first face-lift of the Lexus Centre ever since it was created 15 years ago, and the company has set a target for a 30%

annual growth rate in sales, in order to help the global brand reach the 1 mln mark by the year 2020.

The premises now also include the Omotenashi concept in Japanese hospitality.

For information visit www.lexus.com.cy

January 27 - February 2, 2016

10 | COMMENT | financialmirror.com

EuroAsia InterConnector sets off, paves way for ‘global energy interconnector’ - Charting of sub-sea route will be ready in 100 days - Vessel embarks on survey for 2,000MW link The EuroAsia Interconnector project has commenced its implementation, with the research vessel launched from Limassol this week that will conduct the charting survey of the seabed where the 2,000 MW duo-directional electricity cable between Israel, Cyprus and Greece will be laid.

The Italian research company G.A.S. S.r.l. has already embarked on the first pre-works phase survey for the 1,518 km subsea power cable that will end the energy isolation of the three countries by connecting their power grids to those of continental Europe.

The three studies are for the technical design, the reconnaissance study for the optimum route and an environmental impact study, all of which are expected to be completed during 2016.

During a historic ceremony in Limassol port last week, the Italian-flag research vessel Odin Finder and its 25 crew and scientists was presented to Cyprus government and European Commission officials in the presence of the Ambassadors of Italy, Greece and Israel.

The vessel has set sail for Piraeus and will take about 100 days to complete the survey.

Present at the inaugural ceremony was the Director General of the Energy, Commerce and Tourism Ministry, Dr Stelios Himonas, who emphasised the important role that Cyprus will play in determining regional energy issues, particularly in the eastern Mediterranean.

In his address, EuroAsia Interconnector Ltd. CEO Nasos Ktorides added: “This picture of this ship in the Limassol port is worth an enormous sense of security and progress to three

From left: Ilias Fotopoulos, Ambassador of Greece in Cyprus; Yael Ravia-Zadok, Ambassador of Israel in Cyprus, Nasos Ktorides, Chief Executive Officer - EuroAsia Interconnector; Dr Stelios Himonas, Director General of the Energy, Commerce and Tourism Ministry; Guido Cerboni, Ambassador of Italy in Cyprus, in front of the R/V Odin Finder docked in Limassol Port.

countries and two continents. It also reflects businesses and millions of people prospering from this important electricity highway.

“We have successfully managed to get through the overwhelming maze of plans and we are now sailing steadily into the final three studies before launching the implementation phase of the EuroAsia Interconnector, a European Union flagship Project of Common Interest (PCI).

“We consider the completion of the EuroAsia Interconnector as the beginning of the Global Energy Interconnector,” Ktorides declared, adding that this project “demands a network of specialists, institutions and of course, governments, all actively supporting every step. We, as a team, are grateful to the European Union for embracing this project as its own and labeling it as ‘of Common Interest’ and to our international consultants for infusing it with their expertise and care.”

On November 18, the European Commission released a revised list of 195 PCIs across the EU that included the

EuroAsia Interconnector, based on their “significant benefits in market integration and enhancing competition improve security of energy supply and reduce CO2 emissions.”

This project also offers economic and geopolitical benefits to the involved countries and contributes to the European Union’s target for 10% of electricity interconnection between member states.

The cable is expected to be laid at a depth of up to 2612 metres below the sea and the involved governments are considering expanding the project after its completion in order to double its capacity.

The Ambassadors of Israel, Greece and Italy – Yael RaviaZadok, Ilias Fotopoulos and Guido Cerboni – as well as the Deputy Governor General of Crete for Energy and Industry, Virginia Manasaki, all expressed praise for the speed of the project.

Ambassador Ravia-Zadok said she was “amazed” by the sheer size of the project and the research undertaken, adding that it was of “utmost importance” to Israel, Cyprus and

January 27 - February 2, 2016

financialmirror.com | COMMENT | 11

€1.5 bln EU flagship ‘Project of Common Interest’ aims to end energy isolation of Cyprus, Greece and Israel Greece.

“Italy supports and considers as a priority building a resilient Energy Union, based on the dimensions of security and solidarity, a fully integrated internal energy market, energy efficiency, de-carbonisation, research, innovation and competitiveness. It is essential to strengthen cooperation not only between member states, but also with neighbouring countries that are traditional partners in energy relations,” said Ambassador Cerboni, and added: “As the Ambassador of Italy, I have an additional reason of satisfaction: EuroAsia InterConnector has awarded the studies for the technical design, the reconnaissance study for the optimum route and an environmental impact study, to two Italian companies, CESI S.p.A. (a company from Milano with more than 50 years of experience in testing and consulting services for the electrical industry) and GAS S.r.l, from Bologna province, a company of solid experience worldwide in geophysical, geotechnical and environmental surveys.”

Speaking from the pier where the vessel is docked, Ambassador Fotopoulos said: “The Odin Finder (right next to us) will not just determine the preferable route for an electricity cable. It is actually going to determine the preferable route for connecting the peoples of Greece, Cyprus and Israel. It would be fair to say then that we are all embarking on a historic expedition.”

Work on the initial 329-kilometre cable link between Israel and Cyprus is expected to begin in 2017 and be completed in 2019. The second phase will connect the island of Crete to Attica in mainland Greece in 2020 and the third and final phase will connect the cable from Cyprus to Crete with a view of full implementation of the “electricity highway” by 2022.

The expected cost of step one and step two of the project is 1.5 bln euros and will be undertaken in full by EuroAsia Interconnector.

Dr Stelios Himonas (2nd left) with other VIP guests on board the R/V Odin Finder in Limassol Port, viewing the route the vessel will sail to study the preferred subsea route of the EuroAsia Interconnector

Homegrown energy security for Europe

By Anders Fogh Rasmussen The European Union is highly dependent on foreign oil.

For every 100 liters consumed within the EU, 90 are imported. Meanwhile, domestic oil production is plummeting, down more than 50% over the last decade.

Unless the EU changes course and increases its production of alternative energy – including biofuels, an option the EU has long neglected – some 95% of its oil will come from foreign sources by 2030, according to the International Energy Agency.

The current state of affairs remains the EU’s Achilles’ heel, because it implies dependence on imports from unstable, authoritarian regimes. In 2014, EU member states spent a staggering EUR 271 billion on foreign crude oil – more than the combined GDP of Bulgaria, Hungary, Slovakia, and Slovenia. Roughly half of this money went to Russia, the Middle East, and North Africa.

Thus, not only is the EU exposed to global supply disruptions; it is also helping to prop up authoritarian governments and empower hostile regimes, which limits its own ability to provide effective, coordinated responses to threats and provocations. The EU’s struggle to devise coherent political and economic strategies to confront the challenges posed by Russian aggression in Ukraine and the

inferno in the Middle East is a case in point.

The United Kingdom’s recent decision to boost defense spending highlights the growing recognition that strong military capabilities will be needed to uphold Europe’s security and sovereignty. But as long as its dependence on foreign oil persists, the EU will remain far weaker than it needs to be. The proposed Nord Stream II pipeline – which would funnel even more gas from Russia to Germany – is only likely to aggravate the situation.

Europe’s energy security is likely to gain salience in the coming months, as 2016 shapes up to be another turbulent year in international politics. This year is also likely to see the completion of the EU’s Energy Union, established to ensure secure supplies of affordable, climate-friendly energy.

Unfortunately, Europe’s dependence on foreign oil has been left out of the discussion. The European Commission must provide clear direction if EU member states are to develop alternative sources of energy.

Renewable energy from wind and sun can certainly play a role in decreasing the EU’s energy vulnerability. Such sources are already helping to reduce dependence on coal and gas for electricity production. However, when it comes to energy production from oil – most notably fuel for cars – it is likely to be years before wind or solar energy can provide viable alternatives.

The EU should follow the example set across the Atlantic, where countries have worked to reduce their reliance on foreign oil. The United States, for example, has created incentives for investment in alternative fuels. Indeed, the US is the world’s largest producer of bioethanol, which – along with the production of shale gas – has helped reduce foreign oil imports by at least 25%, while lowering carbon dioxide

emissions and creating local jobs.

