International Finance - January 2025

The Real Estate Empire Middle East

Real estate symbolises national progress and reflects a country's economic aspirations

EDITOR’S NOTE

Middle East: The real estate heartbeat

Donald Trump, now returning for his second presidential term, has once again captured the world's attention as people eagerly anticipate the direction of "Trump 2.0." The 78-year-old's campaign is built on familiar promises, with "Make America Great Again" and "America First" remaining central themes. But what does this mean for America's economic future, and how will his policies ripple through the global market? We’ll take an in-depth look at the potential impact.

Turning to the European banking scene, UniCredit's aggressive acquisition strategy has been causing waves. Since September 2024, the Italian bank's substantial stake in Germany's Commerzbank has sparked debate. Is UniCredit on the path to building a financial giant, or is it risking the autonomy of the region's banks in the process?

In our first edition of 2025, we’ll examine a growing global concern: the ageing workforce. The United Nations reports a 48% rise in the global population aged 60 or older between 2000 and 2015. Projections suggest this number could triple by 2050, raising questions about the long-term implications for economies worldwide.

As International Finance prepares for its 12th Annual Awards, our cover story will highlight the resilience of the Middle East's real estate sector. Despite ongoing geopolitical tensions, the region’s property market in 2024 remained remarkably strong, signalling a promising future. This success can be attributed to several factors, including visionary government policies, ambitious "giga" projects, and an influx of interest from both institutional and individual foreign investors. As a result, the Middle East is solidifying its position as an attractive hub for real estate investment.

JANUARY 2025

VOLUME 25

ISSUE 44

editor@ifinancemag.com www.internationalfinance.com

INSIDE

MIDDLE EAST: THE REAL ESTATE EMPIRE

Real estate symbolises national progress and reflects a country's economic aspirations

IS THE WORLD READY FOR AN AGEING WORKFORCE?

The fact that several nations in the global south are ageing before becoming wealthy further complicates the establishment of social protection systems

TRUMP'S AMERICA FIRST: TRADE, TAXES, & GROWTH

During his first term, Trump implemented numerous tariffs aimed at levelling the playing field for American manufacturers

IS UNICREDIT BUILDING A EUROPEAN BANKING EMPIRE?

The acquisition of Commerzbank shares by UniCredit did not go unnoticed within German political circles

BULLFROG & ROBOT DOGS: GUN WARFARE GETS AI PUSH

The Bullfrog’s design revolves around a rotating turret that can pinpoint and track fast-moving targets using electro-optical sensors

'CASH ENSURES RESILIENCE IN PAYMENT SYSTEMS'

When people spend cash, they are limited to whatever paper money they have immediately on hand

IN CONVERSATION 80

IS VICTORIA STRUGGLING WITH UNEMPLOYMENT?

Victoria's unemployment rate is high when compared to the rest of Australia and is on the rise

BUSINESS DOSSIER

40 The Access Bank UK Ltd strengthens international expansion

68 Assupol CMO: Effective communication key to success

92 Islamic Banking: A growing trend in South Africa

104 MEDGULF & Saudi Pro League: A winning team

Brazil's Pix transforms

payments 70 Transforming Lagos slums: Battling poverty head-on 94 AI in the age of intelligence: A new era begins

16 Used EVs now cheaper than gas cars

Sanctions hurt, but Russia's banks keep profiting

Ghana faces challenges as Mahama takes office

New infostealers target global businesses

AI can process massive datasets but managing ambiguity and making ethical decisions? That’s a human forte

# TRENDING

Ericsson launches Saudi customer unit

A Customer Unit (CU) for Saudi Arabia has been established as part of Ericsson's announcement of a new organisational structure for its Middle East and Africa (MEA) operations. The CU seeks to increase local accountability, enhance customer responsiveness, and streamline operations under the direction of Hakan Cervell, Vice President and Head of CU Saudi Arabia. This action is a component of Ericsson's larger plan to streamline its configuration. This transformation also created five new Customer Units, including the Saudi CU. With more than 30 years of experience in the information communication technology industry, Cervell brings proven leadership, business development expertise, and a deep understanding of the region.

According to a recent report from Mark Gurman of Bloomberg, the Apple Watch Ultra 3 will support satellite messaging. This will enable its users to send texts using satellites alone, even in the absence of a Wi-Fi or cellular connection. Blood pressure monitoring may also be included with the Ultra 3, but since this has already been postponed, it seems less likely to happen right now. For the record, this feature was originally scheduled for release in 2023.

According to a report by adviser LCP, British pension insurance transactions reached £45 billion in 2024, with an additional £40 billion to £50 billion anticipated in 2025, in addition to new market entrants. As a result of companies' desire to transfer pension plan risks, life insurers such as Aviva, Legal and General, and Phoenix have entered the expanding bulk annuity market, which provides insurance for corporate defined benefit (final salary) pension plans. According to LCP data, bulk annuity transactions hit a recordbreaking £49 billion in 2023.

In the first eleven months of 2024, engineering exports rose by 21.6%, reaching a total of $5.11 billion. This achievement marks a significant milestone, surpassing the $4.02 billion recorded during the same period in 2023. According to the EECE's monthly report, exports in November 2024 increased by 12%, climbing to $451 million from $401 million in November 2023. Key industries driving this growth include transportation equipment (+92.4%), automotive components (+15.5%), electrical appliances (+6.1%), and cables (+32.7%).

Source:

Ones to Watch

ECONOMY

Oman GDP to rise to $102.4 billion in 2025

prices will grow to approximately RO 38.39 billion by the 2024 end, further increasing to RO 39.43 billion in 2025.

The value-added contributions of Oman’s economy until the Q3 2024 end highlight growth in both the oil and nonoil sectors at constant prices.

The oil sector recorded RO 9.133 billion, showing a modest increase

previous year. This growth reflected the country’s continued efforts to strengthen its economic foundation and diversify revenue streams.

By the end of Q3 2024, Oman’s GDP growth rate at constant prices stood at 1.9%, reaching RO 28.146 billion, compared to RO 27.632 billion during the same period in 2023.

By the Numbers

KHALDOON AL MUBARAK CEO OF MUBADALA INVESTMENT COMPANY

Khaldoon’s company was the lead sovereign wealth fund investor in 2024, deploying $29.2 billion across 52 transactions — rising 67% y-o-y, according to research consultancy Global SWF’s 2025 report

DAVID SCHWIMMER CEO OF LONDON STOCK EXCHANGE GROUP (LSEG) As per Schwimmer, LSEG sees no immediate contagion from the recent US SEC indictment of a leading Indian corporate group or its directors on Indian companies seeking to raise funds in the British markets

YASIR AL-RUMAYYAN GOVERNOR OF PUBLIC INVESTMENT FUND OF SAUDI ARABIA

Al-Rumayyan, a close ally of Crown Prince Mohammed bin Salman, has spent almost a decade pushing the fund into tech, beginning with a $3.5 billion investment in Uber in 2016

Unionaire's chairperson Mohamed Osman stated that the company would spend $200–300 million to expand its operations in Egypt

The World Bank has revised its forecast for China's GDP growth to 4.9% in 2024, up slightly from its previous estimate of 4.8% in June

Unionaire launches $117m factory, largest in MENA

A significant turning point in Egypt's manufacturing industry has been reached with the announcement by Unionaire Group, a top producer of household appliances in the country, of plans to build a state-of-the-art factory with an investment of about EGP 6 billion. With an ambitious yearly export target of almost $100 million, the new facility is expected to grow into the largest home appliances factory in the Middle East and North Africa (MENA) region. It is anticipated that the factory will start operations in 2026.

Unionaire's chairperson Mohamed Osman stated that the company would spend $200–300 million to expand its operations in Egypt between 2025 and 2028. He also disclosed the company's strategic plans to establish manufacturing alliances in Morocco and Tunisia.

In addition to meeting local demand, the 100,000 square metre new factory will concentrate on third-party production for multinational corporations.

Noting the increasing interest of foreign companies in joining the Egyptian market,

Osman underlined that Egypt's strong infrastructure plays a significant role in encouraging such investments.

Youssef Osman, Vice Chairperson of Unionaire, highlighted the company’s extensive experience in the Egyptian market, with 16 factories and nearly 30 years of operation. He also reiterated Unionaire’s commitment to offering consumers the best options, combining the latest technology with lower operational costs and longer product lifespans.

Unionaire also unveiled a line of new electrical and home appliances, such as air conditioners, stoves, and refrigerators that incorporate artificial intelligence.

Notably, the business introduced the first AIpowered stoves in Egypt that could cook food without human assistance.

Along with cutting-edge features like bottom freezers and dual cooling, Unionaire also introduced refrigerators with technology intended to eradicate bacteria and viruses. The company also introduced an energy-efficient electric water heater.

World Bank upgrades China's GDP forecast

The World Bank increased its 2024 and 2025 economic growth forecast for China but cautioned that the country would still be beset by weak business and household confidence and persistent difficulties in the real estate market.

The year 2023 has seen serious challenges for the world’s second-largest economy, mostly due to a real estate crisis and low domestic demand. Growth prospects could also be hampered by an anticipated rise in US tariffs under Donald Trump, who is scheduled to take office in January.

The World Bank's Country Director for China, Mara Warwick, stressed that a sustained recovery would require tackling issues in the real estate industry, bolstering social safety nets, and enhancing local government finances. She also emphasised how crucial it is to strike a balance between immediate economic assistance and longterm structural changes.

The World Bank has revised its forecast for China's GDP growth to 4.9% in 2024, up

slightly from its previous estimate of 4.8% in June, due to recent policy easing and anticipated short-term export strength. Beijing has set a growth goal for the year of "about 5%," and officials are still optimistic that it will be met.

The growth forecast for 2025 was raised from an initial estimate of 4.1% to 4.5%.

However, slower household income growth and the detrimental wealth effect of declining real estate prices are anticipated to constrain consumption and economic momentum throughout the year.

Chinese authorities have decided to issue a record 3 trillion yuan ($411 billion) in special treasury bonds in 2024 in an effort to boost growth. Although numbers could change before then, the specifics of this plan will be formally unveiled at the National People's Congress in March 2025.

The World Bank does not anticipate a recovery in the Chinese real estate market until late 2025, despite the housing regulator's continued efforts to stabilise the market.

Microsoft intends to spend about $80 billion this fiscal year on growing its artificial intelligence data centres

The Tadawul-listed bank's net profits increased by 15.97% year-over-year to SAR 7.06 billion from SAR 6.09 billion

Microsoft to invest $80bln in AI data centres

According to the reports, Microsoft intends to spend about $80 billion this fiscal year on growing its AI data centres, with over half of that investment going toward the United States. According to a company blog post, the additional processing power will be utilised for artificial intelligence model training and the global rollout of AI-based features. Through a multibillion-dollar partnership with OpenAI, Microsoft has emerged as a leader in AI software, with plans to incorporate AI into every product in its lineup. Meanwhile, Microsoft’s former vice president of silicon manufacturing and engineering, Rehan Sheikh, has left to join rival Google Cloud to become one of the company’s leading silicon chip leaders.

Egypt developers forecast 1030% price hike

Egypt's real estate market is anticipated to experience a surge in price increases in 2025, despite a recent decline in the cost of building supplies like steel and cement. If there are no significant changes in monetary or economic policies, developers anticipate price increases of between 10 and 30% due to economic factors like high interest rates and inflation that will put a lot of pressure on financing and investment costs. Most developers concur that these price hikes represent a fair assessment of the situation. Inflation rates and financing policies will continue to be the main factors influencing the market's trajectory, even though the drop in input costs may lessen the financial strain on real estate developers.

Source: Statista

Riyad Bank to issue SARdenominated capital sukuk

Dollar rises, euro hits lowest level since 2022

Riyad Bank plans to issue additional Tier 1 capital sukuk denominated in Saudi Riyals (SAR) to strengthen its capital base. This issuance will take place under the bank's SAR 10 billion additional Tier 1 capital sukuk programme and will be offered through a private placement in Saudi Arabia. Riyad Capital was required by the Saudi bank to serve as the transaction's exclusive lead manager. The amount will be decided later based on market conditions, according to Riyad Bank, which also stated that the proposed offer is contingent upon the approval of the appropriate regulatory bodies. The Tadawul-listed bank's net profits increased by 15.97% year-over-year (YoY) to SAR 7.06 billion from SAR 6.09 billion.

On the first day of 2025 trading, the dollar reached new multi-month highs versus the euro and the pound, building on 2024's robust gains on expectations that US interest rates would stay high in comparison to peers. The euro lost about 0.3% and dropped as low as $1.0314, its lowest since November 2022. It is now down almost 8% from its peak of $1.12 in late September, when the dollar was at its strongest. Traders now expect the European Central Bank to make significant interest rate cuts in 2025, pricing in at least four 25 basis point cuts. The dollar was hitting milestones across the board and the pound was last down 0.65% at $1.2443. Recently, the single European currency fell to its lowest level since November 2022 against the US dollar, at $1.0226 to €1.

Source: Statista

Airlines reported significant delays in aircraft repairs, with turnaround times increasing by an average of 25%

Airlines battle delays amid travel surge

IF CORRESPONDENT

The global aviation industry in 2024 was a year of paradoxes, marked by surging travel demand juxtaposed against significant supply chain disruptions and operational hurdles. Airlines and manufacturers faced unprecedented challenges, testing the industry's resilience and adaptability.

From the Boeing strike and lingering 737 MAX controversies to widespread aircraft shortages and jet delivery delays, 2024 shaped up to be a defining year for aviation. This article provides a comprehensive review of the year’s critical developments and a forwardlooking perspective for 2025.

Airlines reported significant delays in aircraft repairs, with turnaround times increasing by an average of 25%. This in turn led to prolonged groundings of aircraft and further strained global fleet availability

A record-breaking travel

After years of pandemic-induced stagnation, 2024 witnessed a robust recovery in global travel demand. Passenger traffic soared, with IATA reporting an estimated 4.6 billion passengers taking to the skies, an increase of 12% from 2023. Key markets, including North America, Europe, and Asia-Pacific, saw recordhigh ticket bookings as both leisure and business travel rebounded.

Pent-up demand, the easing of travel restrictions, and attractive pricing strategies by airlines fuelled the surge. Notably, international routes experienced a remarkable revival, with Asia-Pacific destinations

recording a 30% rise in tourist arrivals compared to pre-pandemic levels.

However, this sharp uptick exposed underlying vulnerabilities in the industry’s supply chain and operational infrastructure. Airlines found themselves grappling with operational constraints, and airport congestion surged to unprecedented levels during peak travel seasons, leading to frustrations among travellers and challenges for ground staff.

Airports struggled to manage the influx of passengers, with reports of flight delays increasing by 20% compared to 2023. Major hubs such as Heathrow, Dubai International, and Changi faced logistical bottlenecks, prompting calls for accelerated infrastructure upgrades. The rapid recovery also strained the workforce, as airlines and airports raced to recruit and train personnel to meet operational demands.

Supply chain disruptions: A persistent headwind

Supply chain disruptions continued to hamper the aviation sector in 2024. The ripple effects of global semiconductor shortages, constrained raw material supplies, and logistical bottlenecks significantly impacted aircraft production and maintenance schedules. Leading manufacturers like Boeing and Airbus faced mounting backlogs, with combined deliveries falling short of targets by nearly 18%.

A six-week strike at Boeing's key production facility in Everett, Washington, exacerbated the

situation by bringing the manufacturing pipeline to a standstill. Workers’ demands for better wages and working conditions highlighted underlying tensions within the labour force and disrupted the delivery of hundreds of aircraft.

Airlines awaiting Boeing’s 737 MAX and 787 Dreamliner faced operational challenges, compounding the strain on their fleets. Meanwhile, Airbus, though better positioned, faced delays due to its reliance on a global supplier network that continued to experience inefficiencies.

The ripple effects extended beyond manufacturers to maintenance, repair, and overhaul (MRO) providers, who faced mounting challenges in sourcing critical components essential for keeping fleets operational.

Airlines reported significant delays in aircraft repairs, with turnaround times increasing by an average of 25%. This in turn led to prolonged groundings of aircraft and further strained global fleet availability. Airlines had to adjust schedules and rely on older, less efficient aircraft still in service, leading to a surge in operational inefficiencies.

According to industry experts, problems in the supply chain cost MRO providers nearly $10 billion in lost sales. The bigger picture for the economy as a whole is $25 billion when you add in the effects on airlines and suppliers. The delays also created ripple effects across the value chain, as major MRO hubs

like those in Singapore and Dubai reported backlogs stretching into months.

Additionally, rising costs for alternative components due to shortages further exacerbated financial pressures, with some airlines resorting to cannibalising parts from grounded planes to meet urgent repair needs. These cascading challenges underscored the urgent need for more resilient supply chain strategies and partnerships to weather future disruptions.

Boeing under the spotlight

Boeing’s turbulent year extended beyond the strike, as the company grappled with renewed scrutiny over manufacturing quality issues. In a significant blow, the FAA flagged anomalies in the 737 MAX’s production process, sparking concerns over safety and compliance. This scrutiny followed high-profile incidents that raised alarm about the model’s reliability, reviving memories of the 737 MAX’s grounding in 2019.

Airline customers deferred orders, and several carriers, including Ryanair and Southwest Airlines, publicly voiced frustrations over delays. Boeing’s efforts to reassure stakeholders, including rampedup quality control measures and enhanced customer communication, provided some relief but failed to offset the year’s financial and reputational setbacks. Additionally, the company has announced plans to heavily invest in AI-powered monitoring systems to enhance quality control and mitigate future risks. But it

will take years for these initiatives to yield results.

