Financial Mirror 2016 02 17

FinancialMirror OREN LAURENT

MICHAEL SARRIS

Nigeria amid a currency crisis PAGE 14

Dealing with economic challenges of our times

Issue No. 1173 â‚Ź1.00 February 17 - 23, 2016

PAGE 7

New gas licensing round BUT IS THE TIMING RIGHT FOR CYPRUS?

Cyprus needs to clean its act to attract tourism and new property investors

By Antony Loizou - SEE PAGE 13

PAGE 3

February 17 - 23, 2016

2 | OPINION | financialmirror.com

FinancialMirror Ministry of Happiness? Bah, humbug!

Published every Wednesday by Financial Mirror Ltd.

EDITORIAL

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The Ruler of the United Arab Emirates announced that he is establishing a Ministry of Happiness, headed by a very promising young woman who had also been in charge of economic strategy in the past.

This is not unusual for the UAE, that ranks 20th in the World Happiness Index, as it seeks to improve its position by adding value to the quality of life, so that the Gulf state is not just glamour and riches derived from the energy sector. Actually, the UAE and in particular Dubai, has been at the forefront of the Arabisation programme and has invested heavily in education, human resources and diversification into high-end services.

Despite the mini-property crash of the past decade, the emirate has recovered, thanks to help from its peers, and its corporate portfolio of local and international companies is rapidly expanding into foreign markets, the most evident being that of the ‘national’ airlines.

And the investment does not end there, as the reinvestment of its rich resources has produced efficiencies, such as e-Government, a high-level of healthcare and even denationalisation programmes, to the extent that public dissent is little to nonexistent. Tolerance on several issues is widespread and still growing, at least as regards the Middle Eastern mindset, while interpretation of democracy, as different as it may be from that of the western

civilisation, is one that appeals to the young Emiratis.

Now, travel in warp speed to Cyprus, and one can see why even the concept of rising up the ranks of the Happiness Index is beyond reach, despite the cultural differences with the UAE. In fact, President Anastasiades should abandon the regurgitated promises of establishing six Deputy Minister portfolios, supposedly to help improve the efficiencies of the government machine and make Cyprus more competitive in the areas of energy, shipping, tourism, etc. Instead, he should establish a Ministry of Stupidity, especially now that on the eve of parliamentary elections just three moons away, a lot of promises will not be kept, resulting in a bucketful of potential candidates, both to head the office and to “operate” it.

The reform of the civil service has become a joke, despite the honest intentions of the commissioner in charge, who has obviously been given too much on his plate. Perhaps that was the idea from the onset.

Furthermore, the Ministry of Stupidity would deal with issues such as Larnaca shunning the best that ever happened to the sleepy town, with Energy giants Total and ENI now being lured to Limassol port, where they will be welcomed with open arms.

Come to think of it, what Anastasiades needs, considering the noise we hear on a daily basis from the opposition parties and trade unionists on all issues under the sun, is an adaptation of JK Rowling’s Ministry of Magic.

THE FINANCIAL MIRROR THIS WEEK 10 YEARS AGO

LTV, Cyta in digital deal, VAT to drop in some areas LTV and Cyta seem to have reached a deal for their new cable TV bouquet, while Cyprus has been given a month to request for lower VAT in some sectors, according to the Financial Mirror issue 658, on February 15, 2006.

LTV-Cyta: Cyta subsidiary Digimed Communications and Lumiere TV have signed a deal where the subscriber channels of LTV and Alfa will also be transmitted through Cyta’s myVision platform. Cyta will pay LTV CYP 2.5 mln to manage its programmes and CYP 15 every new subscriber,

20 YEARS AGO

Insiders, short-sellers warned, Linette goes overseas The KEVE-operated stock market has warned insiders and short-sellers that it will impose hefty fines to clamp down on those who violate trading rules, while nappy-maker Linette is about to expand into the eastern European market, according to the Financial Mirror issue 149, on February 14, 1996.

Clampdown: Investors and traders who think they can get away by short-selling shares or trading on insider information until the new official stock exchange is operation, are in for a big surprise, said

while the state telco may also take a 25% stake in LTV that may seek dual listing on the Cyprus and the Athens bourses.

Reduced VAT: Cyprus has until March 31 to request a lower VAT rate from the EU on a small range of labour-intensive sectors, as is the case for all ten new member states up to 2010. These include small repair shops, house renovation, window cleaning, house cleaning, domestic care and hairdressers.

ASE investments: The Athens Stock Exchange has seen about EUR 6 bln of investments in Greek companies channelled through Cyprus, taking KEVE Chamber President Phanos Epiphanou, who said that the intent is to bring the OTC market violators and manipulators out into the open.

Linette expands: The “Nannys” nappy maker Linette, plans to build a manufacturing plant “somewhere in eastern Europe”, in addition to the existing facilities in Cyprus and Greece, in order to meet the growing needs of the rapidly expanding Balkan, CIS and Russian markets. The 10-year old company already enjoys

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advantage of the comparatively lower tax rates here. In all, foreign investors took 40% of Greek stock titles, to the tune of EUR 55 bln, with 34% via Luxembourg, 28% from the UK, 11% from Cyprus, 5% from the US, 12% via the Cayman Islands and 5% from Switzerland.

Hotels upgrade: Hoteliers are being offered incentives to upgrade their properties, or face losing their star rating, by a package of measures to encourage investments in facilities, even tearing down some old buildings, according to CTO chairman Photis Photiou and Tourism and Commerce Minister George Lillikas.

CYP 5 mln in annual sales and al;so plans to diversify from the hygiene products to the dry-foods sector.

Woolworth-Zako: The CYP 6 mln deal by FW Woolworth to take a 55% stake in Zako has given a fresh boost to the mergers and acquisitions market and places Nicos Shacolas firmly on top of the retail sector with similar investments in Lemeco-Silvex, CTC and Woolworth-Zako stores.

J&P in Libya: Athens-based J&P (Overseas) has won part of the USD 1 bln development project for Libya’s Murzuk oil fields with palsn to start production next year. The operator consortium includes Spain’s Repsol, French Total and Austria’s OMV.

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February 17 - 23, 2016

financialmirror.com | CYPRUS | 3

Cyprus to launch third licensing round… Is the timing right?

COMMENT

By Middle East Strategic Perspectives The Council of Ministers has approved a third licensing round for offshore oil and gas exploration, which paves the way for launching the preparatory process.

Despite difficult market conditions, Cyprus hopes to build on the positive momentum created by the discovery of Zohr in Egypt, just a few kilometers from the Cypriot Exclusive Economic Zone, and Block 11 in particular (licensed to Total, which is planning to drill a first well later this year).

Cyprus organised a first licensing round in 2007, following which it awarded one gasfield (Block 12) to Noble Energy. The Texas-based company was later joined

by Israeli company Delek, and more recently by BG (now officially merged with Shell). Noble Energy announced the discovery of Aphrodite in late 2011. First estimated to hold around 7 trillion cubic feet of natural gas, the appraisal drilling lowered it to around 4 tcf.

Encouraged by the discovery, Cyprus announced the opening of a second licensing round a few weeks later, in February 2012, and put 12 blocks on offer. Blocks 10 and 11 were awarded to Total, Blocks 2, 3 and 9 to ENIKOGAS. The two wells drilled by ENI in Block 9, Onasagoras

State universities to accept private school students A proposal by the Ministry of Education for an alternative student admission procedure into public universities in Cyprus has been approved by the Council of Ministers, whereby all public and private school students of secondary education would have the right of equal access to state universities.

Education Minister Costas Kadis expressed his hope that the proposal would soon be passed by the House of Representatives so that the new university admission system will go into effect in the next academic year.

He noted that in order to ensure the level of knowledge of modern Greek all prospective students from public and private schools will have to take a language competency exam.

The Minister also assured that not a single seat is affected by the new procedure of those currently offered through the pancyprian exams since the places to be offered through the alternative procedure would be redundant, namely there will be an increase of the seats offered for the public universities.

The Ministry of Education said that the new admission procedure will be based on redundant seats of up to 10%.

EIB V-P to sign €100 mln in SME loans European Investment Bank (EIB) Vice-President Jonathan Taylor will visit Cyprus on Thursday accompanied by other EIB officials responsible for financing in Cyprus, and will meet the Finance Minister Harris Georgiades to discuss cooperation between the two sides, as well as the Bank’s activities, in the framework of joint efforts to support the Cypriot economy.

Georgiades and Taylor will sign loan and guarantee agreements, to finance small and medium enterprises (SMEs) and mid cap companies. The agreements are worth 100 mln euros at the Bank of Cyprus, 20 mln at the RCB and 15 mln at the Cyprus Development Bank and the Universal Savings Bank.

and Amathusa, failed to reveal exploitable quantities of hydrocarbons. And, after failing to identify targets for drilling, it was hinted Total would quit exploration in Cyprus, but after negotiations with the authorities, it decided to relinquish Block 10 and continue exploration in Block 11. A decision that could prove to be wise. A few months later, on August 30, ENI announced the discovery of Zohr, a large field that could hold around 30 trillion cubic feet of gas in the Egyptian Shourok Block, a few Kms from Block 11.

Zohr is the first discovery in carbonate rocks in the eastern Mediterranean. Previous discoveries off of Cyprus and Israel were made in porous sands. So, there might be a potential for more finds, something that has prompted Cypriot authorities to consider organizing a third licensing round.

The discovery of Zohr revived interest for exploration in the East Med. A combination of factors, including location, stability and regulatory certainty, put Cyprus at the forefront of East Med countries that could benefit from this renewed interest.

Will this be enough to offset difficult market conditions? And will Cyprus be able to translate this renewed interest into actual bids? Choosing the right timing for the tender will be crucial for its success.

Government Spokesman Nikos Christodoulides said that the Council of Ministers decided, during its meeting on Tuesday, to proceed with a third round for hydrocarbons exploration within the Republic’s EEZ. He noted that the Cabinet “authorised Energy Minister (Yiorgos Lakkotrypis) to submit the necessary proposals to the Council of Ministers so the decision can be implemented the soonest possible.”

The spokesman said the government could provide no additional information before “the procedures are completed”.

February 17 - 23, 2016

4 | CYPRUS | financialmirror.com

Joint task force to facilitate energy majors’ relocation The Energy and Transport Ministers agreed on Monday with big oil companies TOTAL, ENI and Noble to set up a technical committee that would take note of their needs with a view to relocating their support facilities from Larnaca to Limassol port.

The decision follows last week’s refusal by a narrow vote of the Larnaca municipal council to renew the oil giants’ permits fir a further six months, prompting the government to say it could relocated them to Limassol.

The two Ministers met on Monday with representatives of the three companies and stressed that the solution to be found should be permanent, with Energy Minister Yiorgos Lakkotrypis stressing that the timetable for TOTAL is more urgent as the company is making its plans that include exploratory drilling in 2016.

“We agreed with the companies to set up immediately a technical committee, to look into the space the companies require and the time-frames they have in mind so to

conclude to what is the best solution to serve the hydrocardon industry,” Transport Minister Marios Demetriades said following the meeting.

Responding to a question, Demetriades said the issue for the companies to relocate their support facilities to another neighbouring country was not on the table.

“We are discussing with provide them space in the port of Limassol. What is important is to facilitate their needs and to find a permanent solution,” he added.

Demetriades said the committee is expected to conclude its work within the next few weeks.

However Lakkotrypis said the timeframe for the French TOTAL is only ten days.

“The solution on the land spaces for TOTAL is urgent as there is planning underway for (exploratory) drilling in 2016 and we should go through all these necessary procedures concerning both the land spaces and the drilling itself,” he said.

Lakkotrypis noted that the company informed the government that a relocation from Larnaca to Limassol would result in a delay of three to four months to the drilling scheduled for September.

“If the solution is permanent then the delay is manageable.” he added. “There is time, we are within our time-frames but we want the drilling to proceed as soon as possible,” Lakkotrypis concluded.

Last Monday, the Municipal Council of Larnaca rejected requests by French Total and Italian ENI regarding the use of support services provided by MEDSERV for their offshore hydrocarbons exploration activities.

Lakkotrypis said that he had a telephone conversation with Limassol Mayor Andreas Christou, with the latter assuring him once more that the town is ready to host energy companies operating in Cyprus. The companies’ intentions remain to be seen on Monday, the Minister concluded.

Solution will dramatically change region’s stability outlook

Davutoglu to meet with ‘like-minded’ countries

A Cyprus solution will dramatically change the stability outlook of the region, said EP rapporteur on Turkey’s accession progress Kati Piri (Dutch, PES), while addressing the press in Brussels.

Kati Piri noted the prospect of the island reunification during her introductory statements, while presenting the text of the progress report she compiled on behalf of the foreign affairs committee of the EP. Piri said that “we cannon turn a blind eye on anything else happening in Turkey, just because Europe is preoccupied with the migration issue”.

The EP rapporteur openly criticised Turkey for regression on freedom of press and prosecution of journalists just for doing their jobs. Kati Piri made a special reference on the seizure of peace talks with the Kurds in the South East part of the country, with 400.000 people forced to leave their country.

“No one is talking about what is going on in Turkey”, she added. “It is very irresponsible to talk migration policy without having the big picture - I did not say they will ask asylum to Europe, but they are internally displaced, we cannot have a dialog only about those arriving in Greece, it is not an internal Turkish issue, it will affect Europe”.

The Dutch MEP said that “we could phase another refugee crisis” and that’s despite the “tremendous hospitality of the Turkish people on refugee issue”.

Finally, she mentioned Cyprus on which “40% of all the amendments on this report are made year after year”, but noted that “this is the year to pay attention to Cyprus” as “a solutions to an over 40 year division is at hand”, due to, as she said “the tireless efforts of the wo community leaders to reach a settlement”.

Kati Piri reiterated the need for Turkey to support the solution process actively and prompted the press to follow the first EP plenary of April in Strasbourg for the adoption of the report.

