Global Business Outlook Issue 03 2020

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Volume 04 Issue 03 | 2020

CREATING A SAFE HAVEN Strategic guidance is the first step to secured investments

FOR KUWAITI INVESTORS

FINANCE | TECHNOLOGY | ENERGY | REALTY | BRANDS | EDUCATION | GBO AWARDS

2 | December 2020 | Global Business Outlook

Editor's note December 2020

Transforming Kuwait’s investment landscape Despite all crises, the market sentiment for Kuwaiti equities remains positive. Kuwait’s fund management industry is underpinned by a host of investment-specific services. Al Safat Investment Company which is licenced by the Capital Markets Authority is at the top of its game for transforming Kuwait's investment landscape. The company's trailblazing approach to fund management points to its wholesome understanding of Kuwait's market dynamics and what investors need to do to achieve rewarding returns.

Last year, Al Safat Investment Company outperformed the Kuwait Boursa Premier and main indexes by following its dynamic long-term strategy that can be shifted from aggressive to conservative based on market conditions. The cover of the current issue is featuring the Chairman of Al Safat Investment Company Abdullah Hamad Al Terkait who discusses the company's approach to securing investor interest, investment portfolio diversification, unique wealth management strategies and a broad outlook for the Kuwaiti funds market.

The issue also seeks to capture changes in other parts of the world. An example of that is China and the UK experiencing a boom and bust in their own ways. For China, the emergence of healthtech startups is leading to a new fortune, and technology behemoths are contributing to the discovery of the vaccine. For the UK, nearing the Brexit transition period coupled with the coronavirus pandemic is having a pulsating effect on its financial market and economy. In other aspects, we explore Apple’s technology trajectory over the years; Argentina’s fortunate support from the IMF; and Oman’s least explored gem—solar. In short, the issue is a collection of new developments in countries and regions of the world.

Kimberly Rivers Editor kimberly@gbomag.com

Global Business Outlook | December 2020 | 3

Content December

A trailblazing approach to fund management

Safat Investment Company is 24 Aldiversifying investors portfolios for rewarding returns

Features

Analysis

06 | AGOA over other bilateral agreements

10 | How is Japan re-

50 | Will Brazil's telecom

emerging from despair?

see new reforms?

new plan for revival

36 | Banks are closing

74 | A grand fortune for

44 | Apple's trillion

accounts of UK expats

China's healthcare

dollars trajectory

4 | December 2020 | Global Business Outlook

16 | Argentina needs

Interview Banking

32

Tom McGillycuddy In line with impact investing

Tickr app allows investors to make meaningful investments Technology

David Hodkinson A gaming-friendly challenger bank For operators and customers in gaming and crypto markets

61

Insight Technology

Surging interest is making way for a bitcoin future in Egypt

56

Director & Publisher Krushikesh Raju Editor Kimberly Rivers Production & Design Brian Williams David Brenton Ian Hutchinson Shankara Prasad Editorial Stanley Rogers Rachel Taylor, Lucas Cooper Alice Parker, Tom Hardy Business Analysts Ryan Anderson, David Pereira, Nick Luis, Ron Athelstan Business Development Manager Benjamin Clive, Mike Lloyd Marketing Danish Ali Research Analysts Richard Sam, Sophia Keller

Regulars

Accounts Manager Edyth Taylor

Editor's Note News

Press & Media Contact Craig Penn Registered office: Global Business Outlook Magazine is the trading name of Business Outlook Media Ltd Winston House, 2 Dollis Park, London, England, N3 1HF Phone: +44 (0) 207 193 3740 Fax: +44 (0) 203 725 9247 Email: media@gbomag.com

Global Business Outlook | December 2020 | 5

Economy Export-led growth

Analysis

AGOA has an edge over bilateral trade agreements The Act is miles better in helping Africa to improve its export-led business and strengthen economic ties with the world’s superpower

6 | December 2020 | Global Business Outlook

Analysis \ Duty-free access

South Africa’s sector growth in 2019 Automobiles: Agriculture:

$553 million $364 million

Rohit Baruah

B

i lateral trade agreements have assisted several African countries over time to propel economic growth. This year, the US and Kenya established trade talks over a possible bilateral free trade agreement that could lead up to a significant deal between both countries. But the deal has the potential to trigger an economic imbalance in small countries that might not be of enough interest to the US—dwarfing their economic growth. This suggests that a shift from regional preferential trade to bilateral trade is not preferred by the majority of those countries.

In 2012, former American President Bill Clinton at a Brookings forum on Africa Growth and Opportunity Act said, “No country can work itself out of poverty with aid alone,” pointing to the fact that the Act is unique in its approach. In Africa, the European Union has established a bilateral trade agreement, while China already has massive expansion and infrastructure projects in 35 African countries. India and Brazil have also grown their influence on the continent in recent years. Despite these countries' prominence on the continent the US still has scope to build a real, sustainable bilateral trade deal with Africa.

The approach is unique: trade over financial aid The African Growth and Opportunity Act was signed by the former American President Bill Clinton in 2000—paving the path for the sub-Saharan economies to flourish with unilateral duty-free access for 6,500 products from Africa to the US. Because the sub-Saharan region is affected by unemployment, civil war and other related problems, it is believed that the African Growth and Opportunity Act will strengthen its countries by reviving the private sector and creating more job opportunities in the region. In addition, the regional approach for the trade agreement by Bill Clinton has empowered developed countries like South Africa and smaller countries like Lesotho on the other end of the spectrum. The technique is different from bilateral agreements as it aligns with trade—and not by means of aid.

Global Business Outlook | December 2020 | 7

Economy Export-led growth

For most part of the years, the African Growth and Opportunity Act has been in jeopardy despite having been extended twice. It has been extended until 2025 because of factors such as imposing charges on aluminium and steel products followed by suspension of duty-free access for apparel imports from Rwanda. Even if there is a small problem in the African Growth and Opportunity Act, it could create disturbances in the sub-Saharan region, especially when the countries are striving to recover from the residual effects of the coronavirus pandemic.

The US roughly imported 10 percent of its wine from South Africa three years ago, which indicates a sizable share in terms of global competitiveness Building up export business for South Africa and others The African Growth and Opportunity Act has played a crucial role in improving export-led job creations in several sectors across South Africa. Last year, the country’s automobiles and agriculture sectors grew by $553 million and $364 million respectively. More specifically, agricultural exports such as wine and citrus in the country have been backed by the African Growth and Opportunity Act. The citrus export business is considered one of the most labour intensive jobs in the agricultural sector.

A report published by the University of South Africa stated that the US roughly imported 10 percent of its wine from the country three years ago, which indicates a sizable share in terms of global competitiveness. It also indicates that a wine-producing market worth $8.1 million could slip away from South Africa’s

8 | December 2020 | Global Business Outlook

grip if the benefits resulted from the African Growth and Opportunity Act are potentially replaced with reciprocal tariffs through the Most Favoured Nation tariff system—where countries might impose tariffs on imports from members of the World Trade Organisation, unless they are part of a preferential trade agreement. To assess the kind of impact the replacement might have on the industry, it seems that the process could trigger a 14 percent loss toward wine export revenue. This in turn might even affect direct and indirect jobs provided by the industry for nearly 300,000 people.

The African Growth and Opportunity Act supports smaller countries too. For example, Lesotho’s textile and apparel exports had dramatically increased only after the Act came into effect—despite the industry being established between late 1980s and early 1981. The industry has flourished exponentially over the past few years—which has benefitted 13 percent of the population in the country by providing 40,000 jobs. It became the largest private sector employer in the 1990s, and export garments worth $250 million in the country were supplied to classic US brands such Old Navy, Levi’s and others—only because of the African Growth and Opportunity Act. Now the Act’s duty-free access is driving competitiveness in the African garment industry, which is not covered by a trade programme known as the Generalised System of Preferences. In fact, the expiration of the World Trade Organisation’s multifiber agreement in 2005 has hampered the industry’s competitive edge because it ended export quotas and intensified competition from garment manufacturers in Asian countries like China. The subSaharan region’s textile and apparel sectors have evolved due to the duty-free access.

Mainly, the textile apparel sectors involve employment of low-skilled workers.

Analysis \ Duty-free access

AGOA creates ‘sustainable structural changes’ The reason for the African Growth and Opportunity Act becoming more popular compared to any other bilateral trade agreements is that it can bring ‘sustainable structural changes’ to the continent. The statistics published by the World Bank in 2108 indicate that if the African Growth and Opportunity Act is terminated then it would lead to a 1 percent loss in income for Lesotho by the end of this year. This would be in addition to a 16 percent decrease in textile and apparel. The World Bank also pointed out that trade facilitation measures that decrease the average trade costs by 2 percent annually is an important factor to consider because it would remove the adverse effects on income—which might occur from the elimination of the African Growth and Opportunity Act. That said, the African Growth and Opportunity Act is providing consistent support to the industry, allowing it to thrive in the coming years.

Notably, countries like Lesotho and Namibia have benefited from the African Growth and Opportunity Act for over two decades now. Namibia which has a huge livestock market comprising more than 7.7 million cattles has been able to remain a buyout in the global meat industry after it became the first African country to export beef to the US last year. Its more than a decade’s worth of effort includes stringent rules and regulations in accordance with the logistics sector. Now the country is expected to export 860 tons of beef to the US by the end of the year, increasing to 5,000 tons by 2025.

In the big picture, the African Growth and Opportunity Act has led to the employment of more than 300,000 people on the continent, transforming sub-Saharan African to become one of the fastest growing regions in the world, observed a report published by Brookings Institution. That said, it has also supported

120,000 jobs in the US, mainly in companies such as John Deere and Caterpillar, who are pioneers in manufacturing machinery units, according to the US Trade Representative.

The US will decide the future of AGOA Africa has great potential for business and the African Growth and Opportunity Act has simply encouraged it to capitalise on that potential. Now African businesses are making huge profits on the back of the US purchasing $3.7 billion worth in oil from Nigeria and $6.4 billion in vehicles from South Africa.

It also purchased oil and textiles worth $736 million and $506 million from Central African country Chad in 2017, according to the US International Trade Commission and the US Department of Commerce.

The Trump-led administration had questions regarding the African Growth and Opportunity Act and whether the US will benefit from future agreements with African countries. However, it is anticipated that the US might approach international affairs in new light with the Biden-administration. What might become of the trade agreements between the US and Africa is to be seen with time.

In 2012, former American President Bill Clinton at a Brookings forum on Africa Growth and Opportunity Act said “No country can work itself out of poverty with aid alone”

Global Business Outlook | December 2020 | 9

Economy Economic assessment

How is Japan re-emerging from despair?

Feature

An assessment was carried out by the government only to find out that the economic contraction had stopped in August

10 | December 2020 | Global Business Outlook

decline witnessed by the country in five years.

Previously, Japan had witnessed an economic contraction during the second quarter of 2014.

The International Monetary Fund (IMF) in its latest forecast said that Japan's economy will decline by 5.3 percent in 2020.

The pace of decline in exports is lessening

GBO correspondent

I

n October, the Government of Japan carried out a reassessment of the economy which found that the economic contraction had stopped in August. Based on the improved performance of a few key indicators, the government had upgraded its assessment for the first time since May 2019. The Cabinet Office said that the economic indicators which measure a range of data including factory output, employment and retail sales numbers, rose a preliminary 1.1 percentage points from the previous month to 79.4 percentage points in August. This data suggests that the Japanese government has upgraded its assessment and even concluded that the economy grew by 0.6 percent in August.

As the third largest economy in the world, Japan has recorded its worst performance in May this year. Positively, the economy since then has gradually increased and is moving upward in its growth trajectory. Japan’s economy also contracted an annualised 6.3 percent during the fourth quarter of 2019, primarily due to a sales tax hike that affected consumer and business spending. It was the first economic

Last year, Japan exported $705.7 billion worth of goods globally and the items shipped included metals, vehicle parts, industrial printers, refined petroleum, LCDs, rubber tyres, air pumps, gold, telephones, thermostats among others. The country had exported goods worth $349.2 billion in the first seven months of 2020 and more specifically, exports in August amounted to $49 billion, which points to a 15 percent drop. However, the country's exports in the previous month that recorded a drop of 19 percent and in the two months prior to that it had recorded a drop of 26 percent and 28 percent respectively. Statistically, the recorded drop directly aligns with the 21st consecutive monthly drop in overseas sales on the back of the deteriorating demand in goods and services as part of the pandemic’s negative impact on supply chain.

With that, the pace of decline in exports lessened as countries ease their lockdown rules and resume economic activities including global trade. The 15 percent drop in exports was outpaced by more than 20 percent decline in imports. In fact, trade across several product categories had declined with exports of transport equipment such as vehicles lowering as much as 23 percent. Even electronic devices such as computers and phones had recorded a strong demand. But the silver lining for Japan is that its exports to China had increased by 5 percent during that period. It is important to take into account that Japanese exports to China had increased by 8 percent in July, while exports to the US decreased by 21.3 percent.

Even exports to Western Europe fell by 15.3 percent, South Korea by 13. 8 percent and

Global Business Outlook | December 2020 | 11

Technology Economic assessment

In August, factory output in Japan had increased 1.7 percent from the previous month.

This is attributed to its growing production of automobiles and car parts as well as minerals such as iron, steel and non-ferrous metals

Hong Kong by 4 percent, observed the United Nations Comtrade database on international trade.

August sees a significant rise in factory output In August, factory output in Japan had increased 1.7 percent from the previous month. This is attributed to its growing production of automobiles and car parts as well as minerals such as iron, steel and non-ferrous metals. This was the third consecutive month in which the factory output had increased in Japan, which suggests that it is positive and a key indicator of its growth. Mainly, the demand had plunged significantly as the coronavirus had forced governments to impose lockdowns in an attempt to curb the infection spread. Overall, the move has

12 | December 2020 | Global Business Outlook

affected global trade and production.

Now manufacturers in Japan expect the output to rise 5.7 percent in September and 2.9 percent in October, according to a survey published by the Ministry of Economy, Trade and Industry. They also expect output to decline 1.5 percent in November and rise 1.1 percent in December. Japan’s small and medium manufacturers are expecting the pace of economic recovery to be quite slow.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) was largely unchanged at 47.3 in September compared to a final 47.2 in the previous month. Output contracted for the first time in four months weighing on the headline index which remained below the 50 threshold that separates contraction from expansion for the 17th month. The PMI survey further revealed a slight improvement in service-sector activity this month, which contracted at its slowest pace in seven months. The au Jibun Bank Flash Services PMI rose to a seasonally adjusted 45.6 from the previous month's final of 45. It is noteworthy that Japan’s industrial output recorded the biggest fall in the last two years in October 2019, exposing the country’s economic vulnerability and highlighting the growing decline in domestic and foreign demand. Factory output fell 4.2 percent in October from the previous month, according to data from the trade ministry.

Feature \ World’s largest stimulus package

Japan’s stimulus package equals to 22% of GDP To further protect its economic growth, the Japanese government is considering an additional trillion-dollar economic stimulus package which is focused on boosting consumption in the country. Former Prime Minister Shinzo Abe announced a $1.1 trillion stimulus package to cope with the protracted coronavirus pandemic—which was noted to be the largest stimulus package in the word. The authorities and policymakers in Japan will be pinning their hope on the new stimulus package which is expected to firm up the economy again on the back of severe downgrades in the last two quarters.

On February 13, the Shinzo Abe-led government announced its first coronavirus emergency response package. Besides providing support for Japanese travellers returning home, the regime also emphasised on strengthening immigration control and loan facilities for small and medium-sized enterprises (SMEs) in the country. This was followed by the second coronavirus emergency response package which was announced on March 10, 2020. Some of the key measures of the package include increasing the number of hospital beds for infected patients, additional loan support for struggling businesses in the country and strengthening employment support measures among several others.

However, the biggest economic package was revealed in April when the government announced a $1.1 trillion stimulus package. This was equivalent to 22 percent of the country’s GDP. Around 25 percent of the trillion-dollar fund was allocated to employment and business support, while the rest was allocated to the healthcare system, consumption promotion campaign and public investment.

Japan is considering an additional economic stimulus package that will focus on boosting the consumption levels in the country. On the political front, newly appointed Prime Minister Yoshihide Suga is expected to delegate the drafting of the budget soon and the draft is likely to be submitted to next year's

parliamentary sessions in January when the initial budget for the next fiscal year from April 2021 is also set to be discussed.

Relapse in unemployment rate affects industries In 2019, the unemployment rate in Japan was at about 2.29 percent. But its unemployment rate reached up to a three-year high in August this year. This is mainly due to additional citizens entering the labour market in search of employment amid increasing economic activity. The Internal Affairs Ministry reported that the unemployment rate had increased to 3 percent from 2.9 percent in July.

The number of unemployed Japanese citizens increased by 490,000 from a year earlier to 2.06 million and it topped two million for the first time since May 2017.

Data released by the labour ministry in Japan also showed that the job availability ratio in August had further deteriorated to 1.04 from 1.08 in the previous month. The latest figures suggest that businesses in the country are finding it difficult to sustain their workforce as consumption has taken a serious hit due to the coronavirus pandemic. Despite a second monthly uptick in the unemployment rate, Japan has suffered from a reduction in the national job count compared to other major economies during the crisis.

For the uninitiated, the country is facing severe labour shortages due to its ageing population. When it comes to Japan’s manufacturing sector, more than half a million positions have been lost. Other sectors that have faced the repercussions of the pandemic are tourism and hospitality.

Even continuing restrictions on international travel has weighed heavily on hotels, restaurants and the

A significant economic package was revealed in April when the government announced a $1.1 trillion stimulus package. This was equivalent to 22 percent of the country’s GDP

August marks a turning point for Japan

Factory output increased by

1.7% from the previous month

Japan retail sales increased by

4.6% month-onmonth

Global Business Outlook | December 2020 | 13

Technology Economic assessment

overall ability to sustain their business. In this regard, new job offers were down by 49 percent in August compared to last year.

Experts believe that a solid recovery in employment could be a long way off. Wage support from the government and low-interest rates on loans have retained workers on the payroll, while a strong balance sheet or legal protection have also helped many global corporations protect their current workforce.

That said, a full recovery is hard to predict at this point in time and much of it depends on the global discovery of a vaccine for the novel coronavirus.

The non-adjusted number of people in work dropped from a year earlier for the fifth consecutive month. It dropped 750,000 to 66.76 million, including 29.54 million women.

Among several industries, the accommodation and restaurant services sector have been hit hardest by the pandemic. The industry saw the largest fall in its number of workers, losing 280,000 from the previous year to 3.91 million this year. In the manufacturing sector, the numbers fell by 520,000 to 10.26 million.

Japanese citizens who were no longer part of its

14 | December 2020 | Global Business Outlook

labour force grew 110,000 from a year earlier to 41.88 million, also up for the fifth successive month. Around 710,000 people among those unemployed voluntarily left their jobs, which was down 10,000 from a month earlier, 590,000 were laid off, which was up 30,000, and 530,000 were new job seekers, which was up 40,000.

METI records increase in retail sales Japan’s retail sales had increased by 4.6 percent month-on-month in August and the sector had recorded sales worth ¼12.419 trillion, according to the Ministry of Economy, Trade and Industry. It is a positive sign for the economy as retail sales dropped by 3.4 percent in July. However, retail sales fell 1.9 percent year-on-year, after slipping by 2.9 percent in the previous month. Department store sales in Japan had dropped by 22 percent in August from a year ago for the 11th consecutive month and the drop is not attributed to the coronavirus pandemic or the humid weather that prompted people to stay indoors most of the time. According to data released by the Japan Department Stores Association, the decline was steeper than the 20.3 percent decrease recorded during the month of July.

