Inside Enterprise Issue 4: "Beyond Borders"

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EDITOR'S MESSAGE Editor-in-chief Marina Yang Deputy Editor-in-chief James Pyo Directors Jenny Huang Howell Sze Sun-Yong Kim General Editor Vanessa Cartwright Editors Jenny Chen Peter Kwag Ann Yee Lim Clara Wong Publisher Matthew Green Designer Erica Liu HR Director Guangyong Chuang Campus Directors Levi Romanov Manpreet Singh Richard Guan Board of Advisors Peter Corbett Hugh Simpson

The team of Inside Enterprise is proud to present its fourth issue, which is dedicated to the concept of business ‘beyond borders.’ Historically speaking, globalisation is nothing new. However, in today’s global landscape, business moves far faster than caravans on the Silk Road, and it reaches into every corner of human civilisation.

It goes without saying that the implications of business going beyond physical, digital and imagined borders are complex and myriad. As such, issue four is not simply about global business, but about the way business everywhere is being shaped by ingenuity, ambition and technology around the world.

This issue includes articles that explore both familiar and unexpected areas of the global business world. Our features investigate how our health and the food on our plates may benefit from developing biotechnology, and how the work-life balance is being challenged by socio-cultural trends of workaholism. Our writers have scrutinised overseas subjects such as private equity in Africa and social media use in Saudi Arabia, as well as topics closer to home, such as the expansion of the renminbi into Australia and foreign investment in domestic property. The New Ideas section looks at the decline of passwords in favour of biometrics, innovation in Australia, millennials, and off-grid solar power.

We have also been privileged enough to speak with John Fraser, Secretary of the Treasury, about his path through both the public and private sectors.

Kate Mason-Dryden, Human Resources Director of Coca-Cola Amatil Australia, tells us her story of ‘falling into’ HR. From the start-up arena, venture capitalist and Fishburners co-founder Peter Davison and Monetise CEO Taichi Hoshino offer words of advice on decision-making and seizing opportunities.

Finally, we celebrate the work of student organisations such as 180 Degrees Consulting, AWAAZ, Capital W and Sunswift. It has been our pleasure to work with these organisations – like Inside Enterprise, each of them harnesses the dedication of students to inspire broader horizons.

I would like to sincerely thank our corporate sponsors and Board of Advisors for recognising the value of Inside Enterprise. To our readers, we thank you for continuing to support us. Finally, I am extremely grateful to our writers, editorial team and executive committee. Our team has grown larger with every issue, and contributions have come from universities across New South Wales. We continue to expand and welcome all writers to pitch their ideas to us. Information on how to get involved is available on our website.

Marina Yang Editor-in-chief

For advertising and sponsorship opportunities, please contact editor@insideenterprise.org COPYRIGHT AND DISCLAIMER © 2015 Inside Enterprise. All rights reserved.

The views expressed in Inside Enterprise are those of its contributors alone. Neither Inside Enterprise nor its Board of Advisors take responsibility for any material published. All pictures remain the properties of their respective copyright owners.

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C O NT E NT S RE G UL A RS Yianna Zafiriou

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New Ideas Australian innovation

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Millennials: Children of the future

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The future of the password

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Around the World

Jeremy Fu

Romilla Mohan

Jenny Huang

The frontier of solar energy Tim Zhong

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FE ATU R ES From Mecca to Wall Street Sukuk is expanding beyond the Middle East

The Science of Revolutions Biotech and the future

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RMB: The Rising Currency The RMB has far-reaching consequences for Australia

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The Absurdity of Negative Yields The unusual reality of negative yielding bonds

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Richard Guan

Sam Wu

Daniel Schwartz

I NT ERVI EWS From McKinsey Consultant to Monetise CEO An interview with Taichi Hoshino

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Venture Capitalist, Innovator and Mentor An interview with PayPal seed investor Peter Davison

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Inside HR An interview with Coca Cola's Kate Mason-Dryden

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Public and Private: The Secretary of the Treasury An interview with John Fraser

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Howell Sze and Joseph Shen

Peter Kwag

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Nicholas Fahy and Isabella Suriwong

Willkie Tan

Saudis in Cyberspace Smartphones and social media

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Emily Scott

Lyn Chen

The Complicated Seesaw of Work and Life Office addicts, siesta lovers and lucky hard workers

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Sandy Chen

Aviation through the Turn of the Century A comparison of Cathay Pacific Airways and Qantas Ricky Chan

The Micromultinational Model A business model suited for niche and high-tech markets

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INTEREST S

David Hogan

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Capital W: International Women's Day Breakfast

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Jessica Qin

AWAAZ

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180 Degrees Consulting

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Aninda Mukherjee

Guang-Yong Chuang

For many more articles and to contribute your own, visit

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Eric van Winssen

A House by the Sea: Chinese investment in Sydney Sydney property prices are booming

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ONL I NE

Bella Xu

Private Equity in Africa Private equity firms in previously uncharted territories

A Place in the Sun: Sunswift Elizabeth Scott

Simeon Ghobrial

Globalisation in the Brave New World The challenges and opportunities of globalisation

ST U DE N T R O OM

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Around the World

Yianna Zafiriou

EUROPEAN STAND-OFF: GREECE VS. INTERNATIONAL CREDITORS With total unemployment at 25%, youth unemployment at almost 50%, years of pension and wage cuts, tax hikes and escalating suicide levels, how much more hardship can the Greek people endure? Neither the Eurozone, nor the IMF, have granted Greece any loans since August 2014. Effectively locked out of global bond markets with an unsustainable debt level of 175% of GDP, Greece faces a severe liquidity crunch as international creditors have been refusing to release the remaining €7.2 billion tranche of Greece’s €240 billion bailout until Greece gives in to their demands for further strict austerity reforms.

Rejecting Greece's request to extend the bailout, the nation had until the end of June to reach a reform deal with its creditors before the bailout officially expired and a €1.5 billion payment to the IMF was due. On the 1st of July, Greece refused to accept the latest terms of the program and became the first developed nation to miss a payment to the IMF. Panic ensued when the European Central Bank announced that it would not increase its liquidity assistance to the banks. In the week leading up the deadline, anxious citizens withdrew billions of euros from Greek banks. In a desperate attempt to prevent the collapse of Greece's banking system, the debt-burdened nation's banks did not open on the week starting June 29th, with strict capital controls enforcing a €60 ATM withdrawal limit per account per day. Now, with fears of a possible 'Grexit' from the Eurozone, the country's future will be determined by the people who presented democracy to the world - the Greek citizens themselves in a yes or no referendum that will decide whether the nation will accept the terms of the bailout.

ECB JOINS THE LATEST FAD: IT’S TIME FOR QE Quantitative easing (QE) - the US Federal Reserve did it, the Bank of England did it, Bank of Japan is doing it, and now, so too is the European Central Bank. After cutting its main interest rate to below 0% in 2014, the ECB launched its QE program in March 2015 by adding public debt, including sovereign bonds and securities from European institutions and national agencies, to the private sector bonds it was already purchasing. This €1.1 trillion asset purchase program raises monthly asset purchases to €60 billion until at least September 2016. Whilst the Eurozone grew by 0.4% in Q1 2015, the fastest quarterly growth rate for nearly two years, and is projected to increase by 1.5% for the year, concerns have been raised about the effectiveness of the ECB’s QE process. Unlike the US and UK, which encourage more corporate bond issuance, companies in the EU obtain most of their financing from the banking sector. This implies that the success of the program largely depends on the banks’ willingness to lend and, given the constrained financial conditions in the EU, markets are far less liquid. In addition, the US and UK began purchasing bonds when yields were relatively high. However, yields on European government bonds are already low and unlikely to fall much lower. The financial markets are therefore concerned about the feasibility of the asset purchase program. It remains to be seen whether the ECB can successfully revive the Eurozone by emulating the QE process of the US Fed and reduce unemployment while lifting inflation.

POOR IRON ORE Over the last 18 months, the price of iron ore has been sliding from its January 2014 price of around US$130 per tonne, hitting a recent 10-year low of around US$47 in April. Iron ore prices have since rallied, currently hovering at around US$60, as large iron ore producers announced to the market that it would slow production growth due to excess supply, including BHP Billiton’s postponement of its plan to ‘debottleneck’ the inner harbour of Port Hedland to allow for more exports.

However, analysts say that this price spike is only temporary. Prices are expected to return to historic lows as the world’s largest producers’ cost-cutting projects have encouraged new supply at a time when China’s slowing economy is undermining the demand for steel, which fell to its lowest price in twelve years. The Chinese government announced that it will invest in the iron ore carriers of the world’s largest exporter of the mineral, Brazilian giant Vale. China will also extend loans to help fund Vale’s US$16.5 billion mine expansion. This project is expected to produce 90 million tonnes of iron ore for the Chinese economy at a low competitive cost similar to that of industry leader Rio Tinto. In a bid to maintain market share as China diversifies its supply sources, Australia’s Rio Tinto and BHP Billiton are expected to ramp up production in the latter half of 2015, once again driving down the price of iron ore. The Australian economy has been hit hard by the collapse of iron ore prices since its historic highs, forcing smaller mine operators to exit the market, leaving thousands of Australians jobless and resulting in billions of dollars of losses in government budgets. However, if Rio and BHP do not continue to boost output, Australia risks losing global market share and the economic benefits associated with a robust iron ore sector.

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GREASY PRICE OF OIL Global commodity prices have been falling, with oil as no exception. Oil has rebounded from its six year low of around US$44 a barrel in March for the main US benchmark, West Texas Intermediate (WTI) oil and from US$53 a barrel for the international benchmark, Brent oil.

This is the result of US crude stockpiles easing as drilling rig counts were reduced sharply, lowering production and rebalancing the market. However, with speculation that climbing oil prices will encourage producers back into production, the momentum has weakened at around US$60 and US$65 per barrel for WTI and Brent respectively, sustaining the global supply glut. The persistent decline in oil since the June 2014 price of US$111.87 for Brent and US$105.24 for WTI is attributed to the higher than expected output from the US, the largest consumer, as well as higher supply from the Gulf members of the Organisation of Petroleum Exporting Countries (OPEC), including Saudi Arabia, the United Arab Emirates and Kuwait in a bid to defend market share. OPEC, which supplies 40% of the world’s crude oil, pumped 31.3 million barrels a day in April, exceeding its collective output of 30 million barrels for an eleventh month. This increase in crude oil production has expanded the surplus of oil as slower growth in the global economy has weakened demand. Slowdowns in the Eurozone, Japan and emerging economies, particularly China and Russia, coupled with the developed world’s drive to decrease carbon emissions is finally having an impact on the oil market through greater energy efficiency, resulting in declining oil demand. Now, with a stronger US dollar and increasing signs that US shale explorers will increase drilling activity to take advantage of higher prices, the oil price recovery has actually threatened to prolong the surplus.

WHEN WILL THE US INCREASE INTEREST RATES? After the United States Federal Reserve cut the federal funds target rate to its all time low of just 0.25% following the 2008 recession, the central bank pursued a policy of quantitative easing to stimulate growth in the economy. Following trillions of dollars worth of monthly purchases of bonds to address weaknesses in its housing and labour markets and boost overall consumer and investor sentiment, the Federal Reserve Chair, Janet Yellen, is now hinting at a rate hike by the end of the year if the US economy continues to improve as it bounces back from its sluggish first quarter. In April, the core Consumer Price Index (the Fed’s preferred measure of inflation) which excludes food and energy costs, increased 0.3% for the month, representing the largest gain since January 2013. In the twelve months through April, core CPI increased 1.8% year-onyear – close to the Fed’s inflation target of 2%. With unemployment at 5.4% in April, almost half of its 10% level during the recession, an increase in rates is now inevitable, following the long six and a half year stretch of near-zero interest rates.

If the Fed delays pursuing contractionary monetary policy for too long so that the economy can reach its employment and inflationary targets, the economy may overheat. At the same time, wage growth in the US is slow, and the slowdown in the wider global economy has resulted in low levels of inflation globally. The Fed must begin ‘normalising monetary policy’ - it is just a question of how soon.

CHINA'S GROWTH ENGINE RUNNING OUT OF STEAM After a sustained period of robust growth, China’s economy is now slowing. First quarter results revealed that China’s GDP grew by only 7% - the slowest since the Global Financial Crisis. Excessive dependence on investment and sluggish consumer expenditure has resulted in the economy now shifting away from an investment-driven growth model to a consumer-led model. After rapid investment growth over the years, China’s booming property market has faltered and the slowdown is expected to continue throughout 2015. With recent cuts to interest rates, Chinese households are instead flowing money into domestic equities – is China moving from a property bubble to an equity bubble? With rising debt and large inventories of unsold property, taxes on property sales have now been cut and restrictions on buying second homes have eased. However, there are concerns that these measures will not effectively remove the excess supply in the real estate market as buyers expect subdued property prices and are therefore delaying purchasing. Property construction has slipped to its lowest level since just before the economy’s 2009 stimulus package. Weakness in the construction industry, which the economy heavily relies upon to generate jobs, has led to a prolonged downturn in steel consumption. As a result, decreased demand for the iron ore needed for steel production is having adverse effects on the Australian economy. As the world's second biggest importer of both goods and commercial services, China’s slowing momentum is reverberating around the global economy. www.insideenterprise.org | 7

NEW Ideas

cit which is halting the entrepreneurial industry from maturing and growing into a driving force for the Australian economy.

Although the Federal Government’s Entrepreneurs’ Infrastructure Program provided $484 million of funding to the industry, this was half of what had been originally planned. Alternative policies intended to provide relief funding have continuously been turned around on a yearly basis by budget cuts. Such an inadequate support base for Australian entrepreneurs already challenged by cultural risk aversion only serves to entrench the weak state of Australian entrepreneurship.

Jenny Huang

Australian Innovation

Jeremy Fu

REVERSING THE PRESSURES THAT LIMIT AUSTRALIAN ENTREPRENEURSHIP

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anufacturing and agriculture were once the bedrock of our national economy, but they are slowly and surely going down the path of economic irrelevance. The rise of biotechnology, energy exploration and industrial design are shaping the future of the next economy based on creative intelligence and innovative foresight. Unfortunately, Australia currently struggles to capitalise on these breakthroughs.

A risk adverse culture The fundamental problem that undermines Australian entrepreneurship is the lack of a cultural incentive towards risk taking behaviour. Entrepreneurship has always been defined by the desire to invent jobs, as opposed to finding one. These characteristics do not define the younger generation of Australians, who are more preoccupied with pursuing the conventional path towards graduate careers in 8 | www.insideenterprise.org

established disciplines such as finance, accounting and law. This mindset is deeply rooted in the value of job security, which has long defined the economic mindset of Australian workers. Whilst this remains completely understandable in an increasingly competitive labour market, such a cultural tendency towards corporate ladder climbing is not conducive to an entrepreneurial society where the emphasis must be towards creating the jobs of the future.

This reality has been confirmed by a recent HILDA survey conducted by the University of Melbourne on Australian citizens and their attitude towards risk since 2001. The research found that people aged between 25 and 54 tended to be more risk averse than people aged 65 and older. In addition to this, a Deloitte study released in November 2012 showed that Australian entrepreneurs tended to be far less idealistic and ambitious than their American counterparts. According to this

study, Australian entrepreneurs tended to tackle much smaller markets, such as niche markets, which were targeted 14% more

by Australian entrepreneurs than their Silicon Valley counterparts.

Inadequate venture capital Over the last decade Australia has invested only $4.5 billion in venture capital. The funding amounts to a mere $7.50 per capita, over ten times lower than the per capita funding in America. Australia is becoming increasingly known as a country that cannot financially support necessary business growth. The investor class, confined by a limited capital base in comparison to their American counterparts, continues to make small gambles which generate minimal value for investors and for the target market.

In addition, limited public support for venture capital and entrepreneurs only serve to exacerbate the funding defi-

Reversing the trend As an established leader in innovation, Australia’s patent policies must encourage innovators to capitalise on their research.