The regulatory scrutiny also led to increased oversight of other Boeing models, including the 787 Dreamliner. Delays in certifications for these models caused further disruptions for airlines awaiting deliveries, prompting several carriers to seek compensation for the setbacks. Analysts projected that Boeing’s total compensation payouts could reach $2 billion by the end of 2024.

For airlines, 2024 was a balancing act between meeting soaring demand and contending with aircraft shortages. Fleet utilisation rates hit unprecedented highs, with carriers like Delta Air Lines and Emirates operating at over 90% capacity during peak seasons. However, the inability to procure new jets on time led to widespread cancellations and schedule disruptions.

Industry-wide, airlines reported collective losses exceeding $15 billion, attributing a significant portion to delayed aircraft deliveries. Budget carriers, which rely heavily on narrow-body jets for short-haul routes, were particularly hard-hit. Wizz Air, for example, slashed its growth projections by 20%, citing a lack of available aircraft.

Compounding the issue, jet leasing rates surged by 25% as airlines scrambled for stopgap solutions. Leasing firms capitalised on the crunch, with AerCap and Avolon posting record revenues. However, for many airlines, the higher costs eroded profit margins, further straining their financial health. As airlines pushed older aircraft into service for longer than expected, maintenance costs escalated, resulting in increased fuel consumption and operational

Airlines also faced challenges in fleet optimisation, with many carriers resorting to using larger jets on shorter routes to manage capacity shortages. While this approach allowed airlines to accommodate passenger demand in the short term, it presented significant drawbacks.

Larger jets operating on shorter routes consumed more fuel per passenger mile than smaller, more efficient aircraft, resulting in increased operational costs. The need for additional crew training and scheduling adjustments to operate these aircraft on unconventional routes exacerbated this inefficiency.

Additionally, the use of larger jets on shorter routes reduced flexibility in scheduling and network planning. Airlines struggled to redeploy aircraft to high-demand routes, which led to suboptimal utilisation of their fleets.

For example, during peak travel periods, airlines reported a 15% decline in the availability of narrowbody jets, which are typically better suited for short-haul flights. This situation created many disruptions,

including flight delays and cancellations, as carriers scrambled to balance their resources.

These challenges underscored the far-reaching impact of delivery delays on airline operations, with ripple effects extending to customer satisfaction. Surveys conducted in late 2024 revealed a 20% increase in passenger complaints related to delays and schedule disruptions, highlighting the strain on carriers during this period.

Spotlight on key markets

North American airlines fared relatively well, buoyed by strong domestic demand and strategic costcutting measures. American Airlines and United Airlines reported modest profits, driven by high load factors and ancillary revenue streams.

However, labour disputes and fuel price volatility remained persistent concerns. In Canada, the government’s push for stricter carbon emissions regulations added a layer of complexity for carriers.

European carriers grappled with operational inefficiencies and rising regulatory pressures. Legacy carriers inefficiencies.

Number of scheduled passengers boarded by the global airline industry from 2015 to 2024 (In Millions) 2018 4,378 2022 3,486

Statista 2015 3,569 2019 4,543 2023 4,497 2016 3,817 2020 1,757 2024 4,964 2017 4,095 2021 2,291

like Lufthansa and Air France-KLM struggled to maintain profitability amid mounting competition from low-cost rivals. Significant investment was also necessary for the expansion of the European Union's green aviation initiatives, which further stretched already limited budgets.

Asia-Pacific has emerged as a promising region, exhibiting strong recovery momentum in international travel. Airlines like Singapore Airlines and Cathay Pacific capitalised on the region’s reopening, achieving doubledigit revenue growth.

However, the slow pace of aircraft deliveries dampened expansion plans, particularly for Chinese carriers. India saw remarkable domestic growth, but infrastructure constraints at major airports hindered operational efficiency.

The Gulf carriers—Emirates, Qatar Airways, and Etihad—continued to dominate the long-haul market, leveraging their strategic hubs. Emirates launched six new routes in 2024, despite capacity constraints, showcasing its resilience.

However, geopolitical tensions and fluctuating oil prices added layers

of complexity to their operations. The region also made significant strides in sustainability, with Qatar Airways piloting biofuel-powered flights on select routes.

The industry’s outlook for 2025

As the aviation industry enters 2025, stakeholders remain cautiously optimistic. The following are key trends and developments to watch:

Manufacturers expect supply chain stabilisation as they ramp up production to clear backlogs, with investments in automation and supply chain digitisation aiding them. Airbus has projected a 15% increase in deliveries for 2025, while Boeing aims to restore its credibility with a renewed focus on quality and transparency. Collaborative efforts between manufacturers and suppliers to build more resilient networks are likely to gain traction.

The push for greener aviation will gain momentum in 2025. Airlines and manufacturers are investing heavily in sustainable aviation fuel (SAF) and electric propulsion technologies. IATA has set a target for SAF to constitute 10% of global jet fuel use

by 2030, with incremental progress expected this year. We anticipate that regional collaboration to establish SAF supply chains will play a key role in achieving these targets.

Carriers will prioritise fleet renewal to enhance efficiency and reduce costs. The introduction of next-generation aircraft, such as the Airbus A321XLR and Boeing’s anticipated 797, could redefine market dynamics. We expect fleet modernisation programmes to closely align with sustainability goals, incorporating lightweight materials and more efficient engines.

Financial pressures may drive consolidation within the industry. Smaller airlines could merge or form alliances to achieve economies of scale and withstand competitive pressures. Collaborative regional partnerships aimed at optimising route networks and resource sharing are likely to emerge as a trend.

Digital transformation will remain a key enabler for growth. We expect airlines to differentiate themselves in a competitive market by leveraging AI-driven analytics, contactless solutions, and enhanced customer experiences. We also anticipate that predictive maintenance technologies and real-time operational monitoring will reduce downtime and enhance fleet reliability.

Governments and private stakeholders are expected to invest in airport infrastructure upgrades to accommodate the rising number of passengers. Expansion projects in regions such as Asia-Pacific and the Middle East will focus on addressing capacity constraints and improving the overall travel experience.

Source:

Owners of EVs are aware of the high cost involved in replacing a malfunctioning battery pack

Used EVs now cheaper than gas cars

IF CORRESPONDENT

The depreciation of electric vehicles (EVs) has become a widely discussed topic, and for good reason. On one hand, the used market is presenting some incredible bargains, but on the other hand, some EVs can lose as much as half their value within a single year.

This trend is particularly evident in the more expensive segment of the market, where cars often start to depreciate the moment they are driven off the dealer's lot. However, if you plan to keep your shiny new EV for a long time, the value after just a year or two becomes less significant.

Analysts advise that if you decide to sell your EV within the first year—perhaps because it doesn't meet your expectations or your local charging infrastructure is inadequate—you should be prepared for a substantial loss. They have taken a balanced approach to assessing trade-in values to avoid generalising all EVs.

The tale of a Mercedes EQE that lost more than $600 a day, or the US dealer who forbade reporters from purchasing their EVs are just two examples of the colourful stories that could be covered here, but for the time being, analysts presented the hard data.

What news reports are suggesting?

A recent study from iSeeCars.com showed the average price of a one-to-five-year-old used electric vehicle in the United States fell 31.8% over the past 12 months, equating to a value loss of $14,418. In comparison, the average price for a comparably aged internal combustion engine vehicle fell just 3.6%.

While lower used EV prices could increase their desirability to some buyers, they can also reduce demand for new electric vehicles, according to Karl Brauer, executive analyst at iSeeCars.

Speaking to CNBC’s “Street Signs Asia," David Kuo, stock analyst and co-founder at the Smart Investor, said that the inability of EVs to retain value had prevented him from investing in the industry.

According to Kuo, EVs are analogous to other consumer electronics like laptops and cell phones in that they tend to lose value and relevance quickly after being sold.

He also added that the software and computing capabilities of used EVs may become outdated and incompatible with updates by the time they are sold or even beforehand. That will be a “lightbulb moment” when buyers realise they paid too much in the first place.

According to iSeeCars, dramatic drops in used electric vehicle values in the United States have largely been driven by aggressive price cuts by Tesla amid a broader price war in the market.

Tesla is the leading seller of electric vehicles in the US. Due to the lower prices of its new EVs, buyers are now less inclined to consider the same price range for used alternatives.

What is an ongoing issue for the EV market, however, may be a boon for electric and combustion-powered hybrids, which are showing increasing strength in new and used vehicle markets. The average price for used hybrid vehicles fell only 6.5% or $2,135 in 2023, a fraction of the decline of the average EV.

Main offenders

Recently, WIRED's analysts carried out a study on the subject using two

instruments. First was an online appraisal system from the US automotive industry resource Edmunds, while the second was a vehicle valuation service for the UK auto trade called Cap HPI. They examined the electric tradein market in the UK and then drew comparisons with the US.

The first thing they found out was that, in the United Kingdom, several new EVs lose half of their value in the first year. Some vehicles even lose 50% of their value. Granted, not all EVs will experience this, but six distinct EVs are all expected to see a halving in value after a year and 10,000 miles, according to Cap HPI data provided by Parkers, a reputable UK online car resource.

Among these are the Ford Mustang Mach-E, which dropped by 52% from £59,325 to £28,575, and the Audi e-Tron GT, which fell by 49% from £107,675 ($138,000) to £54,700 ($70,100). The data also showed that in just a year, a Polestar 2 would lose 52% of its £52,895 sticker price.

While the Porsche Taycan dropped by 49% and the Hyundai Ioniq 5 lost exactly half in the same period, the Tesla Model 3 fared only marginally better, falling by 45% in its first year and 10,000 miles. All of these prices are based on the mid-spec model of each vehicle because trade-in value can vary significantly depending on things like paint colour, trim level, and battery size.

Mileage effect

However, mileage has less effect on depreciation than you might think. The long-range Polestar 2 mentioned above would have only lost an additional 2% of its initial cost, or £975, if it had driven 20,000 miles in its first year as opposed to 10,000, which is significantly more than the 7,000 miles per year average in the UK.

Global revenue for electric vehicles between 2016 and 2023 (In Billion US Dollars)

69.0

112.9

125.1

Source: Statista

176.0 2021 352.1 2022 358.3 2023 561.8

The Taycan's story is comparable. After just a year and 10,000 miles, the price of a 4S model with a long-range battery dropped from £100,200 to £50,700.

However, it would have dropped by just £2,650 more if it had travelled 20,000 miles in the same year. Alternatively, based on the Cap HPI data, it would be worth £44,175 after two years and 20,000 miles. Age (after the first 12 months) has an equally negligible impact. After a year, a 10,000-mile Taycan is worth £50,700, and after two years, it is worth £46,600.

Additionally, after the first year, the Tesla Model 3's depreciation slows down considerably. From £50,000 to £27,550 after a year and 10,000 miles, and then by just £2,500 more after two years and 20,000 miles, according to Cap HPI data, a 2023 Model 3 Long Range would cost.

FEATURE ELECTRIC VEHICLES

In six months, the price would decrease by only £825 if the first 10,000 miles were spread over 18 months instead of 12.

Long-term depreciation is likely to be supported by Tesla and other electric vehicle manufacturers, which can provide software updates and upgrades to their vehicles months or even years after they leave the factory.

It has been observed that Tesla is capable of releasing significant updates to its user interface and even introducing new features via an online portal.

Polestar 2 received Apple CarPlay, a feature that manufacturers used to charge hefty prices for, through a free over-the-air (OTA) update in 2022, while Jaguar released a software update in 2019 that promised to extend the range of its I-Pace by up to 8%.

EVs vs gas-powered vehicles

After a year and 10,000 miles, the gaspowered Audi Q7 55 SUV was worth 42% more than the electric Audi e-tron 55 SUV, even though it was originally less expensive. Even with cheaper cars, this is true. A gas-powered Volkswagen Golf costs 46% more than an electric Golf after three years and 30,000 miles, according to Cap HPI data.

Comparing the gas-powered Porsche Panamera and the electric Porsche Taycan, analysts anticipated finding a comparable difference.

However, according to Cap HPI data, over a two-year and 20,000-mile period, comparable midlevel 4S variants of each lose a comparable amount of value. Prices for the Panamera and Taycan dropped from £93,140 to £63,250 and £84,030 to £53,000, respectively.

The US prices are now available. A

2022 Porsche Taycan Turbo with 10,000 miles, much less than the 14,000-mile annual average in the US, was valued at approximately $106,000 as of July 2024, according to Edmunds. That's roughly $50,000 less than it would have cost new, excluding optional extras that drive up the retail price but generally have no bearing on resale value.

According to Edmunds' historical data, the car's value increased from $129,000 to almost $131,000 between August and October 2023. However, after that, it declined sharply, falling by $4,000 per month between November 2023 and February 2024 before falling by an additional $10,000 over the following five months. The valuation tool indicates that the vehicle's value is likely to decline over the next month.

Even though the US doesn't have as severe initial price depreciation as the UK, there are still many good deals to be found. The WIRED discovered a fully equipped 2020 Taycan Turbo with only 5,000 miles on it for $92,000, which is $86,000 less than what it would have cost at launch. That translates to depreciation of more than $17 per mile.

According to Edmunds' appraisal tool, a 2023 Polestar 2 Long Range Single Motor with 10,000 miles on it is worth $30,500 as a trade-in. The tool estimates a dealer price of $35,000, and if sold privately, this rises to $32,500.

From the car's estimated retail price, the trade-in value represents a $20,000 or 40% reduction.

Edmunds revealed that the Polestar 2's value is declining, much like the Taycan. However, remarkably, it has increased in three of the last eight months, ending in July 2024. The report observed that Edmunds occasionally advised retaining the car because prices were rising.

COVID’s impact

The pandemic turned the used-car market upside down, with production slowing, essential parts like microchips becoming scarcer, and used prices rising. Car search and research firm iSeeCars in the US claims that the effects are still being felt and that all cars held their value better in 2023 than in 2019. The company claimed that, before the pandemic, the typical car would lose 50% of its value in five years, but by late 2023, this had dropped to 38%.

Meanwhile, an analysis of over a million cars sold between 2022 and

2023 from the 2018 model year shows that electric cars are not doing well, losing an average of 49.1% of their value in three years. Used EV costs have finally dropped below those of gas-powered vehicles, according to a June 2024 iSeeCars study.

In May 2023 and May 2024, iSeeCars examined over 2.2 million used cars. The average used electric vehicle (EV) decreased from $41,000 to $28,800, while the average gas car only marginally decreased from $32,700 to $31,400.

The data is fantastic for those who purchase used vehicles, but it is

concerning for those who intend to sell their almost-new electric vehicle. Fantastic deals can be found on anything from a £5,000 ($6,400) Renault Zoe and a £12,000 ($15,000) Citroen e-C4 to a $25,000 Polestar 2 or a $30,000 Jaguar I-Pace.

In addition, Recurrent, a community of 20,000 EV drivers, reports that EV batteries are lasting longer than anticipated. Only 2.5% of battery packs have been replaced outside of manufacturer recalls. Owners of electric vehicles are aware of the high cost involved in replacing a malfunctioning

battery pack. Recurrent estimates $6,500 to $20,000 as the price range for replacing an EV battery that is out of warranty.

If an EV owner's battery is no longer covered by the manufacturer's warranty, which typically lasts for eight years or 100,000 miles, they are likely to worry about having to replace a broken pack for more money than the car is worth.

The RAC, a British breakdown company, states that although battery failure is uncommon, many aftermarket warranty providers now offer EV battery cover. However, there are still horror stories

about year-one depreciation even though EV batteries last longer than anticipated. The most extreme example we've seen involved TopGear running a Mercedes EQE for six months. In just three months and 4,500 miles, it had lost £40,000 ($51,000). That is approximately 50% in 12 weeks, or roughly £480 ($615) per day.

Why is this happening?

Depreciation on cars is nothing new, particularly in the luxury segment of the market; anyone who has paid six figures for a German executive sedan understands the feeling of suffering significant losses. When you take into account the even higher costs of electric vehicles and their add-ons, as well as the persistent worries about EV range and charging infrastructure, you can see that soft residuals are inevitable.

After all, EVs are getting better with every update, with new models gaining more performance, range, and charging speed than their predecessors. Also, remember that a large number of electric vehicles (EVs) making news these days for their depreciation are first-generation vehicles.

The Mercedes EQ, Audi e-tron, and Porsche Taycan are examples of first attempts by established manufacturers that were taken advantage of by Tesla and, more recently, by several lowcost, state-backed upstarts from China. These were the first iPhones, predating 3G technology, and are already being replaced by updated models that have faster charging times and greater range.

The used market is impacted by new EV discounts as well. Although Tesla's price fluctuations are well-known, other companies have also recently slashed prices. Official Porsche dealerships in the UK were found to be selling several brand-new Taycans (albeit from a previous generation) for a cool £20,000

($25,000) less than their £110,000 list price. For instance, a £33,500 discount was available on a GTS Sport Turismo. Discounts on the 2025 Taycan, which just arrived, are available.

What should you do?

EV sales are increasing despite the rapid depreciation. They are outselling plug-in hybrids two to one and made up 18.5% of all new car sales in the UK in July, according to the Society of Motor Manufacturers and Traders. This is an increase of 18.8% from the previous year. Fully electric cars made up 68.8% of new car sales in the US in May, four times more than plug-in hybrid cars.

When purchasing a new electric vehicle, if you intend to keep it for a long time and can charge it at home, you may be able to save money by taking advantage of available tax incentives. However, if you buy the car outright or finance it with a bank loan and then sell it within a year, your out-of-pocket expenses are expected to be high.

As data from the US and UK shows, vehicle prices typically stabilise over the years. To get the best value on an EV with low maintenance and operating costs, consider buying a used vehicle unless you can genuinely afford a new one and take advantage of the remaining five years or more of the battery warranty.