Department stores recorded sales worth ÂĽ323.12 billion across 203 outlets in the country. As Japan maintained sweeping travel

Feature \ World’s largest stimulus package

restrictions, duty-free sales took a hit from a sharp drop in foreign tourists, sliding 86.1 percent to ¥3.55 billion.

In fact, the association had added that August often proves to be a good month for store operators to draw customers as it is that time of year when several Japanese citizens take off for summer vacations. However, the pandemic has forced stores to cut down on promotional activities this year which has greatly reduced the number of shoppers. Also, customers are more inclined to shop online in addition to declining stores. Automakers in Japan recorded a 14 percent drop in global vehicle sales in August as the coronavirus pandemic continued to sap demand even after factories and dealerships reopened. It was for the sixth consecutive month that sales had dropped in Japan. The country's seven major automakers, including Toyota Motor and Nissan Motor, sold a combined 1.97 million vehicles during that period and the decline in monthly sales has slowed significantly since a 50 percent slump in April. In fact, only Suzuki Motor had recorded a 2.2 percent increase in sales during the same period.

Despite the fact that the economy exited recession, experts have warned that the sharp economic bounce back was a one-off. They further warned that the future still remains uncertain as a moderate resurgence in infections at home and abroad could push the economy into recession again. With that, there are looming concerns for Japan. This is because the Japanese Cabinet Office recently compiled a report which indicated that the economy is in a severe situation due to the pandemic, but it is showing movements of picking up. The Japanese government too kept its economic overview unchanged in its monthly report, adapting the same overview for the fifth straight month.

Although the government downgraded its assessment of business investment for the first time since September, the report states that the sector has been decreasing recently.

Assessment for industrial production was upgraded for the first time since September.

The upgrade was attributed to robust exports in automobiles to Southeast Asian countries

Japan's economic shrink stops in August In October, the Government of Japan carried out a reassessment of the economy which found that the economic contraction had stopped in August. Based on the improved performance of a few key indicators, the government had upgraded its assessment for the first time since May 2019. The Cabinet Office said that economic indicators which measure a range of data including factory output, employment and retail sales numbers, rose a preliminary 1.1 percentage points from the previous month to 79.4 percentage points in August. This data suggests that the Japanese government has upgraded its assessment and even concluded that the economy grew by 0.6 percent in August.

and the US, well supported by domestic demand. The government has also kept private consumption unchanged with government officials clarifying that levels are roughly on par with those in the last three years.

Experts and policymakers are expecting the Bank of Japan to extend its corporate funding programme beyond its March deadline and the central bank of the world's third biggest economy is expected to make a decision by January 2021. Economy Minister Yasutoshi Nishimura said that Japan still had a $287 billion negative output gap, or spare capacity, part of which must be filled by a new stimulus package.

For that reason, the country has announced a fresh $708 billion economic stimulus package to pull itself out of the deep coronavirus-driven slump. In addition, the new stimulus package will be targeting investment in growth areas such as green and digital innovation. Prime Minister Yoshihide Suga, said in a meeting, "We have compiled the new measures to maintain employment, sustain business and restore the economy and open a way to achieve new growth in green and digital areas, so as to protect people's lives and livelihoods."

Global Business Outlook | December 2020 | 15

Economy Argentina bondholders

Analysis

Argentina needs a definitive plan for revival Tom Hardy

The International Monetary Fund stands by the new Argentine government—urging creditors to consider the biting recession and high inflation

16 | December 2020 | Global Business Outlook

T

The debt restructuring process in Argentina is prolonging as the Latin giant defaulted again in May, when it failed to pay $500 million on the stipulated date. This points to the country's ninth sovereign default, following which it successfully reached an agreement with foreign creditors to restructure $65 billion in sovereign debt in August.

Argentina owns billions of dollars to the International Monetary Fund and other bondholders across the world, mainly in the US. The country has pushed its debt amortisations to 2025 and has drastically reduced interest payments. Currently, its authorities are holding talks with the International Monetary Fund over a new loan programme replacing its failing $57 billion programme that was launched in 2018. Nearly $45 billion in funds have been disbursed under the new loan programme, and the first payment is due in September 2021.

It is reported that both parties 'share the view' that tackling Argentina's challenges necessitate developing a few carefully balanced policies that can help to rebuild the foundation for sustainable and inclusive growth.

In November, Bueno Aires

Creditors scarred by debt restructuring Argentina's international creditors, who are hurt by this year's debt restructuring, are urging the International Monetary Fund to come with ultra-rigorous conditions for the new programme that the country is seeking. Argentina and its provinces restructured a $100 billion of debt in September, but the country's bonds have lost close to 30 percent since their relaunch. This is worrying international creditors as the government is lagging in the formation of a strong strategy that can stabilise the economy. Now Argentina is in talks with the International Monetary Fund over a new loan programme which is 'fluid and constructive'.

province had initiated talks with the International Monetary Fund on a longer-term Extended Fund Facility.

Again, the province has extended the already delayed-deadline to January 2021 for bondholders to agree to a restructuring deal of nearly $7 billion in foreign debt.

Although Argentina had managed to secure the backing of its creditors and to exchange 99 percent of the bonds, the situation is changing.

Issues related to foreign creditors are next in line to be addressed. Foreign creditors scarred by this year's debt restructuring have urged the International Monetary Fund to come up with ultra-rigorous conditions for the new programme. According to them, the national government is forcing provincial authorities to demand debt restructurings, which in turn, are deeply affecting most of the market. Mangart Advisors' Riccardo Grassi, who was involved in finalising

the recent debt deal, told the media, "We want the programme structured so the debt is declared (by IMF) as sustainable with a high probability.•" More importantly, experts monitoring the country's deal restructuring firmly believe that continuous debt restructuring could set a precedent for future sovereign crises in the country.

Biting recession cuts into the economy Being the third-largest economy in the region, Argentina is expected to contract almost by 12 percent this year, according to the International Monetary Fund. In this context, the Argentine government said that a separate restructuring of local law dollar debt would allow the country to bring a financial relief of $37.7 billion over the next ten years and help to cut the average interest payments on foreign law bonds to 3 percent from 7 percent.

Global Business Outlook | December 2020 | 17

Economy Argentina bondholders

The deal will provide sufficient time for the Argentine government to explore new ways to clear its billion dollar dues which it owes to the International Monetary Fund and other bondholders. Although the deal is a saving grace for the country, it is certainly not the end of all its economic problems. Surpassing the immediate problems of debt and debt reissuance, the country has fundamental economic complexities to untangle—and the pandemic has only added to its woes.

Its economy is expected to contract by nearly 12 percent this year, but the worst part of all this, is that the currency crisis and spiraling inflation

have already done the damage.

Amid this tough economic cycle, the deal might give the country an opportunity to save its credibility on the global front.

IMF lends support to the Argentine government What has come to Argentina’s immediate rescue is the International Monetary Fund which insisted that sufficient time is necessary for the country to revive growth. Ever since the country received backing of creditors in August, prices of the newly issued government bonds have significantly dropped. As bondholders accepted an income

A major economic reform is first required for the country to recover from a contraction of nearly 12 percent this year as projected by the International Monetary Fund

18 | December 2020 | Global Business Outlook

reduction of almost $40 billion over the period between 2020 to 2024, the country’s debt in relation to the gross domestic product is set to increase to around 110 percent this year, which is nearly a rise of 12 percent compared to its public debt last year.

Also, the share of the public debt denominated in the foreign currency appears to be broadly unchanged, at about 70 percent. The increase in Argentina’s debt-to-GDP ratio is due to the economic contraction, estimated to be around 12 percent this year by the International Monetary Fund, as a result of the coronavirus pandemic.

Analysis \ Debt restructuring

Notable challenges in the debt restructuring process Meanwhile, the country was given two options in restructuring its debt: It can negotiate a reduction in the principal or it can accept no reduction in the principal in exchange for a large reduction in interest payments. It has chosen the latter option since the government considers it to be more sustainable —keeping in mind that the problem is related to liquidity and not solvency. It also led to a significant reduction for bondholders in net present value. However, the amount of debt owed remains unchanged.

What the current administration did in the situation is pass the problem to its successors. The country’s fiscal deficit has also skyrocketed this year to reach 10 percent of its gross domestic product, according to the government’s estimates.

Without access to international capital markets and having a small domestic capital market and financial system with a low savings rate, it is unclear how Argentina will fulfill its debt payments when the time comes.

Given the slow pace of consolidation and the state of its public finances, the country is heavily relying on the resumption of its economic growth to start clearing its public debt.

However, a major economic reform is first required for the country to recover from a contraction of nearly 12 percent this year as projected by the International Monetary Fund.

Current policies hamper investments and discourage exports which need to change quickly. That said, the country has to renegotiate its outstanding $44 billion debt with the International Monetary Fund which is by its side at the moment. The negotiations will also allow formulating a coherent economic programme that would bring changes

The debt restructuring process in Argentina is prolonging as the Latin giant defaulted again in May, when it failed to pay $500 million on the stipulated date

and for that it must work closely with the International Monetary Fund. This might actually help the country to bring an end to its debt restructuring saga.

Its fate rests on a definitive plan

Argentina is mired in distress Default payment

$500 million

Economic contraction

12%

to gloomy investors sentiment. But this is not going to be easy. Major reforms need to take place and the onus is on the administration to bring significant change to Argentina’s current monetary and fiscal framework. What Argentina needs in actuality is structural reforms when it comes to social security, labour markets and provision of public services.

Another challenge that is presenting itself to the administration is the urgent need to tackle an imminent exchange rate crisis which was created by excessive monetary financing of the budget deficit. The government announced that it will print money to finance at least 60 percent of its budget deficit in 2021, but many would argue that they are inconsistent with the 2021 budget projections of a declining inflation rate to 29 percent from an estimated 38 percent in 2020. The country needs to prevent itself from heading toward a historic 10th default

Argentina needs to have a comprehensive plan to tackle provincial debt amid various smaller regional restructurings. In September, the minister forwarded a 2021 budget bill to the Congress which included a forecast for a primary fiscal deficit next year of around 4.5 percent. However, a fresh deal with the International Monetary Fund is unlikely before March next year.

The 1 percent of bonds that did not meet collective action clause (CAC) thresholds of support for a restructuring highlights pockets of holdouts on individual bonds, though Guzman said it was not a major cause for concern at the moment and the same would be resolved soon. The government also excluded certain bond series such as the USD Par 2038 Bonds II and III and Euro Par 2038 Bonds II and III. The bonds being restructured have collective action clauses and the government said in a statement that it needs a certain level of support to restructure these bonds.

Older 2005 indenture bonds require a combined 85 percent of creditor support, with two-thirds of them necessitating support on each individual series. Although the idea is counterintuitive, many experts argue that the coronavirus pandemic has helped the country to secure a healthy deal. A deal in fact was necessary for the country and the bondholders, and the pandemic has only lessened the chances for the latter to have the deal in their favour.

Global Business Outlook | December 2020 | 19

News

Economy

IMF projects higher treasury spending in UK

T

he IMF indicated that the UK ‘s second wave of the coronavirus can lead to higher treasury spending to cope with the crisis.

The reports indicate that the UK’s GDP will plunge 10.4 percent this year. The IMF has prepared the reports under

its annual review in light of the country’s economic conditions.

Previously, the IMF had predicted a 9.8 economic plunge under its World Economic Outlook.

The earlier reports had to be slashed because of the second wave headwinds, in addition to changing the economic outlook

as the growth might downgrade from 5.9 percent to 5.7 percent in 2021. It also indicates a potential slump in economic growth, followed by unemployment and lower productivity. The GDP will grow between 3 percent and 6 percent which is below the report’s pre-pandemic trend in the medium term.

The potential risks of the second wave also includes a possibility of a no trade deal with the EU after the transition.

The review states that the government could have additionally spent supporting local activities as lockdown restrictions are tightened.

UK 5G economy

UK’s £108 bn economic boost mired in 5G delay The UK’s £108 billion economic boost is mired in the delayed 5G launch. The reports have been conducted by Assembly Research on behalf of Huawei.

20 | December 2020 | Global Business Outlook

Furthermore, people have been widely acknowledging Huawei’s blacklisting from the UK’s telecom market. However, the move has the potential to delay the 5G launch in the country and make it more expensive.

Industry experts believe that the 5G launch delay will prohibit the country from fully benefiting from the £108 billion worth of wealth.

Matthew Howett, the Principal Analyst and Founder of Assembly said that the government’s own expectation of its restrictions on Huawei is for up to a threeyear delay in the 5G launch.

The telecom operators will have to invest more capital as they will have to set up their deployments in more profitable urban centres. That indirectly means that it will take longer to reach and fully deploy, more rural areas with a 5G network.

The reports also indicate that each household in the country will have to pay £6000 on average by the end of this decade due to the 5G launch delay. In addition, the delay of 5G will also stall innovations which could make a difference to people’s lives

In favour of China's digital yuan

Thailand tourism

Thailand’s economy relies on tourism: Fitch Thailand’s economic recovery will be in jeopardy if the country’s tourism industry does not show signs of improvement. The reports are produced by Fitch Ratings, a US-based credit rating agency.

It is reported that Thailand’s economic growth directly or indirectly ties to its tourism sector. The report indicated that the number of foreign tourists stumbled 71 percent year-on-year to 6.69 million.

Furthermore, the spending slumped 70.4 percent to 332 billion baht compared to the previous year.

The country registered a record 39.8 million tourist arrivals last year, and has not seen a single tourist arrive since the lockdown which started due to the Covid-19 pandemic.

The government has approved in principle the

entry of foreign nationals to revive the tourism sector.

That said, the government has also floated plans to allow those on business to visit the country to boost its economic recovery.

Currently the government has set up these rules for any foreign traveller. This points to 14 days of quarantine for holders of specific visa types.

China’s former central bank governor Zhou Xiaochuan is backing the country’s digital Yuan against US dollar hegemony. He expects that the digital yuan will spur retail payments rather than tackle threats posed by stablecoin.

According to Zhou Xiaochuan, China was pushing hard for the establishment of the digital yuan and electronic payment (DCEP) system. However, the government’s focus differed from the principle laid down by G7.

In his views, the government is currently focused on tackling the challenges that arise from virtual currencies such as Libra, bitcoin and others.

The People’s Bank of China will roll out its sovereign digital currency soon.

It made it clear last week that it would give legal status to the DCEP system.

The launch of the digital yuan is a part of China’s sovereign fiat currency.

Zhou Xiaochuan has always supported that digital yuan concept.

The central bank rolled out a special institution to develop the digital yuan in 2014, during his term.

The number of foreign tourists stumbled 71 percent year-on-year to 6.69

million Global Business Outlook | December 2020 | 21

News

Economy

Japan's consumer prices fall Japan’s consumer prices fall at a slower pace for the time being. However, it has not made profits for the last six months. It is reported that global economists believe that the situation is expected to get worse in the coming months.

According to reports by the ministry of internal affairs, Japan’s consumer goods prices apart from fresh food items slumped 0.3 percent from a year earlier due to the travel subsidies.

The latest data expects to ease concerns of a descent into longer-term temporary deflation.

However, other factors are expected to weigh on prices this month. The pandemic has affected the growth of prices due to an economic downturn, with restrictive measures weighing on consumption. The inflation is expected to remain under check due to a slump in wages, job losses and a halt in recovery in spending.

It is reported that the Bank of Japan is

expected to make changes in its inflation forecast to focus on the temporary impact of travel subsidies on prices. The government’s travel subsidies have assisted in reducing accommodation charges by 30 percent. The overall index reordered a minus 0.35 due to the outcome.

The government is trying hard to mitigate the economic impacts of the pandemic.

Somalia’s economy to slump 2.5%, says World Bank New World Bank reports indicate that Somalia’s economy will contract 2.5 percent by the year-end. The figures are less than the earlier predictions of 3.2 percent.

It is reported that the country has been devastated by floods, including a widespread infestation of desert locusts this year apart from the outbreak of the Covid-19 pandemic.

22 | December 2020 | Global Business Outlook

The government’s travel subsidies have assisted in reducing accommodation charges by 30 percent. The overall index reordered a minus 0.35 due to the outcome

The pandemic has jeopardised economies at large.

The latest reports indicate that Somalia’s GDP will also stumble resulting in fiscal pressure and a surge in poverty levels due to the pandemic.

The country has been exempted by many global financial institutions from paying debts in March, following decades of sluggish economic growth accompanied by frequency terror attacks.

Somalia’s economic growth is expected to take place in 2021. The economy will surge 2.9 percent next year followed by 3.2 percent in 2022.

However, the economy could shrink more if there is any delay in lifting the pandemic induced restrictions to curb the infection.

RECOGNISING PERFORMANCE EXCELLENCE

NOMINATIONS OPEN FOR

2020

GBO AWARDS

Global Business Outlook | December 2020 | 23

24 | December 2020 | Global Business Outlook

A trailblazing approach to fund management

Coverstory Fund Management Al Safat Investment Company

Alice Parker

E

stablished in 1983, Al Safat Investment Company is licenced by the Capital Markets Authority to practice five securities activities in Kuwait. Since inception, the company has captured the right sentiment in managing clients and their investment portfolios, while offering a host of other financial services in private equity, investment banking and asset management. As a member of Union of Investment Companies, it plays an active role in propelling the development of investment entities in the country. Al Safat Investment Company's portfolio is underpinned by an array of sectors and led by a highly experienced team with an impressive track record in enterprise transformation and restructuring.

Al Safat Investment Company has captured Kuwait’s market sentiment full well and is continuously diversifying investors portfolios for rewarding opportunities and returns

Global Business Outlook | December 2020 | 25

Coverstory Fund Management

ASIC revenue growth

22%

in last three years

In August, the GCC equity markets delivered their fifth consecutive positive results, with the Kuwait All Share Index registering a 6.6 percent gain. Most of the ‘inclusion’ premium has been wiped off the value of Kuwaiti equities, and the MSCI's decision to delay its upgrade of Kuwaiti equities from frontier to emerging market status is considered to be a blessing in disguise, as it provided time for companies to stabilise prior to the inclusion inflows.

It is observed that liquidity in the Kuwaiti market has improved, increasing by 45 percent last month. The Kuwaiti parliament has also adopted a new law that will allow companies to opt for a settlement with creditors or a restructuring plan before they are forced to declare bankruptcy.

The development is fulfilling as it seeks to protect ailing companies and attract foreign investors. Overall, the market sentiment for Kuwaiti equities is positive.

Al Safat Investment Company’s longstanding focus on ‘capitalising on promising investments by maintaining financial control mechanisms and seeking rewarding opportunities’ has allowed it to thrive in the marketplace, creating sustainable opportunities for local and international investors. Against this background, Chairman of Al Safat Investment Company Abdullah Hamad Al Terkait in an exclusive interview with Global Business Outlook, discusses the company’s plans of action in securing investor interest, diversifying investment portfolios, building unique wealth management strategies and a broad outlook for the Kuwaiti funds market.

How is Al Safat diversifying its investment activities and services in accordance with Islamic Shariah principles?