Currently, Australia accounts for only 0.8% of the world’s patents per year. There is a direct correlation between patent costs and patent documentation. On average Australian patent costs are at $10,000 – over three times as much as patent costs in the US. Despite Australia’s extensive research, reflected in game changing innovations such as WiFi and Cochlear, the Australian government has simply not put the necessary focus on encouraging the commercialisation of research by reducing patent costs. If it did so, Australians may be more inclined to take the risk of innovation and support the growth of the start-up industry.

Australia’s unique geographical position offers it unparalleled opportunities. In the energy industry, innovative green technologies could support the development of environmentally-friendly energy consumption in Australia. In the agricultural market, technological developments could improve crop yields and lead to growth in genetically modified food and organic food.

Whilst all of these opportunities could form a central part of Australian innovation, such visions are subject to Australia’s ability to redefine entrepreneurialism and shift it away from the current reality of risk aversion towards a more forward looking vision of the future. Many countries have already understood the importance of this shift in mindset, and it is time Australia did as well. ■

The Millennials: Children of the Future

Romilla Mohan

DIGITAL NATIVES: FREELANCERS AND CONSUMERS

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n 2015, the millennial population is set to exceed the baby boomer population for the first time in human history. The millennials represent in many respects the future of the world – they are more ethnically and racially diverse than their elders, and they are the first generation to come of age in a truly global and digital era. Most importantly, millennials have grown up in what writer David Burstein calls the ‘Fast Future World’, where rapid change and adaptive capacity have never been more important. With the world only set to continue changing in the foreseeable future, millennials will play a pivotal role in shaping this century.

Technology diffusion With the millennial composition of the workforce expected to reach 70% by 2017, work environments are becoming breeding grounds for millennial experimentation. In a world where the traditional ‘nine-to-five’ full-time work model is gradually being eroded by the economic uncertainties of the modern age, the millennial generation have pioneered an alternative ‘freelancer’ work model, defined by flexible commitment levels which are more responsive to contemporary economic circumstances.

Central to the new freelancer model

is the development of connections and affiliations that facilitate the brand integration of the freelancer product. The technological savviness of the millennial generation, nurtured by the surrounding culture of connected social media, gives millennials a natural advantage in the new freelancing paradigm that is slowly but surely defining the workforce. According to a survey conducted last year by Freelancers Union and Elance-oDesk, freelancers constitute approximately 34% of the American workforce, a figure which has been growing in recent years.

The new freelancing workforce will continue to be driven by millennial preferences and innovations, including online learning and electronic training interfaces. As a generation which prefers bite-sized learning, big-picture relevancy and immediate feedback, firms have been transitioning into video and mobile learning. The need for firms to realign with the interests of millennials means that 97% of firms will implement technology-based learning within three years, in comparison to only one-third of firms today.

The millennial consumer Yet the widespread reach of millennial innovation does not stop at the workforce.

With an estimated purchasing power

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of $2.45 trillion in 2015, the growing millennial consumer class has begun to shift consumer preferences away from standardised production towards customised goods and services. Retailers have already begun to capitalise on this trend, using Big Data to present a personalised set of products to their customers — something that has been a driving force behind Amazon’s success.

Now brands are taking personalisation a significant step forward into mass customisation, having discovered that they can elevate customer loyalty and engagement and use their customer base as an engine of advocacy to potential buyers.

The rise of the millennial consumer seems to also be ushering in a new era of consumer co-creation in the production of good and services. Some brands allow consumers to design a unique product that will be built to order. Menswear company Indochino, for example, offers customdesigned suits that can only be purchased online. Some companies only allow customisation in fit or design whilst others, like Serena & Lily, provide “consumerchoice bundling.” It is increasingly becoming clear that the growth of the millennial generation is shaping a new economic paradigm. Millennials are at home in a world where continuous change will only accelerate, fuelled by gamechanging megatrends, and they are making their mark. ■

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The Future of the Password

Jenny Huang

The Frontier of Solar Energy

Tim Zhong

BIOMETRICS TECHNOLOGIES ARE REPLACING PASSWORDS IN SECURITY IDENTIFICATION

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espite being regarded as the weakest link in security, passwords appear to have continued to dominate as the main method of end-user authentication. However, technology companies are now promising to eliminate the need for passwords by using biometrics – the science of recognising an individual based on his or her physical and behavioural traits.

At the Consumer Electronics Show in Las Vegas in January, the Fast Identity Online Alliance, which includes tech companies like Microsoft, Google, BlackBerry and PayPal, introduced technology which uses biometrics for scanning fingerprints, palm prints and irises, and facial recognition.

The group aims to create a set of protocols ensuring secure, password-less access to web-based applications.

Unlike passwords, biometric technologies are based upon unique and immutable individual characteristics, which ideally cannot be stolen or faked.

Fujutisu's PulseWallet uses the unique pattern of veins in the hand as its method of identification. PalPay has suggested replacing passwords with vein recognition or direct implants into human bodies.

Meanwhile, Motorola has proposed a

password pill with a tiny microchip that, when swallowed, is powered by stomach acids to send an identification signal to devices.

Vance Bjorn, CTO of access management firm Digital Persona, points out that passwords “are becoming even less convenient as consumers need to type them in on smartphones and via touch screens. The use of a fingerprint for authentication solves both problems — security and convenience.” However, fingerprint authentication, along with many other proposed authentication systems pose problems of their own. Sarah Laszlo, assistant professor of psychology and linguistics at Binghampton University (BU) in New York, notes: “if someone's fingerprint is stolen, that person can't just grow a new finger to replace the compromised fingerprint – the fingerprint for that person is compromised forever…

Fingerprints are ‘non-cancellable.’”

Nonetheless, biometrics has been cited as the future, particularly within the banking industry. In India, ICICI Bank introduced voice recognition software, which has also been used around the world in Abu Dhabi Commercial Bank and Mexico’s Banco Santander Mexico.

ICICI Bank started collecting voice samples from their customers in April this year, with software capturing voice patterns from customer calls. Customers who later dial the call centre are offered the choice of voice authentication. Their voice patterns are analysed and matched to their sample. Experts have suggested that more financial institutions will soon adopt voice recognition, particularly as it becomes increasingly accurate and easy to use. Barclays also plans to implement personal biometric scanners for its corporate clients to combat banking fraud, with finger vein scanners followed by voice recognition technology in phone calls to replace passwords or security questions.

Biometrics are expected to become commonplace over the next three to five years, bringing with them the end of passwords. ■

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attery technology has progressed to the point where it is now possible to store electricity generated by solar panels in an effective and cost-competitive way.

Unlike the centralised method of electricity production, distributed electricity generation through the installation of solar panels on rooftops can be combined with battery technology to store solar-generated power and to dispatch electricity, either for self-consumption or for the grid on demand.

The potential impact this technology combination may have on electric utilities throughout the value chain is significant.

As the total costs of generating and distributing electricity outweigh the declining total costs of a solar and battery combination, it will be economical for households and businesses to go ‘off-grid’.

However, despite having a lower customer base, the electricity networks will need to recover the same variable and fixed costs. This will lead to higher costs for the remaining customers and provide a greater incentive for more customers to go off-grid until utilities are left with stranded assets and an outdated business model.

This theoretical vicious cycle is commonly referred to as the ‘death spiral’, which has the potential to move the power industry towards the free market model that has come to dominate all other aspects of global economic life.

The present Given the potential for significant disruption to a decades-old centralised business model, how receptive are current households and businesses towards adopting solar and battery technology?

From an economic standpoint, a report

by UBS in 2014 found that the lowest-cost solar system already proved to be more cost-effective than buying electricity from

the grid. Based on an 8MWh customer switching to a 4kW rooftop solar and 5kWh battery system, UBS proposes that the customer can go from net consumption costs of $2,044 per year to net revenue of $157 per year. The analysis results in a net gain of $2,200 per year by assuming that the customer consumes stored electricity during peak periods and excess electricity is sold back to the grid.

Yet despite the clear economic benefits of moving towards solar power systems, it is an unfortunate reality that few households and businesses have elected to take up this option. Even with some government support for solar power development, only 1.4 million rooftop solar systems have been adopted across Australia, a number which Everett Rogers equates solely to Early Adopters. In addition, Green Tech Media Research indicates that only 10% of new commercial solar systems will be combined with battery technology by 2018.

The underwhelming uptake of solar battery technology raises the important question of why reluctance to invest in it continues to persist. While social and economic based explanations are common, there may also be a psychological reason behind the low renewable uptake. The current conceptualisation of renewable power as a luxury may explain why it remains in the limited domain of high-end consumers and businesses.

According to Greg Bourne, chair of the Australian Renewable Energy Agency, this psychological conceptualisation is related to the ‘death spiral theory’ — working class consumers are likely to disengage from solar as a means of insulating themselves against the adverse financial consequences associated with wealthy consumers leaving the grid.

What does this mean for utilities?

Regardless of why consumers and businesses are failing to adopt solar technologies, what is becoming abundantly clear is that sooner or later the existing business model of utilities will need to evolve. According to the UBS report, large-scale power generation – the dinosaur of the energy system – is in particular risk of disappearing over the foreseeable future, with a majority of the plants to be retired by 2025 without replacement.

In this changing industry environment, there is growing consensus that a move towards battery storage technologies in the future will become inevitable. Uptake of these models will rise as their cost curves progressively improve, as suggested by a 2013 report by the Edison Electric Institute. Ergon Energy CEO Ian McLeod envisages a changing role for electricity networks away from monopoly and towards being a partner and facilitator in a new world where customers have choice and control over the consumption of their electricity. This transition has particular implications for rural community where the benefits of dispatched electricity distribution are likely to be greatest. On this point, Rob Stobbe, the CEO of SA Power Networks has pointed out that the battery technology future will undoubtedly lead to a segregation of the singular grid system into localised micro-grids which may advantage rural power providers disproportionally, potentially rebalancing energy access across regional Australia.

Households may eventually have total control over the amount and timing of their electricity usage. Businesses that were once extremely energy-intensive can transform what was previously a cost into a resource to be harnessed and traded throughout communities. ■ www.insideenterprise.org | 11

Meccato Wall treet S From

By Willkie Tan

Sukuk is expanding far beyond the Middle East, but are we missing out?

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he second-largest city on the Sumatran Island of Indonesia, Palembang, is well known for being the former capital of the Srivaja Kingdom. It is at this former Buddhist city where SGI-Mitabu, a consortium formed by Australian companies The Solar Guys International and Mitabu Australia Pty, plan to implement a 55 megawatt solar installation funded with Islamic capital. This project not only epitomises the globalised financial landscape that companies now operate in, but could also lead to the issuance of Australia’s first Sukuk, the Islamic equivalent of a bond.

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What is a Sukuk?

The idea of the Sukuk was conceived 1,400 years ago when the Qu’ran was revealed to Muhammad. That revelation contained the strict edict that “those who take interest will not stand but as stands whom the demon has driven crazy by his touch.” It is this association between riba (usury) and the modern concept of interest that is religiously followed by Muslims around the world. Prohibited from using traditional interest-based investments such as bonds, Sukuk are generally used both as an investment alternative and financing method for sharia abiding individuals and

businesses.

The underlying principle of any Sukuk structure involves the ownership transfer of a tangible asset from issuer to investor.

The issuer receives capital while the investor receives regular coupon payments derived from the profits of the underlying asset.

Importantly, these coupon payments are not considered interest and thus the whole structure is halal (permissible). Unlike sovereign bonds, coupon payments cannot be guaranteed and the issuer can cease payments pendent on the profitability of the asset. At the end of a successful Sukuk, the issuer repays the principal by buying

the lender’s stake. The principal is not guaranteed, although bondholders have claim to the liquidation value of the asset.

Historically, there have been numerous Sukuk. By the evolutionary forces of modern finance, the most popular form of Sukuk involves a lease contract for property and its associated rent known as Sukuk-al-Ijara. The financing for SBI-Mitabu takes the form of Sukuk alMusharaka, in which the asset is a venture and coupons are the profits of that specific enterprise. In a Sukuk al-Mudaraba structure, funds are managed by the issuer and there is a predefined contractual

agreement on the payout ratio of profits.

Growth and growth drivers From 2008 to 2014, global issuance of corporate and sovereign Sukuk has increased annually by 15.3% to a market currently worth over US$109 billion.

This far outstrips the global bond market, which grew 7.47% during the same period. Given that it only represents 0.02% of the global debt market, Sukuk is still significantly underutilised within modern finance. However, Ernst & Young sees Sukuk issuance to be a significant contributor of growth in Islamic finance,

forecasting that the industry will double in value by 2018.

Growth in issuance has partially been driven by new sovereigns looking to tap into the liquid Islamic capital markets that are historically starved of halal investment and rich from oil revenue. In 2014, the British government sold £200 million in tax-assured Islamic bonds that held claim to rental profits from three governmentowned properties. This issue, a significant driver of David Cameron’s audacious plan for London to become “one of the great capitals of Islamic finance,” astonishingly recorded demand totalling www.insideenterprise.org | 13

the interest-based ‘budget deficit.’ Sukuk has also been commonly used to fund the development of infrastructure in emerging Middle-East economies. Instead of direct funding through the sale of state assets, such as Premier Baird’s privatisation proposal, a functional Australian Sukuk market would allow the upgrade of infrastructure through raised capital.

Australian investors would also be provided with a local diversification vehicle.

more than £2 billion. South Africa’s issue on the Luxemburg Stock Exchange and Hong Kong’s issue on the SEHK also experienced similar undersupply. It is hoped that the British Sukuk, the first of its kind from a Western nation, will now set a precedent that facilitates Islamic financial activity in London and furthers the city’s claim as the global financial centre.

Growth has also been promoted by the current climate of debt crises. The high costs of funding in such macroeconomic conditions combined with a general conservative attitude towards debt catapults Sukuk as a much-welcomed alternative to traditional interest-based financing. The fact that Sukuk must be tied to an asset limits the number of issued bonds based upon available investable opportunities. It has been suggested that this conservative lending and borrowing practices might prevent future economies overleveraging.

Corporate issuance is another driver of growth. For illiquid companies whose values are tied up in assets, Islamic bonds provide a versatile method of securitising such balance-sheet items. Funds can be re-invested in other high-return ventures or used to minimise interest costs from liabilities. Corporations can also use Sukuk as an alternative method of financing 14 | www.insideenterprise.org

projects. Like their sovereign counterpart, corporate issues made by large institutions with significant financial pedigree have experienced similar excess demand.

Demand for Goldman Sachs’ debut 5-year Sukuk in 2013 exceeded the value of the THE UK, SOUTH AFRICA AND HONG KONG ARE ALL LOOKING TO ENTER THE LUCRATIVE ISLAMIC BOND MARKET notes by approximately USD$1billion, demonstrating a similar propensity for Islamic capital to be splashed microeconomically.

Issues The American investment bank did however bring attention to the complexities that arise when trading with a religiously conceived financial instrument in its failed 2011 Sukuk issue. Despite obtaining the approval of eight recognised Muslim scholars from a qualified sharia advisor, Dar Al-Istithmar Limited, there were concerns regarding Goldman Sachs’ use of the raised funds in normal operational activities, rather than in Sukuk defined ventures. Contentiously, major Islamic banks the Saudi Hollandi Bank and Arcapita Bank had issued similarly

structured Mudaraba Sukuk in the past.

This incident is not only a microcosm of Islam as a divided religion but also encapsulates the decentralised and murky nature of Sukuk compliance, especially for inexperienced Western corporations.

There are only an estimated four hundred sheiks worldwide that form the cadre of respected sharia scholars. Of those, only twenty are experienced enough to prominently occupy positions on a sharia-compliance board. The challenge posed by these restrictions on human capital, stunts the number of Sukuk issued annually. However, this restriction seems temporary and will likely be addressed given the continual awareness and growth of the market. Increasing issuance will create a greater imperative for a centralised body while also driving the lucrativeness of becoming a sharia-scholar with the proper qualifications and recognition.