Middle East The real estate empire

IF CORRESPONDENT

Real estate symbolises national progress and reflects a country's economic aspirations

The Middle East’s real estate market has long served as a cornerstone for economic development, shaped both by global forces and by the distinct regional strategies that drive growth. In 2024, the sector once again demonstrated considerable resilience in the face of international uncertainties, including lingering geopolitical tensions such as the conflicts in Israel and Ukraine.

Despite these challenges, prominent markets in the region—the UAE, Saudi Arabia, Qatar, and Egypt— showed remarkable adaptability and provided strong signals of long-term promise.

This success stemmed from a confluence of factors, including visionary government policies, the pursuit of ambitious “giga” projects, and growing interest from foreign institutional and individual investors. As a result, the Middle East continues to reinforce its reputation as a compelling destination for real estate investments.

Year of resilience and transformation

In 2024, the Middle Eastern real estate sector demonstrated a robust ability to withstand external pressures. Although the broader geopolitical environment could have undermined investor confidence, most key markets in the region were buoyed by stable oil prices,

which helped ensure the continuity of major infrastructural developments.

Governments in Saudi Arabia and the UAE capitalised on these stable revenues to fund real estate and related non-oil projects, supporting diversification initiatives that have become increasingly central to national economic strategies.

This was especially evident in Saudi Arabia, where the ambitious diversification agenda called “Vision 2030” encompasses a shift away from a purely hydrocarbon-based economy toward a more multifaceted growth approach.

Rapid urbanisation emerged as an additional factor driving market expansion. Metropolitan areas such as Dubai in the UAE, Riyadh in Saudi Arabia, and Doha in Qatar continued to experience growing populations partly due to a

steady influx of expatriates and high-net-worth individuals. These new residents spurred demand for residential as well as commercial real estate.

In Dubai alone, plans are set to develop over 28,700 villas by 2025 to meet the needs of the expanding expatriate population and wealthy global buyers seeking luxury accommodation. Across different cities, a rise in commercial real estate projects supported the growth of multinational and local businesses, while hospitality developments benefited from the revival of international travel and major events.

The Emirati city in January 2025 witnessed the administration approving the implementation of a series of housing projects worth AED5.4 billion ($1.5 billion) to benefit citizens across different areas of Dubai.

The projects will see 3,004 new homes being

built for Emirati citizens, of which 1,181 units will come up in Latifa City for beneficiaries under the housing loan category. For beneficiaries, the projects envisage 606 new homes in Al Yalayis 5, 432 homes in Wadi Al Amardi, 398 homes in Al Awir 1, 200 homes in the Makan area of Hatta, 120 homes in Oud Al Muteena, and 67 homes in the countryside and rural areas of Dubai.

Despite facing wide-ranging global uncertainties, the Middle East’s major real estate markets stepped into 2024 with a renewed sense of purpose. National diversification agendas, favourable regulatory reforms, and the expansion of mixed-use urban developments all contributed to the sector’s dynamism.

Real estate symbolises national progress and reflects a country's economic aspirations. Current trends emphasise sustainability, smart city technology, and integrated community living.

Knight Frank’s 2024 Global

Residential Review noted that Dubai’s real estate market was among the fastest growing in the world, with a 21% price increase and approximately 180,900 transactions totalling AED 522.1 billion ($142.1 billion)

The key markets

The real estate landscape in the Middle East includes multiple countries at different stages of economic and infrastructural development. While smaller or emerging markets contribute to the diversity of the region’s property sector, four nations in particular—the UAE, Saudi Arabia, Qatar, and Egypt—have captured international attention with their rapid growth, bold policy moves, and large-scale real estate initiatives.

Each exhibits distinctive features: the UAE showcases its global-city credentials and investor-friendly regulations, Saudi Arabia pushes transformative “giga” projects through Vision 2030, Qatar builds on its postFIFA World Cup momentum, and Egypt capitalises on a huge domestic market and strategic reforms to attract greater foreign investment.

UAE remained a leading indicator of real estate prowess in the region in 2024, with Dubai in particular achieving new benchmarks in teams of transaction volumes and property valuations.

Knight Frank’s 2024 Global Residential Review noted that Dubai’s real estate market was among the fastest growing in the world, with a 21% price increase and approximately 180,900 transactions totalling AED 522.1 billion ($142.1 billion). This performance was attributed to the city’s business-friendly ecosystem, zero personal income tax, and an established global reputation as a hub for finance, tourism, and technology.

A policy milestone that continued to boost Dubai’s real estate appeal was the Golden Visa programme, under which long-term residency permits were issued to tens of thousands of investors, entrepreneurs, and professionals. By 2024, more than 100,000 investors had leveraged this policy to establish or expand their presence in Dubai, injecting significant capital into the property market.

Another essential piece of Dubai’s success story is its emphasis on infrastructure and connectivity. The

city’s airports collectively rank among the world’s busiest, while new expansions at Al Maktoum International Airport and enhanced roadway systems reinforced Dubai’s role as a major global transit point.

Sustainability and smart city initiatives have also become integral parts of Dubai’s planning. Under the Dubai 2040 Urban Master Plan, large swaths of the city are being reshaped to accommodate green spaces, renewable energy solutions, and eco-friendly transportation. Estimates suggest that by 2025, over a third of newly constructed office buildings will have LEED certification or similar sustainable credentials.

Meanwhile, major mixed-use developments in areas such as Dubai Creek Harbour and Dubai South are introducing innovative designs meant to foster walkability, efficient public transport, and the integration of retail, residential, and commercial areas.

While Dubai naturally garners much of the publicity, Abu Dhabi—the capital of the UAE—sustains its own real estate expansion by diversifying its economy away from reliance on hydrocarbons. The city aims to become a cultural hub through projects like the Louvre Abu Dhabi, along with significant developments on Saadiyat Island and Al Reem Island.

Taking the game to the next level, the Dubai Land Department recently launched the Smart Rental Index 2025, marking a transformative milestone in regulating and developing the Emirati city’s real estate sector. This index integrates the latest technologies and real estate expertise, aiming to provide exceptional services that meet the needs of all stakeholders in the real estate market. It further enhances transparency and fairness in determining rental values, aligning with Dubai’s Digital Strategy and the Dubai Real Estate Sector Strategy 2033 objectives.

Streamlined foreign ownership rules and enhanced regulations have helped draw more international investors to Abu Dhabi, making it an increasingly appealing destination for those seeking returns from luxury and mid-market residential developments.

Saudi Arabia: A giant in the making

Saudi Arabia has been on a clear path of real estate transformation, guided by “Vision 2030.” This national strategy seeks to diversify the Kingdom’s economy, cultivate private-sector participation, and position Saudi cities as world-class destinations for investment and lifestyle.

Substantial investments in the Kingdom’s giga projects, such as NEOM, the Red Sea Project, and Qiddiya, are driving this growth. These developments are not only designed to generate global excitement but also to advance Saudi Arabia's sustainability and innovation credentials. Mega-scale ventures serve as catalysts for economic diversification, cultural enrichment, and technological advancement.

The residential and commercial aspects of these projects are expected to attract significant attention from institutional investors. They aim to enter the Saudi market early, anticipating future appreciation as these cities and attractions come online.

The government has also introduced incentives to stimulate local housing demand, including

subsidised mortgage programmes. Moreover, significant efforts are being made to liberalise aspects of the economy, such as the relaxation of certain social regulations and a push for greater tourism, all of which translate into further real estate opportunities.

Luxury housing is particularly on the rise in Saudi Arabia, spurred by a growing affluent population and expatriates who prefer secure, gated communities and amenities that cater to upscale tastes. Market analysts predict that by 2025, the Saudi residential real estate market might reach a valuation of about $1.64 trillion, driven partially by the synergy of ongoing giga projects and progressive social reforms.

Qatar: Building on momentum

Qatar’s real estate sector has continued to build on the legacy of hosting the FIFA World Cup 2022. Although the event was a global showcase for Qatar’s infrastructure capabilities, the country’s real estate market has broadened its focus beyond short-term gains tied to sporting events.

In November 2024 alone, real estate transactions were estimated at QAR 1.14 billion ($311.55 million), with Doha, Al Rayyan, and Al Dhaayen municipalities

Value of commercial real estate market in the Middle East as of 2023, by country (In Billion US Dollars)

Source: Statista

leading in financial value and volume.

Legislative efforts to open the real estate market to foreign buyers have energised demand for properties in specific freehold areas. Luxury developments and integrated city projects such as Lusail City exemplify Qatar’s ambition to develop master-planned urban centres that emphasise sustainability, cutting-edge technology, and a high standard of living.

Legislative efforts to open the real estate market to foreign buyers have energised demand for properties in specific freehold areas. Luxury developments and integrated city projects such as Lusail City exemplify Qatar’s ambition to develop master-planned urban centres that emphasise sustainability, cutting-edge technology, and a high standard of living.

This planned city north of Doha showcases innovations in energy management, urban mobility, and architectural design. Another major locus of real estate dynamism is Education City, which hosts world-renowned universities and research institutions and has spurred demand for quality student housing, commercial facilities, and residential areas that cater to a cosmopolitan population.

Qatar’s tourism sector continues to evolve, supported by high-profile conferences, cultural festivals, and additional sporting events that attract global visitors. The hospitality market has therefore performed strongly, with hotels, serviced apartments, and short-term rentals all benefiting from the country’s drive to expand its global profile.

As Qatar moves forward with its “Vision 2030,” a framework meant to further diversify the economy and modernise the country’s infrastructure, the real estate sector is expected to

remain a key channel for foreign investment.

Egypt: A market of contrasts

Egypt stands as one of the largest and most populous Arab countries, making its real estate market a subject of keen interest for local as well as international investors. Even in the face of currency devaluations and inflationary pressures, Egypt’s property sector has shown remarkable tenacity.

The Aqarmap real estate index reported a rise of 39.3% in property prices in the first quarter of 2024, building upon a 22.3% increase in 2023. This trend reflects the gap between a growing need for housing and the available supply in a country where the population now exceeds 100 million.

Legislative changes that loosened restrictions on foreign land ownership have played a significant part in sustaining market momentum. Foreign investors keen on affordable entry points see Egypt as an opportunity, especially in emerging areas of New Cairo, the coastal city of Alexandria, and new resort developments along the Red Sea.

On the other hand, the devaluation of the Egyptian pound has weakened domestic buying power, leading to disparities in who can afford property. Despite these currency-related challenges, the sheer scale of demand—driven by high birth rates, continued urban migration, and government-led infrastructure projects—points to steady growth over the long term.

Initiatives such as the development of a New Administrative Capital and expansion along the Suez Canal corridor serve as examples of Egypt’s commitment to reshaping its urban landscape.

Trends shaping the future

Across these diverse markets, several emerging trends promise to influence real estate trajectories in the Middle East. One prominent theme is the focus on luxury real estate. Dubai, for instance, reported a surge in high-end property transactions by 62% during 2024, with prices per square foot often topping AED 3,200.

Upscale developments in Saudi Arabia resonate with affluent buyers who favour opulent villas, advanced security features, and lifestyle amenities. The increased flow of expatriates and tourists,

along with relaxed ownership regulations, further supports this segment.

Sustainability and technology-driven innovations are increasingly integral to how Middle Eastern cities are being designed and managed. Projects like Saudi Arabia’s NEOM and Abu Dhabi’s Masdar City highlight the region’s determination to pursue green building standards, advanced energy solutions, and smart city technologies.

The goal is not merely environmental responsibility but also the attraction of global investors who integrate environmental, social, and governance (ESG) principles into their portfolios. Meanwhile, local authorities are encouraging sustainable construction by implementing stricter building codes and providing incentives for LEEDcertified developments.

The hospitality and tourism sector has also regained momentum, with short-term rentals becoming more popular in places like Dubai, Riyadh, and Doha. The occupancy rates in shortterm rental properties saw an upswing, especially as global travel curbs eased and the region continued to host marquee events and conferences.

Regulatory frameworks in the UAE and Saudi Arabia have introduced guidelines for short-term rental platforms to ensure quality control, safety, and taxation compliance, which in turn strengthens investor and tenant confidence.

Further boosting market vibrancy is the rapid adoption of technology in real estate services. Investors and potential buyers can now conduct virtual tours of properties, complete remote paperwork, and make digital payments. Governments are likewise exploring blockchain

solutions for property registration to enhance transparency and reduce fraud.

PropTech start-ups have proliferated, particularly in the UAE and Saudi Arabia, offering specialised platforms for property management, crowdfunding, and AI analytics that help developers optimise pricing strategies and building design.

Forecast for 2025

In 2025, the Middle East’s real estate market is expected to continue expanding. The UAE, with Dubai and Abu Dhabi at the forefront, may see price growth of between 5% and 8% for residential properties, with prime locations experiencing even higher margins due to sustained interest in luxury living.

Saudi Arabia’s drive to achieve “Vision 2030” milestones should reinforce the long-term trajectory of large-scale developments like NEOM and Qiddiya, drawing high-level corporate relocations and new waves of international tourists. Analysts project an annual growth rate of around 1.64% in Saudi Arabia’s residential sector, culminating in a market worth around $1.64 trillion.

Qatar’s Lusail City and other major projects tied to Qatar National Vision 2030 will continue attracting both FDI and residents seeking modern, amenity-rich neighbourhoods. The country is keen to preserve the momentum generated by the FIFA World Cup 2022, thus focusing on diversifying its entertainment, cultural, and business event offerings.

Even Egypt, despite its macroeconomic challenges, is on track for steady growth thanks to an ever-present need for housing in a rapidly

increasing population. Foreign investors see a combination of comparatively low costs, reformdriven policy shifts, and a robust tourism scene as incentives to enter Egypt’s market.

Although macroeconomic factors, particularly oil prices and global monetary policies, could influence the pace of real estate transactions, collective confidence in the Middle East’s prospects remains evident. As other regions grapple with uncertainties tied to inflation, recession risks, or political upheavals, the Middle East stands out for its strategic policies aimed at diversification and openness to foreign capital.

Strategic considerations for investors

Investors interested in the Middle East’s property market can consider various strategies. One approach is to diversify across multiple countries and asset classes, spreading risk through exposure in luxury and mid-tier residential developments, office complexes, hospitality ventures, and retail.

Another consideration is to stay consistently informed about policy changes, as decisions around foreign ownership, visa regulations, and tax incentives can significantly shift market dynamics quickly.

Sustainability is growing in importance, and developments that meet or exceed green building standards tend to attract a more globally conscious clientele and are seen as future-proof in an era increasingly shaped by ESG considerations.

Technological advancements should also feature prominently in any long-term plan, as blockchainbased property transactions, AI-driven analytics, and the rise of PropTech startups will reshape how developers, brokers, and buyers interact.

While certain geopolitical factors could always alter the outlook, the overall expectation is for a steady march of growth, backed by megaproject announcements, progressive economic policies, and the region’s robust cultural and commercial ties to both East and West.

From the attention-grabbing developments in Dubai and Abu Dhabi to the transformative giga projects in Saudi Arabia, from the post-World Cup expansions in Qatar to the large-scale housing demands of Egypt, the region presents a vivid tableau of real estate evolution. Governments have embraced modernisation, sustainability, and international best practices at a scale that few other

Qatar’s Lusail City and other major projects tied to Qatar National Vision 2030 will continue attracting both FDI and residents seeking modern, amenity-rich neighbourhoods.

parts of the world can match.

The outlook for Middle Eastern real estate remains optimistic, underpinned by a constellation of positive indicators: supportive government policies encouraging foreign investment, strong population growth in key cities, ambitious infrastructure ventures that connect and enhance urban environments, and ongoing technological leaps shaping how property is built, marketed, and managed.

Sustainability efforts are gaining traction in every major market, a direction that not only addresses environmental concerns but also aligns with the preferences of a growing class of conscientious global investors.

Potential geopolitical developments and external economic variables still present challenges, but the region’s dedication to resilience and longrange planning has repeatedly proven its capacity to overcome hurdles.

As a result, analysts envision more recordbreaking transactions, the arrival of cutting-edge architectural marvels, and deeper commitments to green, tech-savvy communities across the Middle East.

This blend of innovation, strategic foresight, and cultural evolution keeps the Middle East firmly in the global spotlight. From ultra-luxury beachfront towers in Dubai to futuristic urban experiments in Saudi Arabia’s NEOM, and from the growing modern cityscapes of Doha to the sprawling developments around Cairo’s New Administrative Capital, the market continues to provide fertile ground for visionary developers, astute investors, and an increasingly sophisticated pool of local and international residents.

As 2025 unfolds, these intersecting forces are set to shape one of the most dynamic and resilient real estate arenas on the planet, ensuring that the Middle East remains a critical focus for global property stakeholders well into the future.

Is the world ready for an ageing workforce?

The fact that several nations in the global south are ageing before becoming wealthy further complicates the establishment of social protection systems

IF CORRESPONDENT

The globe is currently experiencing an unparallelled demographic experiment with enormous ramifications due to rising longevity and falling birth rates.

The exponential worldwide burden of overpopulation was the main demographic concern not too long ago. The idea of adding billions more to the list without causing additional human suffering seemed absurd, especially because millions were already dying from starvation and extreme poverty. The quick depletion of fossil fuel supplies and the harm in feeding a constantly growing population was considered disastrous for the earth.

When the world's population surpassed four billion in the 1970s, some scholars, including Paul Ehrlich, claimed that there was a "population bomb" and that the world was "minutes away from famine," according to Jane Falkingham, Professor of Demography and International Social Policy and Director of the ESRC Centre for Population Change.

These gloomy predictions, however, did not come to pass since technological advancements altered how we produce commodities and the "green revolution" raised agricultural productivity and harvests.