Brazil, too, provides a compelling example, having worked since the oil crises of the 1970s to reduce its reliance on imported energy. Today, Brazil is a net oil exporter and the world’s second-largest producer of bioethanol, which has replaced more than one-quarter of the gasoline once used in the country.

Unfortunately, much of the policy discussion surrounding biofuels in the EU is dominated by outdated arguments linking them with rising food prices. Food should not be used to fuel cars, opponents insist. Today, however, advanced biofuels are not based on food, but on waste from industry, agriculture, and private households. In the words of José Graziano da Silva, Director-General of the Food and Agriculture Organisation of the United Nations, biofuels “can be an effective means to increase food security.” Done right, their development would mean “more fuel, more food, and greater prosperity for all.”

Biofuel technology kills four birds with one stone: It improves energy security, recycles waste, reduces greenhouse-gas emissions, and produces jobs (often in rural areas). That is why replacing imported oil with homegrown energy is one of the most important and far-reaching legacies today’s Europeans could leave to the Europe of tomorrow.

Anders Fogh Rasmussen, former Prime Minister of Denmark and Secretary General of NATO, is Founder and Chairman of Rasmussen Global. © Project Syndicate, 2016 - www.project-syndicate.org

January 27 - February 2, 2016

12 | MARKETS | financialmirror.com

Oil companies expected to slash more jobs One unintended consequence of the rapid drop in oil prices is that company managements in the sector desperately need to cut costs. Layoffs are usually a means to lower expenses, and oil industry executives mean to do just that. The pounding that industry workers have taken is not nearly over.

In the sixth annual outlook on the oil and energy industry from DNV GL, a safety management firm, survey respondents focused primarily on cost cuts.

New research from DNV GL has revealed that cost management has become an even higher priority for senior oil and gas professionals in the year ahead, as 73% prepare their company for a sustained period of low oil prices.

The top three m e a s u r e s prioritised to impose stricter cost control are: tougher decisions on capex, headcount reductions and increasing pressure on the supply chain.

In theory, the drop in capital expenditures means an eventual drop in production as the search for new deposits and enhancement of current deposit production undermine supply. Higher oil prices, well into the future, may be the result.

However, 73% of survey respondents said that they were preparing their company for a sustained period of low oil prices, and more than four in ten (42%) believed that oil prices would not increase in 2016.

In other words, prices below $30 a barrel will continue.

And the reaction: “Our survey shows that cost-efficiency initiatives will continue well into 2016. Nearly nine out of ten respondents (88%) said that cost reduction would be top, or a high priority, for them in 2016. This is up from 85% last year. Shareholder pressure is increasing the urgency of cuts: 93% of publicly-listed companies said that reducing costs would be top or high priority for them this year, compared to 85% of privately-held companies and 77% of state-owned companies.”

Oil giants Schlumberger Ltd. (NYSE: SLB) and Exxon Mobil Corp. (NYSE: XOM) already have cut staff. Smaller oil producers, particularly those that count on share, have begun a string of bankruptcies. Layoffs are bound to worsen. (Source: 24/7 Wall St.com)

Chinese stocks have a long way to go before bottoming China’s Shanghai SSE Composite Index has taken yet another severe hit that pulled it down another 6.5%.

Chinese authorities quickly abandoned the circuit breakers that had been set up to prevent these types of plunges after they were tripped twice already this month. These declines look steep, but there could still be plenty of free fall before hitting a solid bottom. Here’s why.

Contrary to Donald Trump’s popular refrain that China is depreciating its currency to hurt American exports, the People’s Bank of China (PBOC) is trying desperately to keep the yuan propped up. We already have seen how the PBOC has burned through an unprecedented amount of foreign exchange reserves to keep its yuan/dollar peg intact — over $660 billion worth by last available count, which by the end of the month could advance to close to $1 trillion.

In addition to that, the PBOC just rejected the option of lowering reserve requirements for Chinese banks, according to a leaked memo. Even before the leak, just last week, reports surfaced that China’s central bank would actually go in the opposite direction and raise reserve requirements for some banks effective January 25, a very telling policy for a country with a stock market in free fall.

If burning through close to $700 billion in foreign reserves is not enough, these two moves really tell you how much pressure the yuan is under.

Perhaps too much to bear, because as the Financial Times is reporting, China’s state news agency is now bringing George Soros into the ring, the trader who became famous for shorting the British pound in 1992 and breaking the Bank of England’s own peg. Soros is also short the yuan, and

an editorial by a Chinese state news agency mocking him probably will only encourage Soros in his convictions.

In short, all signs point to the PBOC putting its currency first and stock market second. They are feeling the pressure on the yuan from all angles, and lucky for them they have $3.33 trillion left in foreign reserves to serve as ammunition to protect the peg. How long that ammo will last is the question.

So how low can Chinese stocks go considering the PBOC is letting them fall for now? The next major support level is at around 2,300, another 17%

down. After that it’s 2,000, and then 1,011.5, a low hit in July 2005. These numbers may seem extreme now, but considering the fact that China has expanded its money supply by 2,384% in 20 years and that this is finally coming to an end now, a ultimate 65% drop is quite plausible.

Considering the sheer amount of monetary expansion, it’s amazing they’ve been able to keep the yuan pegged to the dollar for so long. The longer that peg is tested and the PBOC bent on defending it, the farther Chinese stocks will fall in the long run.

(Source: 24/7 Wall St.com)

Ifo: Germany business climate index drops markedly Sentiment among German businesses weakened at the beginning of the year, with the Ifo Business Climate Index for industry and trade falling to just 107.3 points in January from 108.6 points in December.

Assessments of the current business situation were scaled back slightly, but remained very good, the Ifo report said, adding that “business expectations, by contrast, clouded over significantly as the year started with an unpleasant surprise for the German economy,” according to Dr Hans-Werner Sinn, President of the Ifo Institute.

In manufacturing, the business climate index fell to a 12-month low, the Munich-based research institute said.

Favourable assessments of the current business situation were only scaled back a little, but business expectations were substantially revised downwards. Although the chemicals sector benefited from low oil prices, sentiment weakened in several other branches, including mechanical engineering and the automotive sector, mainly due to the poorer export outlook. Capacity utilisation rates in manufacturing on the whole rose by 0.6 percentage points to 85.1%.

In wholesaling, the business climate index rose, mainly due to far better assessments of the current situation.

Wholesalers’ business expectations, by contrast, deteriorated slightly. In retailing, the index remained almost unchanged.

While retailers were slightly less satisfied with their current situation, their business expectations turned

positive.

In construction, the business climate index continued to fall markedly, but still remains clearly above its longterm average.

The decline was due to more pessimistic expectations on the part of contractors. Assessments of the current business situation, by contrast, reached their highest level in over two years.

January 27 - February 2, 2016

financialmirror.com | MARKETS | 13

Are 75 mln iPhone sales enough for Apple?

By Douglas McIntyre 24/7 WallSt.com As Apple Inc. (NASDAQ: AAPL) earnings approach, nothing matches the importance of iPhone sales, particularly in China. The consensus among analysts is that Apple sold 75 mln iPhones in the quarter. Anything short of that will be disastrous for its share price, which has been under pressure for months.

Sales in the fourth quarter depended heavily on holiday sales, sales in China and consumer appetites for an aging iPhone family. While aging depends on an odd definition for Apple, a few quarters of sales of a new generation of the smartphone move some customers to the point where they either have iPhones already or a desire to wait for the iPhone 7, which probably will be released in the second half of this year.

Apple’s new ad campaign has a tag line for its newest smartphone, the iPhone 6s, that reads, “The only thing that’s changed is everything.” Apple did not make that claim when the iPhone 6s was new. So, the company is pushing features that are many months old.

Hanging over both iPhone and iPad sales is the spectre of the success of Alphabet Inc.’s Google Android OS, which is used in almost all non-Apple tablets and smartphones sold in the world — leaving aside progress made by Microsoft and its new mobile versions of Windows. Samsung, once Apple’s worthy competitor, counts on new Android phones to get share back from Apple. The effort just might work.