Austrian Chancellor Werner Faymann has invited the heads of state and government of ten member states to attend a meeting with Turkish Prime Minister Ahmet Davutoglu on Thursday, February 18, in Brussels, according to EurActiv.

Davutoglu will be in Brussels to follow-up on mutual commitments to a deal to stem the flow of refugees to Europe, coupled with a “reenergising” of EU-Turkey relations. EU leaders are in Brussels for a summit on Thursday and Friday, which is mostly dedicated to an agreement to accommodate the UK ahead of the Brexit referendum, expected in June.

This is the third time that Davutoglu is meeting with the so-called “like-minded countries” which appear to be ready to take refugees directly from Turkey by plane. So far the leaders of Germany, Belgium, Luxembourg, France, the Netherlands, Sweden and Greece have held two meetings in the Austrian Embassy, in the margins of the last two EU summits.

This time, Slovenia, Finland, and Portugal will also join the discussion, so the Turkish Prime Minister will meet a total of 11 member states. It is possible, however, that the premier of Sweden will not be able to attend, an Austrian diplomat said.

European Commission President Jean-Claude Juncker and Parliament President Martin Schulz will also be present.

This will be the first occasion for EU countries to test the water since Turkish President Recep Tayyip Erdogan threatened to send millions of refugees to Europe by buses and planes.

On migration issues, EU countries have split into two camps.

Apart from the “like-minded”, Poland, the Czech Republic, Slovakia and Hungary have been meeting in the format of the Visegrad Group, or V4.

Czech Prime Minister Bohuslav Sobotka, who holds the

rotating presidency of the V4, expressed dissatisfaction on November 29, when the leaders of Germany, Austria, Belgium, Luxembourg, Finland, Sweden, Greece and the Netherlands first met separately to discuss migration.

But the divisions started earlier, when the Visegrad countries decided to reject mandatory quotas for taking refugees, proposed by theCommission. Since then, the four countries have insisted that efforts should instead be directed toward strengthening the EU’s external borders and stopping the flow of immigrants from the Aegean Sea. The Visegrad countries and the “like-minded” countries of Western Europe differ on the very basic concept of how borders should be strengthened. The V4 countries believe that walls and fences should stop the refugees, while Western member states seek to “slow” their arrival, being prepared to provide asylum for a limited amount of time only to people fleeing war zones.

The Visegrad countries have made ouvertures to Bulgaria, but it looks like Sofia prefers to adhere to a common EU position on migration issues.

Cypriot seafarers could channel €50 million per year to state funds Cypriot seafarers could channel more than 50 mln euros a year to state funds, the President of the Association of Merchant Marine Officers Paris Demetriou said.

Addressing the fourth Annual General Meeting held on Friday in Limassol, he said that “if the Ministry of Transport has the will

to support the Cypriot seafarer, they could easily channel to the island over 50 mln euros per year.”

The President of the Association thanked the Cyprus Shipping Chamber (CSC) for its valuable cooperation, saying it employs 4,500 people ashore and 55,000 seafarers,

leading the unemployment of the seafarers to be at zero levels.

During the AGM, the new administrative council was elected: Chairman- Theodoros Marneros; Vice Chairman- Anastasios Filippou; TreasurerElias Hadjisavvas; Secretary- Christos

Hadjiyiannis; Member- Giorgos Athanasi During the annual meeting, the Cyprus Shipping Chamber’s General Director, Thomas Kazakos, became an honorary member of the Association and awards were presented to CSC Vice President, Dieter Rohdenburg.

February 17 - 23, 2016

February 17 - 23, 2016

6 | CYPRUS | financialmirror.com

Full house at Limassol Fintech forum for startups In a full auditorium at the Cyprus University of Technology, more than 150 participants joined the Limassol Fintech Forum last week which was coorganised by Deloitte and Disrupt Cyprus, in the context of Startup Europe Week.

The event was a mix of presentations from prominent speakers from a wide range of backgrounds, who covered topics relevant to startups, followed by a panel discussion with the participation of fintech specialists.

Among the speakers were Christophoros Tzirtzipis – Co-Founder of Startup Cyprus and CEO - Founder of Diyful, Angeliki Solomonidou, the Director and Co-Founder of Kalys Solutions, Monica Ioannidou Polemitis, Senior Manager of Deloitte’s Innovation and Entrepreneurship Centre, Yiannis Liveris, the Manager of IDEA Programme in Nicosia, Konstantinos Soteriou and Stefanos Christoforou the co-founders of Prediti, Yiannis Menelaou, the cofounder and Fintech Editor at DisruptCyprus.com, Demetrios Pogkas, journalist and Phanos Pitiris, Startup and Innovation Expert.

In his welcome address, Nicos Kyriakides, Head of Financial Advisory Services of Deloitte, expressed the need to explore the global challenges and fintech opportunities that lie ahead of our Cypriot startup companies and the innovation ecosystem and hoped that it contributed to bringing the participants a step further towards understanding how they can achieve a fintech culture in our Startup Ecosystem.

The event was sponsored by Bank of Cyprus and supported by the Cyprus University of Technology, which provided the venue.

More than 650 join Stelios Bi-Communal Awards Facebook group More than 650 people have recently joined the group ‘Stelios Cyprus Bi-Communal Awards 2016’ on Facebook, which was created by the Stelios Philanthropic Foundation to promote bi-communal cooperation.

The strong interest by people was expressed in just two weeks and many of the team members, mainly Greek Cypriots and Turkish Cypriots, are looking for partners from the other community on the island, to join forces and apply for the participation in the bi-communal awards, which this year offers to the winners the total amount of EUR 500,000.

The Facebook group is the virtual version of the BiCommunal Café. This network of team members will have the opportunity to participate and attend future events and gatherings, which soon will be organised at the Stelios Philanthropic Foundation premises in Nicosia.

In order to participate in this year’s contest for the BiCommunal Awards, all interested participants are encouraged to join the group on Facebook and contact via inbox the Stelios Philanthropic Foundation page to receive the application forms.

Privacy starts from within Keeping documents safe in the healthcare sector

By Marios Xenophontos

Privacy seems a straightforward principle, but translating principle into practice can be difficult. The privacy of patients’ records is central to the ethical code of each medical organisation, since is one of the vital duties to keep them confidential and safe.

The duty of confidentiality goes beyond undertaking not to divulge confidential information; it includes the responsibility to make sure that written patient information is kept securely.

Confidential records should not be left where other people may have casual access to them or must be avoided breached, as a result of improper disposal or loss. However, Fileminders have the experience and know-how that can help organisations manage the medical records of their patients

safely and at the same time eliminate any negligent incidents from officers.

Safeguarding is a fundamental right for everyone to protect their medical records, which are highly sensitive, thus healthcare organisations should pay attention and comply accordingly. Doctors, nurses, physiotherapists, have a professional and ethical duty to respect patients’ confidentiality and should only access records if they are involved in the patient’s care and this is on a ‘need-to-know’ basis. On the other hand, patients have a right to request

access to their own medical records and can also provide consent for disclosure to third parties.

As a result, healthcare organisations have a duty to protect the confidential data of their patients.

Healthcare organisations can implement these rules for keeping patient data secure to

support patient privacy: - Monitor and audit workforce member compliance with privacy policies and procedures - Develop and adopt appropriate policies and procedures - Communicate privacy policies and procedures - Train workforce members on privacy policies and procedures.

Marios Xenophontos is Director of Fileminders Ltd., www.fileminders.com.cy, a records and information management (RIM) company

February 17 - 23, 2016

COMMENT | 7

Dealing with the economic challenges of our times

By Michael Sarris Former Minister of Finance

The current generation is living in one of the most interesting times in the economic and social history of mankind. This period is characterised by a deep and protracted worldwide recession and by a technological revolution and continuous innovation.

In the aftermath of the onset of the Great Recession in 2008, there is a serious debate on its causes and impact with emphasis on the failings of capitalism and the resulting human suffering.

It is up to this generation to implement reforms, which should eventually lead to a redefinition of the free enterprise system.

The goal is that it will evolve into a market system with a human face.

The other game-changing development of our times is the digital revolution which is called by many as the Fourth Industrial Revolution.

Powerful advances in Information and Communication Technologies are leading to large gains in productivity and efficiency and rapid innovation in products and services. A large share of those now in high school will probably look here for employment and should gear their preparation accordingly.

But these advances are also creating important challenges in job replacement, data protection and the distribution of the resulting growing wealth. The key challenge is how to distribute fairly the “automation dividend� which has made income inequality worse. There is also a shift in market strength: power accrues to those who have most data, best algorithms and most advanced computers. The bet to be won here is how to maximise the benefits of the digital

revolution while dealing effectively with its challenges.

The financial crisis started in the United States about ten years ago. It was a remarkable combination of failings in bank supervision and regulation, greed for profit and lack of attention to the potential dangers of persistent trade imbalances and huge capital inflows coming in from China. The Americans dealt with the crisis, as they always do, and moved on. But the crisis exposed serious shortcomings in the functioning of the worldwide economic system and especially in the European Union and the Eurozone.

For a thirty-year period leading up to the recent crisis, expanding international trade, free enterprise and market-based systems, generated jobs for almost everybody, created wealth and got millions in all continents out of poverty – viewed from afar, a remarkable achievement. But viewed from close by, this was an unsustainable system.

First, there were growing imbalances, as successful exporters like China, other emerging economies and Germany accumulated export earnings but did not recycle them through increased demand for imports. Many other countries with declining competitiveness and low productivity accumulated large deficits and went into debt. Second, in many countries globalisation and technology left large numbers of people behind, creating potential for instability.

With respect to the Eurozone there are alternative narratives, as to the origins and the management of the ensuing crisis. These alternatives were seen in action during the 2015 stand-off between Greece and its creditors. First, is the narrative of national policy failures in terms of heavy public

spending and borrowing, and declining competitiveness. The second narrative puts emphasis on the design faults of the Monetary Union: its narrow emphasis on fiscal criteria, the neglect of rapid growth in private sector borrowing and the absence of a banking union and of a federal budget. At the same time the fact that surplus countries, like Germany, do not participate in the needed correction by expanding their imports, makes the adjustment for deficit countries much harsher. There is truth in both narratives and the challenge going forward is to build systems to help avoid national policy errors, while fixing the architecture shortcomings of the Monetary Union.

The pressure for reforms is coming from the legacy of the crisis in Europe. What we now see is slow growth, income stagnation, low productivity, high debt and, above all, high unemployment, especially among young people. Some changes like a banking union and a stronger fiscal pact are happening. But, the key goal of political union that will enable Europe to deal with crises more effectively like the United States, remains elusive. In fact, we now have sharper North-South and East-West divides, fuelled by economic differences and large migration flows. All this leads to Euroscepticism, nationalism and xenophobia, mostly from the right, and populism from the left.

Because the shortcomings of the free enterprise system are rightly seen as having contributed to the crisis, there is a danger for this populism to lead to a return to tax-andspend approaches and a growth of the role state. These approaches have been tried and failed. That is why it is important for all of us to come up with a credible middle road that avoids the pitfalls of unchecked market-

based capitalism without falling into the inefficiencies of socialism. Elements of this approach must include combating corruption which allows those using devious methods to advance at the expense of the rest of us; fighting tax evasion which frustrates honest people in too many countries; real reform of the financial system so that innocent tax payers do not have to pay the bill again; and tackling monopolies and vested interest groups which have captured the political system and are blocking reforms that benefit the majority. In parallel, this approach would refocus the welfare state on the really needy and use the money saved to invest in health and education.

I have touched on some of the challenges of the younger generation, namely: forging a stronger political union in Europe, rehabilitating a market-based economic system, and taking full advantage from the digital revolution; but there are others, like climate change, where the myopia of the young and the selfishness of the older generations is leading to inaction. There is also the long-standing challenge of reducing income and wealth inequality worldwide and eliminating poverty in developing countries which ought to remain firmly on our radar screen. Reversal of the extreme increase in inequality that has occurred in the last thirty years is a policy choice and must be seen as part and parcel of the big challenge of our times of redefining and reshaping our free enterprise economic system.

This was a keynote speech delivered by Michalis Sarris at the 11th Annual Mediterranean Model United Nations Conference of High School Students, February 5.

February 17 - 23, 2016

8 | COMMENT | financialmirror.com

BARMY ABOUT BAMIA – OR JUST NOODLING ALONG

FOOD, DRINK and OTHER MATTERS with Patrick Skinner As is often the custom around the Mediterranean the dish came to the table just warm.

Elisabeth served them with skewered pieces of lamb leg and Kofta (a kebab of minced lamb, herbs, onion, garlic and spices), a finely chopped salad of tomatoes, cucumber, mint, parsley, onion and Bulgar Wheat, and noodly rice.

I have cooked this dish for many years and it can be done as I have described, or by omitting the tomatoes, whilst some fry the okra by themselves, adding lemon juice and lidding the pan so it can simmer quietly for a quarter of an hour or so.

Okra is a well travelled veg. It seems to have originated in Africa, but it spread from there north-eastwards – it is very much used in India, curried and otherwise spiced – and to Egypt by the 13th century and thence to Europe and the New World over the next 300 years. It goes by a number of names: “Ladies’ Fingers” because of their shape. Gumbo, from Africa, to the U.S.A. by means of the slave traffic, where it settled as the eponymous name for some great fish, chicken and vegetable soups.

Not long now until the New Season for local “Bamia” arrives!

My pictures show the Okra plant in bloom (you can just see the “fruity pods”). I understand the plant is grown in Cyprus, but I have to say in my 21 years of residence I never saw any.

PILAFI! A pilaf of rice and lentils.

I am sometimes asked how to cook rice and I have to admit I have not made a detailed study of the various types of rice and their cookery. For the every day cook, it depends on what sort of result you like. Some people like a rather wet, gelatinous result, whilst others, like me, prefer a dry, slightly nutty finish with every grain separate, as you can see from my photograph, which also includes lentils.