When people are more productive, they can earn higher incomes, pay more taxes, and save more money, which creates a positive cycle for the economy.

Thanks to rapid advancements in medicine and a significant decline in infant mortality rates, people now live much longer. These changes align with societal trends, as many individuals are choosing to delay having children and are opting for smaller families when they do. Consequently, the current demographic challenge we face is the ageing population.

As more economies deal with this problem, the world is entering a previously unheard-of situation. George Magnus, an economist and specialist in global demographic trends, stated that, with a few exceptions, "global population growth is basically grinding to a halt according to the UN population division, which is sort of the font of all wisdom on population and demographic matters."

Ageing population

"The average life expectancy for a man in the UK was 45 in 1901," Falkingham told World Finance. This increased by 30 years every 100 years, or three years every ten years, or 3.6 months a year, or two days a week, or around seven hours a day, to 75 years by 2001! These increases in life expectancy are a result of improvements in public health and medicine, as well as improvements in lifestyle choices, education, nutrition, and living standards. INDUSTRY FEATURE

Since the population is ageing, baby boomers are a large part of the problem. According to the United Nations report World Population Ageing 2015, the percentage of the world's population aged 60 or older increased by 48% between 2000 and 2015. Experts predict that by 2050, the number will have tripled from 2000.

Experts predict that by 2050, the population will have tripled from 2000. Retirement is a phase that will last for a long time.

By the middle of this century, experts predict that no age group will grow as quickly as the over-60s. Finally, those in that group will also age, according to United Nations research, the percentage of people in the world who are 80 years of age or older will rise from the current 14% to more than 20% between 2030 and 2050.

Developed regions of the world currently have the highest concentrations of elderly people, with up to one in four people being 60 years

Top 10 countries with the largest percentage of total population over 65 years in 2023 (In Percentage)

Source: Statista

of age or older; predictions indicate this percentage will rise to one in three in the near future.

It's interesting to note that this change is also anticipated to occur in emerging countries, where the percentage of the population over 60 is predicted to increase from the current 5.5% to 9.8% by 2050. Given that developed nations currently observe this same percentage, the trend poses a truly global problem.

"Rapid changes in age structure make it more difficult for societies to adjust, and the speed of population ageing has important implications for government policy in the fields of health and social care, as well as pensions," Falkingham said, highlighting the serious ramifications of such developments.

The fact that several nations in the global south are ageing before becoming wealthy further complicates the establishment of social protection systems.

Families in harsh developing nations often have multiple children as a form of insurance, with the hope that some will survive birth and childhood, and that at least one will earn sufficient income as an adult to care for their ageing parents. This strategy naturally coincides with economic expansion: as an economy grows, personal incomes rise and child

mortality reduces. Fertility rapidly declines in tandem with this.

Birth rates have previously decreased as a result of war, warfare, and widespread diseases. However, current cultural norms are to blame for the sharp decline in the number of children born.

"This is a unique phenomenon in human history," Magnus continued. When planning a family, people in developed economies now take into account a wide range of additional considerations, such as the lifestyle and education they can offer their children; these are typically better when the number of children is smaller.

Reduced workforce

As workplace equality increases and women have greater professional choices, they are leaving the workforce later to raise families. This element may be responsible for Japan's low birth rate, which stands at 1.4 children per woman, well below the 2.1 average required to maintain the nation's longterm economic stability. Japan has the world's oldest population (33% over 60) and is straining the government and working-age people.

Magnus stated that the definition of working age is constantly evolving. Otto von Bismarck, a Prussian statesman, developed the concept of government-

FEATURE AGEING

supported retirement in 1881 and provided pensions from the age of 65. Traditionally, this term encompassed those between the ages of 15 and 64.

The working age range is currently decreasing in many industrialised states; nevertheless, as more people continue their education for longer periods, there are more options for workers to retire early.

Magnus explained that the 15–64 age group is under a lot of pressure because the over-65s are doubling in the next 20 or 30 years, and the number of workers growing up to replace them as they retire is shrinking very slowly because we are not having enough babies to become workers.

The working-age group is the one that contributes most to the creation of economic value in society because they have jobs, earn money, build wealth, and buy goods and services. Older people still rely on them to pay taxes that fund their healthcare, pensions, and other necessities. Ageing populations not only put more strain on the state and working-age population, but they also hinder economic progress.

Businesses suffer from having fewer employees and clients. The latter is important for accumulation, especially as consumption trends start to change and demand shifts from durable commodities like vehicles and technology to services like senior homes and healthcare. As a result, there may be an exponential increase in demand for jobs in certain places and a decrease in demand in others. For example, the US construction industry is currently experiencing a labour shortage due to the retirement of baby boomers and a decline in homeownership rates.

As people age, their savings habits also evolve. Taking out loans and spending more on homes, kids, and

jobs is more common in the 20s and 30s. However, as they enter their 40s and 50s, their responsibilities decrease and their earnings likely increase, prompting them to start saving more, particularly as retirement approaches.

When that time comes, people over 65 rely on their savings and government assistance. When accumulated, this change can significantly affect an economy, slowing growth as consumption declines. An economy's savings rate will eventually plateau, even if it may spur investment and accelerate output growth as employment increases.

Experience is paramount: Japan has one of the largest percentages of elderly workers worldwide.

The demographic dividend

"The so-called 'demographic dividend' is a phase that demographers have identified, where youth dependency is declining, the working-age population is swelling, and… the over-65 cohort of the population has [not yet] begun to expand—so this is otherwise known as the sweet spot," Magnus said.

This phase occurs when the population bulge is of working age and has fewer children, but at the same time, there isn't a significant increase in the number of elderly dependents. As a result, the state gains from many people saving more money, spending more, and paying more taxes—all without having to deal with the mounting costs of healthcare and pensions.

Many Western economies have profited greatly from this extraordinary window of economic opportunity and the demographic dividend. Furthermore, China serves as a shining example of leveraging this economic opportunity to achieve remarkable success. By doing so, the nation has rapidly advanced its

economic development, emerging as the world's second-largest economy.

There is a chance of losing out on this dividend entirely, even though it is crucial for many developing nations with young populations. In other words, you can only successfully exploit the demographic dividend if you have a strategy to employ people; otherwise, it can lead to waste, disruption, conflict, and violence.

Magnus specifically cited the Arab Spring as an example of what might happen if you have a large number of young people growing up without hope and without aspirations for employment.

Magnus noted that Brazil and India may not exploit it to their advantage. He said, "I believe it's a mistake to say it's a foregone conclusion."

Foreign assistance

Immigration is the quickest—and possibly most evident—way to increase the working-age population. Policies that promote the entry of new workers alleviate strain on the middle class and, consequently, the dependent group of older people.

However, the admission of large numbers of immigrants into a state often sparks strong social and political hostility due to long-standing accusations of "foreigners" taking jobs and overtaxing public resources. Unfortunately, the ongoing refugee issue, which has crystallised in a few European countries in particular, has caused this animosity to intensify recently in many countries.

One such nation is Germany, which is the main destination for Syrian refugees in western Europe. It's pertinent to note that Germany has the worst population ageing situation in the region.

According to a study by Hamburg's

World Economy Institute, Germany currently has the lowest birth rate in the world and is declining faster than any other industrialised nation.

Furthermore, experts predict that about 1.5 million skilled immigrants will support Germany's state pension system by 2060, requiring two workers to support each retiree. Nevertheless, the people were incensed when Chancellor Angela Merkel consented to take in additional refugees in 2016, despite this pressing issue.

Aside from the social backlash, there are many challenges with implementing such measures, even if immigration might be the quickest

fix. It is expensive and challenging to successfully integrate newly arrived residents into a community, especially when there are linguistic and cultural difficulties. However, denying recently arrived immigrants the opportunity to contribute positively to the economy could lead to an increase in unemployment and even a rise in crime rates.

Governments aim to increase their current labour participation rates by increasing the number of traditionally underrepresented groups, such as women and the elderly. Despite facing criticism, there is a compelling rationale behind this move.

Magnus clarified, "It's ironic, but it's not a coincidence that the nations with the highest rates of female labour force participation also have the highest fertility rates. You wouldn't typically think that's the case, but it is; the connection is really widespread, and childcare is easily accessible."

For instance, Scandinavian nations have the most universal and reasonably priced childcare options, as well as relatively high rates of female participation.

In today's world, the primary demographic challenge is the overabundance of elderly individuals and the scarcity of young ones, a stark

contrast to earlier worries about a population explosion.

The OECD states that while labour market conditions, cultural views, and female participation all play a role in the number of women in the workforce, some policies—like paid parental leave, childcare subsidies, flexible work schedules, and child benefits—are also very important.

Employment for women is crucial to a nation's continuous economic development. Furthermore, as the population ages and government spending on pension plans and agerelated illnesses increases, it will become increasingly important. If

we want more women to enter the workforce, we must break down glass ceilings and change attitudes toward women in the workplace.

Scandinavian nations demonstrate how important it is to implement policies that enable women to have kids and careers. Naturally, encouraging female work and increasing a nation's birth rate are not straightforward tasks, especially when they appear to be mutually exclusive.

However, Norway is a terrific example of how people may successfully integrate their personal and professional lives for the benefit of the economy. Around 83% of Norwegian moms with young children are employed, according to the OECD Observer, and during the 1970s, both fertility rates and labour engagement increased significantly. With 1.9 children per woman, Norway now has one of the highest fertility rates in Europe.

This achievement started when the nation's economic expansion led to a rise in the need for labour, which coincided with women's increased educational attainment. It's intriguing to note that this has turned into a self-reinforcing cycle: a larger labour pool results in more tax revenues, which allow the state to invest more in services like childcare and assistance for working mothers. More government assistance increases the likelihood that more women will find employment.

Age-related experiences

Encouraging older adults to enter employment is another possibility. While it's still in its infancy and largely ignored, western nations have already started to witness a surge in its popularity. If given the opportunity,

people in Europe are more likely to retire early, a phenomenon known as "the dream."

In contrast, experience is paramount in Japan. The country's strong regard for the elderly explains the far higher percentage of older workers compared to other nations. Again, the automation of procedures that enable employees to work longer hours will facilitate a shift in attitude.

Magnus asserts that enhancing productivity serves as an additional strategy to strengthen a country's economy: "Imagine if you could turn on a light switch from one day to the next. If tomorrow’s working-age population is more productive than today’s, then we may have already advanced a long way into resolving the problem."

Magnus stressed that productive people earn more, pay more taxes, and save more, creating a positive cycle that benefits the economy and the individual.

"Innovation has always been our salvation," he continued, while citing the development of the wheel, the jet engine, and the internal combustion engine, among other innovations. Governments must, however, increase their funding for research, education, and other initiatives in order to spur innovation.

"Investing in human capital and new products and processes is my vision for the future," he added.

Today's greatest demographic concern is, to put it simply, that there are too many elderly people and too few young people. This is a significant departure from the traditional concerns of a population explosion. Crucially, we expect this global issue to worsen in the coming years, not just a problem in wealthy nations.

Despite the alarming statistics and the accompanying concern about economic loss, there are workable solutions to this demographic problem. Whether it means raising the pensionable age or inviting more migrant workers, the path that each nation takes will be unique and tailored to its own internal circumstances and challenges. Anyway, as usual, innovation is our saviour and the greatest answer.

Is the world ready for the China way of dealing with a shrinking workforce? As China’s workforce shrinks due to an ageing population, automation appears to be receiving a vibrant push in the country. As the world's second largest economy is witnessing labour shortages due to its declining birth rate, the Xi Jinping administration has found an answer in the form of investing heavily in modern production facilities, facilities which make the human presence in factories an irrelevant one.

According to a recent report by the International Federation of Robotics (IFR), China now has a record 1.7 million industrial robots operating in its factories. The report, released in September 2024, notes that the number of robots in China’s factories grew by 17% over the past year, reaching 1,755,132 units. The Asian nation accounts for more than half of global demand, solidifying its position as the world’s largest robotics market.

The Access Bank UK Ltd strengthens international expansion

The Access Bank UK Limited, which is a wholly-owned subsidiary of Access Bank

Plc, a Nigerian Stock Exchange listed company, provides Trade Finance, Commercial Banking, Private Banking and Asset Management products and services for customers in their dealings with the Organisation for Economic Co-operation and Development (OECD) markets, and support companies wishing to invest in and trade in Africa, MENA (Middle East and North Africa) and Asia markets.

“We are authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA in the UK. The Access Bank UK Limited (Dubai Branch), situated in the iconic Gate Building of Dubai International Financial Centre (DIFC) is regulated by the Dubai Financial Services Authority (DFSA). Our Paris Branch is regulated by the French Prudential Supervision and Resolution Authority (ACPR),” the bank told International Finance, while explaining its operations.

Following the footsteps of its parent Access Bank

Plc, The Access Bank UK Limited has remained committed to the task of developing a sustainable business model for its operational environment.“This is reflected in our moderate appetite for risk, our passion for customer service and our commitment to build long-term relationships by working in partnership with our customers. We play a key role in our Group’s vision ‘to be the world’s most respected African bank’. As such, we refuse to chase unsustainable yields as a route to growth. Instead, we focus on building our business through the strength of our customer relationships,” The Access Bank UK Limited added.

Forging strong relationships with strategic partners

The Access Bank UK Limited, which was awarded “Confirming Bank” status by the International Finance Corporation (IFC), provides several services to support business activities in Africa and across the world. The status was provided as part of IFC’s “Global Trade Finance Programme,” thereby strengthening The Access Bank UK Limited’s trade finance capabilities further.

The Access Bank UK DIFC/ Dubai Branch situated in the iconic Gate Building of Dubai International Financial Centre

The Access Bank UK Limited provides a range of services to support business activities in Africa and across the world

The Access Bank UK Limited offices in the heart of the City of London

Jamie Simmonds Chief Executive Officer/ Managing Director, The Access Bank UK Limited

The Access Bank UK Limited was the first Nigerian Bank in the United Kingdom to be appointed as a correspondent bank to the Central Bank of Nigeria to undertake infrastructure work on behalf of the Nigerian government. The Access Bank UK Limited also issues Letters of Credit on behalf of the Nigerian government and Nigerian National Petroleum Corporation (NNPC).

"Founding The Access Bank UK Limited in January 2008 during a challenging period for the banking sector, we laid a strong foundation by defining clear risk parameters, implementing robust processes, and creating customerfocused products that have driven our success,” remarked Jamie Simmonds, Chief Executive Officer and Managing Director of The Access Bank UK Limited, while interacting with the International Finance.

"My dedication to financial services has always been driven by a commitment to excellence

in customer service and the development of innovative solutions tailored to meet the unique needs of our customers and markets. I have been involved in the turnaround of several existing businesses by going back to these basic principles and rebuilding from the ground up," he added.

The Access Bank UK Limited’s commercial banking team offers relationship-based services for corporate and individual customers, through a wide range of products and services with a choice of competitive rates, market-leading systems and topquality service.

“Our Global Private Bank has been built around our passion for delivering excellent service. We deliver innovative investment solutions to our discerning clients who value trust, integrity and accountability as well as investment performance. We take a proactive approach to product and service delivery and offer

unique investment solutions, which are tailored to our customers’ needs by a highly experienced Private Banking team,” Jamie Simmonds noted.

The Access Bank UK Limited (Dubai Branch) offers a broad range of products and services to assist customers in the MENA region with trade and investment needs in Nigeria and Africa. The Access Bank UK Limited (DIFC Branch) is committed to building long-lasting relationships in the region in line with the approach that has proven so effective for The Access Bank UK Limited. The combination of the Dubai branch together with the bank’s presence in the UK and Nigeria delivers a wealth of expertise that significantly benefits the venture’s customers.

The bank is led by a team of experienced people, with experience working in the African, MENA and other international marketplaces, who are dedicated to delivering superior financial solutions to businesses and

The Access Bank UK Paris Branch, located between Place de l’Opéra and the Bourse, was launched in 2023

individuals. The Access Bank UK Limited also provides its employees with constant support and development opportunities, which are reflected in their dedication and professionalism.

“We are very proud that Investors in People (IIP) have re-accredited us Platinum status in 2023, reaffirming our commitment to excellence in people management and development. In common with our parent, the bank is committed to developing a sustainable business model for the environment in which it operates. This is apparent in our moderate appetite for risk, a passion for customer service and a commitment to working in close partnership with our customers to forge long-term relationships with them,” the venture informed the business publication.

Sustainable growth

The year 2023 was notable for The Access Bank UK Limited, as it made significant progress in carrying out its mandate to expand its international operations in Europe and Asia. The venture’s branch in France became fully operational by the year's end and is now well-placed to capture business flows between France and Francophone countries in Africa.

“Our Hong Kong operation – the first West African bank to have a presence in the territory – was granted regulatory approval for a Restricted Banking Licence branch in the final quarter of 2023 and we are moving to be fully operational by Q3 2024. Opening Hong Kong is a key development in our international expansion strategy. With the growth of parent across Africa, the dominance and size of the Nigerian economy, and historic trading links, Hong Kong is the perfect conduit for trade flows in and out of China, and the other major Asian markets. Further, a strong presence in Hong Kong gives the bank the

ability to replicate our proven and successful relationship-based model in the Asian region, as with Dubai for MENA, and France for Francophone countries in Africa. The bank also made progress in applying for a banking licence for the new Malta operation,” The Access Bank UK Limited stated.

The recently published Annual Report and Financial Statements 2023 of The Access Bank UK Limited show that the bank has met all strategic milestones, highlighting its adept execution and strategic vision.

Entitled “Expanding Our International Footprint,” the report highlights a strong operational performance by the main Strategic Business Units, and continued growth and expansion in Europe and Asia. Continuing income growth saw the bank pass the $200 million milestone for the first time, with 58% year-on-year growth to $207.6 million.