While Islamic finance has evolved and shifted from the traditional realms of Islamic commercial banking to different types of financing institutions, sophistication and creation of new product offerings have

26 | December 2020 | Global Business Outlook

lagged behind. Currently, a significant portion of Shariah compliant investments are concentrated in equity investment funds.

However, the next phase of product offerings will appear in areas of private equity and fixed income, in addition to traditional sukuks. At Al Safat Investment Company, we are aiming to be ahead of these trends as we continue to diversify our offerings in the market and capture this opportunity.

One of our strategic goals is to focus on government projects and local companies with an emphasis on small and medium enterprises in Kuwait and the Middle East.

We are also aware that as mainstream and widespread adoption of these Islamic products come into play, there will be a need to address credibility by harmonising standards and practices across the region and the rest of the world. In the future, we would like to be working closely with regulators and policymakers to address these concerns and keep Islamic finance at the forefront of innovation in the financial world.

What are Al Safat's unique wealth management strategies and how are these strategies helping clients in the private and public sectors to make the right investment choices?

Al Safat Investment Company offers a range of portfolio management solutions with robust execution capabilities that suit every investor’s risk appetite. While managing wealth, we consistently focus on providing our clients with the best strategic guidance and premium service, which in turn has helped us to build longterm relationships with them. Our clients’ discretionary portfolios managed by the company have exceeded 34 percent in year to date return, outperforming both Kuwait Premier and main indexes. Not many could have predicted at the turn of the year that this type of black swan event would affect markets worldwide. Estimates on GDP contraction for the second quarter of 2020 ranged from 30 percent to 60 percent on

Coverstory \ Al Safat Investment Company

an annualised basis. The contraction was unprecedented.

For that reason, we have always maintained diversified portfolios for our clients with robust strategies. These kinds of long-term strategies with highly dynamic approaches that can be shifted from aggressive to conservative based on market conditions and circumstances have helped us to stand against the pandemic, hold our position in selective stocks and maintain good performance during the year. As a reputed investment company in the country, we have a duty of educating and assisting our investors and the general public, which is also part of our social responsibility. We have released educational videos for the public to comprehend the principles and risks associated with investing. That said, we are releasing weekly market summary reports that will allow people to monitor and assess the trends, while staying up to date with the latest valuation metrics and critical news that are affecting the market.

With Al Safat been granted a licence for five investment activities, what is the expected impact on Kuwait's investment landscape?

Al Safat Investment Company is regulated and licenced by the Capital Markets Authority and the Central Bank of Kuwait to carry out five investment activities.

These activities are Investment Portfolio Manager, Collective Investment Scheme Manager, Investment Advisor, Subscription Agent and Investment Controller. That said, Activity of Credit Financing is under the supervision of the Central Bank of Kuwait. The main objective of practicing the aforementioned activities is to enhance the spirit of competitiveness and build confidence between clients and the stock market in a way that it serves the investment sector, increases opportunities for growth and development in the market sector and maximises profits for all individual and corporate dealers.

Global Business Outlook | December 2020 | 27

Coverstory Fund Management

What are the chief factors that could influence Kuwaiti funds market performance in the short-term and medium-term?

At present, we are facing turbulent times in the market due to the pandemic. The impact of excess supply due to oil conflicts, lower demand due to national lockdowns and restrictions on movements are weighing on the price of oil—which has plummeted by 65 percent. The Kuwaiti market was naturally going to be a victim of the price drop, as close to 90 percent of government income and export revenue comes from petroleum.

On the positive side, the inclusion of Kuwait in the MSCI Emerging Markets Index calls for celebration, but we are seeing muted responses as passive fund flows are expected to be around $1 billion lower than previous estimations. With that, there is always going to be downward pressure on fund flows and investment climate. However, the recent news on vaccine development brings fresh optimism and signals the beginning of the end. Kuwait has acted promptly in securing vaccine doses for its most vulnerable population. The coming months will slowly but surely see a return to pre-pandemic normal. This will play a big role in stabilising the economy and helping investors to plan for the future with degrees of certainty.

Can you elaborate on the types of advisory services provided through select examples?

Al Safat Investment Company provides many consulting services to its clients, in accordance with the licences obtained from the regulatory authorities, such as the Capital Markets Authority and the Central Bank of Kuwait.

Al Safat offers services to manage third-party funds through investment portfolios owned by clients, which includes 65 portfolios with total assets under management for clients and groups reaching $250 million, through trading shares of listed and unlisted companies in Boursa Kuwait.

This is in addition to establishing and managing the Collective Investment Scheme, for example, the Al Safat Local Equity Fund.

The Investment Controller service monitors and supervises the collective investment

28 | December 2020 | Global Business Outlook

schemes established and managed by others, in addition to providing an investment advisor service related to securities in return for a commission. The company also sells, exhibits and collects securities in the best interest of its issuer for the purpose of remarketing or reissuing securities, known as Subscription Agent.

Al Safat acts as an intercessor in lending and borrowing transactions. What are the challenges faced as an intercessor during such financial activities and how is it preparing to beat those challenges?

We have had to reign in our lending business this year on the back of having a lot of uncertainty with regard to a few traditional industries. The pandemic was the final nail in the coffin for some of the industry players. Coupled with near-zero interest rates around the world, many companies have been able to borrow from banks and governments, raising concerns about the sustainability of their finance and operations. It becomes difficult as an intermediary to lend out at profitable rates. We have had to keep a balance between maintaining profitability and servicing our clients during these challenging times.

Coverstory \ Al Safat Investment Company

At Al Safat Investment Company, we are focused on the financial health of our group of companies and ensure that companies requiring growth capital such as healthcare and sanitation products have enough cash to rapidly expand their business. We have identified shifts taking place in the country and across the world and are looking to provide funding to industries in the future.

We have already devised a plan to patiently build a good lending portfolio, add benefit to the growing market and widen our exposure in the coming years.

How is Al Safat’s stock trading performance in local and international governmental institutions and what is your outlook for the stock market in Kuwait?

Internationally, we are focusing on private equities, and at the right time, we will begin to invest in leading stock markets following our strategy that fits each market and its circumstances. In 2019, we outperformed the Kuwait Boursa Premier and main indexes by following and applying our dynamic long-term strategy that can be shifted from aggressive to conservative based on market conditions and circumstances. This is possible

due to our mechanism in selecting stocks and assessing the weight of each investment and sector. Boursa Kuwait is on the right track to become one of the most attractive emerging markets in the world. Of late, we have seen that the stock market in Kuwait has become stronger, and global crises are having less impact on the market compared to the effect they had 10 years ago. The anticipation is encouraging and several companies are planning to increase their investments in the market, including us.

How is Al Safat protecting its investor relations?

With the aim of strengthening the relationship between current and potential investors, Al Safat Investment Company has established a special unit for investor affairs and has also appointed persons with competence and experience in dealing and building excellent relations with investors. Building trust and credibility between the company and its

Global Business Outlook | December 2020 | 29

Coverstory Fund Management

What are the persistent challenges encountered on the back of the coronavirus pandemic and how is Al Safat addressing those challenges?

Since the beginning of the coronavirus pandemic, the company has been keen to implement many precautionary measures, in terms of health and business to mitigate any risk or negative effects that may be reflected on the company and its durability. The continuity and growth of the company’s business, achieving profitability, and following health procedures and measures to protect its employees and customers are among the most prominent challenges faced during the crisis. With that, it has taken many precautionary measures such as: Direct activation of approved emergency and business continuity plans to ensure seamless operations without any interruption Apply all health and safety standards to promote employee safety in accordance with the guidelines issued by health authorities Focus on implementing all instructions issued by official authorities, executing precautionary measures and a comprehensive plan taken by state agencies to contain the spread of the coronavirus Continuous flow of business activities while maintaining social distancing Develop programmes, mechanisms and means of protecting information related to the information technology department to carry out effective internal communication Build external communication with all customers, supervisory authorities and stakeholders for flexibility, scalability and efficiency Monitor cash flows for operating, investing and financing activities to reduce the company's exposure to liquidity risk, and oversee capital adequacy standards to cover company risks Supervise the company's costs and work to reduce them as much as possible Review the company’s annual budget in 2021, taking into account the repercussions of the coronavirus crisis, potential impact of the risks and analyse the impact on financial, investment and administrative situations of the company through a periodic review of all influencing factors Carry out social responsibility activities to help sectors and ministries that are at the forefront of mitigating risks associated with the coronavirus

30 | December 2020 | Global Business Outlook

investors are one of the main goals that it seeks to achieve through continuous communication and by authorising them to access the company's transactions, financial data and investments— thereby enhancing transparency, credibility and integrity between both parties. There is keenness on the company’s part to achieve the best for current investors and maximise profits in addition to providing investment opportunities with rewarding returns. This in turn will encourage new investors to cooperate with us.

What is the approach taken to cater to the needs of sophisticated investors portfolios in the next five to 10 years?

With more than 15 years of wealth management experience, Al Safat Investment Company offers portfolio management in various asset approaches that are tailor-made to meet investors’ risk or return profiles. Although most investors in the country allocate their savings to passively managed accounts with very few transactions during the year—we at Al Safat Investment Company aim to beat the market through a combination of fundamental and/or technical analysis and consistent income generation from blue-chip companies. Over the years, we have beat the general market index performance and hope to market these strategies to sophisticated investors in the future.

We aim to allocate a greater proportion to the growing sectors in Kuwait, such as education, healthcare, fintech, non-banking financial services and financial instruments in emerging markets. We believe the pandemic has accelerated the adoption of technology in traditional industries. There are plans to increase our product offerings in the form of Islamic private equity funds, innovative fixed income products and real estate investment trusts in the future so that our customers will have a wide range of areas to invest in.

How is Al Safat building up its CSR activities and fulfilling Kuwait’s needs?

We consider our social responsibility as a core factor of our company’s DNA, as we believe in the importance of giving back to the society and the country we are in. We have a flexible annual CSR plan that changes according to the needs and

circumstances around us. For example, during the pandemic we offered all our group resources under the request of the government of Kuwait. Our chemicals factory was one of the main providers donating thousands of litres of cleaning supplies and hand sanitizer liquid to the Ministry of Interior and Ministry of Finance among others. We have also donated rugs from our factory to the Public Authority for Housing Affair which was responsible for preparing and providing quarantine centres. Although the situation was challenging, it was our time to shine and help to an extent that we could. Al Safat Tower was turned into a sanitised workplace following strict health and safety regulations. These efforts have led us to winning prestigious awards.

What are the strategic plans in terms of building investments and lending portfolios over the next one year?

We have a specific plan for the future of the company going forward, especially after winning a big legal case that hindered our

ability to expand over the past 10 years, and now we can have a steady stream of future projections that we can rely on.

We are going towards liquidating non performing investments, in addition to undertaking new investments and expanding revenue lines by using existing cash reserves and cash flows from liquidated investments. Even more, we are working on re-listing the company on Kuwait Stock Exchange that should take place in 2021 to give more liquidity to the shareholders. We are also looking forward to expanding our portfolio by including additioanl business areas that are likely to become successful. Food and Beverages Fund and Venture Capital Fund are some of the examples where we can invest in small businesses. This will simultaneously be in line with the expansion of our consultancy services. As a matter of fact, we are very close to reactivating the company’s financing licence that will enable us to start building a good lending portfolio in the coming years.

There are plans to increase our product offerings in the form of Islamic private equity funds, innovative fixed income products and real estate investment trusts in the future so that our customers will have a wide range of areas to invest in

Global Business Outlook | December 2020 | 31

Banking and Finance

Interview Tom McGillycuddy Co-founder, Tickr

The investor’s guide to impact investing GBO correspondent

I

n the modern-age, making an investment has become an effortless task—thanks to the emergence of new technologies and profound minds that make it happen. Having a globally diversified portfolio can help individuals to

present and near future.

Arguably, many investors express views against international diversification because the markets are so interconnected that it might lead to an overlap of their overseas investments. But that might not be entirely possible because companies act in different ways depending on the market situation and the country they are situated in. In fact, local economic and geopolitical events will play an important role forcing the local market to perform for the better or worse in that period.

These influential factors can be overwhelming for first-time investors and even to those who have been in the game for many years. Although the

We want to move beyond impact investing and lay the foundation for the creation of the world’s first impact company

capitalise on the market cycles of different countries, understand depreciating currencies and efficiently manage risks.

In fact, multinational corporations are the biggest beneficiaries of international diversification—giving them the right amount of exposure. Now those who seek to obtain similar benefits from international diversification will have to remain wellread about various market cycles and the dynamics of international companies in the

32 | December 2020 | Global Business Outlook

underlying fact is that its prudent for investors to diversify their portfolios in local and international markets, assisting them with risk management and positioning their portfolios for long-term growth is highly imperative to their investing activities. For that reason, when technology is combined with profound knowledge in international markets, it can help investors make the right decisions and see favourable returns in the future.

UK-based startup Tickr is capitalising on this niche market with an interesting approach. It has

Banking and Finance

| Tech in investments

Tickr has built an app that allows investors to play their part in diminishing social and environmental issues

developed an app which makes it easy for investors to put their money in global corporations that are looking for profits while solving social and environmental problems. The concept behind Tickr is that it is largely focused on offering long-term investment products, which makes it even more attractive for investors in this domain.

A rising trend among investors these days points to green finance. Several companies and investors have become quite particular about where they invest their money and how these investments are put to use. In line with this trend, Tickr has developed its portfolio based on four global issues: climate change, disruptive technology, equality and combination.

First: Climate change has become a global cause for concern—and the financial sector has an important role to play in combating the crisis. A report published by the International Monetary Fund stated that longterm institutional investors have the power to help with ‘rebalancing and redistributing of climate-related risks’ while maintaining financial stability. For example, hedging instruments including catastrophe bonds and indexed insurance can help to insure against risks stemming from natural disaster. In another example, financial instruments such as green stock indices, green bonds, voluntary decarbonisation initiatives can even help with reallocating investments to green sectors.

Already central banks and policymakers are adopting sophisticated practices to tackle the multifaceted risks from climate change. When their efforts are combined with those who share similar interests, the outcome is only expected to be positive. There are even climate risk disclosures and standards for financial institutions and investors to assess their climate-related risks. Against this background, Tickr has devised its climate change theme which will help investments to be directed toward

leading companies actively involved in addressing global issues. Global water and clean energy sectors are in focus for propelling innovation toward a sustainable planet. Some of the companies associated with this theme are American Water, Xylem, Geberit, Idex Corp and Danaher Corp, with top locations pointing to the US, the UK, France, China and Switzerland.

Second: Technology is a boon and a bane to the world economy. Although disruptive technologies like artificial intelligence, machine learning, robotics and digitisation is revolutionising sectors for the greater good, there is an equal amount of disruption taking place in cyberspace— which is the bane indeed. The need for controlling cyber risks has increased over the years with companies and economies turning victims to malicious activities. The global cost of cyber attack is estimated to be $120 billion each year and the number is in fact growing. Because digitisation is practically integrated into our day to day activities, it has given cyber criminals a golden opportunity to hack medical devices, alarm systems, automobiles, power grids and apps to name a few.

So Tickr has realised that the world is ever more dependent on technology and what it can bring into our lives. Its cybersecurity theme tracks companies from

Global Business Outlook | December 2020 | 33

Banking and Finance

Interview Long-term investments

around the world specialising in producing softwares that can stonewall against those attacks. Fortinet, Rapid7, Splunk, CyberArk Software and Check Point Software are part of this theme.

Third: Equality is a human right and yet there is a significant gap in access to opportunities and decision making power between both genders. But that is not the only form of equality that is persisting in the world today. It also exists in the form of ethnic background, age, social status, women empowerment and much more. In the next two decades, the worldwide population in the 60-plus age demographic is projected to become more than double, reaching 2 billion people.

On the bright side, there are several companies from healthcare to real estate that share similar values and seek to make a difference for the elderly.

This theme seeks to invest in companies that score highly on the basis of four parameters: Gender balance in leadership and workforce; equal compensation and work life balance; policies promoting gender equality; and commitment to transparency and equality.

Companies such as NuVasive, Webjet, OPKO Health, Sarepta Therapeutics and LivaNova are involved in this theme.

Fourth: Tickr has identified the three main issues which contribute to the world’s distress and has combined them to support impact investments. The concept of impact investments is quite powerful because it aims to provide capital to address social and environment issues. According to a report published by the Financial Times last year, impact investments have more than $500 billion in assets under management and it was estimated to reach $1 trillion this year.

Co-founder Tom McGillycuddy in a conversation with Global Business Outlook spells out the company’s growth trajectory and its vision in impact investing.

GBO So far, Tickr has raised around $3 million in funding. How does the company plan to use the proceeds from the funds to strengthen and expand its business?

Tom McGillycuddy: Ultimately, we want to be the most convenient way for anyone to have a positive impact on the world. The tickr app as you see it today—aligning your investments with companies addressing big problems—is just the beginning. Finances should be stacked in favour of the user, and benefit the planet, and we will shake up the industry with these two things in mind. You will see us strengthen our team, scale our user

34 | December 2020 | Global Business Outlook

Tickr’s app makes it easy for investors to put their money in global corporations that are looking for profits while solving global issues.

It offers long-term investment products, which makes it even more attractive for investors with a shared vision

base in the UK and in Europe, and lay the groundwork for some real innovation in the European funds market and within our own business model. All with positive impact as the guiding light.

Tickr has created four special themes on the basis of which the investments are carried out. Can you tell us more about the funds that Tickr invests in?

We have created a series of themed portfolios that address impact causes, like climate change and equality. In the portfolios are hundreds of established global businesses that address the themes, normally through their revenue.

For example, the climate change theme has renewable energy businesses in it, that get all their revenue from, say, building wind farms. Revenue is the purest way to determine an impact company, as they are selling the thing that has the positive impact, and it’s the cleanest thing to measure. We use this data to create our themes, and then our users get to choose which theme they like the most, at a risk level they feel comfortable with.

Now the type of investments in the market are continuously evolving in line with global issues. Does Tickr allow its customers to invest in green bonds or sovereigns?

Depending on the risk level that our customers

Banking and Finance

| Tech in investments

shift in consumer attitudes and the change in whose hands the money is in will transform financial services and make it unrecognisable within the next five years. We will be at the forefront of that, as the first to market impact investment app in Europe, and companies that don’t understand this shift will be left behind.

What are the key markets that Tickr is focusing on to expand its fintech services and why is it targeting those markets in particular?

choose, they will then invest in some green bonds and government bonds. We use these to adjust the risk levels of our themes, so our customers can choose the most appropriate level for themselves.

The protracted pandemic has certainly affected the scope of growth and revenue this year. How has the pandemic been affecting Tickr and its business in the last few months?

We are fortunate in that we are one of the businesses that has performed well during the pandemic. The monthly revenue has increased by 300 percent and our assets under management have been growing 30 percent monthover month. In fact, during the pandemic we have had, consecutively since March, our best months ever as a business. And I think this speaks to the changing nature of the world, especially for our generation. We want to invest in our own future, but we want to do it in a way that we see the future: more sustainable and more equitable for everyone.

When thinking about our product expansion it’s important to understand our DNA as a business.

We want to become an impact company, where every customer interaction with the app results in positive impact. Every product and service is looked at through this lens.

This guiding light allows us to move into any areas that we see as genuinely impactful for our customers and the world. For example, we will soon be launching features that allow our customers to understand, offset and reduce their carbon footprint. This initial step creates a business that empowers customers to invest in impactful solutions with their money, and then have a direct impact on the climate simultaneously.