Long ago, when there was a peaceful few years in Lebanon, I spent time there quite often.

I met some very interesting people. One, I shall call him Jacob, or to use the Arab pronunciation Ya-oub, was a Christian Arab refugee from Palestine who just happened to make a very large fortune by spotting a business opportunity and exploiting it. Those were the days when the Arab (or Persian, if you will) Gulf states were just beginning to bank millions of dollars from oil – they were sandy unkempt places with little other than the black stuff coming out of the ground. Yaoub dreamed up the idea of chartering some aircraft and flying fresh fruit, vegetables and other foodstuffs from Lebanon down to them. Some said he also flew “models” down there for the Sheiks’ weekend pleasures. Anyway, whatever the cargoes were, it made Yaoub a multi-millionaire.

He’d been a poor boy in Palestine, prior to 1948 and had married young to his childhood sweetheart Elisabeth.

This lady was a marvellous cook and in their beautiful seaside villa at Jounieh, a Christian district just a few miles north of Beirut, she had a huge kitchen, made almost entirely of marble. Yaoub was not in favour of her spending time in it, but she loved to cook and I passed some happy hours in there watching, looking, listening and learning.

One day she had brought in a basket of little green vegetables with a ribbed, slightly hairy sticky-looking surface. “Bamia!”, she said, “Freshly picked this morning”. I knew these funny little things as Okra, or “Ladies’ Fingers”, but had never actually cooked them. Elisabeth picked one up and directed her knife towards the top, which looked a little like a gnome’s hat.

“You cut it here, just below the stork. No lower or the juice – which is very sticky – will come out”.

This done, she washed them and set them aside. Then, she took a sauté pan and fried some onions and garlic till soft but not brown, and added lovely big skinned chopped Lebanese tomatoes. When these were soft, she made a space in the middle, poured a little more olive oil in and when it was hot carefully put in the okra. She gently stirred them around now and then, and carefully turned in the onion and tomatoes. Half an hour and it was done. The care she took prevented the pieces breaking and the gummy, sticky interior escaping.

One method is to use 3-4 cups of water to each cup of rice and simply drain off any excess water when the rice is done to your satisfaction. My preferred method is to pour water or stock into a pan to the level of cooked rice you would like, bring to the boil and quickly pour in the rice (American long-grain, unwashed) until it just comes in a pyramid to the surface of the liquid. Bring back to the boil, put the lid on and simmer for 20 minutes and you should have perfectly cooked, separate grain, rice.

Noodly Rice Recipe Ingredients for four servings One and a quarter cups of long grain rice (I use Uncle Ben’s) 1 Vermicelli Nest (fine or medium Chinese noodles will do) 1 coffee cupful of flaked almonds 1 good knob of butter About half litre of chicken stock (fresh for preference – but a cube is OK) Seasoning to taste

Method 1. Heat a small-medium saucepan (preferably non-stick) and melt butter.

2. Crumple the vermicelli nest into little pieces.

3. When butter stops bubbling and would shortly start to burn, throw in the flaked almonds and the vermicelli bits.

4. On medium heat, fry, stirring every now and then until the almonds and pasta bits start to brown 5. Pour in the stock and bring to boil.

6. Pour rice in to the centre of the pan – it should come up in a pyramid to the surface of the stock.

7. Stir and turn heat down low. You may put a lid on. Stir once or twice in the next 15 – 20 minutes, when the rice should be cooked through.

8. If you like rice a bit sloshy, add more stock.

9. If you leave the pan on a very, very low heat (and it is a non stick) with the lid on for about 20 minutes it will develop a golden crust which looks most attractive if you it out bottom side up on to a serving platter.

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

February 17 - 23, 2016

financialmirror.com | COMMENT | 9

Major changes in Warren Buffett and Berkshire Hathaway stocks for 2016 ByJohn C Ogg - 24/7 Wall St.com Warren Buffett has released the official equity holdings of Berkshire Hathaway Inc. (NYSE: BRK-A) as of December 31, 2016. That makes this the official Buffett stocks for 2016, but the stakes are already different from the latest 13F filing with the Securities and Exchange Commission.

24/7 Wall St. has followed the various changes from Warren Buffett’s top stock holdings for many years now. We have also added detail on each of these changes, as well as added color on each of the pertinent holdings or added commentary on the value of those holdings through time.

Mr. Buffett’s total equity holdings are heavily concentrated in just a few top positions. That was previously concentrated among just four top holdings, but now the top stocks are actually in five or six Buffett stocks. His top holdings are listed as follows: credit card giant American Express Company (NYSE: AXP); banking giant Wells Fargo & Company (NYSE: WFC); IT-services giant International Business Machines Corporation (NYSE: IBM); beverage giant The Coca-Cola Company (NYSE: KO); food-giant The Kraft Heinz Company (NYSE: KHC); and refining giant Phillips 66 (NYSE: PSX).

Because of all of the changes that have been made in recent weeks and months, the reality is that the Buffett stocks for 2016 are going to look massively different from the Buffett stocks at the start of 2015 and at the start of 2014.

This was listed as a whopping $131.855 bln in public equities alone which are listed in the United States.

The total public stock holdings from the full 13F-HR filing do not show the full dollars held in preferred shares — like its $3 bln invested in 2009 into preferred shares of Dow Chemical Co. (NYSE: DOW) and like the $5 bln for Preferred shares and warrants in Bank of America Corp. (NYSE: BAC) from back in 2011. Buffett also recently completed the $37 bln acquisition of Precision Castparts Corp. (NYSE: PCP), making that position from the 13F filing no longer relevant.

American Express Co. (NYSE: AXP) has remained the same 151.6 mln shares for years now. Buffett has held these shares so long he probably worries about the capital gains tax he would pay more he worries about how much AmEx shares have fallen from their highs. Still, American Express has suffered handily so far in 2016.

The Coca-Cola Co. (NYSE: KO) was the same number of about 400 mln shares that it has been for years and years.

This stake dates back to when he started buying Coca-Cola in the 1980s. Buffett’s cost basis must be nearing zero if you include the dividends.

International Business Machines Corp. (NYSE: IBM) had been grown and grown, but the IBM stake was kept static at 81.03 mln shares as of December 31. Maybe Buffett got tired of seeing this one go down lower and lower. This stake was about 79.5 mln shares as of the end of last June and the end of 2014 position was 76.971 mln IBM shares.

Wells Fargo & Co. (NYSE: WFC) was listed as 479.7 mln shares at the end of 2015, which is now higher than the stake of 470.29 mln shares at the end of September. Buffett has grown his stake through time, but at a slower rate in the last year or more. At closer and closer to being a 10% holder, Buffett may be at the point that it is harder to grow that stake without more regulatory and more governance issues – particularly with a massive stock buyback.

AT&T Inc. (NYSE: T) had previously been listed as a new stake for Berkshire Hathaway, with a stake of 59.32 mln shares. The reality is that this was tied to the prior DirecTV stake. As of the end of 2015, AT&T’s stake A SMALLER STAKE by 12.74 mln shares to 46.577 mln shares.

Kinder Morgan Inc. (NYSE: KMI) was listed as a NEW STAKE, making Buffett interested more in the infrastructure side. The Kinder Morgan Stake was listed as 26.533 mln shares as of December 31. Maybe Jefferies seeing 6 reasons oil could rise in 2016 was not as far off as it seemed when it was reported.

The Kraft Heinz Company (NASDAQ: KHC) was listed as 325,634,818 shares. This stake is actually the same as the prior quarter, but it is a whopping $23.69 bln as of the end of 2015.

Phillips 66 (NYSE: PSX) was already a larger stake than

what was represented at the end of 2015. This was last seen as a total of 75.55 mln shares as of late last week despite the new 13F filing showing a lower number. Based upon current prices, that is more than $5.5 bln and it is more than 10% of the Phillips 66 shares outstanding. This stake had previously been classified as an elimination in 2015 and then was shown after Warren Buffett got the stake classified with the SEC as confidential.

The full list of additional Warren Buffett and Berkshire Hathaway stock holdings as of December 31, 2015 is as follows: Axalta Coating Systems Ltd. (NYSE: AXTA) was listed as a LARGER STAKE of 23.324 mln shares at the end of 2015 – a tad larger than the quarter before after having been listed as a new position of 20 mln shares.

Bank of New York Mellon Corp. (NYSE: BK) was 20.112 mln, roughly the same as the prior quarter but versus 24.6 mln shares in the past.

Charter Communications Inc. (NASDAQ: CHTR) was a larger stake at 10.281 mln shares — after being 8.51 mln shares, and having been viewed even lower prior to that.

Charter was made a new stake in 2014.

Chicago Bridge & Iron Co. (NYSE: CBI) was ELIMINATED after having been made a smaller position in prior reports (1.983 mln shares in September) – down from 9.33 mln shares last June and 10.701 mln shares last March.

Costco Wholesale Corp. (NASDAQ: COST) was the same

stake at 4,333,363 shares.

DaVita Inc. (NYSE: DVA) was the same stake at 38.565 mln shares. This DaVita stake had been raised on and off in prior quarters, but Buffett had already entered into a standstill agreement not to buy more than 25% of the company.

Deere & Co. (NYSE: DE) was listed as 22.884 mln shares, a LARGER STAKE by more than 5.8 mln shares. This is interesting because it had been lowered to 17.052 mln shares previously and 17.31 mln shares that had been there in June and previously.

General Electric Corp. (NYSE: GE) was the same stake of 10.585 mln shares. This stake had been raised in 2014 and had been telegraphed before because of the warrants.

General Motors Co. (NYSE: GM) was a the same stake of 50 mln shares, but this had previously been raised. from 41 mln shares.

Goldman Sachs Group Inc. (NYSE: GS) was the same stake of 10.959 mln shares, but this had been as high as 12.631 mln shares prior to the end of 2015.

Graham Holdings Co. (NYSE: GHC) is what is just the remains of Washington Post and was the same stake at 107,575 shares.

Johnson & Johnson (NYSE: JNJ) was the same tiny stake of only 327,100 shares, but Buffett watchers know this is a leftover bit from a much larger stake in years past.

Lee Enterprises Inc. (NYSE: LEE) was the same tiny stake of only 88,863 shares.

Liberty Media Corp. (NASDAQ: LMCA) and Liberty Global PLC (NASDAQ: LBTYA) are both again listed as Buffett and Berkshire Holdings. but these are counted as Class A and Class C shares so we will leave this stakes simplified just like that.

M&T Bank Corp. (NYSE: MTB) was the same position at 5.38 mln shares — same as always.

MasterCard Inc. (NYSE: MA) was the same size stake of 5,229,756 shares.

Media General Inc. (NYSE: MEG) was a the same sized stake at 3.471 mln shares at the end of 2015. Just keep in mind that this was down from what had been a static position of 4.64 mln shares.

Mondelez International Inc. (NASDAQ: MDLZ) is the same position again at 578,000 shares. This stake remains far lower than in the past.

Moody’s Corp. (NYSE: MCO) was the same position of 24.669 mln shares yet again, but this is lower than in years past.

NOW Inc. (NYSE: DNOW) was the same stake of 1.825 mln shares.

Procter & Gamble Co. (NYSE: PG) has remained officially the same at almost 52.8 mln shares in the formal 13F report.

We expected to be part of the Duracell swap, and P&G had also previously been lowered in 2012 after a peak of 96.3 mln shares.

Restaurant Brands International Inc. (NYSE: QSR) was the same stake at 8.438 mln shares but it was a new stake in late 2014. The reality is that this is much larger (see here): On December 12, 2014, we acquired Class A 9% Cumulative Compounding Perpetual Preferred Shares of RBI having a stated value of $3 bln and common stock of RBI for an aggregate cost of $3 bln. RBI, domiciled in Canada, is the ultimate parent company of Burger King and Tim Hortons.

As of the acquisition date, our combined investment in RBI possessed approximately 14.4% of the voting interests of RBI. The RBI Preferred is entitled to dividends on a cumulative basis of 9% per annum plus an additional amount that is intended to produce an after-tax yield to Berkshire as if the dividends were paid by a U.S.-based company.

Sanofi (NYSE: SNY) was the same position at 3.905 mln shares.

Suncor Energy Inc. (NYSE: SU) was kept static at 30 mln shares, but this used to be a smaller stake (22.35 mln shares last June). Suncor’s stake had been increased in late 2014 and it had grown each quarter from the 13 mln shares in March of 2014.

Torchmark Corp. (NYSE: TMK) the same stake at 6.35 mln shares.

Twenty-First Century Fox Inc. (NASDAQ: FOXA) was the same stake of 8.951 mln shares at the end of 2015. Its stake had previously been raised from 6.228 mln shares in prior reports and versus 4.747 mln shares at the end of 2014.

U.S. Bancorp (NYSE: USB) was the same position of 85.06 mln shares at the end of September, but that had been raised slightly in June versus the 83.77 mln shares at the end of March. That has grown from 80.09 mln shares at the end of 2014.

USG Corp. (NYSE: USG) was the same stake at just over 39 mln shares, but this had been raised in prior to the end of 2014.

United Parcel Service Inc. (NYSE: UPS) was the same tiny position at 59,400 shares. The UPS stake is way down from 2012.

VeriSign Inc. (NASDAQ: VRSN) was the same stake at 12.985 mln shares, but this one had previously grown in 2014.

Verisk Analytics Inc. (NASDAQ: VRSK) was the same position at 1,563,434 shares, but that is lower than in prior quarters.

Verizon Communications Inc. (NYSE: VZ) was the same stake at 15 mln shares at the end of December, but that had been raised a year earlier.

Visa Inc. (NYSE: V) was the same stake of 9.885 mln shares, but the Visa stake had been rising throughout 2014.

WABCO Holdings Inc. (NYSE: WBC) is SLIGHTLY LOWER again at 3.331 mln shares – down from 3.559 mln shares at the end of September and down from 3.78 mln shares previously. At one point the stake was over 4 mln shares.