A more pertinent issue is the absence of a recognised central regulatory body with worldwide jurisdiction. As such, there exists no official or universal guideline that assesses a Sukuk’s compliance with sharia law. Consequently, contentious religious claims regarding the practices of firms have been raised, as evidenced by the Goldman Sachs Sukuk. The processes of compliance are not transparent and firms are unable to properly engage in a serious

Sukuk offer. Fears of non-compliance significantly deteriorate investor confidence with fears that a bond may be retroactively declared noncompliant during the life of the instrument. This can ultimately derail an issue due to a lack of prospective demand.

Australian Sukuk?

The UK, South Africa and Hong Kong are all looking to enter the lucrative Islamic bond market for potential inroads into the Gulf investor’s oil revenue funds. A similar imperative exists for Australia, given the decelerating Chinese economy and Australia’s need to increase the productive capacity of industries outside of resources. Specifically, traditionally capital-intensive industries such as agriculture would benefit from investment given the likely rise in demand resulting from China’s shift to a domestic consumption economy. The competition between nations to attract capital from the Middle East is indicative of the significant capital reserves seeking investment in that region.

A thriving Sukuk market would also ease the current government’s concerns regarding an uncontrolled ballooning of Australian debt. Islamic bonds would provide the opportunity to obtain financing without further deepening

Establishing a better Australian market?

To encourage corporations and projects like SGI-Mitabu to offer Sukuk in Australia, we need only look to our AsiaPacific neighbour Malaysia for inspiration – it is the world’s largest Sukuk market place. Under the Malaysian standard tax system, the revenue generated from the underlying asset, payments and any transactions to an SPV would be taxed. Creating legislature that taxes the transferral of these funds once, much like franking credits for dividends, would remove a significant barrier to companies seeking to issue in Australia. While other sovereigns have generally elected to amend pre-existing tax legislature, Malaysia has formulated an entirely new set of laws that unambiguously address the intricacies of Islamic financial instruments such as Sukuk. Alternatively, allowances from the Australian Taxation Office would equally suffice.

Aside from such tax initiatives, establishing some centralised body to regulate the sharia-compliance of products

would further create the transparency that often attracts buyers. In Malaysia, the Capital Markets and Services Act 2007 requires that any sharia compliance advisor be registered with the Securities Commission Malaysia. Further, there are strict regulations stipulated in the Islamic Financial Services Act 2013.

Firms floating in Malaysia, such as SGIMitabu, are confident in attaining proper demand for their offer as its recognised compliance ensures that investors can be confident in the Halal nature of their investment. Consequently, the process not only becomes more transparent, but also stable as the Sukuk has distinguished legal character. Giving ASIC powers similar to that of the Securities Commission Malaysia to register sharia advisors standardises advice and ensures there is a general agreement upon compliance. This would be especially boosted by the incorporation of Islamic jurisprudence in business courses around Australia. Furthermore, joining one of the international Sukuk organisations would also give credibility to any sovereign issue that the government undertakes.

If the major concerns of compliance are appropriately addressed, Australian Sukuk will not struggle to draw demand – Australia is geographically close to major Islamic populations in Indonesia and Malaysia, is home to a flourishing Islamic population, has a reputation as a stable economical centre, and fosters a consistent desire for Sukuk investors to diversify from the rupee and US dollar. We can expect the SGI-Mitabu issue to draw significant interest from parties in Canberra. ■

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S

audi Arabia’s enthusiasm for digital devices is proof that the pull from virtual realm is almost inescapable. Every day, Saudi netizens contribute ninety million views to YouTube, making them one of the world’s highest YouTube viewing countries per capita. Around eight million Saudis are Facebook users, and approximately 74% of Saudis own a smartphone.

Yet despite the digital connectivity of the Saudi population, the rulers of the sovereign state have struggled to reconcile this modernisation with the centuries-old ideology of ‘Salafism’ or ‘Wahhabism’, a conservative subdivision of Sunni Islam which has shaped the kingdom’s strict Shar’iahbased legal system. A hybrid of ‘Salafism’ and traditional Bedouin customs has become the underlying cultural doctrine to this day, resulting in stringent constraints such as banning women from driving, gender segregation and the rigid censorship of media.

Saudis in Cyberspace

Smartphone savvy Saudi Arabia’s mammoth consumption of smartphones has been the subject of keen interest for many mobile producers and social media application providers. In 2013 alone, Saudi Arabia ranked third globally in terms of smartphone penetration at 72.8% – three ranks above Australia and ten above the US. Demand for smartphones now exceeds that for laptops and computers.

From a demographical standpoint, the smartphone fixation is unsurprising. Over two-thirds of Saudi Arabia’s thirty million citizens consist of people aged under thirty.

Like any other digital nation, teenagers and young adults have turned to the virtual terrain to socialise, play games and connect with fellow netizens scattered across the globe.

With traditional values that emphasise private family life and entertainment restrictions such as a ban on cinemas, the online world has become an escape for the globalised youth who are keen to be updated with what’s current on the

international stage.

A kingdom of hash-taggers Not only does Saudi Arabia pump out 47% of tweets from all Arab nations, but it also has one of the fastest growing user bases for microblogging sites. In 2010, the number of tweets in Saudi Arabia grew around 440%, compared to a global growth rate of 95%. Business Insider has also found that, as of March 2015, eight million Saudis tweet on a daily basis demonstrating the immersion of Saudis in the networks of the information age.

This is where social media has begun to contribute to a shift in the cultural fabric – namely by becoming an outlet for public discussion. Men may still be the highest consumers of social media in Saudi Arabia, but high profile women such as Princess Reema Bint Bandar Al-Said Saudi have recognised the value of social media in empowering women.

In an interview with SXSW Interactive, she noted: “Everybody is talking to everybody and everyone is listening to everybody right now.”

Though few in words, tweets provide snapshots of the individual sentiments of the general public. Twitter has become a bazaar of words where thoughts and opinions are exchanged in an open online atmosphere. Among day to day activities, hashtags speak of an array of individuals who readily use social media to voice their discontent; whether it is casual complaints on low salaries, scepticism of housing policies or controversial statements in the pursuit of civil liberties.

“Twitter has raised the ceilings of our freedoms,” says novelist Turki al-Hamad. The outspoken al-Hamad faced trouble with authorities in 2012 for tweets criticising the way Islam was being practiced. On the flip side, prominent religious figures have also proven that faith and hashtags can collide by using microblogging sites to pass down Islamic teachings to thousands of followers. Religious personality

Smartphones and social media

By Lyn Chen

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" Twitter has become a bazaar of words where thoughts and opinions are exchanged in an open online atmosphere "

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Mohammad al-Arefe holds the most popular Twitter account in Saudi Arabia, with a following of over eleven million people.

Women and the marginalised Shiite minority have also taken to ‘hashtivism’ and social media platforms to voice their concerns about civil rights. In protest of the country’s ban on women driving, IT consultant Manal Sharif famously uploaded a YouTube video in 2011 of her driving in Khobar for the Women2Drive Movement.

In December 2014, Loujain Alhathloul was arrested for driving past the UAE border into Saudi Arabia – an act she publicised to her 248,000 Twitter followers. The 25-yearold activist made headlines when she was listed as the third most powerful woman in the Arab world in 2015.

Promisingly, the government allowed women to vote and run for municipal elections commencing in 2015. The government is also promoting education by offering international scholarships to women.

However, conservative values have been preserved throughout this process of change, as can be seen by the creation of women-only colleges and universities such as the Princess Nora bint Abdul Rahman University. Noted

as the world’s largest university for women, the PNU features a driverless metro system within the campus.

The digital marketplace Other women have started to use social media as an avenue for e-commerce.

Ride-sharing businesses such as Uber and Careem have capitalised on the driving ban, marketing themselves as upscale alternatives to taxis. These companies have already gained a sturdy foothold in Saudi Arabia, with 80% of their customer base consisting of women – most of whom are unable to afford a private chauffeur. It also saves them from the threat of being criticised for hailing taxis in public. Careem was created in Dubai and currently provides services for around 100,000 Saudis. Some female customers use the app five to ten times each day.

On a local level, Saudi entrepreneurs have used social media sites to market their products. The worldwide trend of ‘Instagram shopping’ has filtered into the kingdom.

Barbeque catering and stylish abayas are among the many products and services sold in over four thousand Riyadh-based Insta-

gram businesses. With youth unemployment at 29% and on the rise, this niche has become a creative source of income for graduates who are yet to find a job in their chosen field.

While many Saudis still opt for cash on delivery (COD) payments instead of credit cards for online transactions and the majority of the online-buyers (59%) are immigrants living in Saudi Arabia, the online marketplace is expected to grow due to high-purchasing power and WOMEN AND THE MARGINALISED SHIITE MINORITY HAVE ALSO TAKEN TO ‘HASHTIVISM’ AND SOCIAL MEDIA PLATFORMS the burgeoning integration of technology into daily life. According to MasterCard, phone-wielding Saudis are mostly buying phone applications, gifts, toys and airline tickets online. The most popular virtual store in the kingdom is the Arab website Souq, followed by Amazon and eBay. Government in the virtual space Despite the penchant for social media amongst citizens and the suffusion of

smartphone culture, the ruling elite still hold an iron grip over the country. The technological successes of social media in Saudi Arabia have not occurred without resistance. For instance, Viber, a messaging app, was banned in 2013 for refusing to create a local server that authorities could access. WhatsApp, the most popular social media application in Saudi Arabia today, was on the verge of being banned just two years ago for failing to comply with the same cyberspace laws. This response to social media is unsurprising considering that ten years ago, imports on camera phones were banned.

In 2014, Saudi blogger Raif Badawai was arrested and sentenced to a thousand lashes and ten years in prison for his online criticism of Saudi authorities. His website, Free Saudi Liberals, was founded in 2008 to provide a domain for people to discuss social issues. Souad al-Shammari, Badawai’s associate and co-founder of the Saudi Arabian Liberals Network, was spared in early February 2014 after three months in prison.

Yet almost paradoxically, the government has adopted the virtual hangout of the youth in an attempt to reconnect with their country’s citizens. Following the death of 90-year-old King Abdullah

in January, the Twitter account of the new King Salam gained half a million followers.

While activists have found a medium to express their concerns, their voices are not the only ones being heard in digital Saudi THE TECHNOLOGICAL SUCCESSES OF SOCIAL MEDIA IN SAUDI ARABIA HAVE NOT OCCURRED WITHOUT RESISTANCE Arabia. Princeton academic Nadav Samin noted that in response to planned demonstrations inspired by the Arab Spring protests of 2011, there was “widespread sympathy for the king and antipathy toward the would-be demonstrators.” The possibilities of cyberspace may be steering Saudi Arabia in new directions, but they also offer an opportunity for those who prefer the status quo to express themselves.

Whether the sovereign state will exercise less stringent policies in the near future is unclear, but it is undeniable that many Saudis have embraced the virtual world and are continuing to carve it into a space of their own. ■ www.insideenterprise.org | 19

BY SANDY CHEN

B

eing hard-working is an undeniably good trait.

Over the years, many cultures have praised the laurels of hard work, from Aesop’s tale of the grasshopper and the ant to Confucius and his teachings. Today, the concept remains ingrained in modern consciousness, with the average individual working around 90,000 hours – an entire decade – over the course of their life, according to Business Insider.

However, overworking remains a major ongoing issue across the globe. Despite the International Labour Organisation deciding on forty hours of work per week as a golden benchmark at the 1935 Geneva Conference, 22% of the world’s employees continue to work well in excess of this at over forty-eight hours per week. This may seem baffling given the growing pool of underemployed individuals worldwide, but there are many identifiable causes of workaholism throughout the world.

The Complicated Seesaw of Work and Life OFFICE ADDICTS, SIESTA LOVERS AND LUCKY HARD-WORKERS

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East Asia In Japan and China, death from overworking is an uncomfortable reality. In fact, the issue was so serious in Japan during the 1970s that the word, ‘karoshi’, death by overwork, was added to the dictionary. The trend of workaholism persists in contemporary Japan, with Japanese employees continuing to take on an average of sixteen additional unpaid hours per month on top of their usual forty hour weeks.

Japan’s neighbour China shares a similar workaholic culture. The tireless work of its population has propelled it to become the world’s second largest economy and enabled it to sustain massive economic growth of 9.5% per annum on average over the last two decades. The same hard work that spurred this growth is of great concern – 600,000 individuals in China pass away each year from working too hard.

This intense workaholism is a persistent trend in many other East Asian countries, including South Korea and Singapore. Workaholism in Asia

can be attributed to cultural influences on the working population. As suggested in a study by Geert Hofstede, East Asian countries generally have high collective orientation compared with other countries, which translates to strong dedication and effort in the workplace. This is exacerbated by the strong psychological affiliations that form between employees and employers due to the permanent company model operating in many East Asian countries. Under this model, an overwhelming number of people remain with a single employer for the entire duration of their career.

The result is a belief that one is fortunate enough to work in a secure occupation and must continue to persevere to retain their position. In China, many workers strive for ‘tiě fàn wan’ or ‘iron rice bowl’ occupations in the government or state-owned enterprises. These jobs are prized for their security and guarantee of stable income. In recent years, iron rice bowl occupations are becoming more like golden rice bowls, due to their increased rarity and competiveness in the job market. For the young Chinese person, the staggering competitive pressure to stand out from China’s huge labour force and the heavy burden of being an only child supporting two parents provide strong incentives to work harder, particularly for those who work in the private sector in an increasingly globalising China. Added to this is the pressure of growing property prices, particularly in cities such as Shanghai where apartment prices have increased by over 150% since 2005, which has further forced people to commit long hours to work to pay for their ever-rising living costs.

Europe Another narrative of workaholism emerges in Europe.

In countries like Greece and Spain, workaholism is fairly prevalent. Despite stereotypes that Greeks and Spaniards are idle workers who contributed to the huge debt that now plagues their countries, they

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actually work some of the longest hours among OECD countries. On top of that, Spaniards on average receive one less hour of sleep than their European counterparts.

Spanish workaholism is partly a relic of hard-working behaviours that became necessary during the Spanish Civil War. However, this makes it difficult for the modern day Spaniard to maintain a healthy work-life balance. As for the Greeks, long work hours are a reflection of higher numbers of self-employed individuals, who have statistically been shown to work more hours than those with fixed hours specified in an employment contract.

By contrast, Northern Europe is known for its focus on workplace flexibility.

Countries like Germany have comparably shorter working hours than most OECD countries, and German citizens are allowed to work no more than fortyeight hours week by law. In recent years, this perception has been augmented by the post-GFC policy of cutting hours rather than laying off workers. Moreover, Germans appear to be encouraging the re-adoption of Spanish siesta naptime practices despite the custom dying out during the Industrial Revolution. This movement has received support from several unions and healthcare experts, signalling the value placed on flexible working conditions by the country.

While some critics may raise doubts as to the economic viability of focusing on workplace flexibility, it simply reflects what most North European countries are doing – improving the work-life balance of their citizens rather than allowing workaholism to proliferate.

Americas The USA has quite the reputation for its intense working hours, but how do its hard-working entrepreneurs in Silicon Valley and busy Wall Street workers compare to their counterparts overseas? As a nation built on hard-working immigrants and spurred on by the great American dream, North Americans unsurprisingly work longer hours than most countries.

However, the distribution between the different states is unequal, and contingent upon the structure of each state’s primary industries. Oil-based North Dakota stands out, with its citizens working the highest average hours in the U.S. Further down south, Mexico brings 22 | www.insideenterprise.org

workaholism to a whole new intensity.

Mexico has among the highest average hours worked among OECD countries.

Mexican workaholism may be attributed to a strong familial culture, along with a rapidly aging population. In 2010, The Economist reported a drop in fertility rates from the 1960s. Back then, individual Mexican women bore approximately seven children per woman. By the 1980s, this number had fallen to two children per woman. In the past, Mexicans worked hard to provide for their large families and reinforced their working behaviour in their children. Today, in the face of a rapidly ageing population similar to Japan and China, Mexicans now would have to work hard to take care of the elderly.