In Apple’s most recently reported quarter, its revenue from Greater China was $12.5 bln, up 99% from the same quarter the year before. That was against Apple’s global sales of $51.5 bln. Tim Cook, Apple’s CEO, has made the point that China sales must rapidly become a much larger portion of his company’s revenues or overall growth will stumble.

Apple has always faced the challenge of consumers who want the newest iPhone and

may wait until it is shipped. How many people will hold their “old” iPhone 6 models and wait for the iPhone 7? No one knows, but it is a threat to sales.

Apple’s stock has slightly recovered from a brutal sell-off that has driven its shares down 30% in the past six months. Over the past five days, the stock is down 3%.

The consensus estimates from Thomson Reuters Apple’s fiscal first-quarter financial results call for $3.23 in earnings per share (EPS) on revenue of $76.59 bln. In the same period of the previous year, Apple posted EPS of $3.06 and $74.60 bln in revenue.

This remains the world’s biggest and boldest technology company. Apple revolutionised personal technology with the introduction of the Macintosh in 1984.

Today, Apple leads the world in innovation

with iPhone, iPad, Mac, Apple Watch and Apple TV. Apple’s four software platforms — iOS, OS X, watchOS and tvOS — provide seamless experiences across all Apple devices and empower people with breakthrough services, including the App Store, Apple Music, Apple Pay and iCloud.

The company recently announced that customers around the world made the 2015 holiday season the biggest ever for the Apple App Store, setting new records during the weeks of Christmas and New Year’s. In the two weeks ending January 3, customers spent over $1.1 bln on apps and in-app purchases, setting back-to-back weekly records for traffic and purchases. January 1, 2016, marked the biggest day in App Store history, with customers spending over $144 mln. It broke the previous single-day record

set just a week earlier on Christmas Day. However, there are increasing concerns that Apple will post its first annual decline of iPhone shipments, as we draw closer the earnings report after the close. This would be the first time that iPhone shipments declined since its inception in 2007, and after multiple Apple suppliers have warned of shrinking demand. Although, no supplier has pointed to Apple as the cause of slowing demand. So far in 2016, Apple has outperformed the markets, with the stock down only 5.5% year to date. While over the past 52 weeks, the stock is down 10.5%.

Shares of Apple were trading up 0.5% at $100.00 on Tuesday, with a consensus analyst price target of $247.67 and a 52-week trading range of $92.00 to $134.54. (Source: 24/7 Wall St.com)

The numbers that matter for Boeing Dow Jones Industrial Average component Boeing Co. (NYSE: BA) reports fourth-quarter and full-year results before markets open on Wednesday. Until last week the prospects were pretty solid.

Then Boeing announced a pre-tax $885 mln fourthquarter charge on its 747 programme and a further slowdown in production of the jumbo jet from one per month beginning in March to one-half plane per month beginning in September.

Analysts had a quarterly earnings per share (EPS) estimate of $2.14 prior to the announcement, and that has now dropped to a consensus estimate of $1.26. For the full year, analysts expect Boeing to post EPS of $7.38, compared with $8.60 in 2014.

The consensus fourth-quarter revenue estimate is $23.55 bln, down from actual revenues of $24.47 bln in the year-ago quarter, and full-year revenue is expected to come in at $96.09 bln, up nearly 6% compared with 2014 revenues of $90.76 bln.

While the 747 production rate decline is not good news, it pales in comparison with production rates on the current version of the 777. That plane is as close to a cash cow as Boeing has and the company needs to keep producing these planes at a rate of about eight a year out through 2021 in order to keep the cash flowing in.

At the end of December Boeing reported 176 unfilled orders for the 777-300ER and 42 for the 777F freighter.

The company also has 306 orders for the 777X, but those are not scheduled to enter service until 2020. The 218 orders for existing models of the 777 won’t last until then at current production rates. If Boeing announces a drop in 777 production, the stock will take a nasty hit.

Another big thing to look for is the company’s cash

flow. Boeing has turned investors into cash-flow fanatics and has stuck by its forecast made in January of last year for $9 billion in cash flow. That’s as close to a sure thing as investors are ever likely to see. Boeing will have moved the proverbial mountain to make this forecast.

One final thing to watch for is a levelling off, if not a drop, in the company’s deferred production costs.

These are almost entirely due to the enormous expense of bringing the 787 programme to life.

At the end of the third quarter, Boeing reported deferred production costs total of $28.31 bln. That reflected a quarter-over-quarter gain of around $577 mln, the smallest increase in more than three years. When that number stops growing it means that Boeing is no longer losing money on every 787 it sells; when the number starts to shrink, Boeing will be making a profit on every 787 it sells.

As the noon hour drew to a close on Tuesday, Boeing’s stock traded up about 2.8%, at $127.46 in a 52-week range of $115.14 to $158.83.

January 27 - February 2, 2016

14 | MARKETS | financialmirror.com

Fate of Emerging Markets hangs in the balance

By Oren Laurent President, Banc De Binary

The Chinese economy is in the process of a 180-degree transition from an export-oriented powerhouse to an economy which is focused on services, manufacturing and the urbanisation of millions of people. This delicate balancing act appears to the world under the guise of structural weakness, but it is nothing more than a rebalancing of the Chinese economy which will lead to long-term growth. In the short to medium-term (1-5 years) there is no doubt that pressure will be maintained on the economies of emerging markets from the Asia-Pacific region, to Africa and Latin America. Chinese demand for raw materials and other resources, notably energy and mining, has diminished. This has been reflected by the declining GDP figures for December 2015, and the year that passed. That China’s annual GDP dropped to 6.9% for 2015 is notable, and it is the worst performance of the world’s second-largest economy in decades.

EM and developed markets on opposite ends of the spectrum This news has sparked tremendous concern among financial entities including Goldman Sachs which recently announced that pressures in China will likely lead to five years of economic hardship for emerging market economies.

The global investment enterprise cautioned its clientele to readjust their financial portfolios to limit their exposure to emerging markets. This trend has been taking place for quite some time and is evident in the declining share of Asian equities, African equities and South American equities in the financial portfolios of clients. Investors have been cautioned to consider the facts when contemplating investing in emerging market economies: Russia, China and Brazil are bear market economies and their performance from April 2011 to mid-January 2016 has revealed a -40% return.

Compare that to a +44% return for US equities and it is clear where the safe money really lies.

Bulls try to charge in Bear Market The question is: why are emerging markets faring so badly? For one, the US dollar has consistently performed above expectations. The US economy has shown increasing strength over time with unemployment dropping to 5%, growth continuously inching higher and inflation slowly but surely moving towards the benchmark rate set by the Federal Reserve Bank. All of these factors combined with the

December 16 rate hike by 25-basis points to 0.50% for the federal funds have resulted in a bleak outlook for EM currencies and a bullish outlook for the USD. But the big stinger for EM economies is weak global demand brought on

by China weakness. Commodity prices, notably crude oil, have been hammered in 2015 and pummelled in the first three weeks of 2016. Crude oil crashed through the critical $30 per barrel support level in the third week of January, but bounced back on Friday to settle above $31 a barrel as bullish sentiment from the European Central Bank and the Chinese authorities helped to stem the rout.

So severe is EM weakness that the MSCI ACWI (the global stock market index) has slid into bear market territory.

Declines had reached 20% across the board by Wednesday, January 20. Other exchange traded funds such as the Schwab EM Equity Fund declined a full percentage point in Q4 2015 and lost as much as 16% during the course of 2015.

Nonetheless, it is not all doom and gloom for emerging markets over the long-term, but now is definitely not the time to see substantial gains being generated as further setbacks are likely to take place before the eventual turnaround in years to come. If we look at things like valuations, it is clear that the P/E ratio for EM equities has consistently underperformed the P/E ratios of developed economy equities by a figure of 20%. There was a period during which EM stocks proved to be highly valuable investments, but that was between 2000 and 2007.

In terms of valuations, the lower the number the better the value for the stock, but volatility may be a factor.