Wal-Mart Stores Inc. (NYSE: WMT) was the same sized stake of 56.185 mln shares at the end of 2015 as it was in September, but this had previously been lowered from 60.385 mln shares at the end of June and versus having been raised prior to 2015.

February 17 - 23, 2016

10 | COMMENT | financialmirror.com

Cameron fails to get EU Parliament assurances over ‘emergency brake’ Guy Verhofstadt, leader of the ALDE group and his Union Jack fridge.

ANALYSIS

By James Crisp - EurActiv UK Prime Minister David Cameron failed to gain assurances from European Parliament leaders in Brussels on Tuesday that they would pass unchanged the so-called ‘emergency brake mechanism’ to stop new EU migrants to Britain claiming in-work benefits.

The mechanism is one of the most controversial demands for EU reform made by Cameron, who has demanded the changes as his price for campaigning for the UK to stay in the bloc. Cameron has already agreed to water down his initial demands for a total ban on EU migrants claiming the welfare for four years to a sliding scale, with payments increasing over three set time periods.

How long those time periods will be has not yet been agreed by diplomats preparing for this Thursday’s crunch summit of EU leaders. That now looks likely to be decided by heads of state and government, if at all.

The British social security system pays in-work benefits as a right, rather than using a contributory system built up over time like many other European countries.

The UK argues that this justifies it being given special treatment, something affording to it by European Council President Donald Tusk’s settlement deal.

Cameron travelled to Brussels this morning to meet with European Parliament leaders. Under the terms of the settlement brokered by Tusk, the emergency brake mechanism is subject to European Parliament backing.

In the “ordinary legislative procedure” the deal foresees, MEPs would have the chance to debate and change the bill.

Before it can become EU law, an identical text must be agreed with the EU Council.

But any changes to the mechanism will be seized on by the Out campaign as evidence that Cameron is powerless to deliver the reforms he has vowed to force through.

While Manfred Weber, leader of the European People’s Party, the largest group in the Parliament, said the “UK could count” on the Parliament, other leaders were less positive.

And sources in the Socialists and Democrats group told EurActiv that changes would be made. “The European Parliament will intervene and have a say, though, in the implementation measures of the deal,” the source said.

There are concerns over the “emergency brake” mechanism, the source said, in case it triggered discrimination between EU workers.

European Parliament President Martin Schulz warned, “No government can go to a parliament and ask for a guarantee about the result. This is a democracy. Once the frame is agreed, we will start the legislative process. This is not a veto.”

Guy Verhofstadt, of the liberal ALDE group, told reporters by a fridge emblazoned with the Union Jack, “We will be very open and very constructive in this process, but we can never predict the outcome of a legislative procedure.”

Syed Kamall, the British Conservative leader of the European Conservatives and Reformists Group told EurActiv, “Of course no political group leaders can guarantee the support of everyone in their group, but getting a declaration from the main group leaders that they will seek to deliver the contents of the Council’s deal is an important step.”

UKIP leader Nigel Farage, of the Europe of Freedom and Direct Democracy group, said, “If the prime minister did win a referendum, it would be on a deal that would subsequently be scuppered by the European Parliament. There are many groups here who are spoiling for a fight.

“The real truth is that this deal is not worth the paper it’s written on. It is subject to European Parliamentary approval and ultimately judgements of the European Court of Justice.”

A spokesman for the Greens said, “It’s clear that any agreement made in the Council cannot expect to be simply rubber stamped by the European Parliament.

“While the Greens/EFA group firmly believes that the UK’s place is within the European Union, and that reforms

are certainly necessary, we will also defend Parliament’s right as co-legislator to ensure that the reforms are the right ones and that they benefit all European citizens equally.”

Gabi Zimmer, the president of the GUE/NGL group of hard left MEPs said, “The EU would also be well advised not to follow Mr Cameron’s most regressive requests in the field of social security and freedom of movement.”

Apart from Weber, only the far-right Europe of Nations and Freedom Group gave unqualified support for the emergency brake.

Gerolf Annemans is leader of the Belgian Vlaams Belang party and a member of Marine Le Pen’s group.

He told EurActiv, “I will never take any parliamentary action whatsoever against any member state wanting to protect its borders and safeguard its social security system.

“We will on the contrary support any initiative that unequivocally enhances freedom for member states.”

A Cameron spokesman said with the president of the European Parliament and the MEPs who are representing the Parliament in the negotiations were “useful”.

“They all offered their support for solutions in each of the

Timeline 18 February 2016: EU leaders to discuss Cameron’s reform demands.

June 2016: Rumoured favoured date of Cameron for holding the referendum.

End of 2017: Deadline for referendum.

July-December 2017: United Kingdom holds rotating EU Council Presidency. four areas and, in particular, committed to work hard to ensure that the relevant secondary legislation on the emergency brake and child benefit is swiftly adopted by the Parliament.

“The prime minister also met with the chairs of the three largest groups in the European Parliament. All three made clear their support for the proposals on the table and said they were ready to take any necessary EU legislation through the European Parliament swiftly.”

Cameron, who met with French President Francois Hollande yesterday, was due to meet the Parliament’s Conference of Presidents this morning (16 February) behind closed doors, but that was cancelled at short notice.

Sources alleged that was because the prime minister wanted to avoid meeting UKIP leader Nigel Farage, as well as hard left and right MEPs. Instead he invited EPP leader Weber and Socialists and Democrats leader Gianni Pittella to the British embassy in Brussels, before later returning to the Parliament to meet

Schulz and Verhofstadt, one of the three Parliament ‘sherpas’. Elmar Brok MEP and Roberto Gualtieri are the other sherpas.

But he broke with protocol by entering through the underground car park, rather than the usual entrance for visiting dignitaries, sources said.

Cameron, who also met European Commission President Jean-Claude Juncker, made no public comment during his four-hour visit to Brussels.

Juncker, speaking before meeting Cameron, said he refused to even entertain the idea of Britain leaving the bloc.

“If I would say now that we have a plan B, this would indicate a kind of willingness of the Commission to envisage seriously that Britain could leave the European Union,” Juncker said.

Asked if this was ‘squeaky bum time’ for the talks – a reference to the nervy run-in to the end of a football championship – the Commission said it had nothing to add to Juncker’s comments.

But a spokeswoman said the frenetic diplomacy would ensure “a well-prepared European Council”.

Tusk, meanwhile, repeated his warning that negotiations were at a “fragile” stage and nothing could be taken for granted.

“The proposal I have put on the table is a fair and balanced one,” Tusk said during a stopover in Athens on a tour to prepare the ground for the summit.

“It helps the UK to address all the concerns raised by Prime Minister Cameron, without compromising on our common freedoms and values,” he said. “There are still many difficult issues to solve.”

Discussing the emergency brake in Prague later the same day, he said, “It protects the freedom of movement, while helping the UK to address all its concerns when it comes to their specific system of in-work benefits.”

Tusk is due to meet German Chancellor Angela Merkel in Berlin tonight to discuss the deal.

British Prime Minister David Cameron promised to renegotiate the UK’s relations with the European Union. The renegotiation will be followed by a referendum by the end of 2017, to decide whether or not the United Kingdom should remain in the EU. If he achieves the reforms, Cameron will campaign to stay in. Otherwise, the Conservatives might campaign to leave the EU. This decision could have farreaching consequences for trade, investment and Great Britain’s position on the international scene.

Some other European countries are ready to listen to Cameron’s concerns on issues such as immigration, and may be prepared to make limited concessions to keep Britain in the bloc.

But EU leaders also have their red lines, and have ruled out changing fundamental EU principles, such as the free movement of workers, and a ban on discriminating between workers from different EU states.

February 17 - 23, 2016

financialmirror.com | WORLD MARKETS | 11

Equity market rebound continues Markets Report by Forextime Ltd

By Jameel Ahmad, Chief Market Analyst, FXTM

The equity markets are currently looking positive and tried to continue building momentum into the second trading day of the week after suffering from a prolonged period of heavy and aggressive selling over the past couple of weeks.

The stronger oil prices are seen as the major driver for the more positive momentum that is evident across the equity markets, but I also think that the resumption in expectations that central banks will continue to ease monetary policy is also contributing towards the gains.

European Central Bank (ECB) President Mario Draghi hinted once again on Monday that more stimulus measures could be on their way to Europe next month, while the pressure on the Bank of Japan (BoJ) to do more to reinvigorate the Japanese economy is a continuous trend.

Additionally, nobody ever really knows what is truly coming next from the People’s Bank of China (PBoC), and the sudden emergence in expectations that the Federal Reserve will postpone its commitment towards normalising monetary policy could also be encouraging investors to look towards the equity markets once again.

All eyes remain on WTI oil The major focus of the market headlines on Tuesday was the reaction to the oil markets after the oil ministers from three separate OPEC committee members agreed to freeze oil output at January levels, as long as others follow suit.

The markets are very undecided on how to take this news and to be honest, with output from most oil producers being at a record level anyway, this basically means that producers are content for the aggressive oversupply in the markets to continue. What we have really seen, though, is an extension of the unexpected comments from the Saudi Arabian Oil Minister, Ali al-Naimi, from back in December when he said that any possible change in production levels would have to be agreed between both OPEC and nonOPEC committee members.

Saudi Arabia in itself made headlines after a report filtered through the media that low oil prices apparently have no impact on the Saudi economy, which most onlookers must have read with amusement because such

an idea is just ridiculous. The bottom line is that we know such depressed oil prices must be having a negative impact on all the economies that are reliant on exporting the commodity, especially when you also take into account that the price of oil has crashed by around 80% since its peak in the middle of 2014. For the price of oil to significantly rebound a change in production cut would have to be met and respected by all global producers of the commodity.

likely be used as a pivot point for investors to then decide what direction they want to drag the metal next. There are ongoing anxieties over a decline in US economic momentum, which might force the Fed to backtrack from its previous confident commitment to continue normalising monetary policy in 2016 and this is why some will likely still be positive on Gold in both the mid and possibly longer-term.

Gold moves back to $1200

GBPUSD still at risk

In line with expectations, Gold found support at $1,200 on Monday after benefitting from one of the most dramatic periods of USD weakness that we have witnessed for a significant amount of time.

The metal is likely to fall below $1,200, but that level is now seen as a major psychological level for traders and will

The Pound/Dollar is currently performing in line with expectations and has commenced the new week under pressure after failing to close trading above 1.4550 last week. There are still many different factors that are going to impact investor attraction towards the British Pound on an ongoing basis, with this including concerns about a likely decline in economic growth, interest rate expectations that are continuing to be pushed back and also questions remaining unanswered around whether a possible “Brexit” referendum could still take place for later this year.

Headline inflation for the UK is also notoriously low, which is why the 0.3% rebound over the past 12 months has not been met with huge enthusiasm from investors. We are still a huge distance away from the Bank of England’s (BoE) 2% target and depressed inflation readings are here to stay in the UK economy for a significant period of time.

EURUSD support at 1.11 The EURUSD encountered heavy selling after ECB President Draghi repeated the possibility around the central bank easing monetary policy once again in March during a public conference on Monday. The only reason for the bounce higher in the EURUSD is due to ongoing Dollar fragility, therefore I don’t think many are surprised to hear that the ECB President seized his chance to send the Euro currency lower. The major issue that he faces though is that if the sudden Dollar fragility intensifies once again, there will be little he can do to prevent the EURUSD from moving higher and this is exactly why investors will want another aggressive round of QE to be encouraged to send the Euro where the central bank would likely prefer it to be.

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

February 17 - 23, 2016

12 | PROPERTY | financialmirror.com

Leptos Estates launches 2016 programme with shows in Kiev and Moscow Leptos Estates recently took part in the “Intax Forum” and “CIS Wealth Conference & Citizenship” which took place in Kiev and Moscow, respectively, where the company resented its latest modern developments not only in Paphos and Limassol but also in Crete and Santorini, areas which attract thousands of visitors and tourists as well as real estate buyers and investors.

As part of the Group’s efforts to set up its operations in these two countries, to consolidate good relations and

cooperation, a large number of meetings were held with major investors and well known real estate agents as well as law and immigration firms and financial consultants.

Andreas Santis, Manager of the Leptos Group for Eastern Europe, said “our participation in both events was very successful as guests were impressed by the wide choice and high quality of our projects, the affordable prices and the easy payment facilities offered. At the same time we are creating and improving good relations and cooperation with our

existing and new business partners.

“These events have for another year attracted high quality visitors and potential buyers and investors who have shown great interest in acquiring a property under the sun in safe and secure regions like Cyprus and the Greek islands. Since the early 1990s our Group continues to show strong momentum in the former Soviet Union, particularly Russia, Ukraine, as well as in Azerbaijan and Kazakhstan, in which it maintains its own or representative offices.”

UK housing confidence strong, says Halifax There has been a small rise in positive selling sentiment in the final quarter of 2015 and a fall in the number who expect it to be a bad time to sell, according to the latest quarterly Halifax Housing Market Confidence Tracker index report.

Despite declining steadily since last May, house price optimism in the final quarter of 2015 continued to show that a majority, +61 compared to +68 in May, think prices will keep rising with 13% believing they will be at least 10% higher.

“Solid economic growth, rising real earnings and falls in already very low mortgage rates are all stimulating housing.

At the same time, there is an increasingly acute imbalance between supply and demand, which is causing property prices to rise at a robust pace,” said Craig McKinlay, Halifax mortgages director.

“This situation, which is unlikely to reverse significantly in the short term, is reflected in the public’s continuing high levels of optimism regarding house price growth over the

coming 12 months,” he added.

There has been a small rise in positive selling sentiment since last quarter, with 55% (+3) of people thinking the next 12 months will be a good time to sell. By contrast, there has been a drop in the proportion who expect it to be a bad time to sell, down three points in the same period, to 29% now.

Positive buying sentiment has increased marginally, at 54% (+1), with negativity down two points to 31% while the proportion who think it would be a good time to buy and to sell property has risen to 39%, up three points on the previous quarter, while 15% of people think the next 12 months would be a bad time to do both.