Continued international expansion

Trade Finance continued to be the largest SBU (Strategic Business Unit), growing overall income by 69% year-on-year to $106.1 million, from $62.6 million in 2022. Correspondent banks, excluding The Access Bank UK Limited’s parent group, contributed income of $54.9 million, an increase of 68% in 2022, while Access Group's income amounted to $28.2 million, a 92% increase year-on-year.

The Commercial Banking unit also posted substantial growth, with income reaching $78.9 million against $49.7 million in 2022, an increase of 59% year-on-year. The commitment to supporting customers at a critical point in Nigeria’s economic emergence, and being flexible to market conditions, was once again a key factor. The bank’s direct membership of Sterling Clearing, and Euroclear, further consolidated its credentials as a haven for

customer deposits, which reached $1.451 billion, an increase of 16% year-on-year on the $1.252 billion achieved in 2022.

The Asset Management division came third among The Access Bank UK Limited’s high-performing units, continuing to provide innovative solutions through discretionary management and a flexible, execution-only share portfolio. Asset managementrelated income grew to $10.4 million, a 28% increase on $8.1 million in 2022. Assets under Management (AUM) also grew by 37% to $458 million.

Commenting on the recently published results, Jamie Simmonds said, “The year’s strong performance has laid the foundations for the new five-year plan, and with the significant progress we have made on growing our international footprint, we will continue to make a comprehensive and sustainable contribution to Access Group. The further investment in staff and infrastructure development is already feeding through in terms of creating a more efficient and streamlined operation from which to grow our customer base.”

David Charters, The Access Bank UK Limited’s Chairman and Independent Non-Executive Director, added, "The year was notable for the significant progress the Bank made in carrying out its mandate to expand Access Bank’s international operations in Europe and Asia. We opened a regulated branch in France in May, were authorised to open a Restricted Licence branch in Hong Kong towards the end of the year and made further progress in growing our international bandwidth elsewhere in Europe. Subject to the necessary approvals from the relevant financial and regulatory authorities, the Bank hopes to make further announcements on its international ambitions in the coming year."

Use of Pix surged 74% in 2023 to nearly 42 billion payments across the Brazilian economy, surpassing credit and debit card charges combined by about 23%

Brazil's Pix transforms digital payments

IF CORRESPONDENT

A financial revolution is underway in Brazil. The core idea is "inclusivity," which holds that one needs to be connected to the banking system to fully engage with modern economy. Both the public and private sectors in Brazil have worked together to implement this insight with incredible vigour and inventiveness, and the outcomes have been astounding.

Historically, the high costs associated with credit card and bank transfers have been one of the biggest obstacles to financial inclusion. This issue was essentially resolved in Brazil with the launch of Pix, which charges an average of just 22 basis points to merchants

Consider those who gain from the Bolsa Familia programme in Brazil, which aids those living in poverty. Of these individuals, only 35% had bank accounts in 2016. These days, that figure is more like 90%, or more than 160 million Brazilians. The majority of this can be attributed to the relatively recent introduction of the “Pix Instant Payment System” in 2020. This quick payment system allows users to transfer money in real-time via a mobile phone interface. This system has accelerated Brazilian commerce and quickly matured the country's digital payment market.

Not surprisingly, PYMNTS recently ranked Brazil as one of the world's most digitally connected nations, outperforming the United States, United Kingdom, and Germany. It has cleverly promoted a financial inclusion

philosophy and worked tirelessly to give everyone a share in Brazil's rapidly growing economy.

A booming digital payment landscape

In October 2024, news surfaced about Brazilbased digital bank PicPay offering access to the Pix instant payment system via WhatsApp, as the financial services venture made the best use of its partnerships with Meta and Microsoft. Unlike traditional chatbot assistants, PicPay’s GenAI, developed in-house and powered by Microsoft Azure OpenAI Service, will instantly recognise Pix keys in many contexts, such as complex conversations, audio messages, or even photos and screenshots containing multiple pieces of information.

As per Carlos Netto, CEO of Brazilian fintech Matera, there were more than 5.5 billion Pix transactions just in September 2024, a 41% increase, by the company's estimates, over 2023. Things have been further boosted by the Southern American country's central bank’s creation of payment institutions, which managed accounts and payment services, leading to inexpensive accounts connected to instant payment rails.

Another prominent Brazilian online payment service provider, PagBrasil, which handles Brazilian transactions for international businesses, has launched two new solutions to expand the reach of Pix beyond national borders, by partnering with fintechs like B89 and Wipay.

International Pix and Pix Roaming will

enable Brazilian tourists to use Pix abroad whilst allowing foreign visitors to utilise the payment system within Brazil. The solutions aim to reduce transaction fees for merchants and eliminate the standard 30-day wait period associated with credit card payments.

Pix, which enables real-time bank-to-bank transfers through mobile applications and digital wallets, has reached 151 million active users, representing 92% of Brazil's adult population. The system processed 227.4 million transactions in one day in September 2024, moving R$108.4 billion (approximately $18.5 billion).

PagBrasil has partnered with Peruvian B89 to offer International Pix to merchants across Panama, Colombia, Peru and Bolivia. The partnership also enables Brazilian citizens to pay in reais with a fixed exchange rate at purchase. The tie-up with Spanish payments technology provider Wipay has ensured that Pix will be available to Europe-based merchants on a much wider scale. The system will operate in Spain, Portugal and the Netherlands, with plans to expand to broader US and European markets.

How Pix overhauled Brazil’s payment systems

Historically, the high costs associated with credit card and bank transfers have been one of the biggest obstacles to financial inclusion. This issue was essentially resolved in Brazil with the launch of Pix, which charges an average of just 22 basis points to merchants and allows peer-to-peer payments at no cost.

According to data from the Central Bank of Brazil, credit has become a major issue in Brazil. The yearly interest rate for revolving credit card lines is 431.6% or 14.9% per month. However, the Brazilian government is taking steps to cap interest rates on revolving credit card lines. This has an impact on customers and merchants, who must pay the acquirer's margin and other associated costs.

While over 40 million more people have become bank customers in Brazil in the last two years alone, at the same time, 50 million Brazilians are thought to have made their first digital payment. Currently, four out of five Brazilians have paid with or received money using Pix, and its usage has quickly overtaken that of credit and debit cards. This is impressive

considering the historically sluggish global adoption of government initiatives. The way a nation views financial transactions is completely changing, and we are seeing this in real-time.

"Consumers in Brazil are also exploring how these wallets can be trusted for non-transactional purposes. In fact, they are doing so at a much higher rate than their peers in other countries. For example, 34% of consumers in Brazil expect to verify their identity using a digital wallet in the next three years. This suggests that the Brazilian market is ready to use these wallets to hold IDs and other documents," reported PYMNTS in September 2024.

Pix is now seen surpassing credit cards as the leader in the local online purchase market as soon as 2025, earlier than initially expected, a new study from Brazilian payments firm Ebanx showed.

The study, based on data from research and intelligence firm PCMI, showed Pix is expected to account for 44% of Brazil's online payment market by the end of 2025, while credit cards were seen with a 41% slice. A previous version of the study released earlier in 2024 had projected Pix to nearly match credit cards in the local online market only by the end of 2026.

Investigating reasons behind Pix's success

The product designed by Brazil's central bank has become a boon to online retailers, helping with cash flow in a sector with tight margins, while undercutting the legacy business of banks and

Brazil's Pix real-time payment users from February 2022 to January 2023 (In Millions)

fintechs built on existing credit card infrastructure.

The use of Pix surged 74% in 2023 to nearly 42 billion payments across the Brazilian economy, surpassing credit and debit card charges combined by about 23%, according to central bank data and industry group Abecs.

For buyers, the switch to Pix has been nearly seamless, as all they need to do is scan a QR code with any banking app instead of reaching for their wallet. For sellers, the innovation has turned the tables on the traditionally lucrative card payments industry. In online retail, orders paid with Pix surged 22% points in two years to about a third of all purchases in December 2023, according to e-commerce research firm Neotrust. Credit card orders slipped 5% points to 51% in the period.

Amid some of the possible changes teased by Brazil's central bank, we have things like recurring payments and purchases in instalments. One government official told Reuters in April 2024 that these features would likely boost Pix Payment's role in retail.

How is Pix putting pressure on

the payment card players? Paying with a debit or credit card requires sellers to pay discount fees divided between card networks such as Visa, Mastercard and American Express, along with payment processors such as Cielo, Rede, Stone, Getnet and PagBank, as well as card issuers, which are typically banks. By removing these intermediaries, Pix ensures that users receive no cut of such transactions, and payment processors, which pocket a much smaller slice than they get for credit or debit card purchases.

The credit card industry players are now feeling the heat from the Pix and shifting their approach. Cielo's controlling shareholders Banco do Brasil and Bradesco announced in February 2024 their plans to take it private, a path already taken in 2022 by rival Getnet, owned by Spanish bank Santander.

According to Reuters, "Going private gives leeway to offer a bundle of integrated products, becoming less reliant on the traditional business of connecting retailers to credit cards."

"Pix has been and will continue to be the most disruptive techno-

Source: Statista

logy in the financial segment in the country for the next few years," said Eduardo Lopes, public policy director at Nubank, Latin America's largest digital bank.

Nubank launched in Brazil a decade ago, offering one product: an iconic purple credit card without fees, but it has now diversified into a range of other segments, including an embrace of Pix seen at several leading banks and fintechs.

The lender ended Q3 2023 with 13.6 million customers using Pix on credit, which lets users borrow for Pix transfers up to their Nubank credit card limit. Customers using it grew 166% from a year before.

A bright future ahead

Brazil is not the only nation that has experienced success with Pix-like technology. The world's advanced economies have recently made comparable efforts, and emerging markets and developing economies (EMDEs) are also making significant progress in this

area. Pix is undoubtedly setting the standard, though, and other nations would be well advised to pay attention.

A range of payment apps from PayPal to Venmo have sprung up globally, but none carry the weight of a central bank owning, operating and regulating the system (like Pix) to guarantee speed, efficiency and universal integration with banks from day one. The success of Pix in Brazil, which moved more than 17 trillion reais ($3.4 trillion) in 2023, has quickly expanded into payments between people and businesses (P2B).

"Pix is definitely a gamechanger," said Carlos Mauad, CEO of Fintech Magalu, the financial arm of retail group Magalu, which processes its own Pix transfers to cut costs and offer discounts to customers choosing the payment method.

According to Mayara Yano, senior advisor to the Pix management and operations department at

the central bank, the central bank is preparing to roll out new features to boost the appeal of Pix for P2B use.

The first one, Pix Automatico, allows for automatically paying recurring bills. It can replace the current practice of bank invoices used for tuition, utilities and phone bills, and may also supplant credit cards used for media subscriptions and online services.

Another feature called Pix Garantido will allow its users to execute payments in monthly instalments, a major perk of credit cards for Brazilian consumers.

Matera CEO Carlos Netto, a tech firm helping companies integrate with the new payment platform, said that these changes may further accelerate the rise of Pix, which is now dictating the payment landscape in Brazil.

RUSSIA SWIFT

Given that a large portion of Russia's financial reserves was held abroad, the freezing of these assets led to immediate concerns about the ability to manage balance sheets

Sanctions hurt, but Russia's banks keep profiting

IF CORRESPONDENT

In the wake of the Russian invasion of Ukraine in 2022, the United States-led Western Bloc swiftly rallied to impose stringent economic sanctions on Moscow. These sanctions were designed to cripple the economic arteries of the nation, severing Russian banks from international financial systems, limiting their access to foreign currency, and throttling their operations to put pressure on Moscow's political ambitions.

Over two years later, however, Russia's banking industry is not only surviving but also thriving. Reports show an unexpected surge in net profits, defying predictions of an economic collapse. This feature explores the sanctions imposed, the operational hurdles faced, the ways Russian banks have adapted, and what lies ahead in light of recent geopolitical developments.

Financial strangulation or inconvenience?

The sanctions were multifaceted, with several escalations over the past two years. Perhaps the most significant measure was cutting several major Russian banks from the SWIFT international payments network. This effectively isolated Russia from global financial transactions, making it challenging for banks to execute cross-border payments.

The SWIFT ban meant that Russian banks could not easily communicate with foreign institutions, severely restricting their ability to engage in international trade and payments. This was a severe blow, particularly for a country like Russia, which heavily depends on exports of oil, gas, and other commodities to finance its economy.

Sanctions also included freezing the foreign assets of major Russian banks, such as VTB Bank, Sberbank, and Gazprombank, and also prohibiting these institutions from transacting in dollars, euros, and other major currencies. By freezing assets, Western nations sought to deny these banks access to liquidity critical to their international operations. The transaction bans also meant that Russian banks were effectively barred from participating in the global financial system, making international business dealings extremely cumbersome.

The sanctions also targeted highlevel executives, CEOs, and board members of these banks, freezing their assets abroad and restricting travel. Such moves aimed to apply personal pressure to decision-makers within the banking industry, effectively putting a face to the consequences of Russia's geopolitical actions. The sanctions have not only impacted the finances of these executives but also added a psychological component to the economic warfare, further incentivising key stakeholders to change their behaviour.

Over the past two years, these sanctions have continued to evolve, with Western nations adding further layers. The aim was to close any loopholes that Russian financial institutions could exploit. Additional sanctions targeted secondary players, cryptocurrency transactions, and correspondent banking services that helped Russian banks indirectly access international systems. The new restrictions were also extended to subsidiaries and affiliates in third countries, tightening the noose around the Russian banking sector and forcing them to reassess their international strategies.

Challenges faced by Russian banks

The sanctions have certainly not been without consequences for Russia's financial institutions. Among the most critical

challenges faced by Russian banks were the inability to access foreign capital markets, currency shortages, and severed ties to Western institutions. These challenges forced Russian banks to find new ways to maintain their operations and services for both domestic and international customers.

Banks struggled with liquidity crises due to restricted access to foreign currency. Given that a large portion of Russia's financial reserves was held abroad, the freezing of these assets led to immediate concerns about the ability to manage balance sheets. Moreover, the exclusion from SWIFT severely impacted the ease of international payments, forcing Russian banks to look for alternatives to conduct cross-border trade and facilitate remittances. The sudden loss of liquidity threatened the ability of Russian banks to fulfil their obligations, leading to fears of insolvency.

The sanctions also caused significant issues in terms of technological isolation. Many Russian banks had relied on Western software and technologies to run their operations smoothly, and sanctions meant that updates and support for these technologies were no longer available. As a result, Russian banks had to accelerate the development of domestic alternatives, often with mixed results. This increased operational costs and presented security vulnerabilities, adding another difficulty for the banking sector.

Yet despite these considerable hurdles, Russian banks were quick to pivot and discover ingenious adaptation methods. By leveraging state support and establishing alternative financial mechanisms, they managed to maintain functionality and even thrive under pressure.

How Russian banks found workarounds

The resilience of the Russian banking sector can largely be attributed to a combination of government support, market

adaptability, and strategic partnerships. Anticipating the risk of being cut off from SWIFT, Russia developed its own domestic payment system, SPFS (System for Transfer of Financial Messages). Though it lacks the reach of SWIFT, SPFS has ensured the continuity of domestic transactions and has even expanded to work with foreign entities in countries like China, India, and Iran. SPFS's adoption has grown steadily, with numerous financial institutions from partner countries joining the network, allowing Russia to maintain a channel for international payments, albeit with added delays and higher costs than SWIFT.

Russia also advanced its Mir payment card system, positioning it as an alternative to Visa and Mastercard, both of which had suspended operations in Russia. The acceptance of Mir cards has expanded, particularly in countries with close ties to Russia, such as Turkey and

BANKING & FINANCE FEATURE

RUSSIA SWIFT

Belarus, reducing dependency on Western financial infrastructure.

Mir cards have also become essential for domestic consumers, facilitating transactions in an environment where international payment systems are no longer reliable. The government has incentivised the use of Mir cards, integrating them into salary disbursement for public sector employees and pensions, thereby ensuring mass adoption.

The Kremlin made significant moves towards a de-dollarisation strategy, increasing the use of the Russian ruble and the Chinese yuan in international trade. Partnering with countries willing to bypass the dollar system, Russian banks leveraged these partnerships to maintain trade flows and stabilise the ruble.

Bilateral trade agreements with China and India have helped to replace dollardenominated transactions with rubles and yuan, insulating Russia from currency-

related vulnerabilities. These new trade channels have also helped stabilise the Russian economy, allowing it to maintain essential imports and exports without relying on Western financial institutions.

The Russian government further stepped in by providing state-backed loans and liquidity support to key banks. These efforts helped cushion the immediate impact of sanctions, allowing banks to restructure and avoid insolvency. Interest rate adjustments by the Russian central bank also played a role in stabilising the domestic financial environment.

The central bank's decision to raise interest rates sharply following the initial wave of sanctions helped curb capital flight and stabilise the ruble, although it made borrowing more expensive. Subsequently, rate cuts were used to stimulate the economy and support domestic lending, showing the flexibility of Russian monetary policy in responding

Ranking of Russian banks as of January 2024, by total net assets (In Trillion Russian Rubles)

Bank 2.17

to crisis conditions.

Russian banks have also increasingly leaned towards cryptocurrencies and are piloting the digital ruble. This pivot has provided alternative channels for transactions, bypassing the traditional and heavily sanctioned banking infrastructure. Also cryptocurrencies, despite their volatility, have become a crucial tool for facilitating international transactions and evading sanctions. Meanwhile, the digital ruble, currently in its testing phase, aims to provide a stable, government-backed digital currency that can be used both domestically and internationally, further

Source: Statista

diversifying Russia’s financial tools in the face of Western sanctions.