Consider these stocks and their associated valuations: - The P/E ratio for Indian stocks hovers around 19 - The P/E ratio for Chinese stocks hovers around 57 - The P/E ratio for the MSCI South Korea index hovers around 10 One cannot ignore the deeper implications of a Fed rate hike on the EM economies. The stability that countries like the US and Canada have is far more than mere currency

strength brought upon by a rate increase; the strength of the US economy is structurallybased, and is fully compliant with regulatory requirements. The problems in developing countries include political instability, structural weakness, lack of an efficient and effective economic framework and high volatility. In the case of South Africa, there are also other concerns such as a failing power grid which cripples the economy.

But the weakness in emerging markets is unlikely to last indefinitely. As a case in point, the aging population in China will likely give rise to a growing middle-class which will require health care in the next decade. This will open up the pharmaceutical sector in a big way. The Chinese market may well become the world’s second most lucrative pharmaceutical market, despite weakness in commodities. Investors who adopt a strategic approach to EM economies are unlikely to be disappointed as growth is bound to take place as these economies gradually develop their own middle classes.

World indexes for year-to-date Saudi Arabia -21% Argentina -19% Egypt -18% Russia RTS -17% Greece ATHEX Composite -17% SSE Composite -16% FTSE MIB -15% Nikkei -14% Chinese equities, for example, are not cheap at all, and they need to undergo additional weakening before any value can be gained. Between 2016 and 2020, Chinese equities could weaken by up to 8% a year before they come in line with corrective valuations. More concerning to EM economies is the fact that China will likely devalue its currency to remain competitive in export markets. This will mean that China will be undercutting its competitors which are largely EM economies. For now, the smart money is on the developed economies of the Eurozone, Japan, the US, Canada and other Asia-Pacific western countries.

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

0.43 0.51 -0.23 0.05 -0.78

0.52 0.55 -0.19 0.07 -0.76

0.62 0.59 -0.17 0.08 -0.75

0.87 0.74 -0.09 0.11 -0.69

1.15 1.01 0.02 0.22 -0.63

CCY/Period USD GBP EUR JPY CHF

2yr

3yr

0.90 0.83 -0.14 0.09 -0.80

1.07 0.98 -0.09 0.09 -0.76

4yr

5yr

1.23 1.36 1.11 1.23 0.01 0.13 0.10 0.13 -0.65 -0.53

Exchange Rates Major Cross Rates

CCY1\CCY2 USD EUR GBP CHF JPY

Opening Rates

1 USD 1 EUR 1 GBP 1 CHF 1.0838 0.9227

100 JPY

1.4207

0.9848

0.8458

1.3109

0.9087

0.7804

0.6932

0.5953

0.7039

0.7629

1.0154

1.1005

1.4426

118.23

128.14

167.97

0.8588 116.44

Weekly movement of USD

CCY\Date

28.12

05.01

12.01

19.01

26.01

CCY

Today

USD GBP JPY CHF

1.0918

1.0778

1.0824

1.0826

1.0788

0.7316

0.7322

0.7451

0.7587

0.7583

131.40

128.55

127.07

127.40

127.22

GBP EUR JPY

1.0756

1.0776

1.0811

1.0897

1.0924

CHF

1.4207 1.0838 118.23 1.0154

Last Week %Change 1.4269 1.0826 117.68 1.0066

+0.44 -0.11 +0.47 +0.88

7yr

10yr

1.60 1.86 1.44 1.66 0.40 0.76 0.21 0.37 -0.29 -0.01

January 27 - February 2, 2016

financialmirror.com | MARKETS | 15

Don’t buy the BoJ bluster Marcuard’s Market update

by GaveKal Dragonomics Haruhiko Kuroda, the Bank of Japan Governor, has presided over a pick-up in domestic demand and seems loath to have it extinguished by a global growth scare. Last week he hinted that he was ready to do more, and subsequent press leaks point to a further expansion of his quantitative easing program. One reason to think a big bazooka may be rolled out at Thursday’s policy-setting meeting is that a month ago the BoJ mildly expanded its QE operation to a deafening silence; since then the yen has risen 3.5% against the dollar, while the Nikkei 225 is down about -11.5%.

It remains to be seen if the recent wild ride in markets presages a global growth crunch. What is clear is that emerging economies are in a tight spot, US credit markets look sick and China continues to send mixed signals about its currency policy.

Monday saw the release of less than stellar economic data from the eurozone. Such a weak global situation can only hurt Japan’s export-heavy economy, especially if the yen continues to see safe haven flows. Such arguments will be weighed heavily on Thursday as the BoJ considers a preemptive move to support markets.

There is also a political logic that points to more easing.

Goosing equity prices has been a key element of Prime Minister Shinzo Abe’s strategy to shore up support for his political goals (the immediate concern is a further unpicking of Japan’s pacifist constitution which needs a two-thirds majority in both legislative chambers). Abe may be mulling a snap election in a bid to consolidate support for his proposed changes and he must deal with Upper House elections in July. In recent years there has been a clear correlation between stock prices and Abe’s popularity, so rest assured he will not oppose further monetary stimulus.

Such a Machiavellian calculus may dovetail with the BoJ’s less political priorities. The BoJ will be happy to pare the yen’s appreciating bias, for this will negatively impact ongoing wage negotiations that are seen as crucial to the domestic reflation goals. The latest Tankan survey suggests that any strengthening of the yen beyond JPY 118 to the dollar will dissuade companies from hiking wages, regardless of labour market tightness. For these reasons, we think it likely that the BoJ will boost its monetary stimulus sooner rather than later. The next question is whether such a policy will be effective.

We have previously argued that the domestic outlook for Japan, while not spectacular, is good enough for corporates

to put their huge cash piles to work in a productive manner.

In fact, Japan was a standout performer in the latest economic surprise index compiled by Citi. And despite recent market ructions, we are not convinced that global fundamentals have deteriorated on a scale seen in 2008, which is what markets are pricing in. Thus, in a scenario where the global economy muddles through, additional BoJ easing would end up being counter-productive if it further boosts exporters, but in good mercantilist fashion impoverishes consumers.

Lastly, there is the question of whether the BoJ has the capacity to move the market in the direction it wants.

Current positioning in the futures market suggests that investors don’t believe that the BoJ can stem yen appreciation. The unit’s 30% depreciation over the last three years has already made it one of the world’s most undervalued currencies when measured in real terms. The effect can be seen in Japan’s current account which is decisively back into surplus territory. Also, there is a widespread view that the BoJ is nearing the technical

limitations of its easing programme. As such, it may be that even if Kuroda does pull out his big bazooka, the market is not greatly moved.

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

21250 1.4207 1.8041 24.9235 6.8846 14.4336 1.0838 2.51 288.37 0.64832 3.1854 0.396 20.6 8.7683 4.1486 4.1795 80.3127 8.5559 1.0154 24.85

AUD CAD HKD INR JPY KRW NZD SGD

0.6963 1.4259 7.7962 67.8325 118.23 1203.78 1.5507 1.4287

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

0.3771 7.8082 30117.00 3.9770 0.7090 0.3038 1513.00 0.3850 3.6414 3.7509 16.5994 3.6729

AZN KZT TRY

1.61 380.58 3.0269

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

January 27 - February 2, 2016

16 | WORLD | financialmirror.com

Promises to keep in 2016

By Bill and Melinda Gates We live in extraordinary times. Each day seems to bring fresh headlines about an unfolding crisis – whether it is migration, economic volatility, security, or climate change.

One factor common to all these complex and unprecedented challenges is poverty; so eliminating it will make overcoming them significantly easier.

There is good reason for optimism about progress on reducing inequity. Since the turn of the century, remarkable strides have been taken toward a world in which every person has the chance to lead a healthy, productive life. Maternal deaths have almost halved; child mortality and malaria deaths have halved; extreme poverty has more than halved.

And last year, the world signed up to finish the job.

The centrepiece of the Global Goals to which the United Nations’ 193 countries agreed in September is to end poverty in all its forms everywhere by 2030. We are confident that this is not only possible, but that we will see major breakthroughs along the way, which will provide unprecedented opportunities to people in poor countries.

Indeed, we think their lives will improve faster in the next 15 years than at any other time in history – and that their lives will improve more than anyone else’s.