What are the company’s plans in the next five years?

We want to move beyond impact investing and lay the foundation for the creation of the world’s first impact company. A single place where everyone comes to have a positive impact on the world. This involves scaling our user base into millions as the next step and doubling down on product and content before expanding beyond this.

Impact investing has become an attractive form for investors, especially those seeking to make a difference. What is your outlook for impact investing?

I think within the next five to ten years, impact investing will just be called investing. Our generation is starting to invest more, and have more money, and this structural

Global Business Outlook | December 2020 | 35

Banking and finance EU financial system

Feature

The Financial Conduct Authority has offered a degree of relief to British expats by urging banks to provide two months prior notice

Banks are preparing account closure of British expats Tom Hardy

B

ritish expats living outside the UK in the European Union were shocked over news reports that their banks might close customer accounts as a result of Brexit. The country is in its transition period which was negotiated after Brexit finally happened on February 1. The transition period is coming to an end in December 2020 and until then everything is expected to remain the same for expats living in the EU. As per data published by the United Nations Population Division, around 1.3 million Brits lived in EU

36 | December 2020 | Global Business Outlook

countries in 2019. Spain accounted for 302,000 of them and Ireland followed with 293,000 Brits living in the country.

France was third with 177,000, Germany was fourth with 99,000 and Italy was fifth with 66,000. Some of the big UK banks like Barclays and Lloyds have already informed their customers, and others are still mulling the decision to close accounts.

In June 2016, 52 percent of the UK population voted in favour of leaving the EU. Since then, there has been a growing

concern about the impact of Brexit on the UK's financial sector. As a result, around 275 financial firms have moved a combined total of $1.2 trillion in assets out of the UK to other parts of Europe.

Financial services regulatory consultancy firm Bovill said in a report that around 1,400 EU-based firms have applied for permission to operate in the UK after Brexit, with over 1,000 of those planning to establish their first UK office, which seems positive for the country in a post-Brexit setting. The UK also confirmed that it has no intention to further extend the transition

period which comes to an end on December 31.

This means that if both parties fail to agree on a trade deal, future trade between the UK and the EU will take place on the terms provided by the World Trade Organisation (WTO).

Notice on account closures worries UK expats in the EU British expats living in the EU have been informed by their banks that their accounts might soon be closed on the back of Brexit coming into effect next year. The Financial

Global Business Outlook | December 2020 | 37

Banking and finance EU financial system

Brits living in EU member countries in 2019 Spain:

302,000 Ireland

293,000 France

177,000 Germany

99,000 Italy

66,000 Source: United Nations Population Division

Conduct Authority (FCA) offered relief to those expats stressing on the fact that banks must give at least two months' notice to its customers prior to closing accounts. The authorities wrote to chief executives of top UK and international banks pointing out that customers should be treated fairly and be given sufficient notice to make alternative arrangements—if they are planning to close accounts or end some of their services to their customers. So why are these accounts being closed? This reason is when Brexit becomes official, UK banks will no longer be allowed to operate in Europe without a proper banking licence. So far, UK banks were allowed to operate in the EU due to passporting—a system which allows banks in the EU to provide services to customers in the European Economic Area (EEA) without acquiring an additional licence. This is likely to change from next year.

From December 31, the UK is set to become a third country and UK banks will lose access to all passporting privileges that they had previously enjoyed. The British Bankers Association (BBA) said in a statement that these passports are the foundation of the EU single market for financial services. They pointed out that without an agreement with the EU, UK banks will find it very difficult to continue to provide cross-border banking and investment services to its customers in the EU. BBA further said in its report that UK banks could look to the national licencing regimes of individual EEA states as an alternative. However, the association stressed that relying on the domestic legal position of individual EU countries instead of the pan-EU passport regime is a costly affair and it is not very feasible for most banks.

Even if a bank manages to acquire a licence to establish an official branch within an EU country state, the licence would be applicable only for that particular country. It means banks would have to apply for licences individually in all EU countries which is a hefty process. So far, no bank has been

38 | December 2020 | Global Business Outlook

contemplating such a process.

Which banks are likely to close accounts?

Currently, there are an estimated 1.3 million Brits living in the EU. Big banks like Barclays, Lloyds and the private bank Coutts have informed their customers living in Germany, France and Portugal that their accounts with these banks will be closed if they fail to provide an alternative UK address. The accounts will be officially closed when the passporting rules expire on December 31. Some expats might find relief in the fact that not all UK-based banks have decided to close the accounts of Brits living in the EU member countries.

Following that, some banks announced that they have not taken any decision in this regard. But they are closely monitoring the situation and a decision could be made based on whether or not a withdrawal deal is reached. Banks such as HSBC, NatWest and Santander are among those who are monitoring the state of the negotiations. UKbased challenger banks that have expanded into the EU will not be affected since they will already have a licence to operate in the EU. London-based fintech Revolut is one of those challenger banks that will not be affected by Brexit as it already has a licence to operate both in the UK and the EU. From January 1, Revolut’s unit in the European Union will still be able to service those expats who live in the EU and have an account with the challenger bank.

Last month, the British media said that Barclaycard credit card customers living in the EU member countries such as Belgium, France and Spain would have their accounts closed. On the contrary, the bank has not confirmed which specific accounts will be closed—whether it is going to be only those customers whose Barclaycard was not linked to a UK address, or even those who fail to provide a UK address prior to the stipulated deadline of November 6. Some 13,000 customers of Lloyds Banking Group,

Feature \ Barclays and Lloyds accounts

including stablemates Halifax and Bank of Scotland, will have their accounts closed on or before December 31. This even includes retail customers in the Netherlands and Slovakia, and business banking customers in Germany, Italy, Ireland, the Netherlands and Portugal. Lloyd said in a statement that it has written to a small number of customers living in the EU to let them know about the account closure due to Brexit.

Many expats will wonder if there is an alternative solution and whether they could continue to use banking services without linking their accounts to a UK address.

Unfortunately, there are no straightforward alternatives to having an expat bank account.

They could find out if an alternate UK bank will continue to operate post-Brexit in the country that they are currently residing in, or move their accounts to a challenger bank such Revolut which can operate in the EU even after the transition period.

Each country’s banking regulations affect providers in different ways—for example, where one may not be able to serve a country,

others may be able to continue offering banking services. Expats can also move their accounts to a local bank in the country they are currently residing in. If expats have citizenship in any other EU country, they are entitled to open a basic bank account.

That said, there are also complications if they opt for these alternative solutions. The drawbacks here are possibly needing a visa or work permit to open the account, and if they continue to earn income in the UK, it will only add to the existing complications.

Regulators urge banks to prepare ahead of time The Financial Conduct Authority (FCA) and the Bank of England Prudential Regulation Authority (PRA) have urged banks to prepare for the end of the Brexit transition period. The authorities have stressed on the importance of the preparatory work that needs to be carried out ahead of Brexit.

According to them, it will allow the banks to prepare for a wide range of scenarios that might occur when the transition period

British expats living in EU countries are being informed that their UK bank accounts will be closed following the Brexit withdrawal period on December 31. At least 10 banks, building societies and credit card firms have decided to close accounts in this context.

Barclays is closing accounts for British expats in Belgium, Estonia, Italy and Slovakia who don't have a UK address, while Lloyds Banking Group, including Bank of Scotland, Halifax and Lloyds Bank have confirmed closing accounts for those in Germany, Italy, the Netherlands, Portugal, Republic of Ireland and Slovenia

Global Business Outlook | December 2020 | 39

Banking and finance EU financial system

The ECB's three priority areas

One

The ECB seeks to ensure that banks are prepared for complications such as distress in funding and trading markets in a post-Brexit setting

Two

Banks must strengthen their risk management and governance arrangements to safely manage their business in the UK and the EU following the end of the transition period

Three

The ECB expects banks to retain full local oversight of the business that they establish and manage and asset relocation should only take place once onshore risk management capabilities are in place

finally comes to an end. The regulators are ensuring that proper measures have been put in place for businesses and individuals in the UK to continue to access services from EU financial institutions after 2020. In addition, they have warned that there remains a risk of market volatility and disruption to financial services, particularly for EU customers.

The regulators have laid out several areas where firms should take action, although they did not specify the order of priority for those actions. According to them, financial institutions need to ensure the continuity of wholesale banking and contracts.

Another important factor pointed out by the authorities is to complete the migration of new or existing businesses to EU entities.

Firms need to consider the impact of this on each customer and ensure that they would be able to comply with national licencing regimes and exemptions in EU member countries by the end of the year. Besides stating that customers who will face account closures should be given sufficient time to allow them to find alternative arrangements, the regulators have also highlighted the need to ensure that financial institutions can continue servicing retail customers in the EU, in accordance with the law.

The FCA also reminded the financial institutions that they should consider updating relevant contracts to comply with EU requirements or consider other measures for transferring personal data from the EEA into the UK. In a letter, the authorities revealed that the UK would retain access to Single European Payment Area schemes after the transition period, and also that institutions should avoid disruption to payments. Processing payments post-Brexit will require additional information about the debtor in the payment instructions.

The letters from the regulators have not covered all issues that could arise during the end of the transition period. The ECB also reassessed banks’ preparedness for the end of the transition period. Supervisory teams formed by the ECB have discussed

40 | December 2020 | Global Business Outlook

the progress made in this regard. They established dialogues well in advance of Brexit as it is highly important for the banks to focus on plugging the gaps and preparing for an unpleasant outcome.

The pandemic is a scare to the transition period When both parties agreed to a transition period, they did not take into account the problems triggered by the coronavirus pandemic. Talks between the UK and the EU were called off in between when representatives from both sides tested positive for the virus. Also, many scheduled meetings were cancelled as traveling was restricted in many European countries. In response to the crisis, the ECB has identified three priority areas.

First: It points to contingency planning, where the ECB seeks to ensure that banks are prepared for complications such as distress in funding and trading markets in a post-Brexit setting. Second: Banks must strengthen their risk management and governance arrangements to safely manage their business in the UK and the EU following the end of the transition period.

Thirdly: The ECB expects banks to retain full local oversight of the business they establish and manage and asset relocation should only take place once onshore risk management capabilities are in place. Staff relocation processes can be delayed on the back of several lockdown measures and partial travel restrictions. In the last few months, the main priority for banks has been to deal with the coronavirus pandemic, a major stressor for economies and financial institutions. The UK has come in support of the banks in this regard through monetary policy and supervisory action to soften the impact of the pandemic on the financial sector. Authorities have also asked banks to use their capital buffers to provide loans to struggling businesses in the country.

News Banking

Central Bank of Turkey makes critical decisions

T

he Central Bank of Turkey (CBRT) plans to curb the borrowing limits of lenders to zero at the interbank money market. The move is part of the central bank’s plan to control liquidity management in the Turkish banking.

For that reason, the central bank will carry out other developments such

as the suspension of overnight repo transactions. The government will use a technique known as the quotation method to carry out the development and it will be used against the national currency’s lease certificate in the scope of open market operations. Recently, the government implemented the new rules in light of the current plans.

The country’s national currency Lira showed signs of rebound before the decision to maintain price and financial stability were announced. The central bank said that all the elements which are required within the framework of monetary policy and liquidity management will continue to remain operational.

The central bank has also increased the interest rate in its Lira swap operation from 11.75 percent to 13.25 percent. In addition, the Lira swap rate became equal to the central bank’s lending rate after its move to increase the rate from 10.25 percent to 11.75 percent in October. Currently, the rate has been raised above the interest rate corridor.

Wallet Technologies

Image: thestandard.com.hk

Former HKMA chief establishes Round Dollar Wallet Technologies Hong Kong Monetary Authority’s (HKMA) former chief executive Norman Chan Tak-lam has established a new fintech company, known as Round Dollar Wallet Technologies. It is reported that Norman Chan Tak-lam will serve as the chairman of the new establishment. The moves come at a time when global central banks are on a spree to roll out their respective sovereign digital currencies. For example, the People’s Bank of China is actively involved in testing its digital currency electronic payment system.

The new fintech is supported by five investors and it will offer digital payment services to facilitate crossborder payments. Norman Chan Tak-lam retired as the head of HKMA last year. He was spearheading the authority during his tenure between 2009 and 2019 and even deepened fintech developments in Hong Kong.

In another development, he rolled out

eight virtual banks to introduce new technologies and spur competition in the Special Administrative Region’s banking landscape.

ZhongAn Digital Asset, HashKey, Eminent Vision, Dragonfly Round and Bright Venture Investment have funded the new fintech company.

The future of Round Dollar Wallet Technologies is quite optimistic.

Global Business Outlook | December 2020 | 41

UK big banks

UK big banks shows signs of rebound

African banks gear up to stay ahead of foreign fintechs Africa’s largest bank by assets Standard Chartered is gearing up some of its operations on the continent as fintech companies are boosting their competitiveness. Against this background, the bank seeks to digitalise its systems to stay relevant in the coming years.

The emerging markets in Africa are targeted by companies such Ant Group’s Alipay through its financial services offerings. The move by foreign players has jeopardised the plans of South Africa’s local banks as the country’s market grapples with recession, corruption and high unemployment.

Banks from Kenya to Ghana are compelled to compete with a thriving mobile-banking industry that paves the way for anyone to carry out cashless transactions such as money transfer using smartphones. Telecom majors such as MTN, Vodafone and Orange are also offering digital banking services in Africa.

Standard Bank Chief Executive Officer Sim Tshabalala said that the bank is highly concerned about Alipay as it has partnered with some of the bank’s clients.

42 | December 2020 | Global Business Outlook

The UK’s five largest banks see signs of rebound in their third quarter results.

It is reported that the loan impairment charges (LIC’s) of these banks touched £1.9 billion mark in the third quarter.

The banks recorded modest but positive earnings and profitability due to these reduced charges. Even the cumulative loan impairment charges for the five largest UK banks were on track to land at about £20 billion for this year.

The banks’ results are based on the third quarter.

The second round of lockdown in the UK is expected to become a burden for the banks’ fourthquarter loan impairment charges for this year as economic uncertainty looms. The reports are produced by Fitch Ratings.

The UK’s five largest banks: Barclays, HSBC, Lloyds, NatWest and Santander have placed themselves strongly within their ratings to absorb unexpected credit loss charges for this year.

However, a surge could jeopardise the ratings, which is indicated in the negative rating outlook.

The Fitch ratings are based on a baseline economic scenario where GDP of the UK records a 11.5 slump this year without a successful Brexit deal. The top five banks are preparing for any kind of economic emergency in the coming months.

Barclays, HSBC, Lloyds, NatWest and Santander have demonstrated strong positions in their ratings

News

Banking

High loan exposure in Brazil's top banks Major Brazilian banks have put their operations at risk as they have provided loans to many small and medium enterprises (SMEs) that are vulnerable during the ongoing Covid-19 pandemic. The reports are produced by S&P Global Market Intelligence.

By the numbers, Banco Bradesco SA, for instance, has contributed 24 percent of loans to the SME segment. Even South America’s largest financial institution Itau Unibanco has allocated 16.3 percent of its loans to the segment, while Banco Santander Brasil SA has lended loans worth 12.2 percent. It is reported that 12.1 percent of loans from South America’s largest banks were allocated to the segment.

The Covid-19 pandemic has affected South American economies. Many economies are actively working to contain the spread of the infection. The government and various flexibility programmes have in fact protected SMEs from

falling into defaults during the pandemic.

South America’s five largest nations benefited from 50 million loans worth $330 billion as a form of credit relief.

Brazil, Mexico, Colombia, Chile and Peru are those nations. In Chile, Banco de Chile provided 15.2 percent of loans to the SME segment, while Peru’s Banco de Credito del Peru contributed loans worth 13.1 percent.

EU reels under fresh lockdown The European Central Bank plans to roll out new stimulus support owing to a mounting fear of anticipated recession among European nations because of fresh lockdowns. On the bright side, the central bank is making decisions without a rush because it

is prepared to face an emergency to protect the 19-member currency bloc’s economy. That said, the central bank’s current bond purchase expects to keep the markets afloat.

Policymakers are ready to direct governments in the matter.

South America’s five largest nations benefited from 50 million loans worth $330 billion as a form of credit relief

But there is a possibility of a fresh economic downturn as Covid-19 induced lockdowns are imposed again due to the second wave of infection. The task for the central bank is becoming intense on the back of having to support an economy that has already suffered an unprecedented recession this year.

The economic gloom might not last long as reports are indicating that EU economies will rebound to its pre-crisis level by the end of 2022.

But the EU’s weakest performing countries such as Spain might be in recession, while Germany is looking for economic recovery.

The gloom is expected to spread in countries such as Germany and France, including other EU nations.

Global Business Outlook | December 2020 | 43

Technology Apple

Analysis

Apple is upping the ante with trillion dollars valuation Rohit Baruah

It is the first American company to reach the $2 trillion mark, surpassing the GDP value of economically developed countries

Apple has hit the trillion dollar valuation twice

2018 $1 trillion 2020 $2 trillion

44 | December 2020 | Global Business Outlook

A

pple, the famed technology behemoth has startled the world by demonstrating a profound growth trajectory over decades. Only a few people had faith that one day it will grow to become the first-ever American tech company to achieve the $2 trillion mark. And then it happened: the company achieved the milestone in August this year—surpassing the $1 trillion market capitalisation level from two years ago.

With that, comes the marvellous news that Apple’s share price climbed steadily despite the coronavirus pandemic. Now it is not only reputed for being a Steve Jobs-led company but it has made it to the top of the world since the beginning of the last decade.

The driving force behind the company’s success is its innovation of world-class tech products. You name it and they have it. All of its products are known to work effortlessly and the sophisticated integration between them is a novel concept that has captured the tech market since its inception in 1976.

The New York Times reported that the stocks of Apple and a few other tech companies surged during the pandemic—a development

Analysis \ Steve Jobs

in contrast to common knowledge at this time. A fun fact here: It only took 26 weeks for the iPhone maker to cross another $1 trillion mark despite the protracted pandemic which has been weakening the works of companies worldwide. The report also stated the company’s value was less than $1 trillion until mid-March, while Saudi Aramco, the Kingdom of Saudi Arabia's recognised oil major was the only company to be valued at $2 trillion.

Tim Cook, Apple’s CEO, told the media, “We do not have a zerosum approach to prosperity. We are focussed on growing the pie, making sure our success isn't just our success and that everything we make, build

or do is geared toward creating opportunities for others.” Now the tech behemoth’s value has surpassed the gross domestic product of many developed countries including Norway, the UAE, Taiwan, Turkey, Switzerland, Mexico, Indonesia, the Netherlands, Italy, Brazil, Canada and Russia, South Korea, Spain, the Kingdom of Saudi Arabia and Australia after hitting the $2 trillion-mark.

It is known that the company has always stood out for its innovation and sophistication in products, advertising and sales. But what is more interesting is its growth trajectory—from developing its first product that created a world benchmark in 1976 followed by the

Apple II in 1977 that boosted its revenue until the mid-1980s—to presenting itself as an iconic brand in international markets today. For the uninitiated, Steve Wozniak was the founder of the company that built Apple I and Apple II, while Steve Jobs managed the marketing in its early days. But that is not to say that the company has faced no challenges in the past. In fact. Apple III and Apple Lisa did not perform well, leaving the company in jeopardy for a period of time.