Interestingly, the country also has a very high level-of-indulgence score based off findings from the Hofestede Centre, implying a higher proclivity to value leisure activities. It seems that the saying “work hard, play hard” rings true for Mexico.

Australia The tourism industry of Australia promotes sunny beaches and a laidback lifestyle, which might be the reason why Australia has a reputation for being a lazy, stressfree country. Like Greece and Spain, this reputation is undeserved. Australians actually work above average hours compared to other OECD countries. This is before factoring in the unofficial extra hours many workers put in. Technological advancements enabling employees to work from home have made it even more difficult for Australians to maintain a healthy work-life balance.

Studies show that one in three Australians want to work less, because they want to spend more time with family, reduce anxiety and prevent sleep deprivation – a problem for 3.3 million Australians.

Australia’s apparently workaholic nature may be embedded in its notoriously high living costs, particularly in the bustling cities of Sydney and Melbourne. To illustrate, a two litre bottle of Coca-Cola is 1.5 times more expensive than its equivalent in New York City. High living expenses combined with increasingly expensive property prices have forced people to work longer and harder in order to be able to provide for their families and lifestyle. Australians are also encouraged

to continue their hard work in the current climate of job insecurity. Employers are eager to outsource to cheaper employees in foreign countries. Fears of retrenchment ingrained from the experience of the Global Financial Crisis reinforce the perception that employees need to work long, hard hours to retain their jobs.

The productivity dilemma Longer working hours do not necessarily correlate with higher productivity levels.

The Germans who work far less hours than their Spaniard and Greek neighbours recorded higher GDP per hour worked at 62.3, compared with 51.4 and 36.2 respectively. Corporate Japan actually has amongst the lowest white-collar productivity levels within advanced economies. And for the hard-working Australians, productivity levels are also lower than expected, at 45.8 GDP per hour.

This seems to imply that higher productivity will be achieved with less working hours. A 2012 report by the Economist which breaks down these OECD figures confirms this inverse relationship.

Yet to take this finding to the extreme would be to suggest the absurd notion that the highest levels of productivity may be achieved when no work is completed whatsoever. However, in the words of Mark Keese – head of the OECD’s employment division – what the report fails to take into account is the relative wealth, levels of training and education, and capital intensity of each nation. “Richer countries can and should see reductions in hours worked ... [because] eventually you’re replacing workers with machines, which allow you to cut back on the number of hours of work.”

As policymakers continue to search for ways to optimise the number of hours worked, they must toe a fine line between maximising productivity and improving citizens’ welfare. The growing underemployment problem faced in many countries adds further complexity to the puzzle of deciding how to maximise economic growth while balancing the demands of those who enjoy working excessive hours against the demands of those seeking additional work. ■

AVIATION THROUGH THE TURN OF THE CENTURY A COMPARISON OF CATHAY PACIFIC AND QANTAS AIRWAYS

BY RICKY CHAN T

oday’s aviation industry has come a long way since the Wright brothers accomplished the first powered flight in 1903. The International Air Transport Association (IATA) estimates the industry will expand by 31% between 2013 and 2017, making it one of the fastestgrowing sectors in the world. However, despite the positive economic outlook

of the aviation landscape on the whole, the big, full-service ‘flag’ airlines have struggled to compete and grow. Their market share continues to be eroded by Gulf carriers and low-cost carriers. Some of the world’s most recognisable airlines could potentially be squeezed out in the current economic climate. To survive, fullservice carriers must turn their attention

to deteriorating yields, profit margins and passenger and cargo loads.

The curious case of flag carriers Two of the world’s most respected airlines, Cathay Pacific Airways and Qantas, both face the same daunting prospect of extinction, and epitomise the current state of other flag carriers. They are the www.insideenterprise.org | 23

flag carriers of Hong Kong and Australia respectively. Blessed with a rich history and an outstanding safety record, both airlines hold trump cards in the aviation game. However, in comparison to the golden days of the jet age in the twentieth century, when they enjoyed consistent double digit growth, recent figures expose some alarming issues for flag airlines. In 2014, despite a rebound in passenger loads in accordance with the economic recovery, Cathay Pacific still experienced significantly reduced yields of 3.9% and a meagre profit margin of 3%. Meanwhile, Qantas posted its first significant profits since its well-publicised demise after the Global Financial Crisis. These figures may represent a temporary recovery, but they mask the ongoing struggles facing flag carriers. These carriers shaped the airline industry’s razor thin average profit margin of less than 1% in 2012 and 2.4% during 2014 – a profit of only $5.42 for every passenger carried.

The low cost upstarts in the industry With the gradual liberalisation of the airline industry in Australia during the 1990s, the introduction of low-cost carriers has severely inhibited the pricemaking authority and profitability of full-service carriers. When airlines were a rare commodity during the early years of commercial aviation, flag carriers were monopolistic figures in the airline industry thanks to their importance to national pride and international prestige.

The current move to relax traffic rights

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and increase bilateral air agreements is exposing the inefficiency of full-service carriers, including losses bred through subsidies and protectionist policies. Fullservice airlines employ a less sustainable but more diverse fleet to facilitate shorthaul to ultra-long-haul flights within their domestic and international networks.

Hence, flag carriers incur more substantial maintenance, servicing and training costs associated with the required human capital and the attainment of airport parking slots. Meanwhile, budget carriers like AirAsia, Ryanair and Scoot typically fly a much smaller network with smaller fleets and range of aircrafts. With a significantly smaller fleet, employee training and aircraft management costs can be minimised along with the negativity associated with aircraft write-downs. .

Responding with a premium experience In response, both airlines have embarked on marketing campaigns to refresh their premium image. Cathay Pacific’s marketing campaign ‘Life Well Travelled’ succeeds its previous award-winning campaign ‘People. They make an airline’. It attempts to differentiate the airline from other fully-fledged airlines and from budget carriers, with a focus on the premium market.

Its re-

newed concept based on the flying experience is integral to improving the yields in the business class and premium economy sectors. Similarly, Qantas enlisted the help of Neil Lawrence, the man behind the Kevin07 campaign, to create a marketing campaign which departed from Qantas’ usual image. The new ‘Feels like Home’ campaign is Qantas’ most expensive advertising campaign in history, and it was timed to coincide with the refurbishment of Qantas lounges in many international airports like Hong Kong and Los Angeles.

Moreover, Qantas has recently installed award-winning business class seats within its domestic business class and has trialled with Select on Q Eat, a process which allows passengers to pre-order their inflight meal on international flights. In doing so, Qantas is able to reduce unnecessary food waste and associated costs and thereby fund larger meals. Rather than try and beat the low-cost carriers at their game, both airlines have sought to differentiate themselves further with a more premium experience: superiority in comfort, in on-board experiences and in check-in services.

Threat of the Big Three from the Gulf Besides the threat of budget carriers, a new breed of state airlines has also increased competition on long-haul routes. The rapid economic development of Persian Gulf countries in the 1970s and 1980s due to

the discovery of vast oil and gas reserves has provided these nations with large amounts of capital. State-owned airlines were established as an integral diversifier of the economy – for example, Qatar Airways’ yearly profit constitutes 11% of the country’s gross domestic product.

Etihad, Emirates and Qatar Airways have established themselves as the new airline powerhouses, with an almost 30% lower cost-base than their competitors from Star Alliance (Singapore Airlines) and Oneworld Alliance (Qantas, British Airways and Cathay Pacific), despite providing similar products. Furthermore, their advantageous geographical base situates them within eight hours flight-time of both the SOME OF THE WORLD'S MOST RECOGNISABLE AIRLINES COULD POTENTIALLY BE SQUEEZED OUT IN THE CURRENT ECONOMIC CLIMATE Americas and Asia, enabling them to act as major transit hubs. With an estimated purchase of 500 new aircraft within the next few decades and secured production positions until 2020, the trend of the Gulf carriers’ expansion is likely to continue.

If you can’t beat them, join them With the remarkable growth from the Gulf carriers, full-service airlines have struggled to cope with their newfound competitors. While Singapore Airways and Delta Airways have remained aggressive and defiant in their battle against the

newcomers, albeit without much success, Qantas and Cathay Pacific have elected to remain passive and share their benefits.

Rather than go head to head with Emirates, Qantas brokered a coordination agreement with the Arab airline, resulting in the relocation of a major Qantas transit hub from Singapore to Dubai, which has surpassed London Heathrow as the busiest airport for international travel. By tapping into the geographic benefits of Dubai, Qantas has been able to transit passengers from Europe to Australia through Dubai within shorter flight times. Besides the geographical benefits, Qantas has also benefited from the collaboration – by coordinating departure and arrival times, transit is more efficient and travel time is shortened.

Similarly, Cathay Pacific has shared a similar vision by embracing Qatar Airways into the Oneworld Alliance, the third largest global airline alliance. In addition to airline alliances, codeshare agreements where airlines share the same flights will allow airlines to allocate their fleet on other routes which will enhance their transit networks and attract more passengers.

replaced expensive A-scale pay packages with B-scale pay packages designed to improve employee productivity. However, while this has facilitated a reduction in costs, it has resulted in heightened tension between union-represented employees and managers, and a greater turnover of staff who have opted to work for airlines which provide more enticing packages.

Similarly, Qantas has also embarked on a fleet optimisation program designed to improve allocative efficiency by matching demand accordingly with appropriate aircraft. To avoid direct competition with Gulf and Asian carriers, Qantas has shifted its international long-haul focus form Europe and Asia to the Americas.

They have also reduced full-day layovers in London and Los Angeles which incurred unnecessary costs. Qantas has further improved its financial position through the well-publicised cut of 5,000 staff positions in both international and domestic divisions. Qantas CEO Alan Joyce has maintained his stance, and his decision has been justified by a net profit of $203 million in the first half of the 2014/15 financial year.

Cutting costs In order to maintain its competitiveness, Cathay Pacific has also experimented with cost-cutting in response to its increasing operating costs. Cathay Pacific’s replacement of its ageing fleet with new aircraft technology allows the airline to retain one of the most fuel-efficient fleets in the industry. Moreover, in order to improve yield, Cathay Pacific’s lean program has

The future outlook for the industry With a growing preference for more affordable travel, full-service airlines will continue to face immense competition from their low-cost rivals. Nevertheless, they will continue to have a role to play in serving their national economies, in providing premium products and in preserving a prestigious image. ■

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THE MICROMULTINATIONAL MODEL

By Simeon Ghobrial

A

lso known as flexible innovation, combinatorial innovation involves joining component parts in ways that create totally new innovations.

The nineteenth century was an era of combinatorial innovation, with standardised mechanical parts – wheels, pulleys, belts and gears – being recombined to create new innovations.

In the twentieth century, internal combustion engines, electronics and (eventually) microelectronic chips fuelled the economic and cultural transformations. The still-evolving computational advancements of the early twenty-first century will provoke even more dramatic changes.

Today, even the smallest company can now afford a communications and computational infrastructure that would have been the envy of large corporations fifteen years ago. If the twentieth century was the age of the lumbering multinational company, then the early twenty-first century belongs to the nimble ‘micromultinational.’ The term, coined

by Google’s chief economist Hal Varian, refers to the growing number of small companies that are multinational from day one, thanks to digital technologies and the Internet.

Enter the micromultinational Micromultinationals pursue a ‘smart specialisation’ strategy of niche offerings, delivered through a powerful mix of

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digital technologies, strong online presence and globally dispersed operations.

The result is a business model perfectly suited to niche and high-tech products, able to scale from their first day of operations and reach across international markets at unprecedented speed.

Talented people in disparate geographic regions or highly specialised local business ecosystems – the kind that exist in Bangalore or Shanghai – can A BUSINESS MODEL PERFECTLY SUITED TO NICHE AND HIGHTECH PRODUCTS be accessed with ease through internetbased collaboration. Greater access to commodity-type skills drives down prices, enabling rapid iterative prototyping and ultimately facilitating greater customer involvement in product development.

Businesses are able to remain attuned to rapidly changing global supply chains, enhancing flexibility and driving down costs.

The most distinctive characteristic of the micromultinational is the emphasis on spreading out production activities to regions where it is cheapest, while simultaneously maintaining high-margin activities at its operating base. This lowers costs while enabling quick access to customers in fast-growing regions.

Micromultinationals and anti-

fragility Micromultinationals are particularly important amidst the current context of rapid globalisation and digitisation, processes that initiate a broader range of global flows and a rapidly expanding web of connections. There are now more entry points to a broader range of players than before, not only for the largest global companies but also emerging countries, small businesses and even individuals and entrepreneurs. These growing multidimensional global flows bring with it an expanded network effect.

However, as economists Ian Goldin and Mike Mariathasan have pointed out, this increased connectively also results in systems that are inherently complex. A world of systemic complexity is an unpredictable one, leaving large multinational corporations vulnerable to what scholar Nassim Taleb calls ‘black swans’ – rare and random events.

These events are often of an enormous, unforeseen magnitude, and they can only be examined clearly in hindsight.

They include World War I, 9/11, the Internet, and the rise of Google. In light of the uncertainty that is generated by the possibility of these black swans, organisations that are anti-fragile will be those that thrive in the years and decades to come.

Anti-fragile businesses are not simply resilient to risks and stressors, but they will also be able to benefit from them.

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Micromultinationals are anti-fragile because they are structurally decentralised.

They are not only able to weather unexpected events, but they can readapt, restructure, and seize advantage of the opportunities presented. Businesses that adapt to this model can better negotiate a world fraught with systemic complexity, and thrive in an environment that is inherently unpredictable. Contrast this with multinationals that, in their quest to achieve scale, become bogged down in bureaucracy, overstaffing and risk management, rendering them slow and often blind to important disruptive opportunities.

Advanced manufacturing The resilience of the micromultinational model extends to manufacturing, which can bring extraordinary economic benefits.

THE EARLY 21ST CENTURY BELONGS TO THE NIMBLE ‘MICROMULTINATIONAL’ The World Economic Forum reports that over 70% of income variations in 128 countries were explained by differences in manufactured product data alone. The US Bureau of Economic Analysis indicates 28 | www.insideenterprise.org

that manufacturing has had a higher multiplier effect on the US economy than any other sector, contributing $1.40 value-add in other services for every $1.00 added by manufacturing.

The micromultinational model will play a critical role in the future of advanced manufacturing, given the increasingly fragmented nature of manufacturing processes defined by digitisation and globalised supply chains. Across the world, large vertically-integrated manufacturing operations are now being superseded by smaller, interdependent production units that supply specialised products and services to global markets.

Most manufactured goods tend to be connected to many other goods. For instance, a country successful at making a few kinds of garments will find it relatively easy to diversify into other kinds. This is also the case for higher-end products such as machinery, electronics, chemicals and pharmaceuticals. Manufacturing creates a set of ‘stepping stones’ to development and a more continuous progression of rungs than other economic activities.

Manufacturing now brings about service innovation as well; modern manufacturing today straddles between products and services. Products have become complex

systems combining hardware, sensors, data, storage, software and connectivity in myriad ways – no longer solely electronic and mechanical. A prime example is Chinese electronics company Xiaomi, which derives its success not only from its physical offering, a top-end quality phone with mid-range prices (significantly MICROMULTINATIONALS DEDICATED TO NEW AND INNOVATIVE INDUSTRIES CAN SPEARHEAD THE R&D CRUCIAL TO ADVANCED INDUSTRIES undercutting Apple and Samsung), but also from its software platform, which generates the majority of its revenue through advertising and app-store purchases.

Micromultinationals are well placed to take advantage of this paradigm shift. By focusing on activities that require specialist, often cutting-edge, knowledge and dispersing low-margin activities to those who can do it cheapest, micromultinationals shed the risks stemming from cost-based competition while capitalising on the income streams secured through a niche offering. As

demand fluctuates from country to country, these businesses can reposition to where the demand is. Collectively, micromultinationals will be capable of resilience in the face of cost pressures.