Finally, partnerships with countries like China, India, Turkey, and UAE have provided critical support. Russian banks have utilised correspondent banking relationships in non-Western financial centres to facilitate international payments, allowing trade and finance to continue albeit at a higher cost. By establishing and strengthening these regional alliances, Russia has managed to circumvent many of the financial barriers imposed by Western sanctions. These partnerships have not only provided much-needed financial channels but have also helped foster a bloc of nations with a shared interest in resisting Western dominance in the global financial system.

In response to technological isolation, Russian banks have invested in emerging technologies, such as blockchain, to create secure channels for international financial transactions. Blockchain technology has enabled Russia to develop a decentralised mechanism that bypasses traditional international banking systems. This has reduced the reliance on Western technologies and allowed for a more

resilient payment infrastructure.

Furthermore, partnerships with non-Western tech companies have also facilitated the development of banking software tailored to circumvent Western sanctions. Russian banks are increasingly collaborating with Chinese and Indian technology firms to enhance their capabilities, allowing them to maintain functionality similar to pre-sanction operations.

Are sanctions effective?

Chris Weafer, Chief Executive of Macro Advisory, notes that the Russian banking sector has demonstrated remarkable adaptability.

“The sanctions have certainly hurt the Russian economy, but the notion that they would quickly cripple the banking sector and force political concessions was over-optimistic. Russia's ability to adapt— through alternative financial networks and domestic ingenuity—shows a capacity to endure despite the isolation," he said.

Another perspective comes from Elina Ribakova, Deputy Chief Economist at the Institute of International Finance, who believes that the impact of the sanctions

is blunted by Russia's strong fiscal policies and partnerships with non-Western countries.

“Russia has built financial bridges to partners like China and India, which has kept their economic engine running. It is also clear that domestic banking support from the government has cushioned the blows, allowing for short-term profitability," she noted.

Indeed, the net profit figures for the Russian banking sector tell a surprising story. As of October 2024, the sector posted a 4% increase in net profit, despite an overall economic slowdown. Analysts attribute these figures to the government's interventionist policies, capital controls that limited cash outflows, and high interest rates which benefited profit margins on loans. The Russian central bank's proactive measures to stabilise the ruble and manage inflation also played a crucial role.

Yet, there are dissenting voices. Mark Galeotti, an expert on Russian politics, points out that the profitability of Russian banks may be deceptive.

“What we see are banks that are generating profit on paper, largely because of state subsidies and artificial financial mechanisms. In reality, the sector is not as healthy as it looks, especially given the mounting non-performing loans and restricted access to technology that impacts long-term growth," he added.

Non-performing loans have indeed been on the rise, as many businesses struggle to stay afloat amid a stagnant economy and the challenges of isolation from the West. This has led to concerns about the sustainability of the banking sector's profitability. Moreover, the reliance on government support raises questions about how these banks will perform if and when this support is scaled back.

The sanctions have undoubtedly isolated Russia from major financial markets, curbed its access to capital, and

SWIFT

FEATURE RUSSIA

put tremendous pressure on its economy.

The Russian middle class, international businesses, and many sectors of the economy have been severely affected, leading to capital flight, unemployment, and economic contraction. The standard of living for many Russians has declined, with rising inflation and decreased purchasing power affecting everyday life.

However, when it comes to the financial sector, the story is more complex. The Russian banking sector's adaptability has blunted the intended effects of sanctions. Non-Western alliances, state support, and structural adjustments have given Russian banks a lifeline that the West perhaps underestimated. Moreover, with oil and gas revenues still flowing in—albeit redirected—the Kremlin has had the funds necessary to prop up its banking system. These revenues have allowed Russia to maintain its fiscal policies and support the broader economy, thereby reducing the pressure on the banking sector.

There is also the aspect of sanctions fatigue. As the war drags on, some Western nations face economic pressures, leading to hesitations about further tightening sanctions. Additionally, loopholes in

enforcement have allowed Russia to continue leveraging cryptocurrencies and informal networks for financial transactions. The effectiveness of sanctions is thus undermined not only by Russia's adaptability but also by the challenges of maintaining a united front in the West as economic conditions worsen globally.

The Trump factor

The effectiveness and future of these sanctions are even more uncertain with the changing political climate in the United States. The recent return of Donald Trump to the presidency raises significant questions about the direction of US foreign policy concerning Russia. During his previous term, Trump took a less confrontational stance towards Moscow, often expressing a desire to improve relations. While it remains to be seen how the new administration will navigate the ongoing war and sanctions regime, analysts suggest that Trump may be more inclined towards negotiation rather than escalation. This shift could mean a softening of sanctions or at least less emphasis on expanding them, particularly

if Trump seeks rapprochement with Russia to focus on countering China’s economic rise. Trump’s approach might involve revisiting the terms of existing sanctions and potentially lifting some in exchange for concessions from Moscow, which could provide much-needed relief for the Russian banking sector.

According to Dmitri Trenin, a senior fellow at the Carnegie Endowment for International Peace, “Trump’s presidency might bring a recalibration of the US's approach to Russia. If Washington opts for dialogue over confrontation, we could see sanctions being dialled back or loopholes being allowed to ease tensions.”

This change, however, could lead to tensions with Europe, which has so far been united in sanctioning Russia under US leadership. If the US softens its stance, European allies may find it increasingly challenging to maintain a tough position without American support, especially as European economies also struggle with high energy prices and inflation. The potential divergence in transatlantic policies could create gaps that Russia might exploit, further undermining the effectiveness of the current sanctions regime.

As the world watches the political landscape shift, particularly with a change of leadership in the United States, the direction that sanctions—and ultimately the Russian banking sector—will take is a question that remains open.

The only certainty is that the next chapter will be shaped by a complex interplay of politics, economics, and international alliances. The Russian banking sector's fate, much like the broader geopolitical scene, is far from settled, and the coming years will be crucial in determining whether the adaptations made thus far will be enough to secure long-term resilience or merely a reprieve in an ongoing economic battle.

PROFESSOR JAY ZAGORSKY ECONOMIST

When people spend cash, they are limited to whatever paper money they have immediately on hand

'Cash ensures resilience in payment systems'

CL RAMAKRISHNAN

Professor Jay Zagorsky is an economist at Boston University’s Questrom School of Business, where he has taught more than 11,000 students and earned multiple awards for his teaching excellence. Prior to his role at Boston University, he spent over two decades as a researcher at Ohio State University, focusing on the causes and consequences of poverty and wealth.

He has published numerous scientific articles across various disciplines and authored four books. In addition to his academic work, he writes accessible, readerfriendly articles for news outlets, attracting millions of readers each month. Widely recognised for his expertise, he is one of Boston University’s most frequently quoted professors and is a regular guest on television, radio, and print media. Zagorsky's forthcoming book "The Power of Cash: Why Using Paper Money is Good for You and Society," is expected to hit the stands in a couple of months.

In an exclusive interview with International Finance , Professor Jay Zagorsky, discusses his book, the importance of paper money, the dark side of digital payments, threats posed by a cashless society, and much more.

What inspired you to write "The Power of Cash: Why Using Paper Money is Good for You and Society"?

Fifteen years ago I rarely used paper money. Instead, I charged everything on a rewards credit card to maximise the number of airline miles I could earn. My wife and I even made it three-quarters of the way around the world on “free tickets.”

Today I try to use paper money as much as possible. I switched because after researching this topic for many years I came to appreciate that what looks like a small decision, how people pay for purchases, actually has huge ramifications for individuals, businesses and countries.

Robin Hood was a mythic character who took from the rich and gave to the poor. Airlines rewards credit cards are a Reverse Robin Hood, where they take from the poor and give to the rich

For example, those “free” airline tickets I got actually were not free. Instead, credit card companies provide these free tickets to richer or financially sophisticated customers by charging poorer or financially unsophisticated customers.

Robin Hood was a mythic character who took from the rich and gave to the poor. Airlines rewards credit cards are a Reverse Robin Hood, where they take from the poor and give to the rich.

What helped change my opinion of cash was working with researchers at the Boston Federal Reserve, which is part of the US Central Bank. They wanted guidance in creating a new survey that tracked how people paid their bills and their purchases.

The survey showed US consumers were moving steadily away from paper money and toward cashless payments. I have spent several years trying to understand the ramifications of this switch.

Why do you believe it is important to preserve the use of paper money in today's digital age?

Keeping paper money around ensures businesses have a backup when electronic payments fail. For example, this past summer the world saw a number of widespread disruptions of electronic payments. In July a software security company called CrowdStrike released a faulty update, which crashed most computers running Microsoft Windows. The press focused on the multi-day disruption that this software caused in airline travel, but large numbers of major banks and financial companies were also taken offline for long periods. Another example is that the month before the CrowdStrike incident about one-third of all McDonald’s restaurants were temporarily shut in Japan because of problems with cashless payments.

Businesses cannot assume cashless payment systems will work all the time. Even when the cashless payment vendor

PROFESSOR JAY ZAGORSKY ECONOMIST

The cashless society depends on three legs: electricity, communications and computers. All three must work all the time for digital transactions to occur

claims their software is available 24 hours a day - seven days a week, there is no guarantee a business can access the software or conduct transactions. Keeping cash around ensures payments can always happen. To effectively use cash as a backup, employees must access and practice handling it.

You mention that the shift to digital payments could weaken national defence. Could you expand on how reliance on digital systems makes us more vulnerable to cyberattacks and natural disasters?

Keeping paper money in use is a key component of national defence. Shifting to a cashless society undermines a country’s security.

The cashless society depends on three legs: electricity, communications and computers. All three must work all the time for digital transactions to occur. When you have a cashless society, enemies can shut down an economy by disabling any one of those three legs, with attacks on the power network, breaking telephone cables, or cyberattacks on the computer system.

Cash, however, works even when all three legs are disabled. People with paper money do not need electricity, communications or computers to complete purchases. The current push to make the world’s transactions more cashless makes countries less resilient instead of more.

October’s announcement that Dubai launched a new “Cashless Strategy” where the city wants 90% of all transactions to be cashless

by 2026 does not sound right as adversaries seek easy ways to disrupt a government.

You argue that the shift away from cash has overlooked several negative consequences. Could you elaborate on how electronic payments negatively impact privacy?

Privacy is important. Many people do not want every aspect of their lives revealed. Electronic payments provide a permanent record of purchases for any company or government to analyse. One of my favourite studies was published in Science in 2020. A group of researchers primarily from MIT took three months’ worth of anonymous credit card records for 1.1 million people. They were able to determine the identities of 90% of the individuals. The study showed that even if a bank or financial service provider doesn’t give out the names and addresses of their clients, just looking at all your purchases can pinpoint who you are!

For example, cigarette purchases are legal around the world. However, the city where I live passed a law making it illegal for anyone born on or after 2000 to buy tobacco products. The ban covers not only residents, but also visitors. While the city has no current plans to do this, they could use credit and debit card records to find and fine cigarette buyers who were not old enough long after purchases were made.

In your book, you discuss how eliminating cash can lead to increased spending. Could you explain why people tend to spend more when they use digital payment methods instead of cash?

When you use a cashless payment linked to a credit card you can spend up to your credit limit. When a person uses a cashless payment method linked to their bank account or debit card, they can spend only the amount available in their account. When people spend cash, they are limited to whatever paper money they have immediately on hand. This limited budget is one reason why using cash makes people spend less. In my book “The Power of Cash: Why Using Paper Money is Good for You and Society,” I

discuss several other important reasons as well.

How does the move away from cash disproportionately affect lower-income individuals, and what solutions do you suggest to address this issue?

On my walk to work each day I pass several poor people asking for charity. In a cashless world, it is difficult to give these people money since many have issues that prevent them from opening bank accounts, handling mobile phones or doing any of the technical tasks like remembering complex passwords that are needed to fully function in a cashless society. It is simple to hand them cash, if you have some in your pocket.

The solution to supporting lower-income individuals is a very simple three-part process. First, maintain cash as a means of payment, for example by passing laws that make it illegal for businesses that deal with the general public to be cashless. Second, ensure continued access to cash, for example by preventing banks from

shrinking their ATM networks. Last, and this is where my book comes in, explain to businesses and people the advantages of continuing to use cash.

What do you see as the most pressing threat posed by a cashless society, and how do you think we can mitigate these risks without reversing the technological progress we've made?

Sudden loss of access to your funds makes it impossible to buy food, use transportation and purchase needed items. Having your funds in electronic records makes you very vulnerable to losing access, while holding some cash protects you.

World Bank data show large numbers of people in the Middle East and Africa do not have either a bank account or an account on their mobile phone. Leaders in the financial technology industry claim the solution is simple. Just have more mobile banking apps. However, each year I see a number of countries

PROFESSOR JAY ZAGORSKY ECONOMIST

PROFESSOR JAY ZAGORSKY ECONOMIST BANKING & FINANCE

INTERVIEW

With electronic money, criminals no longer have to be close. This means the number of criminals who can target an individual or business is much greater. Credit card fraud has ballooned worldwide, stealing vast amounts of money from people who never see the thieves

that have temporarily shut down or blocked access to their mobile phone networks.

Imagine you have all your wealth stored in a mobile phone app. Now imagine the government shuts off the cell network to fight an insurrection or catch terrorists. You are suddenly cut off from all your funds. With paper money, individuals always have access to their wealth.

In the book, you suggest that eliminating paper money could lead to increased crime.

How does the transition to digital transactions enable global criminal activity?

Digital payments increase crime since criminals can target us from anywhere in the world. Many people are worried that carrying cash makes them vulnerable to criminals. I agree that carrying cash makes you a potential target. However, to steal your cash the criminal has to be physically nearby. With electronic money, criminals no longer have to be close. This means the number of criminals who can target an individual or business is much greater. Credit card fraud has ballooned worldwide, stealing vast amounts of money from people who never see the thieves.

You criticise the portrayal of a cashless society as a utopia. How do you think technologists have misunderstood the implications of a completely digital economy?

The cashless society is a utopia for international criminal gangs who now can scan, con and extort money from anyone in the world. The cashless society is ideal for credit card companies, banks, and financial technology firms, as they can earn a commission of between 2% and 5% on every financial transaction. Additionally, the cashless society benefits large technology companies that prefer remote transactions over face-toface interactions.

Unfortunately, while the cashless future looks bright for technologists I see the problems in people’s everyday lives. Recently, I went for a walk and witnessed an incident at a parking lot in the neighbourhood shopping area. The lot used to accept coins in the parking metres but recently switched to cashless transactions. Two women were trying to pay for parking using the electronic kiosk and having a very frustrating time. They finally gave up and drove away. The utopia promised by the company that installed cashless parking systems didn’t work and the

local businesses in that shopping area lost two customers who were ready to put coins into a metre.

What would the restoration of paper money and traditional banking infrastructure cost the economy, and how could this affect taxpayers?

Almost all countries, except for Sweden and China, still have large amounts of paper money in circulation. Every country including Sweden and China still has a large number of traditional banks. We do not need to restore paper money. Instead, we need to encourage people to use it and businesses to accept it.

Given the global trend toward digital payments, do you think there's a realistic path forward that balances the benefits of technology with the need to preserve cash, or is a fully cashless society inevitable?

Last year the US financial companies spent $1 billion advertising credit cards. The amount spent advertising the advantages of cash was zero. When people are told through relentless advertising that the cashless economy is great they will believe it.

Seventy-five years ago tobacco companies around the world relentlessly advertised cigarette smoking. Today, many countries ban cigarette advertising and many packs of cigarettes have dire warnings. My goal through writing “The Power of Cash: Why Using Paper Money is Good for You and Society” and speaking to news publications is to make people stop and think about what we are giving up by getting rid of paper money. My guess is if you spend a few minutes thinking about the downsides of a cashless economy you will join me in carrying cash again and spending it in shops, restaurants and other places you frequently visit.

The acquisition of Commerzbank shares by UniCredit did not go unnoticed within German political circles

Is UniCredit building a European banking empire?

IF CORRESPONDENT

The European banking sector has been abuzz since the announcement of UniCredit's major takeover initiatives, creating ripples across financial and political circles alike. The recent developments have pointed to an increasingly assertive UniCredit, seeking to consolidate its power not only in its home country of Italy but also in Germany.

Since September 2024, the Italian bank's hefty stake in Germany's Commerzbank has sparked a broad debate, leaving many wondering if this move is part of a larger push that raises concerns over competition and operational autonomy across Europe.

Is UniCredit creating a banking behemoth? Or, more worrisomely, is it undermining the independence of financial institutions in the region? This article explores these issues in depth, highlighting the critical events since September 2024 and what the takeover might mean for the European banking landscape.

The initial shockwave

In September 2024, UniCredit surprised market watchers and financial analysts alike when it announced its acquisition of a significant stake in Commerzbank, Germany's second-largest lender. The move was a clear statement of intent, signalling UniCredit's ambitions beyond the Italian banking landscape and aiming to expand its foothold into Germany, Europe's largest economy.

Commerzbank, a historic institution in German finance with deep connections to the country's Mittelstand, small and medium-sized enterprises, had long prided itself on its independence. Thus, the Italian financial giant's purchase sent tremors not only through financial markets but also through German political circles. Many stakeholders questioned whether the move foreshadowed a full-scale takeover, and some went as far as to say that Germany's economic sovereignty was being challenged.

The backdrop to this acquisition involves Germany's banking challenges over the last decade. Commerzbank, like many other European banks, has struggled with low interest rates, regulatory pressures, and economic uncertainty.

Despite efforts at restructuring and cost-cutting, it remained vulnerable to takeover bids. By acquiring this stake, UniCredit effectively positioned itself as a potential saviour for Commerzbank, which in turn left the German institution questioning its ability to maintain autonomy.