But while progress is possible, it is not inevitable. Success will require political will, global cooperation, and human ingenuity – a message we are taking into our various meetings and engagements at the World Economic Forum in Davos last week. For our part, the Bill & Melinda Gates Foundation will focus on the areas of greatest need and take risks that others can’t or won’t. This year, we are concentrating our efforts in three broad areas.

First, we will continue to support the institutions that helped get us to where we are now.

Since 2002, the Global Fund to Fight AIDS, Tuberculosis and Malaria has unlocked an unprecedented wealth of human and financial resources to combat infectious diseases that disproportionately affect the poorest. By providing medicines, training doctors and nurses, and building stronger health-care systems, the Global Fund has so far helped save 17 million lives. That is some achievement. And the Fund’s pledge conference later this year will be another opportunity to help build a better world. We need to make the most of it – not only to help save up to eight million more lives, but also to support health systems in low-income countries and thereby reduce the risk of future health crises.

Similarly, since the start of the decade, nearly 4 million more people are alive today because they were immunized against infectious diseases, thanks in large part to the work

The gender pay gap in developed nations visualised Women still earn less money than men in most developed countries around the world. The gender pay gap is measured as the difference between male and female earnings as a percentage of male earnings. It is most pronounced in South Korea where the percentage difference in full-time earnings between men and women is 36.6%. At 5.6%, New Zealand has the narrowest gender pay gap of any OECD country. (Source: Statista)

of Gavi, the Vaccine Alliance. In the next five years, Gavi and its partners are positioned to immunise another 300 million people, helping millions more children and young people survive and thrive – and thereby boosting developingcountry economies.

Second, women and girls will be at the heart of our endeavours.

By any measure, the world is a better place for women and girls than ever before. But it’s still not nearly good enough.

They need better access to health care, especially familyplanning services; expanded economic opportunities; and more decision-making power over their own lives (which in turn requires greater social participation and public leadership). Empowering women and girls to transform their lives is one of the smartest investments we can make.

Improving their health and wellbeing, ensuring they get a good education, and unleashing their economic potential are fundamental to building more prosperous communities and countries. But we need to improve our understanding of how best to empower women to succeed. And in order to overcome centuries of gender inequity, we need more momentum behind this agenda. The Women Deliver conference in May is the next global opportunity to push for more action and for donors to demonstrate their commitment.

Third, we will invest in innovation.

Scientific and technological advances – from new vaccines and hardier crops to much cheaper smartphones and tablets – are among the greatest drivers of poverty reduction. In just the last few weeks, the world has shown that it is prepared to spend more to find new ways to provide reliable, affordable, clean energy sources. This is one of the most important ways

to help poor people cope with climate change. Meanwhile, innovations in health care have already brought the world close to wiping out polio, and we expect to see dramatic results from a new triple drug therapy that could eradicate elephantiasis, which affects 120 million people.

But the hard truth is that current funding for research and development to address the health needs of the world’s poorest people is insufficient. And the tools and technologies we have now aren’t enough to get us to where we need to be.

If we want to achieve the targets established by the Global Goals for maternal health, child health, and infectious disease, we will have to double R&D funding by 2020. That is why we must ensure that R&D is on the agenda at the G7 summit in Japan in May, with a focus on developing and deploying products that both save lives and dramatically improve the economic prospects of the poorest.

Sustained support for institutions like the Global Fund and Gavi, for the empowerment of women and girls, and for innovation is crucial to accelerating progress for the world’s poorest people. But much more can and should be done. The world must unite behind all efforts to eradicate poverty as a vital first step toward overcoming the many other challenges – from migration to terrorism – that we face today.

The daily headlines all too often reflect the gap between today’s world and a world without poverty. But what the headlines don’t reveal is all the ways life is already getting better for those in greatest need. If we keep our promises to them, it will be front-page news.

Bill and Melinda Gates are Co-Chairs of the Bill & Melinda Gates Foundation.

January 27 - February 2, 2016

financialmirror.com | WORLD | 17

The Varoufakis Effect?

By Yanis Varoufakis

In his end-of-2015 missive, Holger Schmieding of the Hamburg investment bank Berenberg warned his firm’s clients that what they should be worrying about now is political risk. To illustrate, he posted the diagram (shown here), showing how business confidence collapsed in Greece during the late spring of 2015, and picked up again only after my resignation from the finance ministry. Schmieding chose to call this the “Varoufakis effect.”

There is no doubt that investors should be worried – very worried – about political risk nowadays, including the capacity of politicians and bureaucrats to do untold damage to an economy. But they must also be wary of analysts who are either incapable of, or uninterested in, distinguishing between causality and correlation, and between insolvency and illiquidity. In other words, they must be wary of analysts like Schmieding.

Business confidence in Greece did indeed plummet a few months after I became Finance Minister. And it did pick up a month after my resignation. The correlation is palpable. But is the causality?

Consider the following example. Business confidence fell in September 2001 (following the terror attacks on New York and Washington, DC), while Paul O’Neill was US Treasury Secretary. Would Schmieding label a chart showing that decline the “O’Neill Effect”? Of course not: the drop in business confidence had nothing to do with O’Neill and everything to do with fears about global security. The correlation with O’Neill’s tenure was irrelevant.

Similarly, in the case of Greece, the collapse in business confidence happened under my watch. But the cause was that our creditors, the so-called Troika (the European Commission, the European Central Bank, and the International Monetary Fund), made clear that they would close down our banking system to force our government to accept a fresh extend-and-pretend loan agreement.

Before these threats were issued, business confidence was actually picking up in Greece. Indeed, the day after I presented my reform and fiscal proposals to the City of London investor community, stocks rallied impressively.

(Indeed, during my tenure in the finance ministry, real GDP grew more than it had done during the last two quarters of 2014, which Schmieding identifies as a period of increasing confidence.)

So, what caused the huge drop in business confidence during my tenure? Was it my policy proposals – jointly authored with Jeff Sachs (with input from Norman Lamont, a former Tory Chancellor of the Exchequer in the United Kingdom, Harvard’s Larry Summers, and James K. Galbraith of the University of Texas) – that were responsible? Or was it the Troika’s explicit threat of bank closures (which were actually imposed when we dared to put our creditors’ ultimatum to the Greek people in a referendum last July)? In

other words, was it the “Varoufakis effect” or the “Troika effect”?

To answer this question in ways that are helpful to investors, an analyst must at least make an effort to establish whether the observed correlation points to a causal link.

Reading our policy proposals and comparing them to the Troika’s programme would have helped. Unfortunately, this would have required work that some analysts prefer not to do.

The relevant question is whether we were right to confront the Troika – a central plank in our January 2015 electoral platform – or whether we should have signed up to our creditors’ “Greek programme.” My view is that we had no alternative but to resist the Troika’s plan.

The reason is simple: the Greek state became insolvent in early 2010. From May 2010, this insolvency was addressed by means of sequential extend-and-pretend loans on conditions that were guaranteed to shrink national income, investment, and credit. A case of insolvency was made increasingly worse by continuing to pretend that it was a mere liquidity problem.

Was the Greek economy on the mend in late 2014? Of course not. Nominal GDP never stopped shrinking, public and private debt continued to become less and less sustainable, and all along investment and credit remained comatose. Without debt restructuring, a low target for the

primary budget surplus (net of debt payments), a “bad bank” to deal with non-performing loans, and a comprehensive reform agenda that tackles the worst cases of rent seeking, Greece is condemned to permanent depression.

Alas, the Troika was in politically motivated denial and deeply uninterested in our policy proposals. Time and again, they simply demanded capitulation.

To be sure, we could have handled that confrontation better. But for an analyst to blame the victim of such financial violence is not only morally reprehensible, but also constitutes terrible service to his clients (who, for example, may be lulled into a false sense that Greece is on the mend now that Varoufakis has been forced out).

Thankfully, there are diligent analysts, like Mohamed ElErian, to whom sensible investors can turn. And their verdict is clear: Greece’s downturn in 2015 was due to the “Troika effect.”

Yes, political risk in Europe is clear and present. But it emanates from the Troika’s unwillingness to reform itself and to rethink its failed policies.