Revisiting the John Sculley period One of Apple’s profound moments was the launch of the Macintosh in 1984. But IBM stole the thunder when

Global Business Outlook | December 2020 | 45

Technology Apple

it forayed into the international market, which then led to a slump in Apple’s revenue in the intervening period between Apple II and the Macintosh. Then founder Steve Jobs was replaced by John Sculley as the CEO following the temporary slump in revenue. After exactly 12 years, Steve Jobs was back in action as the interim chief executive of Apple. However, the company struggled between 1997 and 2000 until he was assigned as the permanent CEO. After that period, the international market was flooded with top notch products such as the iPod, iTunes and the iPhone.

Then, the company developed as many innovative products such as laser printers, Macintosh Portable, PowerBooks, the Newton, and much more under the leadership of Mr Sculley. It grew steadily on the back of an increasing demand for its products during the period. That said, the revenue further climbed with a surge in sales.

Again, the availability of cheaper Windowsbased computers started to dominate a far larger middle market during that period, while the former’s sales seemed to be stalling.

Again, the company’s product line started to flourish under the leadership of Sculley.

“We do not have a zero-sum approach to prosperity. We are focused on growing the pie, making sure our success isn't just our success and that everything we make, build or do is geared toward creating opportunities for others” Tim Cook

46 | December 2020 | Global Business Outlook

Analysis \ Steve Jobs

Steve Jobs' return to Apple was a decisive moment in tech history When Steve Jobs replaced Gil Amelio as the CEO, he had a different vision for the company. He wanted something big, really big as he truly believed that customers could not understand the value of a product until they were actually using it. Building on that vision, he rolled out the iMac under a campaign resembling a logo called Think Different. The iMac was different from its preceding products in terms of design and sophistication. The iMac was different from a traditional tower and monitor setup which a PC had during that time. By design, it looked like a racer’s helmet photographed at speed, a colourful blur sweeping back from the screen. The iMac was the most aesthetically pleasing machine which was available on the international market in 1998—and the product was user-friendly and elegant featuring a faster OS system.

How iEcosystem changed the game for Apple The launch of iMac was just the beginning of Apple’s innovative journey and after that it introduced products such as the iBook, the iPod, the iPhone, the MacBook Air and the iPad, which then changed the game for global tech companies. The launch of the iPod, the iPhone and the iPad revolutionised the world. All these devices are alluring in terms of quality and design.

Apple was very different from the rest of the tech companies. Steve Jobs had largely focused on this product’s usability and built those products with the ease of use concept, while ensuring that updates are available on time for all consumers.

All of its products pushed Apple into a new business model, which then led to the launch of a rigid ecosystem of software, hardware and content. The iTunes software did not only allow its users to transfer music from MP3 into iPods but

also paved the way for music to be sold individually at a fraction of the whole album's price. The software which Apple uses in its products is unparalleled. It is believed that the content part of the ecosystem is lucrative for Apple in the short-term and the long-term. When a user switches to Apple from a different brand, they will definitely feel the difference because of the content integration that product offers.

The post-Steve Jobs era—how is it panning out now?

When Tim Cook became the CEO of Apple following Steve Jobs demise in 2011, Apple continued to dominate the international market by continuing the trend with the same level of sophistication and efforts. With that, the company’s share prices also rose steadily.

Many global experts have said that Apple without Steve Jobs has turned iterative in its tech releases rather than transformative. The company’s major release after Steve Jobs has been the Apple Watch, then followed the launch of Apple TV, Apple TV+ streaming video-on-demand services and few other gadgets.

Currently, the company is heavily reliant on its iPhone's production cycle to power its financial success in the absence of a new groundbreaking product. Many experts firmly believe that the company has lost its innovative edge in recent years, despite it continuously producing high-end products with the best-integrated ecosystem ever created. For now, there are no major key differentiators between Apple and tech companies such as Google and Samsung, like it used to be back

Apple is the firstever American tech company to achieve the $2 trillion mark in August this year—surpassing the $1 trillion market capitalisation level from two years ago

Incremental rise in R&D investments

2016 $10 bn 2017 $11.6 bn 2018 $14.2 bn 2019 $16.2 bn Source: Analytics Insight

All of its products pushed Apple into a new business model, which then led to the launch of a robust ecosystem of software, hardware and content

Global Business Outlook | December 2020 | 47

Technology Apple

in the day. Companies like Samsung have in fact taken the lead in some categories in the field of product innovation.

Apple’s trillion dollars valuation is a ‘reminder for investors’ But what is intriguing is that the company despite re-hashing its famed integration of all products with a touch of sophistication touched the market value with $1 trillion in 2018. The sales of iPhone X played a pivotal role in the development as it increased revenue by 20 percent, and the company

Tech firms’ controversial take on Apple A company this big cannot escape from the shadows of controversies and complexities. Apple has faced a series of allegations in the last few years, when Google imposed a fine of $5 billion over Android Abuse, which sparked a different outlook among users and critics. Apart from that, there have been other problems such as the iPhone Battery controversy and iPhone slow down, anticompetitive practices, Irish tax bill and universal compatibility violation. As we all know, the company’s market capitalisation has touched a record landmark this year. With that, it is clear that Apple is setting up new goals for the future. The revenue from wearables such as Apple Watch has set new records, while the company’s 13 new services also rose to record high amid the outbreak of the novel coronavirus. The contactless payments services such as Apple Pay have also gained popularity this year due to the surge in demand. Also, this year saw the company make profound changes to its Mac. Apple is using its own customdesigned chips in the Mac instead of Intel processors. The new processors are believed to be more energy-efficient and they are used in iPhones and iPads. The new chips are expected to enhance Apple’s performance for laptops and provide a longer battery life.

48 | December 2020 | Global Business Outlook

managed to grow by 17 percent each year with $53.3 billion in revenue. The fact that Apple’s iPhone sales were skyrocketing compared to more than any other products that the company has offered points to the fact that the iPhone is of utmost importance to its brand value. However, that was enough for Apple to make profits in a thriving marketplace.

The company has been the largest global company in terms of market capitalisation over the years. Despite its looming challenges, it is becoming a more powerful brand then ever and there are hopes that it will launch new products in the market.

The fact that Apple is becoming a $ 2 trillion company is positive news for global investors as its stock is widely owned by lawyers, teachers and electricians. This demonstrates the scope for investors in the company’s stocks. Its position is stronger than ever, allowing investors of all types to invest and make profits. Kate Warne, a renowned investment strategist, told the media, “Apple’s $1 trillion valuation is a great reminder to investors that companies with innovative ideas combined with world-class products and service can create value for investors over time.”

Entering a new decade: Its legacy continues A company this big cannot escape from the shadows of controversies and complexities.

For example, it has faced a series of allegations in the last few years, when Google imposed a fine of $5 billion over Android Abuse, which sparked a different outlook among users and critics. Apart from that, there have been other problems such as the iPhone Battery controversy and iPhone slow down, anticompetitive practices, Irish tax bill and universal compatibility violation.

As we all know the company’s market capitalisation has touched a record

Analysis \ Steve Jobs

landmark this year. With that, it is clear that Apple is setting up new goals for the future. The revenue from wearables such as Apple Watch has set new records, while the company’s 13 new services also rose to record high amid the outbreak of the novel coronavirus. The contactless payments services such as Apple Pay have also gained popularity this year due to the surge in demand for contactless payments services.

Also, this year saw the company make profound changes to its Mac. Apple is using its own custom-designed chips in the Mac instead of Intel processors. The new processors are believed to be more energyefficient and they are used in iPhones and iPads. The new chips are expected to enhance Apple’s performance for laptops and provide a longer battery life. Furthermore, Apple has changed the macOS for developers. Now, they can use iOS and iPad OS apps on the Mac without any modifications. The move has paved the way for PC users to effortlessly use Mac-based apps.

The world prepares for new Apple innovations This year’s Apple’s Worldwide Developers Conference was held virtually due to the outbreak of the Coronavirus pandemic.

The event brought together developers and Apple fans from different parts of the world, which then announced a series of new innovations that have pushed the company’s experience in building its platforms and products even further.

The event unveiled a few groundbreaking features and app development tools such as watch OS 7, App Library in iOS 14, macOS Big Sur which is the new OS for Macintosh computers, a new handwriting feature with Apple pencil in iPadOS 14 and watchOS 7.

Now there are speculations that Apple is developing its own automobiles, which

will take its fame to a whole new level. According to Apple’s analyst, Ming-Chi Kuo, the iPhone maker is developing Apple cars and expected to launch between 2023 AND 2025.

If that is true then the development will revolutionise the automobile industry like it did for the tech industry on the back of profound concepts. Truth be told, Apple has the capability to invest in new business models and foray into other industries, for the simple reason that it has built a robust technology driven ecosystem.

The industry is filled with competitors who seek to challenge Apple’s success with the launch of new technologies. In fact, experts believe that many global companies are following Apple’s ideas and innovations in the process to win.

But the more significant questions point to: Can Apple maintain its edge in the tech market? Can the company innovate new products as it has done before? Will it be successful to engage more loyal consumers?

If we look back, there are other competitors who are enhancing their product lines with new ideas and concepts, and it is only a matter of time before they emerge bigger. It is certain that Apple has the potential to produce something big, but it needs to continuously innovate to stay relevant in the industry while competing with the emerging companies who carry similar potential to overpower Apple in the coming years. For that reason, the company will have to strategically plan its next move to stay ahead of the game

One of Apple’s profound moments was the launch of the Macintosh in 1984, but IBM’s foray into the global market led to a slump in Apple’s revenue during the intervening period between Apple II and the Macintosh

Global Business Outlook | December 2020 | 49

Technology Telecom | Privatisation of telcos

Feature

The telecom industry holds the promise of total connectivity in the country— but it calls for more regulatory flexibility and legal certainty

50 | December 2020 | Global Business Outlook

Will Brazil’s telecom see new reforms?

Rohit Baruah

Telecom giants like Telefonica, America Movil, Telecom Italia and Oi are conduits for enhancing the current wireless networks, speed and latency across the Brazilian landscape. In 1998, the privatisation of the state-owned telecom companies marked the emergence of new entrants in the industry, pointing to a tremendous growth potential in the future. In terms of numbers, the country was equipped with 27 million broadband internet connections, 244 million mobile access, 42 million landlines and 19 pay TV terminals by the end of 2016.

The privatisation of Brazil’s state-owned telecom companies have in fact changed the industry’s game in the long-run. In the beginning of 1999, the country was overwhelmed with several private telecom companies and there were unexpected changes in the industry as a result, showing high telecom and broadband penetration levels. In fact, German database company Statista published a report which indicates that the industry is anticipated to generate revenue worth $47.7 billion in 2023. Telefonica recorded revenue worth $43.21 billion Brazillian reals in 2017, making it the largest telecom company in South America. This growth trajectory was an important milestone to the Latin giant and hoped to pave the way for a new era in telecom.

In the 1990s, the capital city Rio de Janeiro installed 10,000 terminals for operating the cellular mobile system.

There were 667 devices in the country at the time and the number surged to 6,700 devices in 1991, followed by an increase of 30,000 devices in 1992. But what really transformed the industry was the establishment of Vivo in 2003. During that time, Vivo was the largest operator in Brazil with a subscriber base of 17 million, roughly three times the customer base of the country's second largest telco Cellco.

Both the telecom majors had invested $12. 6 million to launch the brand.

Vivo’s early potential has assisted in network expansion During its initial launch, Vivo covered 86 percent of the Brazilian area except for the North-eastern part of the country and Minas Gerais state because the company relied on local operators for roaming agreements in these regions. The parent companies upgraded the existing TDMA networks to CDMA in the second quarter of 2003, enabling Vivo to establish a 3G network for both corporate and private residents.

Global Business Outlook | December 2020 | 51

Technology Telecom

In 2008, Vivo upgraded its 3G network with HSUPA in 27 cities. The new development was a big achievement for the telecom major in terms of innovation and sustainability. The launch allowed users to use the internet with fast upload speeds through an Aiko 82D modem.

With that, its peer Cello also expressed interest in expanding its device portfolio. Vivo initially made the HSUPA available to the people residing in cities such as Brasilia, Curitiba, Porto Alegre, Salvador and São Paulo, while the HSUPA services were rolled out at a price of $26.20 per month. Although the service was committed to deliver data transfer of 500kbps, another package with a slightly higher cost provided unlimited services for its users.

These developments established the basic framework leading to the country’s debut in 3G services in 2007. With that, 3G network became popular among 90 percent of the residents within a span of five years. This development even brought LTE network tests to several cities in the country and the debut of LTE compatible devices in 2013 encouraged the government to speed up its plans for the industry. At present, the Brazilian mobile market is dominated by Spanish Telefonicacontrolled controlled Vivo—which is the leading wireless and fixed company in the

52 | December 2020 | Global Business Outlook

country. The company has established its presence as the second wireless provider after Claro, while the latter continues to dominate the mobile market after TIM. Vivo, Claro, Oi and TIM’s efforts in launching 4G services have created a remarkable improvement in the industry.

But there have been speculations about whether the launch was successful or not.

In fact, the telecoms had auctioned 4G spectrum and also promised to provide network services coverage to at least 50 percent of the country’s urban areas.

However, these services were only available in densely populated cities in the country and the World Cup host São Paulo.

Is Brazil's 4G network still underperforming?

Now, Brazil ranks 22nd in the world in terms of 4G network, with an average speed of 11Mbps. Claro and Oi provide the

Feature \ Privatisation of telcos

fastest services at nearly 12Mbps, while other telecoms including Tim and Vivo deliver various speeds of Mbps. These telecom companies are not able to deliver at good internet speeds despite new developments and several customers across the Brazilian landscape have raised concerns regarding poor 4G network coverage.

But the current trend is changing at a rapid pace. Mobile analytics and insights company Opensignal published an industry report in July which found that TIM remains the best operator in 4G availability. It shows that consumers were able to find 4G connection nearly 88.2 percent of the time using its service. Vivo and Claro were close to crossing the 80 percent milestone, while Oi made it slightly above the 70 percent mark.

This suggests that the level of 4G access in the country is continuing to grow. It seems that since Opensignal’s last report, TIM, Viva and Oi’s scores improved by nearly 2.5 percentage points, while Claro’s scores rose by 1.3 percentage points. Against this background, TIM’s high scores indicate that 4G network is maturing.

When it comes to speed metrics, the report has observed that Claro is succeeding in upload and download speed experiences. In fact, it has demonstrated an average download speed of 23.4 Mbps, which is an impressive 50.1 percent faster than speeds by Vivo, 68.2 percent faster than TIM and 129.6 percent faster than Oi’s network.

According to TeleBrasil, 96 percent of the population across 144 cities had access to 4G networks in 2019. The reports state that 12.3 million new 4G sim cards were issued to users, while 142 million 4G users were already active during the period between January and

TIM remains the best operator in 4G availability.

It shows that consumers were able to find 4G connection nearly 88.2 percent of the time using its service

4G network shows good availability

Network availability

88.2% TIM

80% Vivo

Source: Opensignal July report

May. The overall 4G network in Brazil is above average than most of the undeveloped countries of the world. However, the telecom industry seeks to improve mobile and data connectivity on the back of developing next-generation technology. Certainly, the country expects to transform the industry in the future.

GlobalData in its report observed that the number of fixed broadband access lines connections will burgeon from an estimated 31.8 million to 36.7 million, increasing at a CAGR rate of 2.9 percent. The report even estimates that the country’s 36.8 percent of the total share of broadband lines were taken by digital subscriber lines (DSLs) in 2019. In fact, DSLs also accounted for 30.5 percent of the cable lines. Global technology experts predict that fibre will be the fastest growing broadband service segment for Brazil during the period between 2019 and 2020.

Telefonica’s fibre neutral network—an overview According to the report, fibre-based internet connectivity will account for 28.4 percent of the total broadband subscriptions by the end of 2024.

Telecom majors such as Vivo, Claro and Oi have supported the fibre-based internet connectivity through the national broadband plan initiative. Now Telefonica is planning to launch a neutral and independent fibre optics network and is exploring potential partnership for the development. As it continues to expand its FTTH network across the country, it will simultaneously launch advanced forms of services delivering ultra-speed.

Global Business Outlook | December 2020 | 53

Technology Telecom

Telefonica is planning to launch a neutral and independent fibre optics network and is exploring potential partnership for the development, as it continues to expand its FTTH network across the country

Telefonica had joined forces with American Tower in Minas Gerais state and a franchise model under the Terra brand last year to develop FTTH. But the franchise is expected to decide whether 100 percent of the capex will be utilised to equip homes with fibre as the Spanish telecom company is only responsible for installing the fibre in the city and obtaining rewards for the operations.

In this context, Telefonica Brasil CEO Christian Gebara, told the media, “We are going to continue growing fibre, but under different models. Despite the mobility and installation restrictions imposed during the Covid-19 pandemic, this was the best quarter in 14 years.” The company’s approach toward optic fibre internet is not a novel concept, but a lot of capital is required for the development. In fact, other operators are betting on co-apex and partnership models because of the pricing. In the big picture, the company is planning to launch a neutral network that will be made available to other companies and customers in a wholesale format.

Ericsson makes a giant leap in 5G auctions Ericsson has proposed a new model for Latin America 5G spectrum auctions. The telecom equipment supplier said that it is important to set base prices for frequencies in the region's 5G spectrum auctions and telecom operators should offer premiums in the form of network investment commitments.

Industry experts believe that it is critical not to treat 5G as an alternate technology developed to replace 4G in personal mobile technology. The reason for that is because 5G technology will be vital to industry 4.0 and IoT networks. So providing it with the same coverage requirements will be futile for the technology and the industry on a large-scale.

54 | December 2020 | Global Business Outlook

5G is making significant progress nationwide Although Claro is already operating a 5G-like technology through the DSS system which offers speeds close to that of fibre 250Mb/s per and high bandwidth capacity with more spectrum—making the 5G auction is crucial in the first half of next year. However, the 5G-focused bank is ‘occupied by broadcasting services’.

America Móvil's President for Brazil José Felix pointed out in a report that the terms for tender should be able to deal with the complexities of spectrum acquisition by those who seek to join the process for acquiring and resale.

Claro and Ericsson have established a partnership to establish a 5G network in the country. Both companies plan to launch 5G services across 12 cities including São Paulo and Rio de Janeiro. For that reason, Ericsson will deploy its 5G spectrum sharing platform for the development.

Arun Bansal, President of Europe and Latin America, Ericsson, told the media, “Claro’s customers in Brazil will soon be able to tap into the incredible power of 5G. This next generation network has farreaching potential to transform the country from agriculture and smart cities.”

Ericsson’s 5G platform is expected to provide low latency and faster connections at cheaper costs. The 5G services can be installed through a software update on any of the five million 5G-ready radios that Ericsson has floated in the global market. This has given Brazil a competitive advantage because it already has more than 400,000 radios installed.

In July, Telefonica launched its 5G network.

CEO Christian Gebara, told the media. “5G will be available in selected parts of eight state capitals, namely: São Paulo, Salvador, Brasília, Rio de Janeiro, Porto Alegre, Goiânia, Curitiba and Belo Horizonte.”

It uses dynamic spectrum sharing (DSS) technology, like its counterparts TIM and Claro. TIM started serving 5G in September

Feature \ Blockchain in UAE banks

across Bento Goncalves, ItajubĂĄ and Tres Lagoas.