Furthermore, they will spawn ecosystems where the high-margin activities necessary to sustain their niche offerings lead to prosperous jobs for the economies that embrace them.

In a study by DC think-tank Brookings, ‘advanced industries’ are supporting greater numbers of American workers.

They are characterised by high R&D spending per worker and proportionally large STEM employment. Between 2010 to 2013, the advanced industries sector directly added almost one million new jobs, fuelling 18% of total job growth in the US, despite representing only 8% of the US job base. US workers in advanced industries purchase $236,000 from other industries every year in intermediary goods and services, four times the average for workers in other industries. Their consumption helps fuel jobs across the economy, from the machinery sector to accounting firms to shipping companies.

The benefits extend beyond bachelor degree-holders too: those without college education in the advanced industries

sector earned between 50%-70% higher than in other sectors.

Micromultinationals dedicated to new and innovative industries can spearhead the R&D crucial to advanced industries.

Research from McKinsey & Company finds that most low-performing researchintensive US firms are “sleepwalking” through their R&D investment decisions, maintaining existing R&D initiatives and unwilling to incur greater risk.

Contrast this with micromultinationals ANTI-FRAGILE BUSINESS ARE NOT JUST RESILIENT TO RISKS AND STRESSORS, BUT THEY WILL ALSO BE ABLE TO BENEFITS FROM THEM such as Aquion, which spun out of Carnegie Mellon’s material science research department and now employs 130 workers in renewable energy storage manufacturing.

Australian multinationals Micromultinationals present vast opportunities for Australia. Growing digitisation has created a world where market access is uninhibited by economies of scale. With this comes the opportunity

to secure stable, prosperous incomes in the face of increasingly chaotic and complex business environments. Australia is not only capable of competing in this new industrial world, but stands to benefit immensely from it.

Australia already houses a fledgling small-to-medium manufacturing sector successfully utilising the micromultinational model. Research from the Manufacturing Excellence Taskforce Australia (META) has already identified two thousand globally successful Australian micromultinationals. Examples include Textor, which manufactures highend fabric used in fibre fluid management; RØDE Microphones, a global leader in sound equipment; and ANCA, a machine, software and automation company.

In a world defined by combinatorial innovation, we are again at the cusp of widespread industrial innovations that will redefine this century in ways that we have yet to even imagine. Against this backdrop, micromultinationals can be the vehicle to drive job growth and revitalise the economy – from the outskirts of manufacturing, to wider roles as industrial players in the increasingly global supply chain. ■

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GLOBALISATION IN THE BRAVE NEW WORLD The challenges and opportunities of globalisation

By Bella Xu

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ur newfound ease of connectedness in the last quarter of a century has been a movement imbued with unprecedented optimism. Broadly termed globalisation, this movement was expected to bring peace, economic cooperation and the spread of opportunity and progress. It promised to amplify the voices of people who were previously unheard or repressed, destitute or isolated. However, to paint globalisation as a beacon of modernity is to suggest that in the periphery hides a darker world that is primitive and alien at best.

John Maynard Keynes, writing in The Economic Consequences of the Peace (1920) on Britain before the First World War, vividly conjured up the benefits of a connected world: “The inhabitant of London could order by telephone the various products of the whole earth, in such quantity as he might see fit, and share, without exertion or even trouble, in their prospective fruits and advantages.”

However, the globalisation that Keynes describes cannot be separated from its hegemonic biases. Globalisation has always radiated from focal points of power. It has been a phenomenon hand in hand with Western cultural dominance.

To be modern is to be Western, and to be modern is to be global. Indeed, it is hard to think of terms like ‘modernity’, ‘connectivity’ and ‘progress’ without imbuing them with Western values.

Globalisation is a radiating force that absorbs states into a homogeny of policy, markets and free-market values.

C. T. Kurien, a leading Bangladeshi economist, has described globalisation as the celebration of the triumph of private capitalism and its pervading influence in the world. Three main assumptions have fuelled globalisation. The first is that global capitalism cannot be motivated without the profit imperatives of likeminded global consumers. The second is that globalisation cannot perpetuate without fiscal openness. The third is that globalisation cannot be justified without its moral association to American values of liberty and opportunity. Businesses have seen it as their imperative to globalise these assumptions. Many have flourished as a result, but others have also suffered during recent times of financial crisis.

Globalisation as secession However, globalisation is not a purely economic phenomenon. It is also the

gradual encroachment of uniformity upon the diversity that exists in our world to create markets. Globalisation all too often spreads one main set of Western values, one social structure and one power dynamic between private institutions and government. It comes with a sense of entitlement, where advocates of globalisation assume ethical superiority and claim that globalisation is the ideal form of modernity. What we arrive at is a sad echo of the thinking that justified colonialism and the tragedies it perpetrated.

Zygmaunt Bauman, one of Europe’s foremost sociologists, describes globalisation as an “ethical challenge” in two “secessions.” Firstly, businesses separated from the local household and community. What followed was an era of unprecedented economic prosperity, but also one of unprecedented human agony.

The industrial flourishing of Europe was built upon the backs of the colonised and the marginalised ‘foreign’ periphery. It was an era of extremes: the rich got richer and the poor struggled on.

Keynes himself acknowledges this, musing that “the greater part of the population lived at a low standard of www.insideenterprise.org | 31

comfort, yet were, to all appearances, reasonably contented with this lot.”

These assumptions – that one should be able to access resources, markets, labour and capital freely when moving beyond national borders – closely echo what globalisation has brought us today.

Keynes chose to view culture as separate from economic activity. He predicted that whatever resistance would be met while performing these activities would not be approached with due consideration, but with surprise or even antagonism.

What he has essentially described is the need for doing business despite cultural, GLOBALISATION HAS ALWAYS RADIATED FROM FOCAL POINTS OF POWER governmental and legal barriers, and ideally, without them.

Businesses have broken away from nation states into an international territory of legal inconsistency, a hegemony supportive of a global capitalist economy

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and moral greyness. The territories that offer the most resistance can be tactfully avoided; those weakly governed can be swayed. Indeed, some of the wealthiest and most powerful entities in our world now are no longer states, but businesses.

According to the Corporate Clout 2013 report by the Global Trends knowledge centre, corporations comprise about 40% of the biggest economic entities. Topping that list was Royal Dutch Shell, the 25th largest economy in the world. The sheer size and economic might that these companies possess make both governments and people vulnerable.

Challenging and entrenching Supporters of the global capitalist movement often point to how living standards have risen in many globalised, capitalist economies. Average income is rising. The expansion of international trade and international foreign direct investment is also bringing opportunities for development into third world countries. But the gap between the pace

UNEQUAL PACE OF DEVELOPMENT AND THE DISTRIBUTION OF THE FRUITS OF GLOBALISATION MUST BE ADDRESSED FOR LONG-TERM SUCCESS of development and the unequal sharing of the fruits of globalisation must be addressed for long-term success. The OECD found in its 2014 report Inequality and Growth, that the average income of the top 10% was 9.5 times greater than the lowest 10%, even in advanced countries, up from a 7:1 ratio quarter of a century ago. Even more startling is the fact that according to Oxfam’s 2014 report Working for the Few, the richest 1% owns 46% of world income while for 70% of the population, income inequality has grown in the last 30 years. The Report of the World Commission on the Social Dimension of Globalisation describes our current trajectory as encouraging “deepseated and persistent imbalances in the current workings of the global economy, which are ethically unacceptable and

politically unsustainable.”

In the year 2015, globalisation is not a trend, but a reality. The ability to communicate with others, by itself, is not an insidious force, but one marked with untold potential for human good. Free markets, commerce, trade and business are not innately evil or benevolent, but simply structures through which people and resources interact. What is imperative then is that we realise the potential for improving lives through our tools at hand.

Businesses must understand the power that they have in this brave new world and take up the responsibilities that come with it.

Businesses must take up their place in society just as they have donned the mantle of profiteering. It is not about a choice between profit and morality, as these elements are not mutually exclusive.

The Corporate Clout 2013 report by Global Trends calls for “Responsible Capitalism”: the pursuit of mutual benefits based on strong relationships with communities. Corporations will be compelled, through necessity of public

sentiment and for their own survival, to realise that foreignness does not justify exploitation and cultural integration.

They have the ability to foster a culture that views the world as more than a grand WITH THE RISE OF THE ASIAN CENTURY, THE MOST ATTRACTIVE MARKETS AT PRESENT AND IN THE FUTURE MAY NOT BE MARKETS DOMIANTED BY WESTERN VALUES. supply chain in a sea of economics.

This epiphany is not just important for moral imperatives, but for longterm sustainability in an increasingly multipolar world. With the rise of the Asian century, the most attractive markets at present and in the future may not be markets dominated by Western values.

The current distinctions between the ‘globalised’, the ‘connected’ and the ‘Westernised’ markets and economies from the ‘under-developed’ and ‘isolated’ periphery will and should become

invalid. The exploitation of cheap labour and raw materials in ‘foreign’ countries undermines the potential for innovation at the meeting point of cultures. With this also comes the realisation that globalisation need not be equated with Westernisation or exploitation. Instead of assimilating markets to manipulate demand, corporations can help to promote an adaptive globalisation that recognises the value of difference.

To be culturally inclusive and to create equitable growth is not only a moral imperative. It makes business sense as a driver of innovation, of increased demand in foreign markets and of more developed human resources. If lessons from the past are not enough to motivate inclusiveness, then we only need to look to our news bulletins to understand that for every action we take now to increase suffering, we are building up karma for dissent, conflict and revolution. ■

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Eric van Winssen

Private equity in Africa Why the world's most prominent private equity firms are turning to previously uncharted territories O

nce a continent dismissed for its volatility, Africa has recently been described as the ‘final frontier’ of global economic development. With many African economies growing by 5% or more in the last decade, and with the African middle class expected to surge to one billion people in the next fifty years, that label is hard to refute.

In the face of budding development, private equity investors are usually among the first to wade into tumultuous waters. The development of the sub-Saharan region is attracting foreign investment from some of the world’s most ambitious private equity firms.

The industry Private equity is a broad term that encompasses a class of investing that involves taking substantial ownership in companies. In private equity, investors take on additional risk for the possibility of greater returns. The concept of taking majority

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control in the organisation means that the investment is far less liquid than in many other investment strategies. Consequently, typical private equity firms will look for medium-term investments, where returns are realised after three to five years. Opportunities exist to invest across the business cycle, from angel investment in early stages of development to buyouts of mature companies.

With many developed economies finding greater stability, opportunities to salvage distressed companies are beginning to dissipate. Combined with increased competition, the scarcity of firms with either substantial growth potential or discernable operational inefficiencies has illustrated the need for private equity firms to look outside of their traditional scope.

Growing appeal African nations have recently become appealing destinations for foreign investment. Increased political stability on the

continent is beginning to mitigate the largest concerns of investors. Coupled with greater integration in the global economy and increased need for capital investment, the range of opportunities has ambitious investors salivating. McKinsey & Company predicts that capital demand in Africa is set to rise 8% per year, giving investors the luxury of being selective in their assessment of potential opportunities.

Moreover, many African markets lack the funding methods traditionally available to businesses in developed markets.

Banking systems in many states are unable to provide secure funding, given the risk of governments nationalising their operations. Financial institutions, as a result of this instability, lack the reserves required to offer stable funding to the market.

In this context, entrepreneurial businesses have begun to covet the benefit derived from partnering with experienced private equity firms from overseas. Beyond the secure capital, having experienced

managers provides a competitive advantage in developing markets.

The increase in private equity deals in the region clearly reflects the changed attitudes towards the continent. Over the past five years, the investment value in African private equity has grown by 360%. This figure is driven by the interest in global funds, which has closed more than twice as many deals as it did in the previous period.

An exciting future The influx of capital is advantageous not only for investors, but is also for the economies of Africa. The World Bank has estimated that Africa requires an extra $90 billion a year for infrastructure alone, leading to governments and businesses in the region offering favourable terms to investors. Governments in countries such as Uganda have even gone so far as to guarantee investor returns on specific infrastructure projects. With political instability often the primary concern of foreign funders, it is increasingly common

for domestic parties to agree to have matters adjudicated in foreign jurisdictions.

Princes of the sub-Sahara The crown jewel in this new era is in Nigeria, which now boasts Africa’s largest economy in terms of GDP – the state has experienced 7% annual economic growth over the past decade. A third of private equity investment on the continent in the last half-decade has been in Nigeria, a trend that is likely to continue.

Promisingly, the Nigerian government has set a course for economic reform. The decision to privatise portions of the banking sector is an opportunity numerous private equity investors will vie for and makes the region a top priority for global firms.

Such reform will also facilitate an increase in public offerings within the decade.

Ongoing risks However, in order to realise this substantial opportunity, funds will need to abandon the typical model in private equity of di-

vesting after five to seven years. The direst needs of many African states involve longterm infrastructure development.

There is also a current shortage of largescale deals able to capture the attention of the major global firms. Many have begun to amalgamate small to mid-sized deals to emulate the scale of larger deals. Alone, however, a more effective means to deploy funds will be required to justify the relocation of funds from developed markers.

Finally, the concerns that have previously deterred investors still remain.

Political instability endures as the foremost issue, despite the lowest level of volatility in years. Nor has the threat of nationalisation that once succumbed the continent’s economic development been forgotten.

Moreover, armed conflicts and terrorist threats are still present. Given the often politically sensitive industries in which investments are made, specifically in resource sectors, even the most promising markets show cause for concern. ■

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David Hogan

A house by the sea: Chinese investment in Sydney property Sydney property prices are booming, spurred in part by waves of Chinese investment. Why is this and how sustainable is this investment stream? What would happen if it dried up? These are the crucial questions facing both buyers and sellers in the Sydney property market.

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ydney property prices are exceedingly high due to the demand to live in the harbour city. The Australian Bureau of Statistics reports the median price of a Sydney house at over $1 million. To put this into perspective, the median for Melbourne is around $650,000, while the corresponding figure for Brisbane is approximately $550,000. The difference in price can be attributed to a large number of factors, ranging from personal income to government policy. Most recently, it is investment from Chinese entities such as the Greenland Group in North Sydney that has had the most substantial impact on the increased demand and prices. As of 2014, around 18% of new Sydney homes are being bought by Chinese buyers, and Chinese investment increased by a staggering 400% between 2006 and 2014.

Why Sydney?

Of all the places in the world, why is it that Chinese property developers are avidly investing in Sydney?

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First, one must look at the Chinese environment in order to determine what is deterring national investors. Until 2011, China, much like Sydney today, experienced major increases in property prices. Investment in property is looked upon favourably in Chinese society, with the market attracting significant interest among entrepreneurs. Many believed that a Chinese price bubble was developing as locals were priced out of buying homes.

However, with the ‘bursting’ of the Chinese property bubble in 2011, opportunistic developers have been forced to focus on more lucrative markets overseas. Coupled with interest rate increases, in recent years there have been far more incentives for Chinese developers to invest abroad in areas such as Sydney.

Recent trends indicate that Chinese buyers are investing in the Sydney property market for potential residential purposes. Chinese investors are interested in moving to areas with long-term living prospects, featuring a stable political en-

vironment, an excellent education system and an adequate legal system. Sydney delivers all of these, and more. Every year it is named as one of the world’s most liveable cities, and Australia’s immigration laws are relatively accommodating for the wealthy. Considering these features, it is clear why Sydney is a highly attractive prospect for Chinese buyers and potential residents.

The future Eventually, Chinese investment in the Sydney property market will slow down.

Sydney has seen heavy influxes of foreign investment in its property sector before, most notably the Japanese inflows in the late 1980s and early 1990s. Like the current situation, this foreign investment drove prices up significantly. Over time, the flow of foreign investment plateaued, leading the majority of Japanese developers to exit the Sydney market. However, similar exodus of Chinese property investors from Sydney might be unlikely, given

that many have bought for residential purposes.