Yanis Varoufakis, a former finance minister of Greece, is Professor of Economics at the University of Athens. © Project Syndicate, 2016 - www.project-syndicate.org

Moody’s cuts crude oil price estimates to $33/barrel as supply glut continues Moody’s Investors Service cut its price estimates for Brent crude and West Texas Intermediate crude amid continued oversupply in the oil markets and the risk of additional supply from Iran.

The rating agency has lowered its 2016 price estimate for both the international benchmark Brent and the North American benchmark WTI crude to $33/barrel. For Brent, this marks a $10/b reduction from it’s previous estimate, and for WTI, a $7/b reduction. Moody’s expects that both prices will rise by $5/b

on average in 2017 and 2018.

“OPEC countries continue high levels of production in the battle for market share, contributing to the current oil glut despite moderate consumption growth by key consumers such as China, India and the US,” said Terry Marshall, a Moody’s Senior Vice President. “In addition, we expect the rise in Iranian oil output this year to offset or exceed production cuts in the US.” Moody’s maintains its price estimates for North American natural gas at Henry Hub at $2.25 per million British thermal

units (MMBtu) in 2016, $2.50/MMBtu in 2017 and $2.75/MMBtu in 2018.

Moody’s also maintains its price estimates for natural gas liquids (NGLs) at $12/b of oil equivalent (boe) in 2016, $13.50/boe in 2017 and $15/boe in 2018.

Ongoing increases in OPEC oil production offset growing global demand of about 1.4 million barrels per day, according to the US Energy Information Administration, leading to a rapid buildup of oil inventories.

“Today’s large global inventories will still take time to unwind and will

continue to drag on prices even as demand picks up,” added Marshall.

Moody’s said price estimates are likely to be revised during the year based upon updated information on market fundamentals and futures prices. For example, its $33 estimate of the average price realised per barrel during 2016 implies an upward trend from current spot prices to a price meaningfully higher than $33 by year-end. Moody’s will likely lower this estimate if such an upward trend were not to materialise over the next several months.

January 27 - February 2, 2016

18 | WORLD | financialmirror.com

The marketing of the American President

By Nina L. Khrushcheva When it comes to political entertainment, it doesn’t get much better than presidential election season in the United States. Foreign observers follow the race to determine who is best equipped to lead the US – and, to some extent, the world – toward a more stable, secure, and prosperous future. But in America, entertainment is king, and Americans tend to focus on excitement above all – who looks better, has a catchier sound bite, seems most “authentic,” and so on, often to the point of absurdity.

This is not a new approach, of course.

Edward Bernays, the father of modern public relations, examined it in 1928, in his book Propaganda. “Politics was the first big business in America,” he declared, and political campaigns are “all side shows, all honors, all bombast, glitter, and speeches.”

The key to victory is the manipulation of public opinion, and that is achieved most effectively by appealing to the “mental clichés and emotional habits of the public.”

A president, in other words, is nothing more than a product to be marketed. And, as any marketer knows, the quality of the product is not necessarily what drives its success; if it were, Donald Trump would not be regarded as a serious candidate for the Republican Party nomination, much less a top contender. Instead, a president must serve as a kind of imaginary friend: a beer buddy for men, an earnest empathiser for women, or a charming Twitter user for the

millennials.

In the current campaign, the most complex candidate, Hillary Clinton, is suffering mightily as a result of – let’s be honest – personality issues. She has made important policy contributions as US Secretary of State in the first Obama administration, and she has offered what is arguably the most complete economic vision of any presidential candidate. Yet she is facing a serious challenge from Bernie Sanders, a self-described socialist senator from Vermont, in the race for the Democratic nomination.

Sanders’s popularity stems partly from the image he projects of a stereotypical “nutty professor,” adorably of another world.

His energetic and unselfconscious gesticulations make him seem passionate and genuine. Yet his actual policy suggestions – such as free post-secondary education and universal health care – resemble Trump’s calls to “make America great again,” in the sense that they establish simple yet visionary goals.

According to Bernays, people’s desire for simplicity extends to another area of electoral politics: “party machines should narrow down the field of choice to two candidates, or at most three or four.” Here, the Republicans have gone badly astray. After beginning the election season with 17 candidates, they have managed to narrow it down by only a few, to 12.

Jeb Bush, former Florida governor and younger brother of George W. Bush, was initially considered a serious contender. But Trump is right, for once, in his observation that Bush is a “low-energy” person. He is the Charlie Brown of the election, whose every swipe at the football is thwarted by his

savvier counterparts.

Another Floridian, Senator Marco Rubio, is a more energetic establishment alternative. But his campaign, like his appearance, lacks definition and assertiveness – not to mention a good sound bite.

A lack of sound bites is not a problem for New Jersey Governor Chris Christie, whose Tony Soprano vibe and brash one-liners have plenty of entertainment value. Indeed, in a typical US presidential election campaign, Christie might be a contender for the most cartoonish candidate. But this is not a typical campaign, because there’s nothing typical about Trump.

With his exaggerated facial expressions, penchant for trash talking, and love of superlatives, Trump – a showman and a businessman – seems to have the right background for Bernays-style public manipulation. But he has the wrong background for a president. (It is worth asking whether he really even wants to be President. He must know that, like the Wizard of Oz, he can portray himself as great and powerful only until he needs to perform actual miracles.)

Among these one-dimensional figures, one fully formed candidate stands out: the Texan Ted Cruz. Once a national debating champion, Cruz is fully in control of his persona; not even Trump, with his frantic attacks on Cruz’s eligibility (because he was born in Canada), can get under his skin.

In fact, it is Cruz who has made Trump squirm. In last week’s Republican debate, Cruz accused Trump of having “New York values,” calling the city (explicitly excluding New York State) “socially liberal” and focused on “money and media.” Cruz

managed not only to get a rise out of Trump, but also to enhance his own appeal to conservative voters in the Midwest and South, who view the city as a kind of modern-day Sodom and Gomorrah. (New Yorkers and many others were also offended

by Cruz’s statement, not because the city isn’t socially liberal and the home base of America’s media and financial industries, but because the pejorative use of “New York” has historically been an anti-Semitic dog whistle.)

Appropriately plastic-looking, Cruz can, when necessary, act as brainless as Sarah Palin (who has just endorsed Trump). But Cruz, educated at Princeton and Harvard, is no fool. He is, as Bernays taught, treating his campaign as a “drive for votes, just as an Ivory Soap advertising campaign is a drive for sales.”

Trump is a showman who has captured the public’s attention. But Cruz is a propagandist, selling to his constituents an ostensibly credible story of actual leadership.

Though he, like Clinton, is not the most broadly likable character, he would be a worthy contender in a presidential election.

The question is whether Americans will want to buy what they are selling.

Nina L. Khrushcheva, the author of Imagining Nabokov: Russia Between Art and Politics and The Lost Khrushchev: A Journey into the Gulag of the Russian Mind, is Professor of International Affairs and Associate Dean for Academic Affairs at The New School and a senior fellow at the World Policy Institute. © Project Syndicate, 2016. www.project-syndicate.org

Strategies for responsible gene editing

By Kevin M. Esvelt

The discovery of a powerful new tool capable of addressing health and environmental problems as diverse as malaria, Lyme disease, and invasive species should be a cause for celebration. But, because the tool, called CRISPR, can alter entire populations of wild organisms (and thus shared ecosystems), ensuring that these interventions are developed responsibly poses an unprecedented challenge for science and society.

Humans have been altering animals and plants through selective breeding for millennia; but, because these changes typically reduce the capacity for survival and reproduction in the wild, they do not spread to wild populations.

Alterations accomplished using CRISPR, which enables scientists to edit a cell’s DNA with unprecedented precision, are different in one crucial respect: The process can result in “gene drive,” a naturally occurring feature of some genes that enables them to spread through a population over generations, even if they do not help survival (and thus reproduction).