Interestingly, Ericsson has proposed a new model for Latin America's 5G spectrum auctions.

The telecom equipment supplier said that it is important to set base prices for frequencies in the region’s 5G spectrum auctions and telecom operators should offer premiums provided in the form of network investment commitments.

Industry experts believe that it is critical not to treat 5G as an alternate technology to replace 4G in personal mobile technology. The reason for that is because 5G technology will be vital to industry 4.0 and IoT networks. So providing it with the same coverage requirements will be futile for the technology and the industry at a large-scale.

Lack of tax reforms is distressing Brazil is among the developing countries in the world and is considered one of the hotbeds for investments on the back of its thriving marketplace. In recent years, the industry has been calling for additional regulatory flexibility, legal certainty and reduced tax burden to promote investments. It seems that taxes in the industry had increased 224 percent during the last two decades and revenues by 123 percent in the same period. Felix said at an event that the country has the highest tax burden on its customers in the world.

In fact, Huawei had paid 1.4 billion reais in taxes last year despite the company having established its presence in the country for more than 22 years. By job value, it employs more than 1,800 people directly, of which 80 percent of them are Brazilians.

It seems that the lack of tax reforms

Taxes in the industry had increased 224 percent during the last two decades and revenues by 123 percent in the same period

might have a residual effect on the industry in the coming years.

However, the country is actively working on the existing loopholes and it seeks to develop new regulatory frameworks that can accelerate innovations for industry 4.0 and 5G auction.

The Brazilian telecom industry is complex to analyse because of its isolated nature. But the emergence of foreign investors on the back of recurring mergers and acquisitions between companies have transformed the industry on many levels. So the demand for mobile broadband internet services is only expected to increase or become a bottleneck. The opportunities in the industry are diverse, but there is a lot of change that is yet to be seen.

Global Business Outlook | December 2020 | 55

Technology Insight Bitcoin trading in Egypt

A surge in interest in bitcoin trading and mining has come about on the back of a weakening economy

Egypt begins mining Satoshi

100 millionth of bitcoin

5%

estimated profits

Egypt makes way for a bitcoin future TOM HARDY

Egypt records high unemployment rate in 2020 First quarter

7.7% Second quarter

9.6%

56 | December 2020 | Global Business Outlook

Cryptocurrencies such as bitcoin are becoming popular in Egypt despite looming uncertainties triggered by the coronavirus pandemic. Research has found that the downturn has in fact resulted in a spike in interest in bitcoin among Egyptians. With the global economy entering a recession and economic activities coming to a halt, a higher ratio of Egyptians are seeking the benefits of trading and mining bitcoin as an alternative source of income. The increasing interest in bitcoin is also to do with the fact that it is one of the first cryptocurrencies that came into existence, and it is also increasingly popular compared to other cryptocurrencies. Bitcoin awareness has reached an all-time high in 2020, according to Google Trends data. However, when it comes to African countries, Kenya, Ghana, and South Africa have accounted for significant P2P increases in 2020.

The pandemic has resulted in more than half a million Egyptians losing their jobs, according to the Egyptian Central Agency for Public Mobilisation and Statistics. With the unemployment rate reaching 9.6 percent in the second quarter of 2020, new job opportunities are becoming increasingly difficult to come by. It is reported that an estimated 16,000 Egyptians have joined the Bitcoin Egypt Community during the period.

Although cryptocurrencies were banned in Egypt last year the Central Bank of Egypt (CBE) announced that it is working on a draft law that will

Insight Legalising bitcoin

Opening price of bitcoin in trading December 17 Open

21,308.35 Market cap

423,576,934,966 December 16 Open

19,418.82 Market cap only ban the creation, trading, or promotion of cryptocurrencies without a licence. The move is significant because it highlights the progressiveness of the government to work towards legalising cryptocurrencies, understanding its potential and the role it will play in the future.

Egypt’s surging interest in bitcoin is attributable to recession To further understand the reason behind the surging interest in bitcoin among Egyptians, Dmytro Volkov, CTO of a leading crypto exchange CEX.IO, in an exclusive interview with Global Business Outlook, said “The Covid-19 pandemic has been one of the main factors that has pushed the Egyptian economy into recession. Given the nearly 10 percent spike in unemployment across the nation, it appears that Egyptians are turning to cryptocurrency to invest their assets and hedge them against risks during these uncertain times.”

CEX.IO was one of the first platforms to make fiat-to-crypto transactions accessible by offering card payments and bank transfers to clients. It provides a rich variety of trading tools for bitcoin, bitcoin cash, ethereum, ripple, stellar, litecoin, tron, and other crypto-assets, and it has a strong presence in the Egyptian market. “As more than half a million people have lost their jobs and lockdown measures force them to stay at home, they are using their spare time to navigate into this new asset class.

Therefore, a combination of unemployment and recession are the main reasons behind the recent spike in demand for bitcoin mining and trading in Egypt,” Dmytro Volkov said.

Another plausible reason could be based on the fact that brokers have gained more legitimacy. Brokers in Egypt can now guarantee balance for customers as they are affiliated with larger networks such as VISA and MasterCard. Earlier, the infrastructure was not very supportive, but things are evolving, thanks to the change in stance among authorities.

But there are rising concerns because this group can be an easy target for

395,799,863,746 December 15 Open

19,246.92 Market cap

360,614,771,027 December 14 Open

19,144.49 Market cap

357,432,550,020

Global Business Outlook | December 2020 | 57

Technology Insight Bitcoin trading in Egypt

How much is bitcoin worth on a global scale?

Total worth

$160.4 billion Share of world money

0.4% Quota of world's global supply

1.6% Combined crypto worth of world money

1.6%

fraud due to lack of proper legislation.

However, new laws are being drafted which will provide more clarity on the legalities related to cryptocurrency.

When Facebook announced the launch of its stablecoin Libra, it received a lot of attention from industry experts, critics, traders, regulators and governments across the world. The stablecoin promises seamless functions where its users will also be able to pay bills, share tabs in restaurants and ride local public transport when Libra is legalised.

While Libra is a cryptocurrency like bitcoin, it is not volatile in nature.

Given Facebook’s positioning as a platform used by billions of people, the company has somewhat enhanced the popularity of cryptocurrencies.

With more than 2.5 billion users from around the world, Facebook’s Libra has definitely played a part in promoting interest in cryptocurrencies, not only in Egypt, but for the rest of the world.

Egyptian regulators inspired

by GCC action While the country is slowly embracing the idea of cryptocurrencies, some countries in the Middle East and North African (MENA) region have already integrated cryptocurrency trading and other blockchain technologies into their economic systems. For example, the UAE has already taken significant steps in making cryptocurrency transactions tax-free and launching an official Emirati coin known as EMCASH. The UAE has also established the Global Blockchain Council, thus transforming itself into a cryptocurrency oasis of the region.

Considering the emirate’s progressive stance in cryptocurrencies, other countries in the region are following suit. Many are even reconsidering the laws that have imposed a ban on the use of cryptocurrencies in the region.

In this context, Egypt is making

58 | December 2020 | Global Business Outlook

significant progress, but its efforts have a long way to go to catch up with the UAE. After observing the UAE’s success on this front and how the emirate has implemented its cryptocurrency regulation, Egyptian legislators were inspired to reconsider their cryptocurrency ban. In addition to their willingness to reconsider the legality of cryptocurrency, Egypt is also considering the development of a digital version of the Egyptian pound. Many countries such as China and Japan are pushing ahead with significant investments in Central Bank Digital Currencies (CBDCs). In the near future, we could see more and more countries launch projects for their own CBDS, including Egypt.

Even the Kingdom of Saudi Arabia that runs on Sharia Law has also upgraded its cryptocurrency policies, especially pertaining to remittances.

Iran has also brought in reforms to its cryptocurrency laws, and it has officially permitted the mining of bitcoin, which rose to notable levels.

In Lebanon, citizens continue to buy and use cryptocurrency even though its trading remains illegal because they prefer to hold bitcoin over their local currency. Although cryptocurrency remains banned in wealthier economies in the GCC region such as Kuwait, Qatar and Oman, they are now considering a change in their cryptocurrency policies—and it is only a matter of time before new reforms are introduced.

CBE's strategic progress in legalising cryptocurrency Previously, Egypt saw cryptocurrency as a threat to the economy on the back of its volatile nature and as a result, it had banned all cryptocurrencies under Islamic Law. Following that, Shawki Allam, the current Grand Mufti of Egypt, issued a ban in early 2018. At the time, he said that the technology

Insight Legalising bitcoin

could undermine the legal system and lead to instances such as tax evasion, money laundering and other fraudulent activities. On the contrary to this move, Egypt introduced a bill that gave the board of directors of the Central Bank of Egypt (CBE) the right to regulate cryptocurrencies and made it a mandate to acquire licence for their creation, operation, trading, or promotion.

“Egypt’s central bank is reportedly preparing to issue a law that legalises this new asset class in January 2021. Although the ongoing global pandemic may have changed the bank’s priorities, this is a significant step towards mass adoption. Since the traditional banking system is not doing particularly well these days, Egyptians will likely be more attracted to Bitcoin,” Dmytro Volkov said. “The pioneer cryptocurrency gives them the opportunity to eliminate the procedural bottlenecks that plague traditional financial services and generate an income. Such benefits have catapulted Egypt to be amongst the top ten countries with the highest cryptocurrency activity in Africa. This is a clear sign of the high potential that this new asset class has to act as competition to the banking system in the nation. And if the economic disaster caused by Covid-19 continues to increase, Egypt could become the cryptocurrency hub in the region.”

Pointing to the fact that cryptocurrencies have a bright future not only in Egypt but across Africa, Dmytro Volkov further explained, “Different countries in the region, including Egypt, Ghana, Malawi, Mozambique, Nigeria, Zambia and Zimbabwe, currently have a doubledigit inflation rate. Therefore, the acquisition power of their respective sovereign currencies is deprecating over time. For instance, if a bottle of water currently costs around 3.4

Egyptian Pounds, tomorrow the same bottle could be sold for 4.08 Egyptian Pounds. Based on this fact, the future of Bitcoin and cryptocurrencies in general looks bright in Egypt and Africa as a whole. As seen back in 2015, when Zimbabwe’s inflation skyrocketed, citizens of these countries will likely flock to transact in crypto as opposed to their local currencies, if the economic crisis worsens.

Consequently, the adoption rate of this new asset class will continue to rise over the years to come.”

Is Africa on the brink of a crypto revolution?

It is observed that there is tremendous interest in cryptocurrencies not only in Egypt but across Africa. Many experts believe that the technology is disruptive and they expect it to bring significant changes to the continent.

A report published by Arcane Research notes that Africa is one of the most promising regions for the adoption of cryptocurrencies. The report highlighted that bitcoin and cryptocurrency ownership rates in South Africa and Nigeria stand at 13 percent and 7 percent, respectively, which is significantly higher than the global average of 7 percent. The fact that cryptocurrency is not bound by geography and is internet-based adds to its advantage.

The good news is: cryptocurrency, whether regulated or not, do not need middlemen, and transactions rely on the Internet. This means cryptocurrency transactions can be carried out in any part of the world, which gives a global competitive advantage over any other form of money or payment facility—and Africa is well-positioned to capitalise on this. Emerging economies in Africa such as Nigeria, Kenya and South Africa are already witnessing a surge in cryptocurrency popularity. The fact that the population on the continent

Bitcoin and cryptocurrency ownership rates in South Africa and Nigeria stand at 13 percent and 7 percent, respectively, which is significantly higher than the global average of 7 percent.

The fact that cryptocurrency is not bound by geography and is internetbased adds to its advantage

Global institutional investors via Grayscale's trust ARK Investment Management

$20,226 Kinetics Internet

$15,284 Kinetics Paradigm

$13,995 Arkadios Wealth Advisors

$9,071 Corriente Advisors

$4,201

Global Business Outlook | December 2020 | 59

Technology Bitcoin trading in Egypt

Rise in BTC transfers to and from Africa

2019 October

358.5k November

336.1k December

330.5k 2020 January

305.9k February

304.6k March

363.8k April

508.9k May

585.3k June

600.7k

is growing at a fast rate, alongside technology savvy professionals and entrepreneurs, is a boost to the cryptocurrency development.

Technology savvy Africans have quickly adapted bitcoin as it helps them to get a better value for the dollar compared to weaker local currencies.

The success of mobile money in Africa already indicates that the populace is not conservative toward a new financial disruption.

The use of bitcoin is booming in Africa and it is driven by small and medium-sized enterprises as well as remittance payments. It is reported that monthly cryptocurrency transfers to and from Africa of under $10,000, which is typically made by individuals and SMEs increased by nearly 55 percent year-on-year to reach $316 million in June. The majority of the cryptocurrency activities in Africa are taking place in Nigeria, South Africa and Kenya.

Unstable and weaker local currencies and hyperinflation are known to play a huge part in the cryptocurrency boom in Africa. Africans are turning to cryptocurrencies to avoid paying higher fees and become a victim of instability associated with local currencies.

Now they are increasingly turning to cryptocurrency as means of exchange over local fiat currencies, according to Chainalysis. The report points out that local individuals and businesses are using cryptocurrencies to avoid high fees, regulatory complications, and currency instability.

Assessing risks should be the first step to crypto legalisation Despite Egypt’s tremendous efforts to adopt cryptocurrency, it is important to not be blindsided by the progress made by the UAE or Nigeria. There are certain risks attached to it and Egypt must mitigate them before fully venturing into the world of cryptocurrency. This

60 | December 2020 | Global Business Outlook

is especially important because bitcoin still remains unregulated in many countries and it functions without any safety nets. For many, converting local currencies to and from bitcoin relies on informal brokers because it is highly volatile and the process of buying and selling is complex— which further necessitates technical knowledge in its trading. Against this background, Egypt must deal with the legal aspects of it and establish a clear understanding of whether it recognises cryptocurrency as a legal tender, or not. For now, there are thousands of different cryptocurrencies in the world, with the most popular ones being bitcoin, ethereum and ripple. Since cryptocurrency is intangible and stored digitally in a wallet, it carries underlying risks such as cyber extortion, market manipulation, fraud and other financial complexities. There is also mounting fear in the use of cryptocurrency as it can potentially play an active role in financing terrorism.

Therefore, the country must assess all the risks associated with cryptocurrency and how legalising it will impact the economy, investors and citizens. Another reason for concern here is that a majority of the country’s cryptocurrency-related assets or even companies are very much underinsured or even uninsurable by today’s standards. In short, there is a stigma attached to the technology which has encouraged countries to impose a ban on its use. That said, Egypt should capitalise on its rising interest in bitcoin while keeping these factors in mind. Implementing the right policies and fully understanding the highs and lows of cryptocurrency will allow the country to emerge as a trading hub in the region.

Technology

Interview David Hodkinson Xace Founder and CEO

Using technology, data and gaming can connect more people—forming a niche within the payments landscape

When challenger banks become gaming-friendly GBO correspondent

F

or years, gaming has been a popular form of entertainment and it is now best known for creating new opportunities within the global financial ecosystem. Last year, the global video gaming industry was valued

games to online games, which further necessitates a seamless financial payment system.

At present, there are a host of financial services providers who are seeking a fascinating route to leverage gaming in their offerings. Case in point is Xace which has become the first FCA-licenced specialist payment and account provider in Europe for gaming and cryptocurrency industries.

With the new development, accounts are being offered for GBP and EUR through its custom web banking platform. Xace prides itself on becoming the first digital banking platform designed for those emerging markets. In practice, the company develops digital bank accounts and allows

When you take on a challenge, you face barriers every step of the way, but it only makes you deliver a better product and service as a result

at $151.06 billion and they are expected to grow a compound annual growth rate of 12.9 percent from 2020 to 2027. In May, the world’s 2.7 billion gamers were anticipated to spend $159.3 billion on games in 2020 and surpass $200 billion by 2023, according to the Global Games Market Report published by Newzoo. This anticipated growth trajectory coupled with the coronavirus pandemic has enabled them to make meaningful shifts from physical

cryptocurrency or gaming operators to send and receive payments without the need for traditional banks. It was developed by a team of experts who have previously worked in the financial services industry specialising in gaming and cryptocurrency over the last six years. Statistically, more than thousand gaming businesses and players are seeking accounts with Xace.

It is interesting to note that financial services companies are tapping into unconventional domains like gaming to evolve the industry

Global Business Outlook | December 2020 | 61

Technology

Interview Xace-Visa partnership

and business at large. In a way, it also allows them to differentiate their offerings and gain competitive advantage among new and existing lenders in the global financial landscape. It is now planning to foray into other European markets and will subsequently make significant headways in lowering barriers within the financial and gaming industries. Xace Founder and CEO David Hodkinson discusses with Global Business Outlook the company’s vision in becoming the go-to financial services provider for operators and customers in gaming and cryptocurrency markets.

GBO What is the value proposition that Xace offers to significantly differentiate itself from industry competitors?

David Hodkinson: We set out to solve a very targeted industry problem through our own experiences within the gaming and cryptocurrency industries.

As chartered accountants, our niche clients were in a constant state of battle when it came to bank accounts and transactions, even though they were licenced and compliant entities across Europe. This was costing significant time and money for so many companies with even institutions who were publicly considered as cryptocurrency and gaming friendly, regularly closing accounts or rejecting compliant applications.

With Xace, we set out to win the battle for these industries through experience, understanding and delivering a compliant solution the regulators would be happy with. When you take on a challenge like this, you face barriers every step of the way, but it only makes you deliver a better product and service as a result.

Can you elaborate on the company’s digital banking services designed for emerging markets such as gaming and cryptocurrency?

Xace is a proprietary suite of account and payment products for GBP and EUR, enabling businesses and individuals who are working or trading with cryptocurrency or running or playing online gaming platforms across the European Economic Area to store and use their money. Unlike traditional banks and financial institutions, we understand that gaming and cryptocurrency can be licenced, regulated and compliant and we are not shying away from those responsibilities to provide our customers with their much needed and demanded services.

62 | December 2020 | Global Business Outlook

Given the growth potential of the gaming industry, how important was it for Xace to become the first specialist payment and account provider in Europe offering FCA-licenced solutions specifically for the industry?

Well, first we simply had to solve the challenges that gaming companies are facing in Europe, while many are starting to integrate alternative payment methods such as bitcoin with their access to bank accounts only going to reduce. We have always known that if we created a solution that enables licenced and compliant gaming platforms to manage their money, then we would be a successful business in a short space of time.

The growth opportunities for gaming as a whole only goes to demonstrate that this challenge has been one worth taking and we are now in a position to be there to support companies with whatever direction gaming takes them in.

What are the implications of Xace-Visa partnership for customers while managing their payments in both GBP and Euros?

Through our virtual debit card issuer, Xace customers

We are huge fans of the growth of esports. We have worked alongside some of the global stars and teams who make up the foundations of where esports has got to today and it has really been quite a journey to see it unfold the way it has

will be able to create and manage debit cards at will, to be used in any situation they may need over the global Visa network. Virtual debit cards are growing in popularity within the gaming industry as players seek additional ways of remaining safe. Being used to a gaming-friendly account ensures that payments are less likely to be blocked or rejected. The Visa network makes it possible for Xace to be functional on almost every payment gateway there is and it is going to be a very popular feature when we launch it in the coming weeks.

What are the challenges that you are anticipating in the near future in terms of achieving the company’s goals?