In recent years, Germany's banking sector has faced considerable turmoil, with both Deutsche Bank and Commerzbank struggling to maintain profitability amid challenging market conditions and evolving regulations.

The government has long been

concerned about the stability of its banks, and there have been past discussions about merging Deutsche Bank and Commerzbank to create a national champion. However, such plans never came to fruition, leaving Commerzbank exposed to international acquisition attempts. UniCredit's strategic move, therefore, filled this gap, offering a potential rescue plan for Commerzbank's lagging performance while raising concerns about German economic sovereignty.

Commerzbank's push for independence

In response to UniCredit's stake acquisition, Commerzbank's board of directors made a clear intention to retain operational independence. CEO Manfred Knoll has repeatedly emphasised that the bank will continue to operate autonomously, with its German business and customer base remaining intact. In his public statements, Knoll has insisted that the acquisition should be seen as a "strategic partnership" rather than a takeover.

However, the reality on the ground appears more complicated. UniCredit has already hinted at seeking increased influence within Commerzbank, which fuelled speculation that a full takeover may be on the horizon. Internal discussions at Commerzbank have reportedly turned to safeguarding its governance and operational decisionmaking—an effort to prevent excessive meddling by the Italian stakeholder.

Meanwhile, UniCredit's CEO, Andrea Orcel, has consistently communicated his belief in "synergy potential" between the two banks, leaving many in doubt about how long Commerzbank's independence can last under these circumstances.

The internal dynamics within

Commerzbank have become increasingly tense. Reports suggest that several members of the management board are wary of UniCredit's intentions, fearing that their influence might be eroded over time. Additionally, employee representatives on the board have expressed concerns about potential job losses and cultural shifts that could come with increased Italian oversight. Commerzbank's history of supporting Germany's Mittelstand businesses has always been a point of pride, and many fear that this focus could be diluted under UniCredit's leadership.

Sovereignty at risk?

The acquisition of Commerzbank shares by UniCredit did not go unnoticed within German political circles. The takeover has sparked an intense debate among policymakers regarding Germany's economic sovereignty. In a country

where banking institutions are tightly integrated with industrial policy, the prospect of a foreign entity influencing a significant portion of the banking industry has made many politicians uneasy.

Germany's Finance Minister, Lars Seidel, recently urged caution.

"Our financial institutions are vital to maintaining economic stability in Germany. We must be vigilant about foreign influence undermining our banks' ability to serve our people and businesses," Seidel remarked in an October press conference.

Representatives from Germany's influential Greens and Social Democrats echoed this sentiment, stressing the importance of keeping domestic control over institutions that provide essential capital to the backbone of Germany's economy—its SME sector.

The issue of foreign ownership

has always been a sensitive topic in Germany. The country has a tradition of supporting local industries through close cooperation between banks, businesses, and the government. The Mittelstand— the backbone of Germany’s industrial prowess—relies heavily on accessible and flexible financial services from

banks like Commerzbank. A takeover by a foreign bank like UniCredit could alter these relationships, leading to stricter lending criteria or different strategic priorities that might not align with the interests of German enterprises.

Critics of UniCredit's stake in Commerzbank also include regulatory authorities. BaFin, Germany's financial regulatory body, has indicated its intent to closely monitor the future moves of UniCredit.

BaFin's spokesperson noted that "any further increase in ownership or influence by UniCredit will be scrutinised to ensure that German financial stability is not compromised." This suggests that UniCredit's ambitions might face stiff regulatory challenges if it attempts to acquire a controlling interest in Commerzbank.

Several members of the Bundestag have raised concerns about the implications of such a takeover for Germany's long-term financial security. Some have proposed new legislation that would prevent foreign banks from acquiring controlling stakes in key German financial institutions without government approval. This legislative push underlines the discomfort within the political establishment regarding

Source: Statista

Total assets of UniCredit from 2019 to 2023 (In Bllion Euros)

UniCredit's growing influence over Commerzbank.

Market reactions and antitrust concerns

The market's response to UniCredit's stake acquisition has been mixed. While some investors see potential in the collaboration—with increased scale and synergies benefiting both entities— others worry that a hostile takeover may ultimately undermine Commerzbank's position within the German economy. Commerzbank shares initially surged following the news, largely driven by speculation that UniCredit would soon make an official takeover bid.

However, subsequent statements from both banks have done little to clarify their intentions, leaving uncertainty lingering in the air. UniCredit has yet to file an official bid, but the market's consensus indicates that it's only a

matter of time. Analysts have noted that UniCredit's recent capital-raising measures and Orcel's assertive public remarks suggest a strategy designed to absorb Commerzbank entirely.

This ambiguity has left the shareholders and analysts divided. On one side are those who believe that a merger could be highly beneficial, providing cost savings through shared operations, improved digital capabilities, and a more diversified revenue stream. On the other hand there are those who worry that such a merger could create significant redundancies, particularly in Germany, leading to job losses and discontent among employees and clients.

In addition, the uncertainty has affected Commerzbank's relationships with some of its major corporate clients. Reports indicate that several large clients are evaluating their options,

concerned about the possible changes in management or lending practices if UniCredit takes full control. This apprehension is understandable given UniCredit's reputation for aggressive restructuring in previous acquisitions, which often included significant costcutting measures.

UniCredit's expansionist drive has also drawn scrutiny from European Union anti-trust authorities, raising questions about potential impact on competition within the banking sector. Critics argue that UniCredit's push into Germany, if successful, could reduce competition and weaken financial stability, as the consolidation of major banking institutions risks creating entities that are "too big to fail."

Moreover, European anti-trust regulators are reportedly closely watching developments. The EU's Competition Commissioner, Margrethe Vestager, has previously expressed concerns about increasing concentration within the banking sector, fearing that a lack of competition could reduce the diversity of financial products available to European consumers and businesses. If UniCredit were to take control of Commerzbank, it would further entrench itself as a European banking powerhouse—potentially giving it undue influence in setting loan terms, business financing, and regulatory lobbying.

The European Central Bank (ECB) has also expressed concerns, highlighting that cross-border consolidation could introduce systemic risks. A consolidated banking giant might become challenging for regulators to manage during crises, due to the varying regulatory environments and economic conditions across Europe.

ECB officials have been careful in their statements, emphasising that while consolidation could lead to greater efficiencies, it could also create

complexities that are challenging to resolve during times of economic stress.

There is also a broader concern that cross-border banking takeovers could diminish national resilience to financial crises. A UniCredit-Commerzbank merger, for example, might lead to a situation in which German savings are being used to bail out Italian loans or vice versa—a scenario that could prove politically toxic and economically damaging in times of crisis. This is particularly concerning given the divergence in economic performance between Italy and Germany in recent years, with Italy's economy remaining more fragile and prone to shocks.

Banco BPM in crosshairs

At the same time that UniCredit has been making waves in Germany, the Italian bank has also launched a 10 billion euro ($10.5 billion) takeover bid for its domestic rival, Banco BPM.

Banco BPM has identified the offer as "unsolicited," indicating that it is not eager to entertain UniCredit's advances.

The Banco BPM bid has further contributed to fears of monopolistic ambitions. Industry insiders speculate that the Italian lender is actively working to resist UniCredit's efforts, but its capacity to do so remains in question. Analysts point out that Banco BPM's options are limited due to a competitive Italian banking landscape that has been suffering from the same macroeconomic challenges as Commerzbank—making it more vulnerable to an aggressive bidder like UniCredit.

For UniCredit, the Banco BPM bid represents a continuation of its growth strategy, focusing on creating a banking giant that spans multiple European markets. If successful, the merger would become one of Italy’s largest banking institutions, giving UniCredit a dominant position in domestic and international markets.

However, the unsolicited nature of the bid has raised eyebrows, with critics arguing that UniCredit is pursuing an expansion strategy that disregards the wishes of existing stakeholders.

The simultaneous bids for Commerzbank and Banco BPM paint a picture of a UniCredit with grand ambitions. But with these ambitions come questions of overreach. A UniCredit that successfully absorbs both Commerzbank and Banco BPM could potentially control large segments of the European banking landscape, raising further anti-trust concerns. Are we witnessing the birth of a banking giant that could stifle competition, or will the regulatory framework put a leash on UniCredit's ambitions?

Stakeholder perspectives

As UniCredit attempts to expand its footprint, there are many stakeholders watching anxiously. Among them are Commerzbank's corporate clients, particularly German SMEs, who are apprehensive about the potential consequences of a UniCredit-controlled Commerzbank.

The concern is that an Italian management approach might not fully align with the needs and expectations of these German companies. Many of these businesses rely on relationship-based banking, something they fear might be lost in a takeover driven by synergies and cost-cutting.

Employees, too, are worried about job security. Both Commerzbank and UniCredit have undergone rounds of layoffs in recent years, as European banks have struggled to improve profitability in an era of low interest rates.

The fear is that a merger would lead to further job losses, particularly in overlapping segments such as retail banking and back-office operations. Labour unions in both Germany and Italy have already voiced their opposition to a potential takeover, calling for guarantees of job security and transparent communication.

The prospect of job cuts is particularly

worrying for Commerzbank employees. Labour unions have organised protests and petitioned management to provide assurances regarding employment security.

In a country like Germany, where labour laws are robust and unions have significant influence, any potential layoffs could face serious opposition, potentially complicating UniCredit's integration plans. Similar concerns have been voiced by Banco BPM employees in Italy, who fear that UniCredit’s history of cost-cutting could spell trouble for their job security.

Competitors, meanwhile, are wary of UniCredit's strategy. If the Italian lender succeeds in creating a cross-

border banking conglomerate, it would potentially dwarf most of its European rivals, creating an imbalance in the competitive landscape.

Deutsche Bank, in particular, has expressed concerns that a UniCreditCommerzbank combination could lead to distorted market dynamics in Germany, where Commerzbank's role in financing SMEs is critical to the economy's health.

Other European banks are watching the developments closely. The potential creation of a mega-bank could prompt a wave of consolidations, as other institutions scramble to maintain their competitive edge. Smaller regional banks, in particular, are concerned that

UniCredit's recent manoeuvres have been ambitious, but they raise questions about the sustainability of such aggressive expansion. Historically, European banking mergers have been fraught with difficulty, often hampered by cultural differences, regulatory hurdles, and the practical challenges of merging operational systems. UniCredit itself has struggled with integrating previous acquisitions, and a merger with Commerzbank would be no COMMERZBANK GERMANY

they could be pushed out of the market entirely, as larger entities with more extensive resources and wider networks dominate the playing field.

Is UniCredit's growth strategy sustainable?

less challenging.

Furthermore, UniCredit's push to consolidate power comes at a time when the European economy faces headwinds, including sluggish growth and rising geopolitical tensions. With interest rates inching higher and inflationary pressures mounting, the path to profitability for European banks remains narrow.

Some analysts believe that UniCredit's aggressive strategy could backfire, particularly if economic conditions worsen. The complexity of integrating multiple institutions, coupled with the regulatory scrutiny such moves invite, could well create an unsustainable burden.

Cultural integration poses another significant challenge. Commerzbank's culture, which has traditionally focused on maintaining close relationships with German SMEs and supporting local economic growth, may clash with UniCredit's more international and cost-focused approach. Such cultural differences have derailed banking mergers in the past, and UniCredit will need to tread carefully to ensure that the value of Commerzbank’s client relationships is not eroded in the process.

UniCredit's recent capital-raising measures indicate that it is preparing for a significant outlay, but the risk of overleveraging remains. The banking sector is still haunted by the memory of the 2008 financial crisis, and regulators will be keen to ensure that any merger does not create systemic risks. If UniCredit's growth strategy proves unsustainable, it could have far-reaching consequences not only for the bank itself but also for the broader European financial system.

A new dawn for European banking?

The unfolding story of UniCredit's stake acquisition in Commerzbank—as well as

its bid for Banco BPM—is emblematic of broader challenges and questions facing the European banking sector today. On the one hand, consolidation may offer benefits such as improved efficiencies, cost savings, and a stronger balance sheet to compete with the giants of Wall Street. On the other hand, the spectre of reduced competition and the potential loss of autonomy for key national institutions looms large.

The European Commission will likely be at the centre of this debate in the coming months. Regulators will need to weigh the benefits of consolidation against the potential risks to competition, financial stability, and national sovereignty. The stakes are high: if UniCredit is allowed to proceed unimpeded, it could set a precedent for other banks, leading to a wave of consolidation that might leave Europe with just a handful of mega-banks controlling the majority of assets and lending.

For now, UniCredit has sent a clear

signal—it's intent on becoming a leading player on the European stage, regardless of the obstacles. Whether this leads to a more robust European banking sector or a fragile one dominated by institutions that are "too big to fail," remains to be seen.

If the ambitions of UniCredit succeed, it could herald a new era of European banking, marked by fewer but more formidable players capable of competing on the global stage. But with this potential comes a real and pressing risk: these new banking behemoths may prioritise profitability over the diverse needs of the European economy. As the story unfolds, the key question remains—will the push for growth lead to a stronger, more unified banking landscape, or will it undermine the very competition that has driven Europe's financial sector for decades?

Assupol CMO: Effective communication key to success

Assupol CMO Velmah Nzembela stated that the commitment to innovation has profoundly enhanced the client experience

In 2024, Assupol Holdings was awarded the prestigious title of Most Innovative Life Insurance Company in South Africa. This recognition highlights the company's pioneering approach in the industry.

Velmah Nzembela CMO, ASSUPOL

Velmah Nzembela, Head of Group Corporate Affairs and Chief Marketing Officer, emphasises the significance of this accolade, which not only validates Assupol’s commitment to excellence but also drives its ongoing innovation efforts.

With a history marked by groundbreaking milestones such as rapid claims processing and advanced digital platforms, Assupol continues to redefine client experiences. Velmah Nzembela further discusses the challenges faced, strategies for overcoming them, and future trends shaping the insurance landscape.

Assupol has been named the Most Innovative Life Insurance Company in South Africa for 2024. What does this recognition mean to you and the company?

Being named the Most Innovative Life Insurance Company is a great honour and a testament to our commitment to excellence and forwardthinking. This recognition not only validates our efforts but also motivates us to continue pushing the boundaries of innovation in the insurance industry. It justifies our dedication to meeting the evolving needs of our clients through creative and effective solutions.

Can you elaborate on the selection criteria that were used to determine this award? How did Assupol meet or exceed these criteria?

The selection criteria for this award typically focus on several key areas including the implementation of cutting-

edge technology, introduction of new and effective products or services, client-centric approaches and overall impact on the industry. Assupol excelled in these areas through our proactive approach to integrating technology, along with our dedication to delivering tailored solutions that enhance client satisfaction and engagement.

Assupol has a rich history of innovation. Could you highlight some key moments or initiatives that have defined the company’s approach to innovation over the years?

Our journey of innovation has been marked by several significant milestones. For instance, becoming the first insurance company to pay claims within 48 hours, setting a new standard for the industry, an approach that has now become a norm across the industry. We are constantly reinventing ourselves to be ahead of the curve compared to our competitors.

How has Assupol's commitment to innovation impacted client experience? Can you share any specific examples of how these innovations have improved service for your customers?

Our commitment to innovation has profoundly enhanced the client experience. For example, our digital platforms have streamlined the policy management process,

allowing customers to access their information and make changes in real time. We have improved our claims system, allowing for claims to be processed within minutes. These advancements have not only improved convenience but also helped build a more personalised and responsive relationship with our clients.

What were some of the major challenges Assupol faced while implementing innovative strategies, and how did the company overcome them?

One of the major challenges we faced was integrating new technologies with our existing systems while ensuring minimal disruption to our services. To overcome this, we adopted a phased approach to implementation, allowing for thorough testing and feedback before full-scale deployment. Additionally, we invested in comprehensive training programmes for our staff to ensure they were well-equipped to adapt to the new technologies and provide exceptional support to our clients.

Looking forward, what are some of the future trends or technologies that you believe will shape the life insurance industry, and how is Assupol preparing for these changes?

Future trends in the life insurance industry are likely to include further

advancements in AI and machine learning, which will enable even more precise risk assessments and personalised services. At Assupol, we are actively exploring these technologies and investing in research and development to ensure we are at the forefront of these changes, ready to integrate them into our offerings to better serve our clients.

In your role as Head of Group Corporate Affairs and CMO, how do you ensure that the company's innovative initiatives are effectively communicated both internally and externally? Effective communication is crucial to the success of our innovative initiatives. Internally, we focus on regular updates and training sessions to ensure our employees are well-informed and aligned with our strategic goals. Externally, we utilise a mix of channels including press releases, social media, and client newsletters to share our innovations and their benefits. We ensure that all our stakeholders are fully aware of and engaged with our advancements by maintaining clear and consistent communication.

The researchers identified significant disparities in poverty, as measured by a multidimensional score, among slums in Lagos State

Transforming Lagos slums: Battling poverty head-on

IF CORRESPONDENT

Lagos stands as Nigeria's economic powerhouse, yet it also harbours some of the country's most deplorable slums. These areas are characterised by profound poverty, where basic needs such as food, water, housing, healthcare, and education remain unmet. Poverty is a multifaceted phenomenon which transcends mere financial considerations. Conventional methods often analyse poverty in Lagos slums with income criteria as the primary concern. If an individual's income falls below a specified threshold, they are considered impoverished. Though this method identifies financial distress it overlooks several dimensions of poverty, like inadequate access to education, healthcare, clean water, and satisfactory living conditions.