Simply put, we can now contemplate altering wild populations in very specific and consequential ways. Those changes can be highly positive. By altering certain features of

mosquitoes, we could reduce or even eradicate ancient scourges such as malaria and dengue that afflict hundreds of millions of people each year. (Malaria alone kills a child every 90 seconds, on average.) By permanently immunising the relevant animal populations, we could prevent new cases of Lyme and other diseases that originate in wild organisms, or we could block newly emergent pathogens such as the Zika virus, which has been linked to an epidemic of stunted brain development in newborns in Latin America.

As for the environment, human activities have already impacted every ecosystem on Earth, with far-reaching consequences – for us and many other species – many of which are yet to unfold. Gene drive elements could potentially reverse much of this damage. For example, limiting invasive species – such as cane toads in Australia, mosquitoes in Hawaii, or rats and mice almost everywhere – could help to restore damaged biomes. And eliminating pests’ attraction to our crops, without diminishing their capacity to fulfill their other ecological roles, would remove the need for toxic pesticides.

As we attempt to realize these tremendous potential benefits, however, we must bear in mind that the effects of gene drive interventions will be shared by entire communities. Given the vast complexity of ecosystems, careful research will be needed to assess the consequences of each intervention before proceeding.

CRISPR gene drives also highlight a problem that goes beyond ecology: Existing systems for developing and evaluating new

technologies are woefully inadequate for powerful new tools with broad impacts. It should be self-evident that technologies like gene drives, which don’t require widespread adoption to have a widespread effect, should never be released without informed community consent. Yet history shows the opposite pattern, with decision-making seldom factoring in environmental consequences or citizens’ opinions.

Nowadays, there are few opportunities for public input until after products are developed, when it is typically too late to make changes. By ignoring potentially helpful contributions from an increasingly knowledgeable public, closed-door technological development has precluded balanced assessments and created acrimony – a dangerously irresponsible and wasteful outcome for both science and society.

CRISPR gene drives offer an opportunity to chart a new course. For starters, public notification and broadly inclusive discussions should always precede and inform development of gene drive interventions in the lab. A clear description of the potential impact of an experiment – as my colleagues and I have provided for the technology as a whole – must be followed by transparency throughout the development process. This community-guided approach to research provides opportunities to identify and address potential problems and concerns during development. If a perceived problem cannot be adequately addressed, researchers should be prepared to terminate the project.

Another feature of a responsible approach would be a commitment by scientists to

evaluate each proposed gene drive intervention – say, immunising mice so that they cannot transmit Lyme disease to ticks – individually, rather than making a blanket decision on the technology as a whole. After all, the benefits and risks of each intervention would be entirely different.

A final safeguard against the irresponsible development of gene drive technology is to ensure that early interventions are developed exclusively by governments and nonprofit organisations. Given the potential of financial incentives to skew the design and results of safety tests, keeping the profit motive out of the development and decisionmaking processes will encourage balanced assessments.

The bottom line is that existing models for technological development are inadequate for technologies with broadly shared effects. Only with early discussion, transparent research, careful safeguards, and community guidance can we build a responsive model of scientific development well suited to ecological technologies. Given the life-saving (and environment-saving) potential of CRISPR gene drive interventions, let us determine how to develop them – and when to decline to do so – together.

Kevin M. Esvelt is a professor at the MIT Media Lab, where he leads the Sculpting Evolution group in exploring ecological engineering and responsive science. © Project Syndicate, 2016. www.project-syndicate.org

January 27 - February 2, 2016

financialmirror.com | WORLD | 19

A payment plan for universal education

By Gordon Brown

The Sustainable Development Goals, which the international community adopted in September, include a commitment to provide every child with access to free primary and secondary education by 2030. Finding the additional $20 billion per year, or more, that will needed to deliver on this commitment is one of the central objectives of the International Commission on Financing Global Education Opportunity.

The commission was established last September by the Norwegian prime minister, and co-convened with the presidents of Malawi, Chile, and Indonesia and the directorgeneral of UNESCO. Its members, including five former presidents and prime ministers, three former finance ministers, six Nobel Prize winners, and three of the world’s most successful business leaders – Jack Ma, Aliko Dangote, and Strive Masiyiwa – will report their findings to United Nations Secretary-General Ban Ki-moon and the coconveners in September. On January 24, we met in London to chart the way forward.

The challenge is daunting. Some 60 million primaryschool-age children have no access to formal education. Of the roughly 590 million who are attending school, some 250 million – roughly two in five – are failing to learn the basics of reading, writing, and arithmetic. And some 60% of school pupils in developing countries do not meet basic mathematics standards.

If current trends persist, by 2050, children in most regions

of the world will receive, on average, ten or more years of schooling – up from three years in 1950. Some countries in Africa, however, will lag far behind, with just 3-4 years of schooling on average.

If we maintain a business-as-usual approach, it will take more than a hundred years – well into the twenty-second century – before every child is provided with an opportunity to complete his or her schooling.

Even as education levels play an increasingly important role in economic growth, the funds needed to raise them have failed to materialise. International development aid for education has fallen by nearly 10% in recent years – and government spending in low-income countries has failed to make up the difference.

In 2002, education accounted for 16% of total domestic spending in poor countries. Today, the figure is just 14%.

Meanwhile, outlays for health increased from 9% to 11% of total spending. And, to make matters worse, in many of the countries with the greatest need for education – including Pakistan and Nigeria – governments are spending too little on it (sometimes as little as 2% of national income).

Nor is the money – when it is made available – spent equitably. In low-income countries, almost half of all education funds are spent on the most educated 10% of children. Very little trickles down to street children or boys and girls in remote rural areas, conflict zones, or urban slums.

According to UNESCO, the ratio of pupils to qualified teachers in the Central African Republic, Chad, GuineaBissau, and South Sudan is more than a hundred to one. And those teachers receive little support, encouragement, or feedback.

Good teachers are undoubtedly the key to quality education; but they can do only so much if they are not provided with skilled supervision, a well-organised curriculum, and access to technology.

The phrase “universal education” will mean nothing if it does not apply to children living in huts, hovels, and refugee tents. When war or disaster strikes, the international community rightly mobilizes funding for food, shelter, and

health care. All too often, however, financing education is only an afterthought. With refugees spending more than ten years away from home, on average, this neglect cannot be allowed to continue.

Fortunately, progress is being made in this area. In an exciting experiment in Lebanon, schools have been put on double shifts in order to accommodate the country’s Syrian refugee population. Local children attend in the morning, and in the afternoon, Syrian refugee children study in the same classrooms.

The programme has been a stunning success, providing schooling for some 207,000 children who might otherwise have been deprived of an education. And plans are underway to expand the program to cover one million children in Lebanon, Turkey, and Jordan. The biggest obstacle to what would be a spectacular achievement – as is so often the case – is a shortage of money.

It is to support efforts like this one that the International Commission on Financing Global Education Opportunity was formed. UNICEF leader Anthony Lake, UNESCO head Irina Bokova, and Global Partnership for Education Chair Julia Gillard have lent their support to a platform for the provision of education in emergencies, a proposal that I hope will be formalized at the World Humanitarian Summit in Turkey in May. And it is my goal that by the end of the year we will also have a timetable to provide primary and secondary education to every child in the world – and the funding with which to achieve this most important of objectives.

Gordon Brown, former Prime Minister and Chancellor of the Exchequer of the United Kingdom, is United Nations Special Envoy for Global Education and Chair of the International Commission on Financing Global Education Opportunity. © Project Syndicate, 2016 - www.project-syndicate.org

From child slavery to freedom

By Kailash Satyarthi It is a blot on the face of humanity that we have yet to eradicate slavery – of children, no less. Not only does child slavery persist; the number of child slaves, 5.5 million, has remained constant in the last two decades.

They are bought and sold like animals, sometimes for less than a pack of cigarettes.

Add to their number the 168 million child laborers, 59 million out-of-school children, and 15 million girls under 15 who are forced to marry every year, and the situation is beyond unacceptable.

Eighteen years ago, the Global March Against Child Labour spearheaded a global movement to bring child labour and child slavery to the attention of global leaders.

Thanks to the invaluable contribution of fellow activists, workers, educators, and businesses, the campaign was a resounding success, leading to the adoption of the International Labor Organisation’s Worst Forms of Child Labour Convention.