Moreover, the extent to which Federal and NSW Governments take a ‘hands on’ approach to foreign property investment regulations and practices has become a topical issue. Treasurer Joe Hockey’s role in this issue has been particularly well documented, with the Treasurer commenting that such large foreign investment and property acquisitions raise “significant issues ranging from national security to potential criminal activity, money laundering and other undertakings.” It seems that Hockey is determined to make a statement, having ordered Chinese billionaire Hui Ka Yan to sell his $39 million Point Piper harbour side mansion, which was thought to have been “illegally purchased.” While some have deemed Hockey’s actions tokenistic, they none-

theless raise the possibility of increased government involvement in the property transaction process, which would diminSYDNEY IS A HIGHLY ATTRACTIVE PROSPECT FOR CHINESE BUYERS AND POTENTIAL RESIDENTS. ish the attractiveness of the Sydney market to prospective foreign investors.

Given that thousands of properties are built and sold in Sydney each year, monitoring the entire market in an equitable manner proves difficult. Institutions such the Australian Prudential Regulation Authority perform a monitory function, but there have been transactions that have eluded their scrutiny. As the case of Hui Ka Yan’s Point Piper mansion demon-

strates, the system is in need of improvement. A host of legislative and regulatory reforms have been suggested, such as an increase in the stamp duty charged to foreign buyers. Upholding propertyrelated regulations is common practice for governments around the world, so it would seem unrealistic to suggest otherwise in Sydney.

Nonetheless, the possibility of deterring Chinese investment to the point of collapse seems improbable, particularly as it is widely considered that it has greatly benefited Sydney’s economic wellbeing.

It is to be expected that in the coming months and years, property transactions, especially those involving Chinese entities, will be scrutinised closely from economic and social angles. ■

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Richard Guan

not only to extend ageing but also to create eternal life by using radical life extension technologies. Once considered by the scientific community as far-fetched, eternal life is no longer considered an absurd possibility, with experts claiming that immortality may be possible in the next 30 years.

Professor Sinclair from UNSW medicine has recently discovered a new drug which

The science of revolutions:

GENOMICS HAS THE CAPACITY TO REPROGRAM OUR GENES TO RESIST BOTH AGEING AND DISEASE

Biotech and the future I

n a world littered with difficult challenges ranging from population ageing to climate sustainability and global health concerns, the answers that we find in current economic and political discourse are insufficient. The real answer to these concerns may be biotechnology, which has the potential to stimulate a scientific revolution that will promote peace, harmony and stability in an age of global uncertainty.

The biotech futures Biotechnology essentially involves the use of living systems and organisms to develop products or technological applications for use in both economic and social contexts.

It has been around for centuries – humans have used the biological processes of microorganisms for more than 6,000 years to make useful food products, such as bread and cheese, and to preserve food products. However, the modern approach to biotechnology is fundamentally different.

Contemporary biotechnology provides breakthrough products and technologies to combat debilitating and rare diseases, reduce our environmental footprint, feed the hungry, encourage efficient energy usage, and have potentially safer, cleaner and more efficient manufacturing processes.

De-ageing the population Ageing populations are a concern around the globe. Longer life expectancy due to

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advances in medical science and healthcare means that people aged 65 and older will constitute 40% of the world’s population by 2050. The wealthy elderly will then invest heavily into the biotech sector to extend their life, which will further age the population. This creates a self-propagating chain of innovation which will accelerate the development of the biotech industry.

Biotechnologies are revolutionising the ageing experience by offering earlier diagnoses as well as new treatments such as regenerative and genetic interventions, and ultimately disease prevention. In particular, genetic sequencing which once cost $100 million and took ten years in 2001, DOCTORS WILL BE ABLE TO LAY OUT INCREASINGLY ACCURATE TIMELINES FOR THE MEDICAL FUTURE OF INDIVIDUAL PATIENTS now only costs $1,000. It is predicted to cost only $100 and take 20 minutes in three years’ time. As genetic profiling becomes more affordable and efficient, doctors will be able to lay out increasingly accurate timelines for the medical future of individual patients. This will help to customise treatments based on our genomic makeup.

Biotechnology may help humans live not only longer lives, but also healthier and better lives. Researchers at Harvard

have discovered ten rare gene variants that provide people with incredible health benefits such as extra-strong bones, and lean muscles. While the technology has not yet reached the stage where we can selectively edit our genomes, it is not far away. Existing technology can already successfully delete target gene 40% of the time and switch it off correctly 20% of the time. Techniques to replace lost functions are also gaining traction, with the use of pluripotent cells for cell transplants and organ regeneration.

has reversed ageing of muscle in mice.

Google has announced the creation of Calico, the California Life Company with a mission to reverse engineer the biology that controls lifespan and to “devise interventions that enable people to lead longer and healthier lives.”

Genetically modified One of the major concerns that arise with the introduction of immortality and overpopulation is world food shortage. The solution lies in producing more from less.

Genetically modified (GM) foods have captured the imagination of the world since the first GM plant was produced using antibiotic-resistant tobacco in 1983.

Yet political interference has stalled the GM revolution, which has become largely confined to the Americas. However, the rest of the world is slowly beginning to open up to GM food. If the GM experiences in the Irish fields of Carlow are anything to go by, genetically modified foods may present the only true solution to protecting the world’s food supply. Blightresistant potatoes would be one of the first major foods genetically engineered to incorporate defences against plant diseases, which annually destroy some 15% of the world’s agricultural harvest. Despite the heavy use of fungicides, late blight and other plant diseases ruin an estimated fifth of the world’s potatoes, a food increasingly grown in China and India. Natural evolution has done its part in developing crops and it is now up to science to improve the quality and quantity of our food supply.

GM potatoes could also lead to a new generation of biotech foods sold directly to consumers. Although transgenic corn, soybeans, and cotton have been widely planted since the late 1990s in the United States, the corn and soybean crops go mainly into animal feed, biofuels, and cooking oils. No genetically modified varieties of rice, wheat, or potatoes are widely grown, because safety concerns

with human and animal consumption have discouraged investment in these varieties.

Furthermore, seed companies have yet to find ways to make the kind of money on THE SOLUTION LIES IN PRODUCING MORE FROM LESS those crops that they do from genetically modified corn and soybeans. However, the tide is turning, with the European Union – notorious for its stringent GM food regulations – having recently authorised the import of seventeen new GM foods. It seems inevitable that GM foods will soon become a worldwide staple. While safety concerns may be legitimate, the exponential growth rate of technology could solve the health concerns of GM foods in time, thereby reducing criticism of GMOs. Far from finished While biotechnology has come a long way in recent years, it is far from finished as a diffusive force in society. Like the industrial and quantum revolutions before it, the biotech revolution has the potential to reshape the next century in ways that civilisation could never have anticipated. ■

Eternal life The fascination around mapping genomes, known as genomics, doesn’t stop at reshaping the ageing process: rather, genomics has the capacity to reprogram our genes to resist both ageing and disease. According to an OECD report into biotechnology, it may be possible to find cures for agerelated diseases such as dementia, cardiovascular disease and osteoporosis. Scientists at Pennsylvania University have discovered how to insert remote-controlled nanomotors into cells, which could be used to eliminate ageing. Within the next 15-20 years, the nanobots may be able to remove the build-up of chemical waste in our cells, keeping us in peak physical condition.

Some scientists, like Aubrey de Grey, Chief Science Officer at the Strategies for Engineered Negligible Senescence Research Foundation, believe it is possible www.insideenterprise.org | 39

Sam Wu

RMB: The rising currency The RMB has far-reaching consequences for the Australian economy

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n a world where economic gravity is slowly but surely moving east, the internationalisation of China’s renminbi currency (RMB) stands as the most visible symbol of this shifting global paradigm.

Rising from its relative obscurity in the pre-liberalisation years, the RMB has emerged as a major financial player in recent years, constituting the second largest global trading currency and the second largest currency holding in Asia behind the yen. Some analysts even believe that the RMB may one day replace the US dollar as the world’s reserve currency.

Given the pending seismic currency shift towards the RMB, the ultimate question that an Australian audience may ask is: how will a more powerful RMB impact Australia? As Australia’s largest trading partner, any dramatic economic reversals in China will manifest themselves in pronounced, material ways here in Australia. Yet it would be foolish to limit the consequences to the economic arena, especially as diplomatic tensions surrounding Chinese strategic tensions

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are bound to intensify with the increased power of its currency. Weighing these two factors against each other ultimately leads to a rather uncertain future regarding the RMB expansion into Australia.

RMB and rising trade What is abundantly clear from a pure economic analysis is that the immediate effect of RMB expansion into Australia will be a surge in the already integrated trade flows between Australia and China. By 2019, it is expected that clearing of settlements in RMB will be in its fourth year of operation, Australia will have entered into its third bilateral currency swap agreement with China, and one in five Australian trade businesses will conduct transactions in RMB. These figures imply that there will be a tangible and material presence of RMB expansion into Australia.

What is not so clear is how RMB expansion into Australia can reinvigorate a national comparative advantage over regional neighbours regarding supply chain matters by winning central access to RMB flows.

Australia’s unique position as China’s central source for resource inputs ensures a liquid market for RMB exchanges here, giving domestic companies a competitive advantage when seeking to break into the Chinese market. What is more, the comparatively stronger bilateral economic relationship that China enjoys with Australia relative to the rest of the Asia Pacific gives Chinese companies unfettered access to Australian markets. This attraction will likely to advance Australia’s claim to being an RMB hub outside of Hong Kong.

Business decisions and transactions denominated in RMB will no doubt be judged with a critical eye by all stakeholders. RMB denominated transactions may be perceived as carriers of Chinese influence, regardless of whether it is actually the case. Business decisions that involve Australian land and transactions related to the exchange of ownership will bring about the greatest potential for controversy.

In the past, Chinese FDI into Australia’s mining and agricultural sector has borne

incredible suspicion from domestic viewers relatively unfamiliar with Chinese investment. However, these suspicions are nothing new given that previous Japanese and Korean investment flows that were subject to same hostile resistance are now considered an integral component of Australian economic life. There is no reason why similar concerns with Chinese investment flows cannot be overcome with a similar credible track record of investment. Given the enormous benefits that accompany RMB investment, it is in Australia’s best interest to make a similar exception for Chinese foreign investment.

Australian policymakers In order to facilitate the benefits associated with RMB expansion into Australia, domestic policy support is necessary. Policy frameworks in facilitation and management of currency flows in regards to the RMB will require ongoing creation and maintenance. According to a survey by the Renminbi Trade and Investment Working Group, a regulatory environment that

reduces administrative and procedural burdens and improves clarity in taxation will be integral to driving RMB intake growth. These policies will condition how banks run their trade financing and hedging products, and how companies with extensive transactions with Chinese businesses use these products.

In any policy framework drafted by the Australian government, the Chinese government will undoubtedly exert significant influence. Liquidity is a predominant reason for their concern, given that the Chinese government needs to ensure abundant liquidity of RMB to successfully internationalise the currency. It is for this reason that Australian policy developments will be monitored closely by the Chinese government. Additionally, the RMB acts as a foreign policy instrument for the Chinese Government. RMB flows through Chinese-led global institutions such as the Asian Development Bank and Asian Infrastructure Investment Bank are seen as manoeuvres to create a path towards world reserve currency status.

Even though at the rising challenge posed by the RMB is in its early stages, it is certainly a source of unease for US officials. The Australian government’s implicit support in supporting the RMB will likely generate backlashes on our relationship with our US counterparts. Our foreign policy will be steered by the ongoing need to balance our relations with China and the US. The RMB and the future In a world that is being defined by the rise of China, the internationalisation of the RMB will continue to be a narrative that gathers momentum. In this changing world, Australia has a great opportunity to redefine itself as a strategic RMB hub outside of Hong Kong, in a world where the RMB will soon emerge as a major currency player. Whether or not Australia capitalises on this opportunity is another question altogether. ■

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Daniel Schwartz

The absurdity of negative yields The unusual reality of negative yielding bonds

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omeone asks you to pay them to borrow money from you. This seems to be an absurd suggestion, but it is an unusual reality. Around the world, $3.6 trillion has been committed to negative yielding bond investments – around 16% of the global bond market. Negative yielding bonds defy the basic understandings that have long differentiated bond and equity investments.

For decades, contemporary financial theory has differentiated equity and bonds on the basis of risk. On the one hand, equities have always been characterised by unlimited upside and downside potential whereas bonds have always represented a safer investment, with price fluctuations generally limited to 15% of the face value amount. Yet negative yields fundamentally challenge these preconceived ideas of modern finance by indicating bond price

volatility may now more closely resemble the equity asset classes, if we assume the inverse relationship between price and yields persists. As the traditional rate floor of 0% becomes a thing of the past and bond prices continue to soar, the now vague risk differentiation between equity and fixed income asset classes will undoubtedly question old asset allocation strategies based on differentiation.

Why are negative yields popular?

Prominent American economist Gary Shilling ties the growth of the negative yield market to cultural trends, such as the age of de-leveraging and the ageing population which he argues has fundamentally shifted risk preferences toward excessively risk free assets, thus driving bond prices up. On the other hand, financial players such as Nizam Idris, head of fixed income strategy at Macquarie, argue that negative yielding bonds are the result of more cyclical portfolio management factors. With a significant interest rate differential across Eurozone countries, Idris argues that negative yielding bonds from Switzerland and Germany are a perfect hedge against the financial instability present in countries with positive yielding bonds.

However, even though all these justifications for negative yielding bonds contain intellectual depth, none of them provide clarity as to the exact reason why such a phenomenon exists. On the one hand, cultural explanations regarding changing risk preferences ignore the fact that over the last three years, risky asset classes such as American and Japanese equities, private equity and real estate, have continually outperformed global bond markets. More cyclical explanations that focus on the attractiveness of German and Swiss national bonds do not explain why the negative yielding bond market has expanded to more risky European countries such as Italy and France which cannot be seen as equally attractive. What is evident in all of these explanations is the inability of the modern finance world to provide a coherent theory on why negative yielding bonds have emerged.

Arbitrage and sovereign default risk While it is unlikely that the market will come to a consensus on why such absurd investor behaviour is occurring, there is agreement on the impact negative yielding bonds will have on financial markets for decades to come. In recent years, negative yielding bonds have formed a critical part of deflationary hedging strategies, particularly as concerns of deflation in Japan and the Euro Zone continue to persist. If one assumes that investors are more preoccupied with real returns as

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opposed to nominal ones, negative yielding bonds can serve as an effective deflationary hedge given that real rates are always higher than nominal counterparts in a deflationary environment. This phenomenon explains in part why negative yielding bonds are becoming more pronounced in struggling economies such as Poland, Italy, Hungary and France, where deflationary concerns are far more pronounced than in traditional negative yield safe havens like Germany and Switzerland, where yields have moved back towards positive territory. With deflation expected to continue to impact much of the global economy, it is likely that negative yielding bonds will continue to form a critical part of the hedging portfolio.

Furthermore, if the recent experience with the Swiss Franc revaluation has taught us anything, it is that dabbling with negative yielding bonds can be rather expensive. Investment banks sought to earn carry trade profits on interest rate differentials between negative yielding German, Swiss and Italian bonds and the positive yielding returns on British Guilds. When massive appreciation of the Swiss Franc completely eliminated the gradual gains in fixed income trading industry wide, financial institutions worldwide were shocked. Citigroup was particularly affected, losing $150 million in its European operations over 24 hours.

According to Michael Pettis, a professor of finance at Peking University, such dramatic reversals have the potential to completely

end the carry trade arbitrage for all time to come.

Perhaps the most intriguing contribution that negative yields will make on financial markets in the future is the immediate impact on sovereign default risk. Suk Joong Kim and Eliza Wu’s 2015 study ‘The Effects of Sovereign Ratings-Contingent Financial Regulation on International Bank Lending Behaviour’ suggests, using the Basel II case study, that ratings regulations may unintentionally shift international banking portfolios towards low yielding debt instruments that allow institutions to meet risk weighted asset requirements. The obvious implication here is that the advent of negative yields will only exacerbate this debt rebalancing, increasing sovereign default risk concerns when they are already at an all-time high. It is for this reason that the growing negative yield phenomenon in debt-riddled nations such as France and Italy is something that policymakers should keep a watchful eye over.