The proportion identifying rising property prices as a barrier to buying a property has risen to 37%, up six points on the previous quarter and the highest this figure has been since the survey’s inception, with average UK house prices now standing at £208,286 following a 10% increase during 2015.

However, raising a deposit is still believed to be the main barrier to buying property, with 58% of people choosing this as a reason, up one point from last quarter). Job security is the number two reason, at 42%.

Concerns about interest rate rises as a barrier have fallen, with only 11% of respondents mentioning this, down five points from last quarter.

“Difficulties in raising a deposit, concerns about job security and high property prices remain the main barriers to people buying a home. The proportion identifying rising prices has risen to the highest in the survey’s history. The decline in affordability that this highlights is expected to dampen housing demand and property price growth over the medium term,” said McKinlay.

Half think mortgage interest rates will be higher in 12 months’ time, a drop from 58% in September and expectations of a rise in savings interest have also fallen, to 28% having been 35% in September.

Italy’s NPL plan lets banks use securitisation to clean-up balance sheets... with possible losses The Italian government’s plan for EUR 200 billion of sofferenza (“bad loans”) on banks’ balance sheets allows banks to use securitisation to help clean-up their balance sheets and stimulate credit growth, according to Moody’s Investors Service.

The rating agency said the plan would help participating Italian banks clean up their balance sheets and increase lending, but if the sale to a special-purpose vehicle (SPV) is made at a discount, they will likely have to recognise losses that they previously did not. Moody’s said that the plan will have a limited impact in the short term on the reconstitution of banks’ balance sheets.

However, it gives banks the option to reduce bad loans at somewhat improved values, compared to sales in the market. This measure will not reduce bad loans significantly this year, but will assist in a gradual reduction. Assuming that banks are able to off-load bad loans without significant capital erosion, the framework will be positive because banks would be better

protected from stress scenarios.

Under the government’s new plan, Italian banks can securitise their bad loans, subject to certain conditions and on a voluntary basis, and investors in the senior notes can benefit from a government guarantee.

The guarantee for interest and principal payment will be priced with reference to a bank’s single-name credit default swaps. To be eligible for the guarantee, the senior notes would need to be of investment-grade credit quality and at least 50% of the junior notes, and mezzanine if issued, would need to be sold, in order to benefit from the guarantee and deconsolidate bad loans, according to the details of the plan. The structure will be strictly sequential and all returns to the junior noteholders will be subordinated to the senior notes being completely repaid. An independent servicer would service the securitised pool. The plan will be available for 18 months and extendable for 18 additional months.

Moody’s said that the amount of debt

that can be raised for the senior tranches will depend on the composition of the underlying portfolios (for example, corporates loans or loans to individuals, secured or unsecured) and the expected time to recovery, among other factors.

The government has proposed that banks use securitisation to clean up their balancesheets and transfer the credit risks inherent in the relevant loans into the capital markets. Under the scheme, losses cannot be transferred to the SPV and embedded into the junior tranches because banks would have to sell more than 50% of the junior tranche in order to benefit from the sovereign guarantee and deconsolidate the bad loans.

The plan has limited credit implications for the sovereign as the additional contingent liabilities are limited in size and the expected loss related to providing the guarantees is low. The amount of contingent liabilities is limited because the guarantee will only be extended to the senior

tranches of the bad-loan securitisations and because banks will only sell part of their bad loans. The expected loss for the sovereign related to providing the guarantee is low, as only tranches of investment-grade credit quality will qualify for a sovereign guarantee.

The total stock of Italian non-performing loans (NPLs) has increased post-crisis and currently totals about EUR 350 billion in the banking system. They now represent about 18% of total loans and 23% of GDP, up from EUR 236 billion in 2012, and EUR 132 billion in 2009. Of these EUR 350 billion, the government’s plan would cover the outstanding EUR 200 billion of bad loans.

When assessing the expected loss on senior tranches, Moody’s considers loan characteristics, including the type of debtor, loan-to-value ratio, the type and location of the asset securing the loan (if any), and the stage of default. The analysis also factors in other pool characteristics, the servicer’s strategies and capability, the liability structure and any additional support.

February 17 - 23, 2016

financialmirror.com | PROPERTY | 13

How should we extend the tourist season? µy Antonis Loizou Antonis Loizou F.R.I.C.S. is the Director of Antonis Loizou & Associates Ltd., Real Estate & Projects Development Managers

The extension of the tourist season, which is expected with a proportionate increase in the number of tourists and state revenues, is a precursor for the improvement in our economy and, of course, by extension the real estate industry. I have often referred to the misfortunes of other countries that have “helped” us at times (Lebanon-YugoslaviaRussia), and more recently the events in Egypt and Turkey.

Suddenly, we have discovered new markets for Cyprus as a tourist destination, and yet we are not ready to welcome them due to multiple deficiencies, both in terms of infrastructure, as well as mentalities from our own stakeholders, private or state.

The qualities of Cyprus, sun/sea, clean beaches, security, etc., are well known, especially in recent years with the developments and other events that occur in our rival markets, particularly with regard to safety.

• We then learned that the closure of Cyprus Airways was not a disaster after all, but a blessing, not only for the unfortunate taxpayers Cyprus - but now there is a long queue of aspiring operators, albeit with somewhat higher costs. This is a tremendous opportunity for Cyprus as a destination, and new markets such as Germany, Belgium, etc., do not recognise us because of the limits we had in the past due to the monopoly of the Flying Moufflon.

• So, due to prevailing circumstances we attracted a specific category of tourist who now has to face some of the following problems: - Crooked taxi drivers at the airport who rip off visitors who paid 100 euros to come to Cyprus by overcharging them 100 euros for to be taken to their hotel in Paphos.

- Overcharging, in general, is the most common of criminal activities, with the recent case in Paphos with a restaurant owner charging 5 euros for a lemon, or the recent beating of a tourist in Ayia Napa who had the courage to complain that he was overcharged by the taxi driver.

Unfortunately, both cases have been widely reported online tarnishing our image further.

- Limiting the connection between Ayia Napa and Protaras by the public transport system, because the taxi drivers would lose their opportunity to overcharge, after which the government caved in and compromised by limiting the times of the bus services, while the continuous interconnection of Ayia Napa-Paralimni-Protaras would benefit everyone, especially at night.

- Closed resorts and hotels. Perhaps here there should be a way to offer some incentive, eg. a reduction in the real estate or corporate tax during the calculation if these establishments remain open during the winter months.

- Foolish trade unionists who view the whole industry in a shortsighted manner, who insist on claiming the summer salaries in the winter months as well, as a result of which staff are suspended during the winter months when they deal with their private jobs during this period and claim unemployment as well. So, then, why do they complain about the employment of foreigners?

- How is it possible that the beaches of Cyprus are under the control of the coastal mafia? A case in question is the problem we now have to deal with as the EU wants the

Ayia Napa has cleaned up its act... literally! The mayor launched a campaign to remove eyesores. such as billboards, in order to make the resort town more attractive to tourists.

beach business licensing deregulated, something that local authorities and MPs do not want, surely because of personal interest.

- Promoting different areas to overseas markets by focusing on their local events.

With the exception of Ayia Napa, all other efforts are limited or non-existent, that need constant advertisements for local tourism, instead of campaigns that promote anything from a Sirtaki festival up to the traditional dish of kolokasi.

- Hotels and catering. Even though hoteliers do not enjoy the public’s full sympathy, their actions do not support them. Overcharging for drinks (3-4 times the cost - for example, a bottle of wine that retails for 5 euros is charged in the menu for 20) while the service is chaotic. This is why some establishments in these areas have an anticipated reservation time and others are just empty.

- Sports tourism for all? Ayia Napa immediately saw a return after it upgraded its football fields with increased demand now from the northern European countries for training during their winter months and even some interest from distant China, while there is no assistance to neighbouring

Paralimni and other municipalities that sought assistance from the state.

- Despite all that I have mentioned, some tourists dared (unwisely) to visit Cyprus, and came face to face with the local mentality of “why bother?” We even have the case of high-ranking public officials who, instead of assisting the state and the struggling local economy, resorted to filing complaints, such as the case of the Limni golf resort, the conference centre in Pentakomo with angel statue that officials did not approve of, the dolphinarium, crocodiles parks, etc. At least, the camel park succeeded as did the donkey sanctuary in Kofinou. All these would provide alternative activities for winter tourism.

I do not know what it has cost us fore the foreign consultants to advise the state on the use of government land. We have been given the usual runaround, with the consultants advising the state to create more plots and to build offices, etc., at a time when the supply is at a peak.

So, it has been suggested to build more hotels in the centre of Nicosia, when the capital’s existing hoteliers are already struggling. Or to use the site of the old

general hospital for the creation of more office blocks, which effectively destroys the plans for a new museum that could have helped attract more visitors for winter tourism. Detailed proposal have been submitted to the state, free of charge, suggesting that such a museum also hosts visiting exhibits, such as temporarily housing collections from war-torn countries or other troubled states, as is the case of Iraq, Lebanon, Syria, etc.).

So, we want the Tourism Minister to take action, for example in the case of uniting the municipalities of Limassol for the common use of dams, fishing, excursions, sports, and even for the use of certain areas of the former British SBA bases that have since been handed to the Republic.

Unfortunately, due to a misunderstanding and old mentalities, a lot of these areas will remain static, and is the case of the football pitches in the Protaras area, that instead of attracting international teams for winter training of football and other sports, have attracted human-height weeds. www.aloizou.com.cy ala-HQ@aloizou.com.cy

February 17 - 23, 2016

14 | MARKETS | financialmirror.com

Nigeria on the ropes with fully-fledged currency crisis

By Oren Laurent President, Banc De Binary

Nigeria is Africa’s largest crude oil producer, but that has not stopped the OPEC nation’s downward spiral into a fullyfledged currency crisis. The oil price rout that is tearing away at the global economy is proving to be a thorn in the side of Nigeria’s crumbling economy. Crude oil was trading at well above $100 a barrel and countries like Nigeria, Venezuela, Saudi Arabia, Iraq and others were sitting pretty with large central bank reserves and a seemingly endless supply of greenbacks. The situation deteriorated rapidly as WTI crude oil producers gained momentum and started pumping out millions of barrels of crude oil per day. The rise of the US shale oil industry has been a boon and a bane for the global economy. Today, it is possible to pay around $1.70 a gallon or less at the pump, significantly down from over $3.50 per gallon a year ago.

As a consumer, the crude oil price rout is generally perceived as a positive development, but the deflationary effects are severe. We have already seen the shuttering of oil mines across the US, and much the same pattern is being seen in OPEC countries like Nigeria, Venezuela and others.

The fact of the matter is that oil wells cannot maintain production at a profitable level at current prices, but they are willing to eat the losses in the hopes that ongoing revenue streams will at least service debts until such time as supply is cut. If and when that happens is a dubious proposition, since supply cuts will invariably raise prices which will then entice more producers back into oil production. With regards to Nigeria, it is the low price of Brent crude oil and the high costs involved in maintaining production that is crippling the industry.

Nigeria maintaining an artificial exchange rate The latest economic data from the Nigerian Central Bank indicates that just $28 billion in forex reserves are available.

The Nigerians have been selling USD in the hopes of strengthening their local currency, the Nigerian Naira (NGN).

Presently, the central bank has two exchange rates – the official rate which is pegged at 197-199 to the US dollar and the unofficial rate which hovers around 300 NGN to the US dollar. Owing to the fact that the price of crude oil has plunged by 40% since the time that Nigeria adopted a fixed trading range for its currency with the USD, problems are coming to Nigeria. There are already multiple warning signs that the economy is not faring well under current conditions.

Inflation is soaring, interest rates are high, employment is down, and job prospects are slow in coming.

Nigerians do not believe that the current official exchange rate has any value, and neither do foreigners who are withdrawing their investments from the country at a rate of knots. The current dissatisfaction with the exchange rates in Nigeria has given rise to shadow dollars. This market is

effectively a black market for purchasing USD at a premium.

This premium in Nigeria stands at approximately 70% above the current trading rate. According to the American Chamber of Commerce, you would now be paying approximately 337 NGN per US dollar. The official exchange rate is significantly less than that, at 198.97963. This means that the Nigerian Central Bank is artificially maintaining an exchange rate that is perceived as highly overvalued, according to foreign investors and locals alike. Further, analysts expect the Nigerian currency to depreciate by an additional 30% before the year is over, bringing the officially sanctioned exchange rate within range of the black market price level.

Incidentally, other countries that have premiums on purchasing US dollars over and above the official rate include Tajikistan at 4%, Egypt at 12%, Uzbekistan at 110% and Angola at 136%.

Important economic metrics in Nigeria The Nigerian economy is growing at a rate of 9.19%, but it has an unemployment rate of 9.9%, and an inflation rate of 9.6%. The current interest-rate has been lowered to 11% from 13% back in November 2015 in an attempt to stimulate economic activity in the face of a global slowdown. The government debt to gross domestic product ratio is 10.5%.

This populous African country of 179 million people has a food inflation rate of 10.6%, an interbank rate of 9.38%, and a lending rate of 16.96%. Nigeria also has 21.37 tonnes of gold reserves and FDI (foreign direct investment) totaling $1.214 billion. Some of the troubling metrics include the manufacturing production rate of -0.3% and industrial production rate of -6.6%. There is also tremendous bearish sentiment when it comes to the manufacturing PMI and the

services PMI at 47.2 and 46.9, respectively.