Hopefully, our biggest hurdles have already been faced, but creating a payment institution for these industries is nothing short of difficult. Our growth has been rapid, with no marketing spend as yet and no launch of our marketing strategy. So really, it will come down to how we navigate growth as an organisation that will bring the biggest challenges moving forward. We embrace the challenges brought by regulators, while technical integrations will always

be an ongoing process,but we have a very tight knit team and we are all in it together.

Are there any challenges that esports would face in the near future and how could Xace solve these problems?

We are huge fans of the growth of esports. We have worked alongside some of the global stars and teams who make up the foundations of where esports has got to today and it has really been quite a journey to see it unfold the way it has. We have already seen where some of the challenges are going to come from and it really comes down to how financial institutions understand the business of esports. As fans begin to put finances in and alternative payments are received, such as crypto and tokens, the banks become anxious as it is new to them. Then it is a question of do they want to understand it or is it cheaper and quicker to just move on or not accept accounts in the first place, which is a likely situation. At Xace, we know the industry, we know and understand the types of payments involved and we know how to get compliance right to support businesses and players.

Esports first gained popularity in Asian countries such as South Korea. Does Xace have any plans to set up offices in APac or anywhere outside Europe in the future?

Our motto is never say never and our plans are big, but right now we are 100 percent focused on our goals in the UK and the European Economic Area.

Can you discuss more on Xace’s plans for the next five years?

First up we are due to launch our Malta office in the coming weeks. The team at Xace have worked a lot with Maltese companies in the past and this has been a target market for us since the outset. We have big plans for the region. Outside of that we are committed to delivering the best products and experiences we can for our customers, while continuing to grow the business.

We will keep our cards close to our chests on our core plans, but 2021 will see a lot of developments for Xace and we are looking forward to it.

Global Business Outlook | December 2020 | 63

News

Technology

Africa sees surge in remittance services

T

he money transfer business in Africa is thriving as the pandemic spurs online remittances. The World Bank earlier forecasted that weaker economies will suffer a historic 20 percent slump to $445 billion in remittances due to the pandemic outbreak.

It is reported that remittance companies currently have the edge over their main counterparts because of the pandemic. That said, dealers, bus passengers and drivers are increasingly using remittance services during the lockdown.

African money transfer major Mukuru’s CEO said that the

company has witnessed an influx of fresh customers from the informal marketplace. The company specialises in remittance services which includes both money and grocery transfer.

Furthermore, the company’s growth surged 75 percent compared to last year. The World Bank reports have indicated that remittances into sub-Saharan Africa officially totalled $48 billion in 2019, and the cash came through informal networks.

The remittance services in Kenya surged 6.5 percent in August, while its demand in July had increased 33 percent in Zimbabwe.

Blockchain investment

Japanese firms target blockchaindata investment Several Japanese companies are gearing up to invest in a new trade data management system. It is reported that the blockchainbased data platform is developed by Japanese company NTT Data.

Earlier in 2018, the company joined forces with the country’s largest public management organization NEDO for the development of a blockchain platform for the trade sector.

The system helps to prevent malicious third-parties from tampering with the recorded data. The exporting and importing companies will be able to manage receipts through the new system and manage bank related credit issuance letters. The system also has the

64 | December 2020 | Global Business Outlook

Several Japanese companies are gearing up to invest in a new trade data management system.

The system helps to prevent malicious third-parties from tampering with the recorded data.

The exporting and importing companies will be able to manage capability to manage documents processed by receipts through the new system and companies in the logistics and insurance space. manage bank related The companies which are ready to invest credit issuance in the development include Sompo Japan letters. It can also Insurance, Tokio marine nichido, MUFG manage documents Bank, Kanematsu, Toyota Tsusho and a major processed by companies in Japanese bank. the logistics and These companies are expected to roll out insurance space the new service by the fiscal year-end.

BUSINESS & FINANCE NEWS BITS

Nokia's restructuring plan

Nokia aims restructuring after share price dip Finnish company Nokia expects to restructure after shares plunge 17 percent.

The company’s decision has come directly from its CEO Pekka Lundmark.

It is reported that the company’s revenue recorded an 8 percent year-onyear slump compared to competitor Ericsson’s 7 percent surge in the same period, on a currency basis.

The company’s results have shocked global investors marking the lowest level in five years. However, the share price slump amid a

Nokia’s revenue recorded an 8% Y-0-Y slump compared to its competitor Ericsson’s 7% rise

wider market selloff following the announcement that countries such as Germany and France will undergo a second round of lockdown.

Pekka Lundmark was designated as the CEO in August. He said that Nokia is undergoing profound changes. The customer demand for services such as cloud-native software, virtualisation and highperformance networks are driven by Industrial automation and digitalisation.

The company will ensure that it is well-positioned for long-term value creation to leverage these trends while boosting its performance as restructuring takes place.

It is reported that the company’s new structure and appointments will come into effect from next year.

Huawei’s cloud future is in question Telcom major Huawei has faced international pressure from the US as its government has urged European nations to avoid purchasing cloud commuting equipment from the company.

The pressure from the US will hamper one of the company’s fastest evolving businesses. The company which is ranked as China’s top tech company by sales has attracted genuine clients from all over the world. The clients list includes some of the big names such as Spain's Telefonica, France's Orange and Deutsche Telekom.

The company is planning to expand its presence to attract customers from sectors such as logistics, oil companies and power grid operations.

While Alibaba operates a larger cloud business and Tencent is also expanding, Huawei’s supply chain is in jeopardy because of the US. The Trump administration has banned the use of Huawei 5G telecom gears in the US and it has even urged European nations to boycott its products.

Market researcher IDC’s reports indicate that Europe's cloud infrastructure is a $12.4 billion business that grew 33 percent this year compared to 2019.

Global Business Outlook | December 2020 | 65

News

Technology

Google, Temasek to invest $350 mn Technology giants Google and Singaporean investment company Temasek will inject $350 million into Tokopedia, an Indonesian ecommerce platform. The capital infusionist will pave the way for Tokopedia which is backed by SoftBank to boost its expansion plan amid the pandemic.

Google and Temasek will sign an agreement for the funding soon. Despite that, Tokopedia is seeking other investors because the new financing is short of the initial mark of between$500 million to$1 billion.

It is reported that the ecommerce platform might have held talks with Facebook, Microsoft and Amazon in regard to financing.

The support from Google and Temasek will ramp up the business for Indonesia's biggest ecommerce operators that have driven the online marketplace during the pandemic.

Apart from Tokopedia, Alibaba's Lazada and Singapore-based Shopee have served millions of people during the widespread lockdowns. Indonesia has become the hotbed for regional ecommerce commerce. It is reported that the country’s ecommerce market is expected to touch the $82 billion mark in the next five years.

Nigeria is Africa's new tech capital?

Nigeria is turning out to be the unofficial tech capital of Africa. It is reported that Africa is one of the world’s fastest-growing tech markets and is emerging at a steady speed.

Previously, the country has been notorious for activities such as

corruption and terrorism. However, it has become a hotbed for venture capitalist formation and a vital entry point for Silicon Valley. Nigeria, as a frontier market can change the region’s economic and political scenario.

66 | December 2020 | Global Business Outlook

It is reported that the country’s ecommerce market is expected to touch the $82 billion mark in the next five years

There are many global companies that are betting on Nigeria despite political problems. According to fresh reports produced by VC firm Partech, Nigeria has become the top African nation for venture investment. But the US imposed immigration restrictions could disrupt the commercial technology relations between the US and Nigeria as the majority of the funding comes from American companies.

Nigerian technology startup became the African company to be listed under NYSE. Another African tech startup Kobo360 has raised a $20 million series A round led by Goldman Sachs. Africa has been a breeding ground for technology startups in the recent years.

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Industry Energy

Analysis

Why Oman should capture the solar market?

Rohit Baruah

The solar radiation in the Sultanate can peak at 6000 watt-hours per sq metre—making a strong case for it to rely on solar, while diversifying away from oil

68 | December 2020 | Global Business Outlook

B

ordering the Arabian Sea—the Sultanate of Oman renowned for its oil-rich resources is setting its sight on solar energy to develop a sustainable economic future. The Sultanate is at the forefront of carrying out massive solar projects and other related developments as it prides itself on abundant unused land and solar energy. For electricity generation, solar energy is of utmost importance to the Sultanate because of its capabilities to fulfil the emerging needs in energy diversification and non-oil economic diversification.

According to Oman Power and Water Procurement (OPWP), 21 percent of the Sultanate’s total power requirement will be produced by solar energy by 2030. Although developments in solar energy have become an attractive economic trend in most countries—what is it that really differentiates the Sultanate from those countries? That question points to an important fact that the Sultanate receives huge amounts of solar radiation throughout the year, even in comparison to the rest of the world.

It was in 2008 when the Sultanate’s potential in solar energy came into limelight following the Authority for Electricity Regulation’s report stating that it has one of the highest solar energy densities in the world—making it an excellent candidate for solar energy projects. Here is a fact: The majority of the places in the Sultanate have a tremendous global average duration of daily sunshine and solar radiation. In support of that fact, the Renewables Readiness Assessment report published by the International Renewable Energy Agency points to the desert areas, in particular, Marmul, Fahud, Sohar and Qaroon Hairiti

Analysis \ Oman solar density

which have the highest insolation of solar energy—while it is relatively less in the coastal areas.

By numbers, there are 320 sunny days each year and high-intensity sunlight can peak at nearly 6000 watt-hours per sq metre. Such abundance of solar resources has given the Sultanate a competitive advantage in the development of the world’s largest solar projects. For that reason, the Sultanate has a clear goal to provide a progressively cheaper way in electricity generation and become a hotbed for investors in the coming years. But the policies, fiscal incentives and public financing issued by the government merely determine the progress of its solar output for projects.

According to Oman Power and Water Procurement,

21 percent of the Sultanate’s total power requirement will be produced by solar energy by 2030

The race to solar power Five years ago, the Sultanate unveiled its national energy strategy 2040 which was backed by IRENA’s Renewables Readiness Assessment. In addition, the Public Authority for Electricity and Water floated a report for the country’s first large-scale solar power project. Last year, the future of its solar energy project development was underpinned by a $2 billion initiative, which foresees the establishment of industrial plants for manufacturing solar panels and aluminium frames at a cheaper cost. The 2019 project is largely supported by the combined efforts of technology and knowledge. Now the government is planning to collaborate with big technology companies and international universities

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Industry Energy

specialising in renewable energy education to assist the Sultanate’s population in servicing the industry on a global scale.

As it stands, the government has expressed interest in the development of clean energy for fulfilling the local energy demand, and its ambition to enhance the use of solar energy is already moving in the right direction. In March, the Authority for Electricity Regulation decided to issue fresh guidelines for the use of cleantech energy in rural areas. Indeed, the Rural Areas Electricity Company will play a prominent role in the development of solar

Oman has one of the highest solar energy densities in the world—making it an excellent candidate for solar energy projects

70 | December 2020 | Global Business Outlook

energy projects by including a component of renewable energy technology wherever funding is expected to be floated. Even the International Renewable Energy Agency in support of the Sultanate’s efforts has published a renewables readiness report which was represented by the Public Authority for Electricity and Water (PAEW).

The government seeks to utilise a sizable amount of solar energy in the domestic energy demand including exports. It is currently drafting a national energy policy review which will focus more on cleantech energy use. It is estimated that the Sultanate has the full potential to meet all energy demands exceeding the required capacity by installing concentrated solar power technology sprawling across an area equivalent to one-tenth of its landmass, especially because of its high solar density.

That said, the government expects to generate 10 percent of the Sultanate’s electricity this year from solar energy alone. Top-level officials in the industry believe that the review will considerably boost the percentage of solar output to meet the domestic energy demand at a cheaper cost. But everything depends on the government—to what extent it will develop solar projects and be open to foreign direct investments.

The Sultanate’s power infrastructure and hydrocarbon reserves pose a real challenge to its economic growth because of its major cities like Duqm, Sohar and Salalah heavily reliant on fossil fuels on the back of industrialisation and dense population. But it will be convenient for the Sultanate to harness solar energy on both large and small scales, owing to its economic importance and strategic geographical location. The enhanced use of solar energy not only reduces those cities dependence on fossil fuels but it will create a more sustainable environment for the

Analysis \ Oman solar density

future. The establishment of solar energy projects backed by robust research and development will help the Sultanate to bring a paradigm shift in the diversification of its economy and create new job opportunities in the region.

Authorities take the lead in diversification The government might have taken many initiatives toward the development and diversification of the solar energy sector, but it should push the private companies to support and inject capital in new projects.

The support given by private companies will ensure a smooth diversification of the Sultanate’s oil and natural gas-based economy—which in turn will help it to become one of the world’s largest and wealthiest energy producers in the world.

The Authority for Electricity Regulation Oman who is the regulator for the power sector is allowing citizens to set up solar panels at homes. The surplus electricity is expected to be retrieved by the national grid. Companies such as Knowledge Oasis Muscat (KOM), Majan Electricity Company and Sultan Qaboos University have already embarked on a pilot scheme for the development of solar energy. The production of solar energy has become an attractive option in the process of water desalination because of the slump in cost of photovoltaic (PV) panels, making solar thermal desalination process using solar collectors to become commercially available, as testing in pilot projects have already started.

The Sultanate's largest solar project makes headway One of the largest solar energy projects, in Dakhiliyah Governorate, as part of Oman's National Energy Strategy 2040, will see the use of concentrated solar power and photovoltaic technologies.

The project is expected to have a capacity of 200MW. The Sultanate has already started floating Power Purchase Agreements (PPAs) to investors to further support the domestic cleantech sector, and the government has been pushing oil companies to expand their footing in the Sultanate to remain afloat against the depleting oil resources by providing a stronger and sustainable market.

However, problems may arise if stakeholders show less interest in setting up policies. In fact, lack of regulatory policies in the clean tech space will definitely affect the development of solar projects if they are not dealt with appropriately.

The market potential will only be determined with the help of particular resource assessments which should be in the key resource areas.

Paddy Padmanathan, Chief Executive Officer of ACWA Power, told the media, “We are pleased to partner with GIC and AEPC on the largest utility scale solar IPP in Oman. Successfully achieving financial closure during these challenging times is a testament to the determination of all the stakeholders in this project to keep doing the best we can within the constraints we all need to work within.”

Oman’s first-ever Solar PV project has secured funding worth $275 million from six banking majors including ACWA Power and Gulf Investment Corporation (GIC) for the 500MW solar photovoltaic independent power project (IPP) in the region of Ibri. The six banks are Kuwait’s Warba Bank, Standard Chartered, Germany’s Siemens Bank, Riyad Bank, Bank Muscat

The government has expressed interest in the development of clean energy for fulfilling the local energy demand, and its ambition to enhance the use of solar energy is already moving in the right direction Global solar radiation in Oman ((kWh/m2/day) Khasab: 6.09 Suwaiq: 5.59 Sohar: 5.43 Buraimi: 5.38 Sur: 4.52 Source: International Journal of renewable energy research (2013)

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Industry Energy

and Asian Infrastructure Investment Bank (AIIB). The funding assisted the Sultanate to establish the largest utility-scale solar PV project on a 16.5-year door-to-door tenor. The financing marks the Sultanate’s first-ever renewable energy financing as well as in the GCC region by the Chinaheadquartered AIIB.

Making the right transition The Sultanate of Oman’s power infrastructure and hydrocarbon reserves pose a real challenge to its economic growth because of its major cities like Duqm, Sohar and Salalah heavily reliant on fossil fuels on the back of industrialisation and dense population.

But it will be convenient for the Sultanate to harness solar energy on both large and small scales, owing to its economic importance and strategic geographical location. The enhanced use of solar energy not only reduces those cities’ dependence on fossil fuels but it will create a more sustainable environment for the future. The establishment of solar energy projects backed by robust research and development will help the Sultanate to bring a paradigm shift in the diversification of its economy and create new job opportunities in the region. The government might have taken many initiatives toward the development and diversification of the solar energy sector, but it should push the private companies to support and inject capital in new projects.

The support given by private companies will ensure a smooth diversification of the Sultanate’s oil and natural gas-based economy—which in turn will help it to become one of the world’s largest and wealthiest energy producers in the world.

72 | December 2020 | Global Business Outlook

Rajit Nanda, chief investment officer for developer partner ACWA Power, told the media, “The project which is the largest utility scale Solar PV project in Oman, will also be the first renewable energy financing for AIIB in the GCC region, paving the way for a stronger partnership with the Beijing based international multilateral bank in the future.”

China is part of SAGC's landmark solar project The solar project is developed by Shams Ad-Dhahirah Generating Company (SAGC), which explained that it is making progress by leaps and bounds in the implementation of the huge scheme in Dhahirah Governorate. The company is working on a 500 MW solar photovoltaic based grid-connected utility as part of its Ibri II Independent Power Project amid existing challenges such as mobility restrictions, supply disruptions and other measures imposed by the Sultanate’s government to contain the spread of Covid-19 virus.

How are Chinese companies contributing to the project?

Few Chinese companies specialising in solar technology and related equipment manufacturing are part of the landmark project. The $400 million projects which are backed by top-notch lenders are considered as one of the world’s largest PV plants boasting single-axis trackers and bifacial modules. It is reported that the Chinese company Arctech Solar is believed to have completed production and shipment of major tracker components to the site of Ibri-II in the Sultanate.

Chinese company Sungrow plans to carry out the shipments of inverters to the Ibri-II project. The inverter solution has

Analysis \ Oman solar density

the potential to boost returns on the project as it is compatible with bifacial modules and tracking systems. The world’s largest manufacturer of N-type bifacial solar panel modules Jolywood (Taizhou) Solar Technology has started delivering modules for the project. The bifacial solar modules can generate power from both sides of the module, thus, boosting the overall energy generation process. The UV-resistant module is durable in nature.

The Ibri-II Solar IPP is expected to be operational by summer 2021. Oman Power and Water Procurement Company (OPWP) will be the first entity to purchase clean energy from the project with a 15-year contract. According to industry experts, the project once completed will be able to power an estimated 33,000 homes and cut down 340,000 tonnes of CO2 emissions every year.

The project which was unveiled in 2017, had 12 bidders. A consortium led by Marubini was assigned for the Petroleum Development Oman’s 100 MW Al Amin solar PV plant in 2018. According to media reports, a 50 MW wind park at Harweel is set to be commissioned this year.

Furthermore, the 50 MW Dhofar I Wind Power Project is expected to become the first large-scale wind farm in Oman, powering 16 000 homes in the Governorate of Dhofar and reducing CO2 emissions by 110 000 tonnes yearly.

Oil sector is heavily contesting with the solar market The government is taking necessary steps to establish solar energy projects in the Sultanate. However, the solar industry market faces a tough competition from the heavily dominated oil sector. The government must focus on providing incentives and subsidies in the form of feed-in-tarriffs in an effort to reassure a guaranteed price for electricity sold to

the state-owned electricity grid by merging solar energy in the power production process. The renewable sector in the Sultanate requires political support to remain afloat in the highly competitive market. The laws governing power generation regulation should be incentive oriented to attract more stakeholders seamlessly and the laws should be more flexible for renewables.

In this context, Deloitte in its report said that “Given its abundance in the region, oil and gas have been the main source of primary energy; however, their share is expected to be replaced by solar by 2050.” The solar energy sector and future projects will be bolstered by positive initiatives such as low tax regimes, strong property rights and establishing a positive investment environment. In addition, the government should encourage local companies to approach leading international companies to take part in the Sultanate’s power sector.