Negative yields and the future Negative yields are a phenomenon in an economic world defined by the unconventional. While it will take time before the professional finance world comes to a consensus on the exact causes of this phenomenon, what is clear is that negative yields will shape many aspects of modern financial markets, from sovereign default risk to carry trades and deflationary hedging. ■ www.insideenterprise.org | 43

TAICHI HOSHINO: From McKinsey Consultant to Monetise CEO

By Joseph Shen and Howell Sze

T

aichi Hoshino knows that the role of a modern CEO is a juggling act. On his road to becoming CEO of FinTech start-up Monetise, Taichi has learned the value of committing to his passion. He has a to-do list that is metres long and rarely sleeps more than five or six hours a night. He regrets nothing since leaving his consultant position at McKinsey to join two friends in building Monetise and bringing it to market. The company is part of the burgeoning FinTech trend – technologically-driven disruption in banking and financial services with a laser focus on serving the consumer.

Monetise looks to optimise customers’ use of financial products, showing them

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where more savings could be earned.

To Taichi, this is an exciting field, with real value for customers, institutions and start-ups. “The days just disappear because it’s really just so much fun to be building something from scratch,” he says. “The challenge is that because my heart is so in it, I'm so emotionally involved and I care so much, it's hard to switch off or carve out time for myself that is completely separate from the business.”

Ten thousand hours Before Monetise, Taichi had always hoped to eventually start his own business. “While there is great comfort

in a comfortable corporate and a sense of belonging to a community, I’ve always been interested in carving my own path and enjoy the independence and autonomy of running my own business,” he says. “A lot of my immediate family are business owners but only went into entrepreneurship late in their careers and lives. I’m glad that I’ve started early in my career.”

When he had attended the University of Sydney to pursue degrees in Economics, Finance and Law, he had explored a myriad of career directions.

“My problem was never saying no to anything,” he admits. “That meant spreading myself thin and getting

exposure to a lot of things, but never truly exploring anything in depth. You can’t really have both. In hindsight, I would have benefitted from knowing that I was making a deliberate trade-off for breadth over depth of experience.”

For Taichi, university is the prime time to test the adage “fail fast, fail cheaply.” This maxim is oft repeated in entrepreneurial circles, and Taichi points out that the opportunity to start a business is never as ripe as it is during a student’s time at university. “I look back and I wish I had started my own thing back in university. It is such a fantastic way to learn, balancing between a business, studies, part-time work and socialising, and there are not that many periods in your life where you have so much flexibility with your time.”

University is also the time for developing the deep skills to stand out in a specialty area. “The most unique and most sought after people are those who can apply their expertise to not just the most traditional applications, but novel ones too,” Taichi says. “They’re the masters. You can learn enough about a topic to be sensible after a hundred hours.

You push real expertise after a thousand hours. But mastery only comes after ten thousand hours.”

Decisions, decisions When it came time to think about his future, Taichi explored numerous career paths, ultimately choosing to go into consulting. “I’ve always enjoyed the journey rather than the destination, and I value the freedom and ability to spontaneously pursue the most interesting

and exciting adventure very highly,” he says. “I really looked into everything before settling on consulting. Ultimately I decided on it because it preserved the most optionality in the short to medium term.”

It proved to be the right choice. The projects and business problems he worked on helped create the foundation for his mentality as a CEO. “The skills are wholly transferable. I felt and still feel fully equipped for this role.”

While he wasn’t thrown in at the deep end, Taichi concedes that the CEO role is a challenge. “Working as a consultant is a really intellectually engaging role –

"I'VE ALWAYS ENJOYED THE JOURNEY RATHER THAN THE DESTINATION" 80% of the time, you’re working on one particular problem from a wide-ranging platter of corporate problems to solve. At a start-up, you work on all of them, all at the same time. While I’m well qualified for the job, the job description is so broad that I’m genuinely good at only around 40% of the work. The rest of the time, I’m figuring stuff out as I go! It’s both incredibly enriching but daunting.”

As a CEO, Taichi is much more involved in decision making than he ever was during his two years as a consultant.

He considers it the most challenging and empowering element of his job. His approach to making decisions is to focus

on reversibility – these decisions require a lower burden of proof and are easier to respond to. “The start-up world is a non-stop, fast spinning conveyor belt of decisions,” he says. “Nowhere is it more important to be able to distinguish between different decision types.”

This method of decision making has served him well. One of his earliest decisions as CEO was to set the number of products Monetise would have on offer. Taichi ultimately stripped back the insurance, utilities and reward program categories to just focus on retail banking and superannuation products.

The rationale was to reduce complexity and clearly communicate the company’s unique value proposition to consumers in light of the impending launch. Such a commitment was initially reversible in the short term, but irreversible the longer Monetise stuck with it. “There was some hesitation and it could have gone pearshaped, but luckily it didn’t. It’s proven to be a solid decision that I continue to look back on as a critical turning point.”

Sea change The public launch of Monetise was a turnaround rather than a turning point.

Five days before the launch, Taichi was told that the Monetise website only ranked on the third page of the Google search results. He spent the next 72 hours furiously working on search engine optimisation – and just before the launch, Monetise sat at the top of the first page.

“From nothing, to something, to meaningful business outcomes in a number of days,” he says. “That’s really what the job is about.” ■ www.insideenterprise.org | 45

VENTURE CAPITALIST, INNOVATOR & MENTOR AN INTERVIEW WITH PETER DAVISON

By Peter Kwag

P

eter Davison is a prominent venture capitalist who commenced his career in a bold way. Without any background in finance, he resigned from his job in Sydney, flew to Silicon Valley and simply introduced himself as an Australian venture capitalist. Prior to his leap of faith, Peter studied computer science

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and mathematics, graduating with honours. After working in information technology and marketing for a couple of years, he joined a former classmate at a new venture capital firm with Wall Street funding.

Peter discovered PayPal in its early startup phase, becoming a staunch

" DELUSION IS AN INGREDIENT IN ANY TYPE OF DISRUPTION OR INNOVATION "

PayPal Seed Investor and Fishburners Co-founder proponent of its synergy with eBay and its internet transaction platform. PayPal’s present value exceeds $40 billion, accounting for more than half of eBay’s market capitalisation and leading to an eventual spinoff. Peter also co-founded Fishburners, Australia’s largest startup space.

Current endeavours Peter was visiting from Shanghai, where he resides for most of the year, when we first met at an entrepreneurship conference at the Sydney Town Hall.

We spoke backstage at the conclusion of the scheduled events, and we caught up again weeks later at the Canberra International Airport. Peter’s business initiatives, as illustrated by his hectic travel itinerary, span across multiple countries and demonstrate the international character of modern investment and commerce.

At the moment, Peter invests predominantly in startups based in China and mentors entrepreneurs working in incubators. “I don’t do this for the money anymore, but to create value in society. After a certain point, enough is enough and you don’t really need to earn more,” he says.

In his spare time, he remains involved with Fishburners as a co-founder. At the weekly Pitches and Beers sessions, entrepreneurs share their ideas with peers and investors. Many of the pitches mention an international target market, as the communication networks available to consumers supersede physical distance and time zones. As Peter notes, “less

than half of China’s population use the internet, but that figure is already more than twice the entire population of the United States.” The largely untapped potential of the Asia-Pacific region provides a compelling reason for individual investors and multinational corporations alike to shift their focus from the West to the East.

Pursuing opportunities When prompted to describe his younger self, Peter is quick to utter a single word.

“Delusional,” he says. He attributes much of his early success to this trait.

“Delusion is an ingredient in any type of disruption or innovation. I had this intense inner belief and self-conviction that few rational minds would entertain, let alone act on.”

Peter explains that the visionaries behind a number of now leading technology companies opted to drop out of school, interrupt stable career paths or relocate in order to pursue what most would have perceived to be a risky proposition. “The willingness to take risks and put everything on the line is a common characteristic in entrepreneurs, and a lot of them have had some extraordinary life experiences.”

Peter says that while “sound reasoning and due diligence are necessary for making good decisions both in business and in life,” risk aversion itself should not get in the way of an otherwise worthwhile venture. He adds, “If I went back in time, I might tell myself to make sure it’s a good idea before taking the jump. But with the benefit of hindsight,

I’m glad I took that risk. Sometimes, being irrational can lead to amazing things.” Once a promising opportunity is properly identified, “there shouldn’t be too much delay or hesitation in pursuing it.”

Additional insights Peter tells all entrepreneurs to keep three things in mind. “Avoid psychiatric wards, incarceration and excessive debt,” he advises. “Look after yourself and don’t neglect your mental well-being. One way to ensure this is to work in a field you’re truly passionate about. Staying out of jail shouldn’t be too difficult, as long as you maintain a strong sense of ethics. Also, don’t try to borrow more than you can repay.”

To Peter, all failure can be constructive. “Setbacks are an important part of the learning process and are just stepping stones, as long as they provide a valuable lesson. You can’t always win, and sometimes it’s necessary to accept negative results. Just move on and remember to use what you’ve learned the next time around.”

Those at the top have rarely attained their positions solely on their own merits. In Peter’s view, they have been supported by a host of mentors and other friends along the way. “It’s about humility, respect and staying grounded,” Peter says, pointing to the symbolic beads he wears to remind himself of these virtues. “That’s why everyone who succeeds should reinvest in society and the next generation.” ■

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InsideHR

An Interview with Coca Cola's Kate Mason-Dryden

By Nicholas Fahy and Isabella Suriwong

O

n the fourteenth floor of Coca-Cola Place, visitors enter via a red foyer and are greeted by foosball tables, gaming machines and, of course, a Coca-Cola fridge with complementary refreshments.

Beyond this is a small glass conference room overlooking the expanse of North Sydney, where we sit down with Kate Mason-Dryden, the Human Resources Director of Coca-Cola Amatil Australia, to discuss with us her fascinating career – from working for Paul McCartney to Credit Suisse, from the world of HR to her lifetime of travels in-between.

From Rock ‘n’ Roll to Coke “Did you study HR at university?” we first ask.

“No, I actually have no formal HR qualifications,” Kate says, smiling. “I’ve come up through the school of life with a business admin degree.”

Her studies began in Canberra and ended with her taking a graduate position at Arthur Anderson in Sydney.

However, she soon left thereafter for London when she decided that the finance and accounting route was not for her. “I was guided very early on by my quest to travel and new adventures,” she says, “so I became a backpacker.”

After a temporary receptionist job where she received a high commendation for her work, her next temp role was Executive Assistant

YOU'VE GOT TO ALIGN THE HUMAN CAPITAL STRATEGY WITH THE BUSINESS STRATEGY to the President of International Marketing worldwide for EMI records, a British record label which had enjoyed incredible global success in the 1960s. “It was every girl’s dream.”

However, with no experience in an executive assistant role, Kate acknowledges that she was in the wrong role at the wrong time.

Facing this lack of experience, she employed novel and often improvised approaches to her duties, finding and creating solutions through her strong

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interpersonal skills and relationships with staff. At the end of her tenure, her director insisted the she stay on and take up a marketing job for six months – and among other things go on tour with Paul McCartney.

“I like to say I fell into HR,” Kate says. “Midway through the role with EMI records, someone came up to me and asked, ‘Excuse me, are you the HR lady?’ There is a soft side to HR and a business side to HR. I think the soft side is what I learned first.”

From there, Kate undertook domestic HR roles at W.D. & H.O. Wills, Queensland Rail and AusTrade, before deciding to start her own business. She started her own consultancy company in Singapore, TST Learning – Tomorrow’s Skills Today.

“I loved that. And then I was challenged one day to put my money where my mouth was by one of my clients, Credit Suisse First Boston, and I stupidly said ‘I will come on board for twelve months.’”

Twelve months became twelve years, spent in four countries. Kate worked in Singapore, moved back to Sydney, moved to New York and then moved to Zurich. She became the head of Credit Suisse’s business school for all the bank’s support functions which includes all of its learning and leadership programs. In 2006, Kate assumed the role of Global Head of HR for the IT Division of the new amalgamated Credit Suisse Group (heading 23,000 technologists in 43 countries) before subsequently taking up her present role as the Human

Resources Director for Coca-Cola Amatil Australia.

More than ‘working with people’ With a current HR team of 105 responsible for 10,000 Coca-Cola Amatil employees, and having been responsible for over 23,000 employees

WE WANT PEOPLE THAT CAN MAKE THE IMPOSSIBLE POSSIBLE at Credit Suisse, working with people on a daily basis – engaging with them, solving their problems and cultivating firm culture – is very much an ingrained aspect of Kate’s role as an HR manager. But as Kate explains, the importance of HR and its reach within the firm extends much further than the common misnomer of ‘working with people.’

“It’s hiring the right people at the right time for the right role.

Once you get people into whatever company you’re working for, you’re then developing and growing those people, recognising and rewarding their performance, and assisting them on their career paths. That’s from the people side. Then from the business side it’s important that we set the business strategy and then align a human capital strategy because it’s always the people that will deliver on the business strategy. So it’s two parts: what you do for the individuals and

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Without people, a business cannot survive getting the right people in, but importantly, how you’re enabling any organisation to achieve their strategy.”

A significant part of this strategic role is working with business leaders to forge and implement this overarching business strategy. “For Coca-Cola we sell soft drinks, and we sell alcohol and we sell coffee. So my day is around ensuring that we have the right strategy, the right people,” Kate says. “Who needs career development? Are we running the right leadership programs? I spend a lot of time doing on-the-job coaching of various people. Then I’m enabling my HR team to develop on the components of their role, advising the CEO when she has issues or wants advice, the managing directors, the CFO, the marketing manager. It all comes to us and then we work as one team to try and consult.”

For Kate, leadership is paramount when it comes to the skills and attributes of an HR manager. “As a leader, you need to constantly be aspiring to lead better: lead more effectively, lead more efficiently. That vastness, ensuring you’re covering the right people at the right times, ensuring you’ve got your team.” But Kate stresses that despite the significant demands that accompany the leadership role “you’re never alone. The way in which you lead a big group of people is you have great leaders beneath you, and they have great leaders underneath them and then you have great people, and together you act as one leadership team.”

Within this team, effectiveness is then the product of communication and precision. “Have very clear strategy, very clear KPIs and you cascade those KPIs so everyone knows what they need to be working on and how they need to do their jobs. And then as leaders [we ask]: are we giving them the right tools, the right processes, the right support to ensure that everyone does their best? That’s how you lead.”

As for the additional attributes of an HR manager, Kate emphasises the importance of a broad knowledge of business and its functions. “It’s easy to learn HR but it’s hard to learn business acumen. I always look for HR people who have a business background because you really need to understand business strategy. It’s very important that you understand the finances. You’ve got to understand how to put together a strategy because you’ve got to align the human capital strategy with the business strategy. And it’s magic when you get that right. When you put the right person in the right role at the right time and then see someone flourish and grow, and watch people then develop and get into their dream roles, become the leaders and then grow others as you’ve helped them to grow – there’s just nothing better.”

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Experience is your greatest skill Kate’s career is one that is marked by the breadth and diversity of her work at an international level, an increasing requisite of the modern manager. “From the professional perspective, it again shows your agility and flexibility. It’s an entirely new culture. There’s different business norms and different ways that you’re going to get your job done.” And then with sudden seriousness she leans forward and says quite simply, “We want people that can make the impossible possible. If you’ve been in those environments then you’re used to coming up with a variety of different ways to make things happen.”

Yet this agility and flexibility is the product of more than just the world of business, it is shaped through the personal experiences and challenges of the everyday.