Nigeria recently took a leaf out of China’s book and decided to implement circuit breakers in the NSE (Nigerian Stock Exchange). However, the Nigerian stock exchange has been one of the poorer performing bourses in the world with a year-to-date decline of -13.80%, and a 1-year return of 6.77% . The bourse’s 52-week trading range on the low side is 22,330.96 and on the high side is 35,843.39. In this index comprising 178 members, 11 members are up, 26 members are down and the balance is neutral. In the event of a 5% decline in prices, a 30 minute trading stop will be implemented. If there are 2x 5% declines in the day, all trading will cease until the next day. The Chinese abandoned this policy, however, as they saw it as a way to accelerate selloffs by playing to investor and trader fears. Analysts are deeply concerned that Nigeria would attempt to mimic a failed policy that the Chinese themselves have abandoned.

According to the latest financial charts, the Nigerian Naira has weakened substantially against the USD since 2015 with the bureau de change rate rising from approximately 180 to the USD to over 300. The interbank FX market rate has remained steady at 197-199. However, these dual rates which are designed to stabilise the currency are being hampered by runaway inflation, rising unemployment, plunging crude oil revenues and a loss of foreign investor confidence.

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% .-0.10% -0.75%

Swap Rates

CCY/Period

1mth

2mth

3mth

6mth

1yr

USD GBP EUR JPY CHF

0.43 0.51 -0.25 -0.01 -0.79

0.52 0.55 -0.22 0.00 -0.78

0.62 0.59 -0.20 0.02 -0.77

0.86 0.74 -0.12 0.03 -0.73

1.13 1.00 -0.01 0.10 -0.64

CCY/Period USD GBP EUR JPY CHF

2yr

3yr

4yr

5yr

7yr

10yr

0.78 0.75 -0.16 -0.10 -0.86

0.90 0.80 -0.13 -0.12 -0.78

1.03 0.88 -0.05 -0.10 -0.68

1.15 0.99 0.07 -0.06 -0.57

1.37 1.18 0.30 0.03 -0.34

1.62 1.42 0.62 0.19 -0.07

Exchange Rates Major Cross Rates

CCY1\CCY2 USD EUR GBP CHF JPY

Opening Rates

1 USD 1 EUR 1 GBP 1 CHF 1.1161 0.8960

100 JPY

1.4424

1.0122

0.8739

1.2924

0.9070

0.7830

0.7018

0.6059

0.6933

0.7738

0.9879

1.1026

1.4249

114.43

127.72

165.05

0.8633 115.83

Weekly movement of USD

CCY\Date

19.01

26.01

02.02

09.02

16.02

CCY

Today

USD GBP JPY CHF

1.0826

1.0788

1.0852

1.1147

1.1096

0.7587

0.7583

0.7543

0.7732

0.7692

127.40

127.22

130.63

127.74

127.14

GBP EUR JPY

1.0897

1.0924

1.1046

1.0971

1.0955

CHF

1.4424 1.1161 114.43 0.9879

Last Week %Change 1.4417 1.1147 114.60 0.9842

-0.05 -0.13 -0.14 +0.37

February 17 - 23, 2016

financialmirror.com | MARKETS | 15

Having your cake, and eating it Marcuard’s Market update

by GaveKal Dragonomics

Is the world really facing a 2008-style economic and market meltdown all over again? If it is, then the prescription for investors is clear: load up on long-dated US treasuries in expectation of a continued slide in yields, leaven your portfolio with exposure to gold, and prepare for the apocalypse.

Some investors, it appears, have been doing exactly that over the last six weeks, and they have been handsomely rewarded for their caution. The 30-year US treasury has delivered capital gains of 8.75%, while gold is up 15.2%. In contrast the S&P 500 is down 8.3% with other major equity markets suffering even bigger falls.

But what if the end of days is not imminent? In that case, investors face a trickier call. With treasuries now priced for something close to economic catastrophe, the violence of the year-to-date moves would suggest that the time is approaching to rebalance their portfolios. But while a partial rebalancing out of treasuries is a relatively straightforward choice — if we are not facing a 2008 implosion, then it makes sense to position for stabilisation and a potential rebound — deciding exactly what to rebalance into is an altogether tougher proposition.

The obvious choice would be the broad US equity market.

However, since the beginning of the year, the S&P 500 has gained considerable downside momentum. Nor, despite the recent sell-off, are US equities exactly cheap. Indeed, the S&P

500 remains among the most richly valued of all major market indexes. Moreover, with fears over negative interest rates hurting bank shares, the strong US dollar hammering manufacturing earnings, and the energy complex yet to work through the impact of cheaper oil, there are solid reasons to avoid a broad market exposure, even for investors who are inclined to play a near term reversion to the mean.

In that light, a more promising option may be not to rebalance into assets, like the broad US equity market, that have taken a beating over the last six weeks. Instead, investors might want to ask whether it is time to look again at markets that have been beaten down over a longer time span — since the US Federal Reserve signalled the end of its quantitative easing program in mid 2013 and halted asset purchases in late 2014.

The stand-out assets here are commodities, commodityproducers, and commodity-dependent emerging markets.

Clearly investors should hesitate to include oil and oil companies among these rebalancing plays. Yes, the correlation of oil and equities over recent weeks implies that if risk assets stabilize and rebound, the oil price could outstrip equities on the upside. But the current correlation looks anomalous — and temporary. Cheap oil may be a near term negative for markets as energy company earnings suffer and fewer petrodollars get recycled into financial assets. But the resulting longer term wealth transfer from producers to consumers is a clear positive for global growth. What’s more, there are few signs that this transfer is going to reverse any time soon, at least not as long as Saudi Arabia has a clear geostrategic incentive to continue pumping as much oil as it can.

But away from oil, there are signs that low commodity prices may now be prompting the looked-for supply-side response as producers shut down marginal capacity and cancel capital investments. This dynamic has been clearly visible for some time in the iron ore market, where prices have collapsed -77% since February 2011, squeezing all but the most competitive producers. In recent months, however, the capacity closures have also spread to the non-ferrous metals sector, implying that the long slide in prices may be nearing a bottom. Supporting this view is the stabilisation

since December of a range of commodity-linked currencies, including the rupiah, rand, real and Chilean peso. This stabilisation, coupled with the broader weakness of the US dollar over the last two weeks and the YTD outperformance of emerging market equities, at a time of prevailing risk-off sentiment, is highly unusual, and suggests that selling by “weak hands” may now be exhausted and possibly that EMs may be poised for a period of outperformance after years in which they have deeply underperformed.

Thus, for investors who are not convinced that a massive crisis looms around the corner, and who want to position for a stabilisation in asset markets and a tentative return to riskon investment sentiment, it may well be that rebalancing into the commodity complex is a more compelling riskreward proposition than rebalancing into broad US equities.

Such investors should retain sizable positions in longdated US treasuries and gold as a hedge against the worst case, selectively look to pick up oversold commodity-related assets as a mean reversion play, and hold long positions in US high yield, Canadian Reits, MLPs and Indonesian government bonds for their favourable carry. Of course, such a portfolio is a blatant attempt both to have one’s cake and to eat it.

But as London mayor Boris Johnson likes to say: “My policy on cake is pro-having it and pro-eating it.” In the current market environment, that’s a sensible approach.

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

21700 1.4424 1.7518 24.201 6.6871 14.0226 1.1161 2.475 277.24 0.62969 3.0935 0.3846 19.84 8.6052 3.9371 3.9998 76.3588 8.4749 0.9879 26.6379

AUD CAD HKD INR JPY KRW NZD SGD

0.7151 1.3767 7.7876 68.375 114.43 1216.23 1.516 1.4022

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

0.3771 7.8075 30187.00 3.9022 0.7065 0.2987 1508.00 0.3850 3.6410 3.7450 15.7305 3.6729

AZN KZT TRY

1.5475 357.5 2.9513

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

February 17 - 23, 2016

16 | MARKETS | financialmirror.com

Putin, the Pope, and the Patriarch

By Nina L. Khrushcheva Russian President Vladimir Putin’s years as a KGB officer taught him how to take advantage of others. In Steven Lee Myers’ excellent new biography, The New Tsar, the former New York Times Moscow bureau chief describes how, when Putin was posted in East Germany in the waning years of communism, he used his opponent’s weaknesses to advance the Soviet cause.

The historic meeting between Pope Francis and Russian Orthodox Patriarch Kirill in Cuba is another occasion that Putin will seek to turn to his advantage. The meeting is the first between a Roman Pontiff and a Russian Patriarch since Christianity’s Great Schism in 1054, when theological differences split the faith into its Western and Eastern branches. Since then, the Orthodox Church (in Russian, Pravoslavie, literally the “right worship”) has been considered the only correct form of Christianity in Russia, with other denominations dismissed for their support of individualism and insufficient reverence of the human soul.

For nearly a millennium, the animosity has seemed insurmountable. In modern times, it took the threat of nuclear war to spark efforts to mend ties between East and West – and even then the rapprochement was spearheaded primarily by Russia’s secular authorities. In 1963, Soviet Premier Nikita Khrushchev, a devout atheist, sent his son-in-law and adviser Alexei Adzhubei for a historic audience with then-Pope John XXIII. But the real breakthrough came in 1989, when Soviet Premier Mikhail Gorbachev met with Pope John Paul II, a Polish priest who had spent the past decade framing his papacy

as part of the opposition to the Soviet’s atheistic totalitarian rule.

After the fall of the Soviet Union, relations continued to warm, as Boris Yeltsin, the first President of the Russian Federation, visited the Vatican in 1991 and 1998. Objections from the Russian Orthodox Church, however, prevented the pope from accepting invitations to visit Moscow.

Relations between Russia and the Holy See took on new significance after Putin became President. Unlike the officially atheist Soviets, Putin works closely with the Orthodox Church, championing conservative social values at home and seeking to expand Russian influence abroad.

In 2007, the Russian Orthodox Church reunited with a breakaway branch, the Russian Orthodox Church Outside Russia, which had split off in protest against close ties with the Bolsheviks. “The revival of church unity is a crucial condition for revival of lost unity of the whole ‘Russian world,’ which has always had the Orthodox faith as one of its foundations,” Putin said at a ceremony marking the occasion.

The Cuban meeting provides Putin with an opportunity to become the Russian leader who oversaw the start of a dialogue between the Catholic and Orthodox churches. The importance he places on this event is reflected in its very improbability. After all, Putin and Kirill have presided over rising anti-Western animosity and turned the Russian Orthodox Church toward conservatism, nationalism, and intolerance. The Patriarch (rumoured to have served in the KGB himself) has called the war in Syria “a holy struggle,” adding that, “today our country is perhaps the most

active force in the world to combat [it].” In contrast, Francis is not only clearly progressive, refusing even to speak ill of homosexuals; he has repeatedly called for a peaceful solution in Syria.

In allowing the meeting to take place – and there can be no doubt that Putin had given it his blessing – Russia’s president is seeking religious validation and political popularity. The meeting also allows him to needle the West, which he resents for

imposing sanctions on Russia over the conflict in Ukraine and for criticising his intervention in Syria.

Holding the meeting in Cuba is a clever calculation. Given the sanctions on Russia, Europe was out of bounds.

But Cuba, where the Soviet Union provided essential financial assistance in exchange for Fidel Castro’s slavish loyalty, offers a powerful reminder of Russia’s claim to global relevance.

The island’s leaders never denounced Christianity as fully as the Soviets did, and over the last 20 years it has been the site of three papal visits: John Paul II in 1998, Benedict XVI in 2012, and Francis in 2015. Raúl Castro, Fidel’s brother and successor, had already invited the Patriarch to visit, to see first-hand that Communism and Christianity are compatible.

For Putin, the meeting could not come at a better time. Plunging oil prices, the dramatic decline in the value of the rouble, ongoing sanctions, and the increasingly bloody images coming out of Syria have left him desperate for positive news. And what better photo opportunity than having the Vicar of Christ standing side by side with your close spiritual and political ally?

Healing one of Christianity’s oldest divisions is a noble goal. But when Francis met Putin’s Patriarch, he would have been wise to remember the old English dictum: “He who sups with the Devil should have a long spoon.”

Nina L. Khrushcheva 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

Connecting the Red Sea

By Fahd Al Rasheed The Red Sea has played a pivotal role in global trade for millennia. In the time of the pharaohs, it was at the heart of the global spice trade. Today, it is an essential global artery, feeding Western demand for hydrocarbons and facilitating the flow of goods between Europe and booming Asian markets. More than 10% of world trade moves through the Red Sea basin every year, a figure that is set to increase as Egypt doubles the capacity of the Suez Canal.

And yet, with a few exceptions, most of the modern wealth generated by that trade sails rapidly onward, leaving little to show for its passage. There is no reason that should continue to be the case. A regional effort to facilitate trade and build infrastructure has the potential to reposition the countries surrounding the Red Sea as destinations for global investment and international trade.

The Red Sea region, comprising the 20 countries that use the route as their primary trading corridor, is the largest, fastest-growing, and least exploited emerging market in the world. Over the next 35 years, the United Nations expects the region’s population to rise more than twofold, from 620 million today to 1.3 billion. This population growth will be accompanied by one of the world’s highest urbanization rates, creating a burgeoning middle class, which the Brookings Institution estimates will grow from 136 million today to 343 million by 2050.

Over the same period, according to current projections, the region’s GDP will triple, from $1.8 trillion to $6.1 trillion, while trade will increase fivefold, from $881 billion to $4.7 trillion. And yet, as encouraging as these numbers may be, the region has the potential to do much better. Long-term forecasts for the Red Sea region’s share of global trade are comparatively flat. According to HSBC, for example, trade within the Middle East and Africa will account for 10% of the global total in 2050, up only slightly from 9% today.

There are good reasons for this conservative outlook.

Many of the countries in the Middle East and Africa have comparatively limited infrastructure; there are few worldclass deep-water ports in the Red Sea or nearby. Levels of economic development vary widely, from the wealthy countries of the Gulf Cooperation Council to the emerging economies of sub-Saharan and East Africa. And, unfortunately, political and cultural differences do not always encourage cross-border cooperation. A coordinated initiative to facilitate trade within the Red Sea region would have a significant impact on future development, boosting GDP by about 10% to $6.6 billion and increasing trade by nearly 35% to $6.3 trillion, according to research commissioned by King Abdullah Economic City. By providing greater access to international trade for small and medium-size enterprises, the core drivers of growth and job creation, such an initiative would diversify exports and significantly enhance the local share of the global value chain.