Clearly, however, there is much work left to do. That is why the Global March Against Child Labour worked so hard – collecting 550,000 signatures on a petition – to push world leaders to include strong language against child slavery in the Sustainable Development Goals, which will guide global development efforts for the next 15 years.

Among the SDG targets is one that aims to “eradicate forced labour, end modern slavery and human trafficking, and secure the prohibition and elimination of the worst forms of child labor.”

But now it is time to back that promise – one of 169 targets – with concerted action.

After all, if child labor, slavery, human trafficking, and violence against children continue, we will have failed to accomplish the agenda’s overarching goal of achieving inclusive and sustainable prosperity. And the responsibility does not lie only with governments; businesses, civil society, and individual citizens must all contribute, not least by pressuring their leaders to make a change.

Consider the situation in India, where impending revisions to two major development policies – the National Education Policy and the Child Labour (Prohibition and Regulation) Act – are heading in opposite directions. On the one hand, a new education policy has the potential to address child labour as a barrier to education and, more broadly, to improve the life prospects of millions of marginalised and deprived children. On the other hand, the proposed amendments to the Child Labour Act would erect new barriers to further progress on education.

Specifically, the changes to the Child Labour Act would allow children under the age of 14 to help their families in “nonhazardous” family enterprises or the entertainment industry. This may sound innocuous, but it fails to acknowledge a stark and undisputable reality: Work for “family

enterprises” can be as brutal as any other kind. And the list of “hazardous” occupations is far from complete.

Before being rescued by my organization, Bachpan Bachao Andolan, eight-year-old Arpita was forced to work 16-18 hour days in the home of her uncle as domestic “help.”

When we rescued her, we had to break down the door. It was the dead of winter, and she was barely clothed and severely malnourished, covered in wounds, and cowering under a rag on her uncle’s balcony.

Likewise, when we rescued ten-year-old Mohsin and eight-year-old Aslam in 2007 from a sweatshop – owned by their uncle – where they made children’s clothing for one of world’s largest garment retailers, they were starving. The jobs performed by Arpita, Mohsin, and Aslam would not be considered “hazardous” under the amended act.

In a recent analysis, we found that onefifth of the children under age 14 rescued by Bachpan Bachao Andolan were working in family enterprises. More than 40% of the rescued children were performing hazardous jobs – for example, working in roadside restaurants (dhabas) or manufacturing garments, leather goods, cosmetics, or electronics – that would be allowed under the amended act.

There are millions of enslaved Arpitas, Mohsins, and Aslams. But if the proposed amendments are adopted, we will not be able to rescue a single child under 14 years of age who is employed by his or her “family” – no matter how vile the conditions of their servitude. The impact – not just on individual children, but also on the future of

our society – will be devastating. On behalf of India’s children, we call upon our parliament to do the right thing and reject the proposed amendments to the Child Labour Act. Beyond India, the imperative to protect children is just as strong. If we are to realise the future promised in the SDGs, surely we must do everything in our power to protect the fundamental human rights of every person, especially the most vulnerable. That is why governments worldwide must deepen their commitment to pursuing child-friendly policies and investing in the protection and education of their young people.

My colleagues and I have humbly done our part over the years, rescuing more than 84,000 children from despicable conditions.

It has not been enough to end the blight of child slavery, but to those children and their families, it has meant everything.

Still, far too many children remain enslaved, missing out not just on their childhood, but also on the chance for a happy, healthy, and prosperous future. It is time for the world to stand up and lend its voice to those whose cannot. We must demand that our leaders fulfill their promise of ensuring that every child’s life is free from exploitation, enriched by education, and full of promise. Our generation can and should be the one that ends child slavery forever.

Kailash Satyarthi, a Nobel Peace Prize laureate, is Honorary President of the Global March Against Child Labour and the founder of Bachpan Bachao Andolan. © Project Syndicate, 2016. www.project-syndicate.org

January 27 - February 2, 2016

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Should business travel be obsolete?

By Ricardo Hausmann Think about it: You can call, email, and even watch your counterparty on FaceTime, Skype, or GoToMeeting. So why do companies fork out more than $1.2 trillion a year – a full 1.5% of the world’s GDP – for international business travel?

The expense is not only huge; it is also growing – at 6.5% per year, almost twice the rate of global economic growth and almost as fast as information and telecommunication services. Computing power has moved from our laptops and cellphones to the cloud, and we are all better off for it. So why do we need to move brains instead of letting those brains stay put and just sending them bytes? Why waste precious work time in the air, at security checks, and waiting for our luggage?

Before anyone starts slashing travel budgets, let’s try to understand why we need to move people rather than information. Thanks to a research collaboration on inclusive growth with MasterCard and an anonymised donation of data to the Center for International Development at Harvard University, we are starting to shed some light on this mystery. In ongoing work with Dany Bahar, Michele Coscia, and Frank Neffke, we have been able to establish some interesting stylized facts.

More populous countries have more business travel in both directions, but the volume is less than proportional to their population: a country with 100% more population than another has only about 70% more business travel. This suggests that there are economies of scale in running businesses that favor large countries.

By contrast, a country with a per capita income that is 100% higher than another receives 130% more business travelers and sends 170% more people abroad. This means that business travel tends to grow more than proportionally with the level of development.

While businesspeople travel in order to trade or invest, more than half of international business travel seems to be related to the management of foreign subsidiaries. The global

economy is increasingly characterised by global firms, which need to deploy their know-how to their different locations around the world. The data show that there is almost twice the amount of travel from headquarters to subsidiaries as there is in the opposite direction. Exporters also travel twice as much as importers.

But why do we need to move the brain, not just the bytes?

I can think of at least two reasons. First, the brain has a capacity to absorb information, identify patterns, and solve problems without us being aware of how it does it. That is why we can, for example, infer other people’s goals and intentions from facial expressions, body language, intonation, and other subtle indicators that we gather unconsciously.

When we attend a meeting in person, we can listen to the body language, not just the spoken word, and we can choose where to look, not just the particular angle that the video screen shows. As a consequence, we are better able to evaluate, empathize, and bond in person than we can with today’s telecom technologies.

Second, the brain is designed to work in parallel with other brains. Many problem-solving tasks require parallel computing with brains that possess different software and information but that can coordinate their thoughts. That is why we have design teams, advisory boards, inter-agency taskforces, and other forms of group interaction.

Conference calls try to match this interaction, but it is hard to speak in turn or to see one another’s expressions when someone is talking. Conference calls have trouble replicating the intricacy of human conscious and

unconscious group interactions that are critical to solve problems and accomplish tasks.

The amount of travel should then be related to the amount of know-how that needs to be moved around.

Countries differ in the amount of know-how they possess, and industries differ in the amount of know-how they require. Controlling for population and per capita income, travel is significantly more intense to and from countries and industries that possess or use more know-how.

The countries that account for the most travel abroad, controlling for population, are all in Western Europe: Germany, Denmark, Belgium, Norway, and the Netherlands.

Outside of Europe, the most travel-intensive countries are Canada, Israel, Singapore, and the United States, a reflection of the fact that they need to deploy many brains to make use of their diverse know-how.

Interestingly, countries in the developing world differ substantially in the amount of know-how they receive through business travel. For example, countries such as South Africa, Bulgaria, Morocco, and Mauritius receive much more know-how than countries at similar levels of development such as Peru, Colombia, Chile, Indonesia, or Sri Lanka.

The fact that firms incur the cost of business travel suggests that, for some key tasks, it is easier to move brains than it is to move the relevant information to the brains.

Moreover, the fact that business travel is growing faster than the global economy suggests that output is becoming more intensive in know-how and that know-how is diffusing through brain mobility. And, finally, the huge diversity of business travel intensity suggests that some countries are deploying or demanding much more know-how than others.

Rather than celebrate their thrift, countries that are out of the business travel loop should be worried. They may be missing out on more than frequent flyer miles.

Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist of the Inter-American Development Bank, is Professor of the Practice of Economic Development at Harvard University, where he is also Director of the Center for International Development. © Project Syndicate, 2016 - www.project-syndicate.org

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