“When you go overseas,” Kate says, “you’ve got to be in the right mindset that this is going to be challenging, that I’ve got to stand on my own two feet a lot. But I think they’re the best life lessons. When I was first in London, living pay-check to pay-check, there was no one to support you, you had to literally rely on yourself, and I think that builds self-reliance.”

At the same time, with this self-reliance comes a wealth of social and relationship opportunities. “You’ll get a variety of different perspectives, you’ll learn so much about yourself and you make lifelong friends.”

For her, the choice is always clear: “If you want to travel and you want to go and work in another country – go!”

But always remain grounded Despite the passion Kate has for her work, the enviable breadth of her travels and the diversity of her career, at heart she is driven by a sense of social responsibility and treasured regard for those around her. She is first and foremost a member of The Starlight Children’s Foundation, for which she is proudly the President of the Chair of NSW. She also does significant work with people with disabilities and works as the Vice President of the International Women’s Forum, a collective that works with the United Nations in the promotion of women’s rights and empowering female leaders.

But what motivates her to leverage her HR acumen and empathy to such degree outside of the office? “It keeps you grounded,” she replies, plain and simply. “It’s very important. You can have all the fancy titles in the world but at the end of the day it’s your family that matters, and my family is my number one priority. And then helping others to help them lead their lives a bit better. No one succeeds by themselves.” ■

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J

OHN FRASER

Interview with the Secretary of the Treasury

By Emily Scott In today’s workplace, people are transitioning between positions, companies, sectors and professions at a dynamic pace. John Fraser, the recently appointed Secretary to the Treasury, has successfully made this transition in both directions and was once described

by The Australian as “the most influential Australian executive in international finance.”

He spent the first two decades of his career at the Treasury before making an exceptional transition into the private sector, where he served in senior management positions in London at the global banking giant UBS. Inside Enterprise takes a look at the unique challenges Fraser has faced working in both the public and private sectors, his views on effective management and how he plans to recruit the best talent to his Department.

You first entered the Department of Treasury in 1973 as a twentytwo year old graduate from Monash University, where you received a first class Honours degree in Economics. What motivated you to enter the public sector?

What made me choose the public service was very simple – I was broke. I had wonderful parents but we didn’t have any money. My father had found life tough – he had seen the war – and he strongly believed in the security of the public service.

My father wrote my application for a Treasury cadetship which, at the time, was offered by the Commonwealth government to fund university students during their third and fourth years. In return, you had to work for the Treasury for three years. I had studied Economics and so the Treasury was, and still is, a very great place for an economist to work. After

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three years I found that I really enjoyed public policy and the camaraderie attached to life in the public service.

Until 1993, you continued your work at the Treasury, which included an appointment as Deputy Secretary (Economic) as well as postings at the International Monetary Fund and Australian Embassy in Washington D.C. Why did you make the transition to the private sector?

How did people react to your decision to join UBS? I left the Treasury because I decided I didn’t have enough money to be able to do all the things I wanted for my family.

The reality is that the public/private sector salary differential is significant. I admire the hard working public servants who devote their time to the betterment of public policy, but it comes at a cost. I was also attracted by the challenge of business.

Many people in the Treasury thought the jump to the private sector would be too big because the culture is totally different. Many people in the private sector similarly thought that I would be too bureaucratic and not entrepreneurial enough for the job. The first year was

I felt a real need to give something back to my country. scary because the work and people were so different. In the Treasury you were judged on your views and diligence as a worker, but in the private sector you had to make decisions very rapidly and you were expected to make money for the company.

A vastly different set of incentives.

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When I made the transition, I first went into the investment banking arm of the company, which at the time was called SBC Dominguez Barry Limited. After a year, I was on the executive committee of the whole bank in Australia. They had an asset management firm that was losing about three million dollars, and in 1994 I was asked to step in and turn it around.

By 2001, I was made Chairman and CEO of UBS Global Asset Management in London, managing more than one trillion Australian dollars before the global financial crisis. I held this position until I stepped down in December 2013, in anticipation of retirement.

How did your return to the Treasury as Secretary come about?

I was approached by the Prime Minister in August last year about the position. I believed that I had been very lucky in my life and I felt a real need to give something back to my country. And giving back

to my country in the esteemed role of Treasury Secretary, working with energetic and dedicated people who are keen to drive good outcomes for the Australian community, was impossible to resist.

How did your management experience at UBS prepare you for your role at the Treasury?

Management is about attracting, supporting and keeping the right people. It is also about forging the best organisational structure and making changes where required.

Although the main role of the Treasury is policy advising, to do that, you need to have a strong department. We have around 850 people in the Treasury and the 16 portfolio agencies, including the Australian Taxation Office. The breadth of responsibility within the Treasury Portfolio is similar to what I was familiar with at UBS Global Asset Management – managing businesses in 24 countries. What is different in the public sector though is

that I can’t give bonuses or high salaries to staff as incentives.

How do you encourage graduates to work for the public sector then?

Joining the Treasury is an opportunity to do exciting work not only with economists but people with a variety of professional backgrounds, helping to make decisions that will affect the nation for years to come. There is also a great sense of comradeship in the public sector. This is, and should be, an attractive prospect for graduates.

Today, entering the public sector is not necessarily about committing to a fortyyear career. I have created a Sydney office, with the prospect also of Melbourne, so we can get people for shorter terms of two to three years, who can’t necessarily take their partners and children to Canberra.

Also, having people work in the public service, then trying their hand in the private sector and returning (like me) can only broaden the perspective brought to policy issues. And perspective is everything.

What are your views on the importance of MBA qualifications for someone interested in management as a career?

There is no straight answer. I have seen great managers who had no management training and others who have learned a lot from management degrees. I myself have only read biographies of great managers but have never read a management book. So there is no one answer for it.

Information today is at our fingertips – so people should explore the development options open to them. There are so many opportunities and not just in our own backyard.

From your expansive experience, what advice would you give to graduates?

My advice to graduates would be: don’t overthink it. Discover what you love and follow your heart. Unless you’re Shirley McLean (who thinks she can come back again and again) you only get one shot at life. Also be adventurous – don’t lock yourself into one career. Again, the great thing about life now is that labour at all levels is mobile internationally and you should take advantage of the opportunities. ■

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Student Room A place in the sun: Sunswift Elizabeth Scott

Source: Daniel Chen

I

n a world where the burning of fossil fuels is accelerating climate change, humanity must pursue sustainable alternatives to current practices. The pervasive use of cars throughout society in particular calls for attention. By emitting huge amounts of carbon dioxide into the atmosphere, cars are one of the biggest contributors to global warming. As such, creating a sustainable car is imperative to reducing our carbon footprint. It is this vision of a world powered by renewable energy which brought together a students from multiple engineering backgrounds to form Sunswift – Australia’s top solar car team.

Founded in 1996 with the aim of competing in the World Solar Challenge (WSC), the Sunswift team has pushed the boundaries of solar technology to race world-record breaking vehicles. It has thus far produced five different solar cars, the most recent of which is Sunswift V, also known as eVe. The car broke a Fédération Internationale de l'Automobile World Record in 2014, with the world motorsport’s governing body recognising that eVe is the world’s fastest electric vehicle to travel 500 kilometres on one battery change.

The cars are built from carbon fibre, and by running on battery and solar cells on their exteriors they can function in both rain and shine. The lithium-ion battery can be charged through an

electric wall outlet or by drawing energy from the solar panels.

The secret to their success lies in what their current leader Zuni Dierk calls the ‘Sunswift Spirit’, the passion that connects all its members, and drives the team forward. “We are going to construct this car, build friendships and make memories,” he says. “But most of all we are going to leave the team as more than we were when we first joined.”

Each member understands the importance of their role in the team, and puts the success of the team first. As such, all members will go above and beyond what they are required to do. As one member notes, “Now I do everything humanly possible from meeting with potential sponsors to building fibre glass moulds. I don’t even do the heavy lifting, I’m just a cog in a machine that runs without an engine.”

Despite the successes Sunswift has achieved over the years, their broadened vision is not without significant challenges and obstacles. One of the challenges faced by its members is seeing the bigger picture. “Most of my day-to-day operations consist of designing parts and building it in the workshops,” says Hayden Smith, a Sunswift project director. “Other days, I spend time convincing the government that Sunswift is a legitimate business. www.insideenterprise.org | 55

However, once every two weeks, I realize that we’re building a car.”

Most recently, the team has expanded their vision to include producing the first mass market solar sports car. They hope to develop modifications of the eVe model to make it road legal, which would allow them to officially register it as Australia’s first road legal solar car. The price is still too high for the aver-

age driver – eVe cost around $500,000 to build – but the team aims to bring down the cost of its carbon fibre body and solar cells as part of their objective to eventually commercialise the vehicle. Within the next decade, the vision of solar cars being part of our daily lives may not be a mirage, but a sustainable reality. ■

Capital W International Women’s Day Breakfast Jessica Qin

take place within the minds of men and women across society.

Highlighting this pursuit are the “Male Champions of Change.”

In 2010, the Australian Sex Discrimination Commissioner, Elizabeth Broderick, put forward a refreshing solution to the issue of male-dominated leadership by bringing together 15 influential Australian men to make a pledge to promote women in leadership in their workplaces. The International Women’s Day Breakfast panel was attended by two “Male Champions of Change”, Kevin McCann from Macquarie Group and Glen Boreham from Cochlear. The initiatives they have undertaken to increase women in leadership within their respective organisations are leading the industry through a phase of transformation.

The International Women’s Day Breakfast is only one of Capital W’s events aimed at helping young women develop on a professional and personal level. Capital W is hosting similar events in Semester 2 of 2015, including workshops and networking events. ■

AWAAZ amazes us with communication opportunities Aninda Mukherjee

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C

apital W is a women’s business society based at the University a panel discussion and the conversations that were shared of New South Wales Business School but is open to female amongst the attendees, Capital W shed light on the change students from all Australian Universities. Capital W is dedicated that is occurring in the wider corporate and not-for-profit to developing, motivating and educating the talented women of sphere in order to inspire similar change at the grassroots level. today to become tomorrow’s business leaders.

“As a young girl, my upbringing On the 13th of March 2015, Capital W instilled in me a sense of independence. I To create meaningful difference, celebrated International Women’s Day with always thought that I myself, as a female, change needs to take place the Network of Women (NOW) from the could and would reach my goals with within the minds of men and University of Sydney and industry leaders sufficient individual hard work and effort.” women across society from some of Australia’s most powerful The opening statement by the Presidents organisations, both male and female. The of Capital W and NOW is reflective of breakfast event highlighted the opportunities that arise when the mindsets of many female students. Capital W realises diverse groups of people share the common pursuit of bringing the need for a strong support network to help young women more women into business and advancing their leadership achieve their career goals, one that also promotes men working aspirations. It celebrated women in leadership, but also applauded together with women, within both the workplace and at the men who helped to advance women’s aspirations. Through home. To create a meaningful difference, change needs to

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aaz Khanna is a 24-year-old Indian engineer working at cate the intellectual, social and personal thoughts of users to Tata Consultancy Services (TCS) as a systems engineer. He other individuals with whom they are communicating to. is a hardworking, passionate individual whose motivation and This instrument has already changed Raaz’s life, helping him unconventional ideas have won him many friends and admirers overcome social and personal barriers and develop professional at TCS. Yet despite his achievements at TCS, Raaz suffers from communication abilities. At Raaz’s graduate interview at TCS, a speech disorder which has continually prevented him from he was able to communicate his thoughts through AWAAZ. To achieving even greater heights in his personal and professional life. indicate pleasantries such as “thank you” and “hello”, Raaz initiMuteness, the speech disorder that has rendered Raaz completely ated screen gestures to exchange niceties with his future employincapable of speaking, has introduced many challenges into his life er. He landed the systems engineer position after proving that that still confront him today. Difficulty in developing long term he was capable of communicating as well as any other employee. friendships due to his limited communication abilities has defined Whilst AWAAZ has long been seen as a compassionate innovahis personal life for years. Being only able to tion, it also has great utility in a variety of situacommunicate via verbal gestures has not only tions. The translation software of AWAAZ enaAWAAZ can communicate the impacted upon Raaz’s personal life but also bles it to translate human voices into a specified intellectual, social and personal on his professional development, with several language. This could support individuals travelthoughts of users to other employers refusing his application on the basis ling to foreign countries where they are unfamilindividuals with whom they are of his limited verbal communication skills. iar with the language. If a tourist were to venture communicating It is an unfortunate reality that speech to China without having learnt Mandarin, they disorders such as muteness affect millions could initiate hand gestures over the AWAAZ of people around the world. The younger generation of people device, which would translate the gestures into Mandarin. In eduaged between 15 and 24 is the group most significantly af- cation, international students could use the sensory screen to transfected by selective mutism, and many feel trapped by the disor- late their lectures into their native language. International conferder. In order to alleviate the sufferings of millions of selectively ence attendees can use the device to convert the entire presenter’s mute people around the world, four students at the Indian In- speech into their respective language through their observed verbal stitute of Technology (IIT), Abishek Chakroborty, Yash Mal- cues. In addition, AWAAZ can be used for a wide range of multimehotra, Devesh Ghatak and Aninda Mukhopadhyay sought to dia tasks such as voice-overs, subtitling, lip-syncing and transportcreate an innovative product that would shift technological ing and transcribing. Audience members with headsets can capture trends in speech recognition. Together, they launched AWAAZ, every word uttered by a presenter in real time. This is beneficial an instrument that converts sign language gestures into speech. in diverse situations such as conferences, advertising campaign AWAAZ generates a voice for every hand gesture initi- launches and depositions where instant communication is central. ■ ated over the screen. In doing so, AWAAZ can communiwww.insideenterprise.org | 57

180 Degrees Consulting

Image Sources

Guang-Yong Chuang

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powerhouse in the university-based consulting world, 180 Degrees Consulting excels in its provision of innovative ideas to tackle issues for non-profits on a global scale.

Since its inception in 2007, 180 Degrees has not only provided affordable consulting services to many organizations, but it has also given students the opportunity to gain experience and exposure to real world issues. It currently operates in 61 branches over 28 countries, with 824 completed projects.

The 180 Degrees Social Impact Consulting Competition was the first competition ever held by the Sydney branches. It allowed candidates to practice their skills beyond the limited client context of non-profits and demonstrate their presentation and pitching abilities to a wider corporate audience, where the judging panel featured representatives from the likes of BCG and EY. “This year, we wanted to diversify our activity and our level of collaboration across the 180 Degrees Consulting branches in the Sydney region, so an inter-university consulting competition seemed like the way to go,” says Trisha Shastri, president of the University of New South Wales (UNSW) branch.

Alongside Nous Group, the major sponsor who provided the competitive content, both the UNSW chapter and the University of Sydney Chapter came together to deliver a joint collaborative effort which saw approximately 200 registrations.

In the first three rounds, the participants were introduced to a case study for Sunrise Aged Care, a large aged care provider. The

prospective consultants were asked to perform research into the aged healthcare market to underpin their suggestions on how to reposition Sunrise Aged Care’s services under competitive market pressure. Contestants who passed this round were subsequently assessed on their ability to formulate a strategy for the client, which sought to solidify company reputation while operating under a sustainable framework. At the end of these rigorous tasks, Samuel Che, Kevin Oh, and Eric Chen from UNSW were crowned the winners.

For Eric, the competition was overall a positive experience and a great addition to his academic study. “It was a very challenging experience where my teammates and I constantly had to think what the board of directors might say in response to our solutions,” he says. “It was also a great bonding experience. The sheer number of hours spent together and dealing with time constraints turned us into very close mates.”

Looking to the future, Eric would like to see other universities join the fray to tap into the student talent pool.

“An expanded competition would definitely help in building greater numbers of submission and increasing the quality of overall submissions,” he says. “A lot of students can benefit from participating – it affirmed my passion for problem solving.”

According to Trisha, there will be no shortage of similar competitions in the future. “Based on the level of enthusiasm for this initiative, we will definitely be looking at doing more competitions focused on consulting for social purpose organizations,” she says. ■

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