Achieving this would require significant improvement of logistics capabilities in the region. The World Bank’s Logistics Performance Index (LPI) scores most of the countries in the Red Sea economic region below 2.6 on its five-point scale. The most logistics-friendly market in the

region, the United Arab Emirates, has a score of 3.54, placing it just within the top 20% of countries in the LPI. The private sector should be at the forefront of the effort to build the infrastructure and logistics links that form the backbone of global trade, install the technologies and systems that maximise efficiency, and provide the training and skills to boost performance. This process alone will create jobs, open career paths, and improve access to education across the region.

National governments will also need to participate, streamlining customs controls, border management policies, and regional trade regulations. A good place to start would be the formation of a Red Sea Trade Agreement, similar to the Trans-Pacific Partnership, outlining specific measures to reduce the costs of cross-border trade and mechanisms to settle disputes between investors and governments.

Another potential initiative would be the formation of a regional infrastructure bank, modeled on China’s Asian Infrastructure Investment Bank. Such an institution would facilitate the efficient distribution of capital to infrastructure development around the region, enhancing national trade capabilities and promoting sustainable economic growth.

The Red Sea region has a unique opportunity to develop into a global center of excellence in trade facilitation, strengthening economic ties throughout the region and building a new growth engine for the global economy. All that is needed is the will to seize it.

Fahd Al Rasheed is Managing Director and Group CEO of King Abdullah Economic City. © Project Syndicate/ Mohammed Bin Rashid Global Initiatives, 2016.

February 17 - 23, 2016

financialmirror.com | WORLD | 17

Putin is no ally against ISIS

By George Soros

The leaders of the United States and the European Union are making a grievous error in thinking that President Vladimir Putin’s Russia is a potential ally in the fight against the Islamic State. The evidence contradicts them.

Putin’s current aim is to foster the EU’s disintegration, and the best way to do so is to flood the EU with Syrian refugees.

Russian planes have been bombing the civilian population in southern Syria forcing them to flee to Jordan and Lebanon. There are now 20,000 Syrian refugees camped out in the desert awaiting admission to Jordan. A smaller number are waiting to enter Lebanon. Both groups are growing.

Russia has also launched a large-scale air attack against civilians in northern Syria. This was followed by a ground assault by Syrian President Bashar al-Assad’s army against Aleppo, a city that used to have 2 million inhabitants. The barrel bombs caused 70,000 civilians to flee to Turkey; the ground offensive could uproot many more.

The families on the move may not stop in Turkey. German Chancellor Angela Merkel flew to Ankara on February 9 to make last-minute arrangements with the Turkish government to induce the refugees already in Turkey to prolong their stay there. She offered to airlift 200,000300,000 Syrian refugees annually directly to Europe on the condition that Turkey prevent them from going to Greece and will accept them back if they do so.

“It is hard to understand why the leaders of both the US and the EU take Putin at his word rather than judging him by his behaviour” Putin is a gifted tactician, but not a strategic thinker.

There is no reason to believe that he intervened in Syria in order to aggravate the European refugee crisis. Indeed, his intervention was a strategic blunder, because it embroiled him in a conflict with Turkish President Recep Tayyip Erdogan that has hurt the interests of both.

But once Putin saw the opportunity to hasten the EU’s disintegration, he seized it. He has obfuscated his actions by talking of cooperating against a common enemy, ISIS. He has followed a similar approach in Ukraine, signing the Minsk Agreement but failing to carry out its provisions.

It is hard to understand why the leaders of both the US and the EU take Putin at his word rather than judging him by his behaviour. The only explanation I can find is that democratic politicians seek to reassure their publics by painting a more favourable picture than reality justifies. The fact is that Putin’s Russia and the EU are engaged in a race against time: The question is which one will collapse first.

The Putin regime faces bankruptcy in 2017, when a large part of its foreign debt matures, and political turmoil may erupt sooner than that. Putin’s popularity, which remains high, rests on a social compact requiring the government to deliver financial stability and a slowly but steadily rising standard of living. Western sanctions, coupled with the sharp decline in the price of oil, will force the regime to fail on both counts.

Russia’s budget deficit is running at 7% of GDP, and the government will have to cut it to 3% in order to prevent inflation from spiraling out of control. Russia’s social

security fund is running out of money and has to be merged with the government’s infrastructure fund in order to be replenished. These and other developments will have a negative effect on living standards and opinions of the electorate before the parliamentary election in the fall.

The most effective way that Putin’s regime can avoid collapse is by causing the EU to collapse sooner. An EU that is coming apart at the seams will not be able to maintain the sanctions it imposed on Russia following its incursion into Ukraine. On the contrary, Putin will be able to gain considerable economic benefits from dividing Europe and exploiting the connections with commercial interests and anti-European parties that he has carefully cultivated.

As matters stand, the EU is set to disintegrate. Ever since the financial crisis of 2008 and the subsequent rescue packages for Greece, the EU has learned how to muddle through one crisis after another. But today it is confronted by five or six crises at the same time, which may prove to be too much. As Merkel correctly foresaw, the migration crisis has the potential to destroy the EU. When a state or association of states is in mortal danger, it is better for its leaders to confront harsh reality than to ignore it. The race for survival pits the EU against Putin’s Russia. ISIS poses a threat to both, but it should not be overestimated. Attacks mounted by jihadi terrorists, however terrifying, do not compare with the threat emanating from Russia.

ISIS (and Al Qaeda before it) has recognised the Achilles’ heel of Western civilisation – the fear of death – and learned how to exploit it. By arousing latent Islamophobia in the West and inducing both publics and governments to treat Muslims with suspicion, they hope to convince young Muslims that there is no alternative to terrorism. Once this strategy is understood, there is a simple antidote: Refuse to behave the way your enemies want you to.

The threat emanating from Putin’s Russia will be difficult to counter. Failure to recognise it will make the task even more difficult.

George Soros is Chairman of Soros Fund Management and of the Open Society Foundations. © Project Syndicate, 2016. www.project-syndicate.org

2016 Presidential Primaries: Which candidates are U.S. Muslims supporting?

Some 73% of Muslim voters in the United States say they will go to the polls in state primaries, but with Islamophobia a top issue, who will they vote for? Also, 67% plan to support Democratic candidates with a mere 15% supporting Republicans according to recent research conducted by the Council on American-Islamic Relations (CAIR). Even though Donald Trump wants to ban more Muslims entering the United States, he is still the most-liked Republican candidate among American-Muslims. Overall, Hillary Clinton and Bernie Sanders are the two most popular candidates among Muslim voters in the state primaries, garnering 52% and 22% of support, respectively.

CAIR surveyed 2,000 registered Muslim voters in California, New York, Illinois, Florida, Texas and Virginia. (Source: Statista)

February 17 - 23, 2016

18 | WORLD | financialmirror.com

Solidarity with the sharks

By Bradnee Chambers It has long been said that we know more about the Moon than we do about the oceans. After all, 12 people have walked on the surface of the Moon, but only three have been to the deepest part of the sea. But it now seems that we know even less about the oceans than we thought – and we may well have been doing even more damage than we realised.

A recent study found that fishing catches have been substantially underestimated for years. This should grab the attention of both regional fisheries management organisations, which oversee commercial fishing in the high seas, and those monitoring compliance with the United Nations Convention on the Conservation of Migratory Species of Wild Animals (CMS), which covers endangered migratory species.

According to the CMS, the species demanding the strictest protection today – listed in Appendix I – include great white sharks, five species of sawfish, and eleven species of ray. The CMS meetings on migratory sharks, set to take place this month in San Jose, Costa Rica, represent an important opportunity for advancing regulations to ensure the conservation and sustainable use of these species, so that they can continue to fulfill their critical ecological role as apex predators.

At their last conference, held in Quito, Ecuador, in 2014, the CMS parties added several shark species, the protection of which governments are encouraged to secure through the negotiation of international agreements. One such agreement, reached in 2010 and so far signed by 39 parties, is the Memorandum of Understanding on the Conservation of Migratory Sharks.

Despite being legally non-binding, the initiative provides

an important forum to reach agreement on policies ensuring that any exploitation of migratory shark populations is sustainable.

But, as the recent study on fishing catches underscores, we often lack the accurate data needed to determine what level of consumption is sustainable. Without it, the precautionary principle – if in doubt, don’t do it – should be applied. The problem is that the absence of reliable data can make the need to protect a species seem more abstract and less urgent, weakening governments’ capacity to resist other, more immediate demands, especially the need to protect relevant livelihoods.

In the meantime, consumption of the oceans’ resources continues to surge.

Over the last two generations, as the world population has doubled to 7.3 billion, the amount of fish taken from the oceans each year has grown even faster, from 20 million metric tons in 1950 to 77 million in 2010. And these are only the official figures, which do not account for illegal, unregulated, and unreported catches.

Given that sharks are a commercially valuable secondary catch of fisheries (usually those targeting tuna), regional fisheries management organizations tend not to elaborate specific regulations for them. It is thus easier for sharks to slip through the gaps in international law than to elude fishermen’s nets – especially the massive specialised nets that fisheries employ nowadays.

Indeed, unlike the artisanal fisherman of the past, factory ships and modern technologies have enabled the massive scaling up of catches to satisfy demand not only locally, but in distant markets as well. Given this, the addition of so many species to the endangered list in recent years should come as no surprise.

In this challenging environment, initiatives like the Memorandum of Understanding become even more crucial as a means of encouraging (often region-specific) action.

Some signatories, including certain Pacific island states, have declared their huge exclusive economic zones to be shark sanctuaries and have established areas where all fishing is prohibited. For their part, Australia, New Zealand, and the United States have created observer schemes and systems to assess and manage fish stocks.

Furthermore, in response to the outcry at the wasteful practice of shark finning, the European Union now requires

that all sharks are landed intact, thereby preventing the removal of fins from sharks at sea and the disposal overboard of their less valuable bodies.

This has been reinforced by the Chinese government’s pledge not to serve shark fin soup, considered a delicacy, at official banquets. Even freight companies and airlines have been spurred to act, with a growing number now refusing to transport shark fins.

While such progress should be applauded, there is a long way to go. For example, efforts must be made to address bycatch (the trapping of sharks in nets intended for other fish, especially tuna). The key is for all interested parties – from fisherman and conservationists to governments and international forums – to work together through the Memorandum of Understanding and similar initiatives.

The adverse economic impact implied by such efforts is not nearly as large as one might expect; in many cases, it could be more than offset by other kinds of commercial activities that take advantage of live sharks. The thriving ecotourism operations in the Maldives, Kenya, South Africa, Fiji, and some Central American and Caribbean countries are a case in point. As a tourist draw, seen at close quarters in its natural habitat, a manta ray can be worth thousands of dollars; dead on a slab at the quayside, its flesh and gills fetch a fraction of that.

The short-term thinking that impedes environmental conservation efforts today could prove devastating; indeed, to some extent, it already has. If we continue to deplete critical ecosystems, they will soon become unable to regenerate.

Only with a concerted, cooperative, and urgent effort to preserve marine ecosystems and protect the livelihoods of those who depend on them will the oceans be able to continue to feed – and fascinate – the world for generations to come.

Bradnee Chambers is the Executive Secretary of the Convention on the Conservation of Migratory Species of Wild Animals under the United Nations Environment Programme. © Project Syndicate, 2016. www.project-syndicate.org

Zika and reproductive rights

By Francoise Girard Mosquitoes know no boundaries, and neither does fear.

As public-health experts grapple with the Zika virus, panic continues to spread around the world. Yet the crisis has brought to light two important truths.

The first revelation is how badly degraded public health systems have become, across Latin America and beyond.

This did not happen by chance. In large part, it is the result of pressure on developing countries by concessionary lenders, such as the International Monetary Fund, to cut social sector expenses, including health spending, beginning in 1980. In Brazil and elsewhere, state authorities could have deployed well-known and cost-effective measures to control mosquito-borne diseases, but they did not. Their most affected citizens, who tend to be poor, have been forced to live with the consequences.

Second, the Zika epidemic has revealed, with particular poignancy, another dire threat to public health: the denial of women’s reproductive rights. Governments are shirking their responsibility in this regard too, often in a grotesque manner. The reported spike in cases of microcephaly – a birth defect – among infants in Zika-affected areas led the governments of Brazil, Colombia, Ecuador, and El Salvador to warn their female citizens “not to become pregnant.”

This message, which places the blame and burden of the Zika epidemic on women, is as unjust as it is unreasonable.

It is also toothless, as many women in the region do not have access to contraception or safe abortions. The Zika crisis has highlighted an obvious reality: Not providing women with reproductive health information and services places their lives – and those of their children – at grave risk.

Latin America’s abortion laws are among the world’s most restrictive. El Salvador, for example, bans abortion in all circumstances and has incarcerated women who have gone to emergency rooms after miscarriages, charging them with seeking illegal abortions. Contraception can also be expensive or difficult to access across the region, despite high rates of teenage rape and pregnancy. The result, especially with the addition of the Zika virus, is a recipe for tragedy.

Brazil, the Latin American country hit hardest by the virus so far, is emblematic of the problem: Abortion is allowed only in cases of rape, danger to the woman’s life, or in the case of fetal anencephaly (the absence of a major portion of the brain). In response to the Zika crisis, Brazil should immediately allow abortion in cases of suspected microcephaly as well.

The loosening of restrictions, however, should not stop there. Over the last few years, conservatives in the Brazilian Congress have been trying to place limits on abortion in cases of rape. These efforts – which demonstrate complete disregard for the rights and dignity of women – must end.

Instead, women’s right to seek an abortion should be expanded – and quickly.