It is especially important for the government to devise a transparent plan of action for the development of solar energy in the future, with its neighbouring countries such as the UAE seeking to become the Middle East’s solar powerhouse, if a favourable regulatory framework is not developed quickly. In short, the Sultanae is in a good positiion to capitalise on the solar market, and if the government invests in the right developments, it might even become a leader in the coming years.

Oman’s first-ever Solar PV project has secured funding worth $275 million from six banking majors including ACWA Power and Gulf Investment Corporation for the 500 MW solar photovoltaic independent power project in the region of Ibri

Oman’s largest solar project strikes financial close

Project capacity

200MW Project funding

$275 million

Global Business Outlook | December 2020 | 73

Industry Healthcare China healthtech

Feature

In the months leading up to the vaccine’s discovery, the government has encouraged its people to opt for telemedicine

A grand fortune for China's healthcare Tom Hardy 74 | December 2020 | Global Business Outlook

I

n recent months, Chinese healthcare startups have raised substantial funding to introduce their innovative services to the people on the mainland. Although the coronavirus pandemic has steamrolled the mainland—on the bright side, it is encouraging rapid advancements in healthcare. An analysis by CB Insights found that healthcare funding raised by private companies worldwide in the second quarter of the year had reached a quarterly record of $18.1 billion. When it comes to Asia, healthcare funding has almost doubled from the previous quarter to $5 billion and the magnitude of deals across Chinese startups have recovered to precoronavirus levels.

Healthcare companies in Asia have raised around $12.7 billion through first-time share sales this year which is higher than the full-year record in the past 12 years. According to the Ministry of Commerce, foreign direct investment into the Chinese mainland climbed 18.7 percent year-onyear to $12.3 billion in August.

Now the changes are quite evident in the government policies. New regulations are being passed or reforms are being made to support the mainland's digital healthcare landscape.

In fact, there is strong emphasis on telehealth, online consultation and purchasing of online medical products or services. Data released by

the National Health Commission in August discovered that during the first six months of the year, visits to healthcare institutions in China dropped 21.6 percent year-on-year.

More specifically, visits were still down 9.7 percent year-on-year in June to 630 million, according to the commission.

In this context, leading global healthtech platform WeDoctor said that customer orders for online consultations had increased 3.6 percent from the previous year owing to the epidemic of coronavirus.

The Tencent-backed healthtech said that around 50,000 doctors had joined

Global Business Outlook | December 2020 | 75

Industry Healthcare

the platform since the beginning of the pandemic leading to a total of about 250,000 physicians.

The Chinese government’s efforts is a go

Surge in funding for Chinese healthcare companies XtalPi:

$318.8 mn Hinova Pharmaceuticals

$147 mn Sinovent

$145 mn Biocytogen

$142 mn

China is not new to the effects of a pandemic.

In fact, it was in 2003 when the mainland was plagued by the SARS outbreak from the previous year. The virus was first identified in Foshan, Guangdong, China and quickly spread across 30 countries worldwide. But the outbreak was swiftly contained leaving with only 8096 confirmed cases and 774 casualties. To common knowledge, the outbreak of coronavirus took place in the industrial city of Wuhan in China. With that, the mainland alone had reported nearly 85,500 cases and 4634 casualties as of October 8, 2020. But on the global front, 36.2 million cases have been reported with 1.06 million deaths. Given the mainland's history with epidemics, the Chinese government has stepped up its efforts in building up the healthtech sector.

It seems that 13 national departments and ministries had announced their support to develop online medical services on the mainland as part of a broader vision to accelerate the growth of healthtechs and simultaneously create economic opportunities. Now China is preparing digital healthcare companies or telehealth companies as its first line of defence in the event of a second wave of coronavirus. This development will not only help to curb the spread of the infection, but allow patients to have medical consultancy from home.

Healthtech is at the helm of transformation, again The healthtech industry is predicted to be worth nearly $30 billion in China alone for this year. There are already more than 1,000 telehealth companies operating on the mainland, observed by a large database technology service company Tianyancha.

Some of these telehealth companies in China

76 | December 2020 | Global Business Outlook

are owned by technology and ecommerce giants such as JD.com, Baidu, Tencent and Alibaba. It is reported that all of these companies are on the brink of a consultancy boom, mainly attributed to the Chinese government’s efforts in encouraging its people to adopt these online medical services.

Indeed, the SARS outbreak was a wakeup call for the Chinese broken healthcare system.

Since then, the public sector spending in China’s healthcare industry has exponentially increased by 14-fold, according to a World Health Organisation and the World Bank report. Of the developments known so far, the government is continuing to emphasise on healthcare insurance for its citizens.

Another report published by the World Health Organisation points out that the mainland’s healthcare is too ‘hospital-centric, fragmented and volume-driven’—a challenge for the system overall. It is becoming too expensive to sustain, especially with healthcare costs growing between 5 percent and 10 percent faster than the GDP. This has further accentuated the government’s focus on the development of digital health or the healthcare system at large.

Apple and Microsoft are realising the industry’s growing potential, especially with Chinese technology companies venturing into the business. In August, Alibaba launched an online clinic service on its Alipay and Taobao apps for users in Hubei province where the coronavirus had originated. The province had also recorded the maximum number of cases.

It was in the same month that Alibaba Health Information Technology launched a follow-on new share sale to raise up to $1.06 billion in line with its plan to expand its pharmaceutical and medical services network. The funds raised through the share sale will be used by the company to improve its digital infrastructure. Alibaba Health also partnered with Tmall, a business-toconsumer online retail platform operated by Alibaba Group, to provide medicine delivery services across the mainland.

Feature \ China healthtech

Tech companies seek to contribute to vaccine discovery In another example, China’s largest search engine Baidu has launched a free service for all online medical queries. According to the company, it handled more than 15 million inquiries from users and listed around 100,000 doctors to manage the growing demand of its platform. Baidu is also making its algorithm LinerFold free for gene testing agencies, epidemic control centres and research institutions worldwide. The algorithm developed by Baidu helps researchers to decode the genetics of the coronavirus and it could also help to discover a vaccine.

These developments hint the existing opportunities for technology companies to capitalise on. One of the world’s largest gaming companies Tencent has launched a free online health consultation services through five online healthcare platforms on its messaging platform WeChat. An interesting fact is that Tencent has been helping researchers by allowing them to use its supercomputing facility in developing a vaccine for the pathogen.

Today, the healthcare evolution contributed by technology companies is vast.

The gaming company has led a funding round for healthtech companies in early September.

The company is integrating modern technologies such as cloud computing and Software-as-a-Service to provide smart healthcare solutions across the mainland.

Since inception, the company has claimed to serve around 13,000 medical institutions on the mainland. But that is not all.

Even Chinese ecommerce giant JD.com has raised more than $830 million in its funding in August. The company had secured the funding from Hillhouse Capital in a non-redeemable series B preference share financing. It now runs a multifunctional health platform that provides numerous services such as a 30-minute pharmacy delivery, telemedicine

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Industry Healthcare

service, consumer-related health services such as genetic testing through to solutions to digitise hospital systems. Recently, the company’s telemedicine service saw a surge in business due to the pandemic and there are speculations that the company is also planning to raise around $1 billion by selling its shares on the Hong Kong Stock Exchange.

Funding for biopharmaceuticals has skyrocketed The trend in funding can also be found across an array of Chinese pharmaceutical companies over the last couple of months.

It seems that Chinese drug developer Hinova Pharmaceuticals had raised around $147 million in its series C funding led by Shenzhen Investment Holdings, Hangzhou Tigermed, Beijing-based Huarong Rongde Asset Management and Sinopharm-CICC. The Chengdubased pharma company has nine pipeline products related to cancer and metabolic disorders among other critical fields.

In September, pharmaceutical company XtalPi secured around $318.8 million in its series C funding round led by SoftBank’s Vision Fund 2. XtalPi, which is an algorithmdriven artificial intelligence (AI) healthtech company, is reinventing the industry’s approach to drug research and development

with its Intelligent Digital Drug Discovery and Development (ID4) platform. According to the company, the funding will be used to further develop the XtalPi’s ID4 platform.

It was during the same time that biotech company Biocytogen, which is based in Beijing, raised around $142 million in its series D funding. The company largely seeks to develop antibody drugs and it has currently served more than 2,000 clients globally last year. On a similar account, biopharmaceutical company Sinovent secured around $145 million in its series C funding led by Loyal Valley Innovation Capital. The startup is engaged in technical development, consulting and services of biological medicines covering therapeutic areas such as oncology, autoimmunity, infectious diseases and others. Sinovent currently operates in Suzhou, Beijing, Shanghai, Boston and Sydney. It is reported that the startup will use the funds to carry out clinical trials of its new products and pre-clinical studies of earlier-stage products.

It will also use funds for the development of a new production unit.

Multinationals’ new quest to go beyond the coronavirus Now global drug manufacturers are stepping up their game in investments and increasing

Chinese healthtechs are flourishing The healthtech industry is predicted to be worth nearly $30 billion in China alone for this year.

By numbers, there are already more than 1,000 telehealth companies operating on the mainland, observed by a large database technology service company Tianyancha. Some of these telehealth companies in China are owned by global technology and ecommerce giants such as JD.com, Baidu, Tencent and Alibaba. It is reported that all of these companies are on the brink of a consultancy boom, mainly attributed to the

78 | December 2020 | Global Business Outlook

Chinese government's efforts in encouraging its people to adopt these online consultancy services.

More recently, a team of scientists have developed a new Covid-19 global surveillance system which can track not just the virus, but other factors such as: 'where it is going, how fast it will arrive and whether that speed is accelerating'. The system has been rolled out in 195 countries and is the first of its kind.

Feature \ China healthtech

their footprint on the mainland. Again, the surge is mainly due to the economic resilience reflected by the quick recovery of the coronavirus and the substantial market potential. A report published by McKinsey found that China’s pharmaceutical market is the second-largest in the world, with a $130 billion valuation in 2019. It is normal for the market to easily attract foreign investors given that the size and growth are at peak.

American multinational pharmaceutical company Pfizer agreed to buy a 9.9 percent stake in China-based Cstone Pharmaceuticals, while it is also set to acquire 115.93 million new shares of CStone at HK$13.37 apiece, representing a 43.8 percent premium over the closing price of HK$9.30 on that day. CStone said in a security exchange filing that it will use the proceeds from the share sale to fund development activities and strategic collaborations. It is reported that the transaction received the necessary internal approvals of both companies.

Through the deal, the Shanghai-based pharmaceuticals company can focus on product development and strengthen its ability to commercialise CS1001, an antiPD-L1 monoclonal antibody. CStone and Pfizer will develop and commercialise additional late-stage oncology therapies in Greater China, Pfizer said in a statement.

Boehringer Ingelheim, one of the largest pharmaceutical companies in the world, is planning to invest more than $529 million in China over the next five years across its main business areas, including pharmaceuticals, animal health and biopharmaceutical contract manufacturing.

Felix Gutsche, president and chief executive of the China branch of Boehringer Ingelheim, revealed that the company, which is one of the fastest-growing in China, will continue to direct investments to China as it is a market of the present and of the future. He further revealed that the planned investments will go into production sites, research sites and clinical development.

The company, which is headquartered in Ingelheim, Germany, has developed its fourth business in China, called healthcare solutions, to provide services with a stroke rehabilitation clinic in Shanghai.

Swiss multinational pharmaceutical company Novartis has decided to end drug discovery at its research and development hub in Shanghai last year and shift resources toward early development and commercial activities. According to Jay Bradner, president of the Novartis Institutes for BioMedical Research, the decision to shut its Shanghai R&D hub is driven by the maturation of the Chinese life sciences sector and regulatory system, the emerging impressive innovation potential of entrepreneurial biomedicine in China and the company’s need to rebalance drug development and discovery. The hub, known as China Novartis Institutes for BioMedical Research, was launched in 2016 by Novartis as a part of its $1 billion plan to build a stronger foothold on the mainland.

Even Danish diabetes care giant Novo Nordisk has collaborated with Chinabased supplier CR Sanjiu to sell its growth hormone therapy Norditropin Nordilet injection on the mainland. The drug has received approval from China’s National Medical Products Administration to treat the rare disease Noonan syndrome. Norditropin is the only imported liquid injection in China, but it is facing competition from GenSci, a local manufacturer that sells the same growth hormone in three varieties: powder injection, liquid injection and longacting liquid injection.

Now the coronavirus surge has encouraged multinational companies and startups to reinvent their visions in the long-run. That in turn has led to a series of developments in terms of funding, expansion and introductory services—causing a healthcare boom on the mainland.

China’s pharmaceutical market is the second-largest in the world, with a

$130 billion valuation in 2019.

It is normal for the market to easily attract foreign investors given that the size and growth are at peak

Global Business Outlook | December 2020 | 79

News Industry

Lukoil plans to boost oil output in Iraq

R

ussian oil major Lukoil plans to ramp up oil production in Iraq once the OPEC+ production cuts are over. The decision was announced by the company’s Middle eastern managing director Egor Zubarev.

It is reported that Iraq’s oil production limit under the OPEC+

pact is around 3.6 million barrels per day (bpd). However, the country is compelled to produce less oil than expected as it didn’t fulfil compliance rules according to the agreement in previous months.

Iraq has confirmed to global oil refiners that it will cut oil production due to the OPEC+ deal. Global oil

refiners such as Lukoil, BP and Exxon which produce the highest oil output in the country were directed to reduce production.

But Iraq is unable to fully comply with the cuts. The situation has led to a slump in oil prices and sales which are an important revenue for the Iraqi government.

It is reported that few oil projects have been halted or postponed due to fund shortage.

The Russian oil major will aim to boost oil production as Iraq is a key region for the company.

Currently, the company operates the large West Qurna-2 oilfield in the country.

Indonesia’s insurance

IFG to bolster Indonesia’s insurance industry The government of Indonesia has launched the Indonesia Financial Group (IFG) to boost the country’s insurance sector and pave the way for insurers to tap into the insurance market. It is reported that the launch will also help the country to spur recovery against the Covid-19 pandemic.

The new stated-owned company has total assets worth Rp 76.2 trillion and it is geared up to manage the Indonesian insurance sector.

The company has committed to a total gross premium of Rp 18 trillion for services such as insurance protection and underwriting services. Meanwhile. the company’s management fund touched Rp 81.8 trillion.

80 | December 2020 | Global Business Outlook

Currently IFG has nine subsidiaries under its belt: Bahana Kapital Investa, Bahana Artha Ventura, Bahana Sekuritas, Bahana TCW Investment Management, Graha Niaga Tata Utama, Asuransi Jasa Indonesia, Asuransi Kredit Indonesia, Jasa Raharja and Jaminan IFG has also established life and health Kredit Indonesia. services focused insurance firm IFG Life Global insurance companies have to bolster its holdings business and ramp been hugely up its list of services. IFG will accept the migration policy request of the customers of its affected by the pandemic. However, restructured Persero. the Indonesian The Indonesian government has approved government’s move funds worth Rp 22 trillion for IFG. The capital is a bold one will be provided separately in 2021 and 2022.

BUSINESS & FINANCE NEWS BITS

Total Marine Fuels

Total’s commitment to cut emissions French oil and gas major Total will charter four Liquified Natural Gas (LNG) propulsion based Aframax-type vessels.

The development comes at a time when the company aims to cut greenhouse gas emissions in maritime transportation.

The expected delivery time of the vessels is 2023.

Furthermore, each vessel has a holding capacity of 110,000 tons of crude oil or refined products. shipowner Hafnia will charter the first vessels, while Viken Shipping will charter the remaining ones.

Each vessel is equipped with the most sophisticated LNG propulsion technologies to curb emissions. It is reported that the vessels are expected to cut more than 5,000 tons of greenhouse per ship gases every year.

Total Marine Fuels Global

Solutions, a Total subsidiary, will provide the LNG for these four LNG-powered vessels.

Luc Gillet, Senior Vice President Shipping at Total said that the new charter contract is part of the company’s Net Zero carbon neutrality target by 2050. The new charter contract is similar to the one that the company had signed earlier for two LNG-powered VLCC. Global oil majors besides Total are also getting serious about climate change action.

Total's each proposed vessel has a holding capacity of

110,000 tons of crude

5G to generate $3.3 tn for Latam by 2035 Research firm Omdia and Nokia have produced a report which indicates that Latin America could see 5G technologies generate $3.3 trillion by 2035.

Ericsson’s mobility report indicates that 13 percent of the mobile connection in Latin America will be equipped with a 5G network by 2025. Furthermore, the reports said that 5G deployments in 2020 are expected to take place in countries such as Mexico, Argentina, Brazil, Chile, and Colombia.

The economic disparity in India and China has made these two nations score poor in terms of 5G deployment. That said, BRIC nations including Brazil are set to benefit from 5G. The reports are produced by the Asia Cloud Computing Association (ACCA).

Many countries have capitalised on the pandemic to ramp up sectors such as healthcare and emergency services, manufacturing, and the supply chain.

But 5G deployment is yet to be carried out by many countries.

Wally Swain, principal consultant for Omdia Latin America, said that the economies should diversify their income sources and jobs into higher valueadded activities. 5G will play a pivotal role in bolstering major activities.

Global Business Outlook | December 2020 | 81

News Industry

South Korea’s healthcare is vital The healthcare sector has played a pivotal role in strengthening bilateral ties between South Korea and the UAE. With the new development, over 20,000 patients from the emirates have made medical visits to South Korea following the signing of a Patient Referral Agreement in 2011.

The number of patients from the UAE are expected to surge in the coming years. South Korean hospitals are expected to provide Arabic translators, prayer rooms and meals to the patients.

A good number of Korean medical staff such as doctors, nurses and other professionals are working in the Emirates, marking a strong presence for Korean expertise in the country.

Seoul National University Hospital (SNUH), one of South Korea’s renowned hospitals, was assigned to operate and manage Sheikh Khalifa

Specialty Hospital (SKSH) in Ras Al Khaimah for five years between 2014 and 2019 by the Emirati government.

South Korea’s Nanoori Hospital launched its branch in the emirates earlier this year. The hospital has a record of treating patients from the emirates for a long time now. The clinics under the new branch operate in partnership with Emirates Specialty Hospital at Dubai Healthcare City.

Saudi ports to drive Vision 2030?

Business leaders have indicated that if the Saudi government makes the Kingdom’s port into a global megahub, it could bolster industrial growth plans of Vision 2030.

Saudi Global Ports (SGP) became

the sole cargo facility operator at King Abdul Aziz Port Dammam (KAPD) in October. The first terminal of the two was handed over to SGP from Saudi Ports Authority (Mawani) in April comprising an agreement

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Healthcare has played a pivotal role in strengthening bilateral ties between South Korea and the UAE. Over 20,000 patients from the emirates have made medical visits to South Korea

between the two bodies.

The Kingdom’s ministry of transport said that the implementation of vital initiatives and investments to bolster the economy is due to the support from the transport and logistics space.

Both SGP and Mawani have worked closely on several activities since the signing of the agreement.

The bodies have worked together to carry out activities such as assets transferring, manpower retention, partnering stakeholders and conducting activities for port communities.

SGP has also granted the purchase and commissioning of over 220 items for both the terminals. Global ports and shipping industries have been severely affected by the pandemic.

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