Governments must also ensure that services are accessible and affordable. Wealthy Brazilian women can afford to pay private health providers for safe abortions. Poor women are forced to resort to poorly trained and equipped

providers who operate in unsanitary conditions, sometimes as part of criminal networks. In September 2014, two women died in Rio de Janeiro following clandestine abortions. In the region overall, 95% of abortions are unsafe.

In Latin America and the Caribbean, 62% of women aged 15-49 want to avoid a pregnancy. But nearly a quarter of these women are not using an effective method of birth control. Expense is only one barrier for poor women and girls; another is the lack of information. Men and women need comprehensive sexuality education, so they are informed about their reproductive health and family planning options and know where they can get modern contraceptives. Recent evidence suggesting that Zika might be transmitted sexually adds extra urgency to making male and female condoms and other contraceptives widely available.

The movement for reproductive rights has a long history in Brazil and in other parts of Latin America. Over the last several months – even before Zika – feminists had been taking to the streets in outrage at the lack of access to safe and legal abortions. The Zika crisis may mark a turning point in the fight for women’s health and equality. It is certainly a wake-up call for governments everywhere to rebuild and strengthen public health systems, and to guarantee all women and girls access to contraceptives and safe abortions. Women and girls around the world know the alternative – and it is terrifying.

Françoise Girard is President of the International Women’s Health Coalition. © Project Syndicate, 2016. www.project-syndicate.org

February 17 - 23, 2016

financialmirror.com | WORLD | 19

Vaccines versus superbugs

By Jim O’Neill The outbreak of the Zika virus, like Ebola before it, has highlighted the risk that infectious diseases can pose to the health of entire countries – and the importance of vaccines to the fight against fast-moving epidemics. Indeed, efforts are already underway to find ways to inoculate people against both viruses.

But vaccines also have a crucial role to play in protecting us against a far deadlier and far more predictable threat: drugresistant infections.

In contrast to unexpected, rapidly spreading outbreaks such as the Zika epidemic, antimicrobial resistance is like a slow-motion car crash that has already begun. Resistant pathogens cause about 700,000 deaths every year. If we fail to take the necessary precautions, they will be killing some ten million people a year by 2050.

Developing new antibiotics and putting in place methods to extend the lifespans of

existing medications will help maintain a supply of effective treatments. But vaccines offer a unique opportunity. By reducing the number of infections, they limit the need for medication.

And because the use (or overuse) of antibiotics is what leads to drug resistance, the pressure on the pipeline of effective treatments will be alleviated.

Unfortunately, the value that vaccination can provide in this area has yet to be properly recognised. As a result, we are not moving fast enough to develop the types of vaccines that could be used to prevent antimicrobial resistance.

Vaccine development takes a long time, often more than ten years. It is a high-risk endeavour, with the vast majority of potential vaccines failing to reach the market. Consequently, many vaccines are not commercially viable, even if they would be useful for society.

Indeed, there is no vaccine available for any of the three resistance threats that the US Centers for Disease Control and Prevention considers “urgent”: Clostridium difficile, carbapenem-resistant enterobacteriaceae, and drug-resistant Neisseria gonorrhoeae. Nor are there enough candidate vaccines against these pathogens undergoing clinical trials.

There have also been problems developing vaccines to combat tuberculosis or – more worrying still – multidrug-resistant TB. The World Health Organisation has warned that the Sustainable Development Goal of eradicating TB by 2035 will not be achieved unless new drugs, better diagnostics, and improved vaccines are developed. And yet a

new vaccine remains many years away, especially given that funding for TB vaccine research has declined in recent years.

Even vaccines that are already available are not being used widely enough to have a large impact on antibiotic use and resistance.

Every year, infections caused by the Streptococcus pneumoniae bacteria kill more than 800,000 children under the age of five.

These deaths are completely preventable – by a jab that is already available in many parts of the world, the pneumococcal conjugate vaccine. Universal vaccination would save millions of lives and prevent 11.4 million days of antibiotic use per year in children younger than five. Similarly, the rotavirus vaccine could be used to prevent outbreaks of diarrheal diseases, a chief cause of child mortality in developing countries and a major driver of antibiotic use.

Vaccines also have an important role to play in protecting livestock and fish from infections, optimizing the application of antibiotics in agriculture – where their overuse is an important cause of growing resistance.

Maximising the potential of vaccines to fight antimicrobial resistance thus requires the wider application of existing vaccines in humans and animals. But it also entails developing new vaccines, which, in the short-term, could be kick-started by a $2 billion Global Innovation Fund for earlystage research in vaccines and other viable alternatives to antibiotics.

And in areas where research and development is not an attractive proposition, developers must be provided an opportunity

to make a return from useful products.

Depending on the characteristics of different products, possible interventions would include advance market commitments and market-entry rewards.

Vaccines hold the potential to have a huge impact on drug resistance, if they are included as part of a broad series of interventions to combat the problem.

Fortunately, awareness of this challenge is starting to take root.

At the World Economic Forum’s annual gathering in Davos last month, 85 companies, including vaccine developers, large pharmaceutical companies, diagnostic developers, and biotech firms, committed to further action to reduce drug resistance. And later this year, the World Health Assembly, the G-7 and G-20 summits, and the UN General Assembly will all address the topic.

The momentum now gathering in the public and private sectors is creating an opportunity that must not be missed.

Jim O’Neill, a former chairman of Goldman Sachs Asset Management, is Commercial Secretary to the UK Treasury, Honorary Professor of Economics at Manchester University, a visiting research fellow at the economic think tank Bruegel, and Chairman of the Review on Antimicrobial Resistance. © Project Syndicate, 2016. www.project-syndicate.org

What beats corruption?

By Lucy P. Marcus Corruption is a global scourge, sometimes becoming so deeply ingrained in countries that combating it seems impossible. In January, Transparency International released its annual Corruption Perceptions Index, noting that the problem “remains a blight around the world.”

The International Monetary Fund, for example, has just warned Ukraine that its $40 billion financial bailout could be cut off, owing to fears that corrupt officials will steal or squander the funds. And, during his recent visit to Mexico, Pope Francis called on the country’s leaders – several of whom (including the president and his wife) are embroiled in conflict-of-interest scandals – to fight endemic corruption But change is possible, as we have seen in the world of corporate governance in the last couple of years. Not even a decade ago, companies were run from “black box” rooms controlled by a few people whose authority seemed untouchable. Shareholder activists who thought otherwise were regarded as a nuisance – so many dreamy do-gooders who would never change anything. The only thing that would ever matter, “realists” argued, was return on investment, regardless of the cost to people, the planet, or economies.

The realists were wrong. Since the beginning of the year, Berkshire Hathaway’s Warren Buffett and JPMorgan Chase CEO Jamie Dimon have been holding meetings with other business leaders to discuss possible improvements in corporate governance. On February 1, Laurence Fink, the chief executive of investment firm BlackRock, wrote a letter to some of the world’s largest companies in which he issued a stern warning against short-termism and demanded that companies lay out clear strategic plans.

The following day, the corporate lawyer Martin Lipton, a

longstanding critic of shareholder activists, released a memo entitled “The New Paradigm for Corporate Governance.”

Lipton recognised that long-term active investors are here to stay and that companies need to adhere to higher environmental, social, and governance standards and place greater emphasis on corporate social responsibility.

Similarly, Norway’s sovereign wealth fund recently announced that it will hold companies in its portfolio accountable for their human rights records. And women, once told that gender parity in the boardroom might be achieved within a generation, will benefit from quota legislation adopted in the past year in Italy, Germany, and France.

None of this happened overnight. Change is coming faster now, but only as the result of momentum that has built over time. Whistle blowers would not be silenced, reporters investigated bad corporate actors, and investors were held accountable for their choices (leading them to act like Norway’s wealth fund). The cumulative, mutually reinforcing effect of these and other factors has brought about change that only recently seemed unimaginable.

Clearly, there is still a long way to go; no one is hanging up a “mission accomplished” banner. But the process of change provides a roadmap for the battle against corruption.

There was a time when only a few NGOs voiced concerns about corruption, and every once in a while a couple of brave journalists managed to write about what they, and others, observed. Fighting corruption seemed like a Sisyphean task, with little to show for hard, lonely work.

But those voices have multiplied and strengthened, becoming a more powerful chorus.

Governments are passing stricter legislation, like the UK Bribery Act 2010, and broad oversight mechanisms such as the United Nations Convention against Corruption encourage further legislation and enforcement. Companies are under genuine pressure to adhere to anti-corruption rules, and plenty of high-profile cases – from Walmart’s corruption scandal in Mexico (involving violations of the US Foreign Corrupt Practices Act) to those in the crosshairs of law enforcement now, such as Petrobras, Rolls-Royce,

TeliaSonora, and FIFA – should boost deterrence.

And public officials are being prosecuted as well.

Guatemala’s former president, Otto Pérez Molina, was forced to resign and was subsequently jailed for corruption.

Indonesia’s House Speaker Setya Novanto was also forced to resign, after he was caught attempting to extort money from a subsidiary of the mining company Freeport-McMoRan. And Indonesia’s Special Court for Corruption Crimes has just sentenced the country’s former minister of energy and mineral resources, Jero Wacik, to four years in prison.

Journalism has played a larger role as well. Reporters have gained more knowledge and more outlets to share their stories, including social media. And they are covering people who, in the face of blatant corruption, are no longer willing to be silent. For example, in Moldova, Europe’s poorest country, a billion-dollar banking scandal has spurred a wave of public protests calling for fresh elections.

This is the kind of momentum that signals real change.

Indeed, many government officials are taking principled stands. In Ukraine, Aivaras Abromavicius, resigned as Minister of Economic Development and Trade, citing highlevel obstruction of anti-corruption measures.

And crackdowns on official corruption do make a difference. Luxury-goods sellers around the world, such as Prada and LVMH, cite China’s curbs on bribery as a reason for weaker sales. Earlier in the year President Xi Jinping said he wants China to be a country where “nobody dares to be corrupt.” (Of course, China’s policy on corruption is not without worrying political overtones in itself.)

Corruption thrives wherever power, secrecy, and repression combine. It is undone by civic mobilisation, sunlight, and vigilant enforcement. Those who view it as intractable should take note of the similar process that has begun to transform corporate governance.

Lucy P. Marcus is CEO of Marcus Venture Consulting. © Project Syndicate, 2016. www.project-syndicate.org

February 17 - 23, 2016

20 | BACK PAGE | financialmirror.com

Is oil becoming stranded?

By Paul Spedding The conventional wisdom regarding the recent plunge in the price of oil is that we are seeing a repeat of the 1985-1986 collapse, when Saudi Arabia ramped up production as part of a dispute with other members of the OPEC cartel. This time, the thinking goes, Saudi Arabia is doing the same in response to its loss of market share to shale-oil production in the United States.

But there is another parallel that is even more relevant – with important implications for the long-term price of oil.

The recent collapse is reminiscent of a similar dive in the price of coal – which crashed from a brief high of $140 a ton in 2008 to about $40 a ton today – which led some deposits to become “financially stranded,” meaning that the cost of developing them outweighs potential returns.

The drop was the result of long-term environmental policies, including programmes aimed at mitigating climate change, which undercut demand for coal. Efforts to improve air quality in China, US carbon and mercury emissions standards, cheaper natural gas, and growing investments in renewable energy have all eroded coal’s share of the energy market.

A similar mechanism may be at work in the oil market. As pressure grows on governments to take action to combat climate change, demand for fossil fuels is likely to drop, which could result in prices remaining depressed for longer than the industry anticipates – perhaps forever.

To be sure, some critics – including the British economist Dieter Helm – dismiss the possibility that assets can become stranded. They contend that the absence of serious international efforts to reduce emissions, the cyclical nature of petroleum markets, investors’ short time horizons, and the fact that most oil assets are state-owned make it unlikely that policies to mitigate climate change will have an impact on oil prices.

These arguments are easily rebutted. For starters, while the international community is unlikely to agree any time

soon on a global mechanism for putting a price on carbon emissions, other types of environmental policies have already had an effect on demand for oil.

That is a crucial development, because even small shifts in supply or demand can cause large swings in the price of oil.

The drop from $120 per barrel in 2014 to under $35 today is the result of a 2% change (roughly two million barrels a day) in the supply-demand balance. That reflects Saudi Arabia’s output increase of more than a million barrels a day, as well as mandated efficiency measures in the European Union, partly motivated by efforts to cut carbon dioxide emissions, which have contributed to a comparable drop in demand – by about 1.5% a year. Similar measures can be expected elsewhere as governments strive to meet the targets pledged under the Paris climate agreement.

Second, though oil prices may be cyclical, structural changes in energy markets are likely to undermine price increases. Alternative transport technologies, including electric cars, static batteries, and hybrid solutions, are already

threatening to make oil less necessary.

Third, while many investors do have short time horizons, development of resources in the oil industry can easily extend to more than a decade. That means that the “safe” cash flow from today’s assets can end up invested in the next generation of high-cost assets that are at a far greater risk of stranding.

Finally, the fact that many oil properties are state-owned does not protect investors who have put their money into publicly traded assets.

Governments may have strategic reasons to hold onto unprofitable assets, but investors who own shares in partly privatised state firms do not.

Furthermore, the first victims of any long-term price decrease will be highcost producers, many of which are publicly traded, leaving investors more – not less – exposed.

Commodity markets have repeatedly proved vulnerable to expectations that prices will fall. Given the political pressure to mitigate the impact of climate change, smart investors will be watching closely for indications of policies that will lead to a drop in demand and the possibility that their assets will become financially stranded.

It is dangerous to assume that stranding can occur only over the long term. Doing so risks putting investors in the same position as the last shareholders in Peabody Energy, the world’s largest private coal company, which is teetering on the edge of bankruptcy. The fact that Peabody Energy is still operating, and thus technically not stranded, is probably of little comfort to its owners.

Paul Spedding, former Global Co-Head of Oil And Gas Research at HSBC, is an adviser to Carbon Tracker.

© Project Syndicate, 2016. www.project-syndicate.org

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