In a study examining poverty in the slums of Lagos State, three fellow development economists, including Oluwaseyi Omowunmi Popogbe, employed a mathematical framework to model multidimensional poverty

Assessing poverty necessitates a multifaceted framework rather than solely an income-based perspective. Multidimensional poverty entails examining various facets of deprivation to have a comprehensive understanding of the experience of living in poverty. It aids policymakers and researchers in recognising that an individual may continue to face difficulties despite having some income due to the lack of other vital services.

In a study examining poverty in the slums of Lagos State, three fellow development economists, including Oluwaseyi Omowunmi Popogbe, employed a mathematical framework to model

multidimensional poverty. They employed the fuzzy set method. The fuzzy set method emerged in the 1990s as a substitute for relying solely on financial indicators to measure poverty.

The conventional monetary approach often categorises individuals as either "poor" or "not poor" according to defined thresholds. Poverty manifests on a continuum, with individuals encountering varying degrees of lack in multiple facets of their existence. The fuzzy set methodology addresses this by allocating varying degrees of membership to distinct poverty indicators.

The researchers identified significant disparities in poverty, as measured by a multidimensional score, among slums in Lagos State. Their discoveries will allow economists and policymakers to discern the many forms of deprivation experienced by individuals in slums. This should assist them in comprehending how to enhance their lives in a more focused and efficient manner.

The

Lagos story

The research concentrated on five major slums situated near the coastline in Lagos State. As part of a $200 million loan initiative, the World Bank has designated these slums for enhancement to improve drainage and solid waste management.

They selected 400 participants from the five slums: Makoko, Iwaya, Ilaje, Ijora Badia, and Amukoko.

Avijit Hazra and Nithya J. Gogtay, experts in biostatistics and research technique, assert that a minimum of 384 samples is suitable for a big population size. Nonetheless, the chosen sample for this study constrains the capacity to generalise

the findings to other slums, particularly those with distinct characteristics.

The multidimensional poverty index reached its peak in Makoko and Iwaya. These scores signify extreme poverty since they exceed the threshold of 0.50.

Conversely, Amukoko exhibited the lowest multidimensional poverty index, indicating milder deprivation across all measures.

Makoko and Iwaya face substantial challenges in education, sanitation, and nutrition, which contribute to their higher poverty rates compared to other communities.

Makoko's coastal position, characterised by improvised housing and inadequate infrastructure, exacerbates its susceptibility. Iwaya faces comparable difficulties in educational and healthcare services. These characteristics render both places more impoverished than other slums.

Among the three primary aspects of poverty assessed, education exhibited the greatest level of deprivation across all localities. This underscored the restricted formal education in the population.

Makoko and Iwaya demonstrated the most significant educational deficits. Notwithstanding certain advancements, especially in child enrolment, many neighbourhoods continue to exhibit significant disadvantages.

The second dimension that demonstrated a significant disadvantage was living standards. Variations existed among various slums. Makoko and Iwaya experienced a higher prevalence of sanitation issues.

The third dimension in the category of severe deprivation was health. Indicators encompassed mortality and nutrition. Numerous slums experienced elevated mortality and nutrition, significantly influencing their multidimensional poverty indices.

Other localities, such as Amukoko, demonstrated superior sanitation results. Conversely, the indicators for electricity, flooring, and cooking fuel typically exhibited reduced levels of deprivation, with the majority of slums registering scores around or below 0.03 in these categories.

The incidence of both severe and minor ailments, along with inadequate medical care, resulted in elevated mortality rates. Inadequate sanitation may contribute to health problems.

In Makoko and Iwaya, the lack of proper sanitation facilities and waste management has resulted in the disposal of refuse into the waterways.

Notwithstanding this, personal hygiene practices, including the use of clean water, soap, and regular brushing, were widespread. This contributed to maintaining a relatively low sanitation score in comparison to other health-related concerns.

Other slums exhibited comparatively superior garbage collection systems and enhanced sanitation standards.

What must be done?

One cannot improve the quality of life in Amukoko, Makoko, and Iwaya without addressing many faces of poverty, including inadequate infrastructure and limited access to essential services. These densely populated areas, often characterised by informal settlements, lack of proper sanitation, and insufficient housing, can become hubs of opportunity and sustainable living with targeted interventions. Such an endeavour involves a multitude of complexities and opportunities.

Infrastructure is a critical foundation for improving slum conditions. Roads and transportation systems must connect slum residents to the broader city, offering better mobility and economic opportunities. The people of these slums cannot educate themselves or participate in the economy without affordable public transport tailored to their needs.

There is also the question of reliable electricity and energy solutions, such as extending the grid or introducing renewable energy options like solar panels, which can provide consistent power to households. Offering subsidised rates for the use of sustainable energy to low-income families would significantly improve their situation.

Of course, clean drinking water and proper sanitation are equally vital. Installing piped water systems, boreholes, and community toilets, along with effective waste management solutions, significantly reduces health risks and improves living conditions.

One of the most important facets is housing in slums, which requires special attention. Imagine the impact that government and NGO partnerships can achieve through affordable housing projects, ensuring durable homes for these unfortunate individuals.

Only if financial institutions are willing to lend them microloans and subsidies, can their livelihoods and economic independence significantly improve. In a similar

vein, granting land titles offers security and reduces the constant threat of eviction, fostering a sense of stability. Finally, none of the above would mean anything without the legal frameworks in place to protect residents from exploitation and to ensure fair and equitable treatment within the housing sector.

For slum dwellers, education is a transformative process. Free schools in the area can raise literacy rates and skill levels among the young. Providing scholarships, free uniforms, and learning materials ensures that education is accessible to all.

Vocational training centres provide practical skills that enhance employability, focusing on trades like carpentry, tailoring, and IT.

The education process shouldn't stop with children, as adult education programmes, including literacy and financial literacy workshops, empower older residents to manage their resources effectively and explore new economic opportunities.

Without a doubt, healthcare access is another pillar of improved quality of life. Community clinics that offer affordable or even free services could ensure that residents receive the essential care that they deserve. But it all begins with training health workers in first aid and preventive care, which address immediate health concerns.

Almost all communities aiming to improve life expectancy and quality of life prioritise health campaigns, including vaccination drives and disease screenings. Women and children are often the most vulnerable groups in any community, and targeted programmes for maternal and child health can significantly reduce mortality rates.

Number of people living in extreme poverty in Nigeria from 2016 to 2024 (In 1,000s)

Source: Statista

Adding cleanliness drives to the mix to educate residents about hygiene and encourage waste segregation and recycling significantly raises awareness and creates jobs.

Economic empowerment is crucial for encouraging self-sufficiency within slums. Job creation through the establishment of micro-industries and cooperative businesses can provide local employment opportunities. Government policies promoting local businesses to hire from these areas alleviate unemployment.

Access to microfinance, including low-interest microloans, supports small businesses and fosters financial independence. Programmes for skill development equip residents with the necessary skills to compete in the job market. Partnerships with companies for internships and apprenticeships provide invaluable practical experience.

Community engagement and leadership are essential for sustainable development. Local committees representing residents’ interests ensure participatory governance and foster a sense of ownership and responsibility. Platforms for youth and women to voice their concerns contribute to building inclusive communities.

Programmes addressing gender equality and domestic violence enhance social well-being. Systems for peaceful conflict resolution prevent disputes from escalating, while training community leaders in mediation strengthens social harmony.

Green spaces, such as parks and recreational areas, can improve mental and physical health. Urban farming projects provide fresh produce and promote self-sufficiency.

Renewable energy projects, including community solar farms and biogas systems, reduce reliance on fossil fuels. Training residents to maintain these systems ensures sustainability and creates jobs. Disaster resilience measures, such as flood control systems and disaster preparedness training, protect lives and property.

Regular audits and feedback mechanisms enhance accountability and outcomes. Integrating slum development into broader urban planning ensures that these efforts align with the city’s growth. Policies promoting affordable housing, healthcare, and education address systemic inequalities and create a more inclusive urban environment.

Digital literacy programmes, coupled with affordable access to smartphones and internet connections, can bridge the digital divide and enhance employability. Smart solutions, such as apps for reporting infrastructure issues, improve service delivery.

Telemedicine services bring healthcare to residents’ doorsteps. Data-driven planning, which utilises information on slum demographics and needs, guarantees targeted and effective interventions.

Promoting local arts, crafts, and cultural events fosters a sense of identity and pride within the community. Patronage of local artists provides socio-economic benefits, and

mentorship programmes pair young residents with professionals who inspire them to pursue their dreams. Success stories not only boost morale and motivation within the community, but sports and recreational activities also enhance community cohesion and physical fitness, thereby improving the overall quality of life.

Partnerships and collaborations can improve slum conditions, government-NGOs can ensure efficient resource use, and joint programmes can address multiple issues simultaneously. Similarly, CSR (Corporate Social Responsibilities) initiatives can fund vital projects, including skill training and employment programmes. International aid and collaborations with global organisations bring expertise and resources, enabling innovative solutions.

Amukoko, Makoko, and Iwaya slums demand a comprehensive approach combining infradevelopment, education, healthcare, and financial empowerment with sustainable practices and community engagement.

Tailored interventions, designed with inclusivity and cultural sensitivity, can transform these areas into vibrant, thriving communities. By encouraging partnerships between governments, NGOs, and residents, the potential for meaningful change becomes a reality, offering hope and opportunity for all.

Ghana faces challenges as Mahama takes office

The global inflationary impact of a Middle East conflict extends beyond energy prices

IF CORRESPONDENT

Former President John Dramani Mahama claimed a historic comeback victory in Ghana’s presidential election, which took place in December 2024, defeating the ruling New Patriotic Party (NPP) as voters punished the incumbent government for the way they handled the economic crisis.

Vice-President Mahamudu Bawumia, the NPP candidate, conceded defeat on December 8, acknowledging public frustration over surging living costs and economic turmoil.

Photo Credits: johnmahama.org

Bawumia's loss ended the eight-year NPP rule under President Nana AkufoAddo, during which the West African nation grappled with high inflation and a debt default. For Mahama, who served as president from 2012 to 2017, the victory marks a triumphant return after unsuccessful bids in 2016 and 2020.

Mahama also becomes the first leader in Ghana’s Fourth Republic to regain the presidency after losing re-election. He has pledged to tackle corruption by creating an office to scrutinise government procurement exceeding $5 million, to curb graft.

However, as per Theophilus Acheampong, Associate Lecturer, University of Aberdeen, the West African nation immediately needs to find a balance between the dual objectives of living within its means and achieving economic growth that creates sustainable jobs for its teeming youth.

What are we talking about?

Ghana has been facing an economic crisis since 2022 when it was forced to seek assistance from the International Monetary Fund (IMF) in order to meet its payments to the rest of the world and restore the health of its government finances. This was the second time in three years that Ghana had to tap the IMF, and the 17th since independence in 1957.

"Though inflation which peaked at 54% in 2022 and the country’s currency, the Cedi, have stabilised somewhat since mid-2023 under IMF-supported reforms, these improvements have not been significant enough to be felt by citizens. Inflation remains sticky. Monthly consumer inflation figures have averaged 22.85% from January to November 2024, below the pre-crisis (2017-2021) average of 10.14%," Professor Acheampong said.

The average unemployment rate in Ghana rose to 14.7% in the first

three quarters of 2023. The number of unemployed youth aged between 15 and 35 rose from about 1.2 million to over 1.3 million during the same period, while the rate among females remained consistently higher than males.

According to a recent report on voter concerns (prepared by the National Commission for Civic Education), the major poll issues that emerged were the economy, jobs, education, and roads and infrastructure provision. The key concern of the economy is the declining living standards.

The study, published in October 2024, saw voters being particularly focused on issues surrounding the government's Free Senior High School (SHS) policy, while younger voters were increasingly concerned about employment opportunities.

The Ghanaian government, in the leadup to the polling day, also took aggressive

steps to halt the decline of the national currency Cedi amid a challenging macroeconomic environment.

The Cedi has been under pressure for several years. Like practically every African and emerging market currency, the Cedi weakened against the US dollar during the COVID-19 pandemic, during which time traders on foreign exchange markets sought the perceived safety of dollar-denominated assets.

The Cedi suffered further in 2022, when Ghana defaulted on most of its external debt amid rising debt costs, higher interest rates, and excessive government borrowing. Since the start of 2020, the US dollar has gained almost 180% against the Ghanaian Cedi, which currently sits at 15 to the dollar, an increase from 11 in May 2023.

In its attempt to halt further declines in the currency, the government tried to prevent pension fund managers from investing in offshore assets in an attempt to limit foreign exchange outflows. While Ghanaian pension funds have tended to invest in domestic assets such as government bonds, this has changed in light of the debt default, and more fund managers have taken to increasing their exposure to overseas assets.

Under current laws, pension funds are allowed to invest up to 5% of their total assets abroad, but the national pensions regulatory authority allegedly threatened to sanction funds who attempt to move assets, as per the Reuters report which emerged in December 2024. The authorities, however, denied there was any resistance to asset movement.

As per Joseph Appiah, vice-president at Accra-based investment banking firm Black Star Group, attempts to stabilise the Cedi have “impacted” market dynamics, particularly as efforts are made to maintain currency stability in the leadup to the election period. While the Cedi has regained some ground against the

dollar over November 2024, appreciating by about 7%, Appiah doubts this can be sustained.

Ghana is known for its high reliance on imports for essential goods, including staples like rice and poultry. The collapse in the value of the Cedi has contributed to significantly higher inflation on these goods. As per Appiah, a weak Cedi has also resulted in the households’ purchasing power getting reduced, along with their daily incomes.

In 2023, prices rose in Ghana at a rate of over 37%, with the World Bank reporting that “high inflation –particularly in food prices – has worsened living standards, pushed more people into poverty, and increased the risk of food insecurity.”

The historically weak Cedi has also become a threat to the Ghanaian authorities’ attempts finally to escape the cycle of frequent default. While Ghana reached a deal in January 2024 to restructure $5.4 billion in debt to its official creditors, and recently bondholders agreed to accept a 37% haircut on $13 billion worth of debt, the West African country is still grappling with a debt pile in excess of $50 billion.

A weak Cedi is problematic because it makes dollar-denominated debt repayments more expensive in local terms.

Economic crisis and its impact

As Ghana's economic fundamentals took a plunge in the past few years, the outgoing NPP administration sought to blame the aftershocks of the RussianUkraine war and the pandemic behind the phenomenon, However, as per Professor Acheampong, evidence shows otherwise.

"The major contributory factor was the poor management of its public finances, which meant the country did not have enough buffers to withstand

these external shocks. Ghana’s economy and finances were already precarious before Putin invaded Ukraine in February 2022. Fiscal policy in Ghana is notably procyclical with a clear bias towards overspending during good times. This is related to commodity and electoral cycles. That is, fiscal deficits tend to increase sharply in election years, and have been even more so following the commercial discovery of offshore oil in 2007," he added.

The effects of the economic and financial crises since 2022 have been 20-year-high inflationary trends, local currency depreciation, dwindling foreign reserves, rising debt vulnerabilities, and increased poverty. At its height in December 2022, inflation reached 54%, the highest levels in nearly 20 years and public debt was 109% of GDP.

The above-mentioned economic challenges also forced Ghana to default on its external debt obligations in December 2022 and approach the IMF for a $3 billion bailout, which was approved in May 2023. Ghana recently completed a three-step, domestic, bilateral, and commercial, debt restructuring process, which began in December 2022.

Poverty, on the other hand, has been rising in Ghana since 2022. About 850,000 citizens in 2022 were pushed into poverty due to rising costs of goods and services. Ghana’s poverty rate is forecast to rise to 30.6% of the population by 2026, indicating the extent of the impact of the economic and financial crises on many citizens.

When Nana Akufo-Addo won the presidential election on his third attempt in 2016, many saw it as a turning point. He became the first person to unseat an incumbent. Mahama, the 2024 victor, was vanquished back then. Alleged corruption had ballooned under his rule. Cedi depreciated by 200% within a decade of its redenomination to equal the

dollar and the country sought a bailout from the IMF to stabilise the economy.

Coming back to December 2024, As Akufo-Addo prepares to leave the Presidential office, he has legacies like two oilfields being discovered in 2019, which boosted government revenues and allowed the administration to spend more on social programmes. Salaries for teachers and medical personnel were increased.

However, critics also accuse the outgoing President and his deputy, Mahamudu Bawumia of steering the African country into hardship. While Cedi's downfall has been a testimony towards those charges, let us also not forget the fact that Ghana returned to the IMF for another bailout in 2022, as it could not meet its debt obligations, despite being one of the world’s leading gold and cocoa producers.

While electricity blackouts, illegal mining, corruption and nepotism are still around, there has been dissatisfaction on the job front too. Since 2017, thousands if not millions of schoolchildren have benefited from the flagship free senior high school policy and free meals for those in lower cadres. However, a 2023 Afrobarometer report shows that while young Ghanaians are indeed more educated than generations before them, they are also more unemployed.

Then there was a call by the president Akufo-Addo for members of the Black diaspora to visit Ghana and settle there. While the move may have worked some wonders from 2019, as thousands of people flocked in and the government too reportedly made millions in revenue from it, but as per the local people, the action triggered inflation, particularly in the real estate and hospitality sectors.

As the COVID-19 arrived in 2020, Akufo-Addo handled the situation

Ghana: National debt from 2019 to 2024 (In Billion US Dollars)

impressively on the economic front, as a trust fund was set up as well as a $209 million relief fund. But then the senior government officials faced accusations of misappropriating funds meant for health workers. Also, a tax instituted to cushion government coffers at the time is still being collected four years on, on everything from food to toiletries.

Challenges galore for the incoming President

The economy began rebounding in 2024, with a 6.9% growth in the second quarter, but experts remain cautious.

“Whoever becomes the next president has their work cut out for them. In terms of the path that we are on, we are seeing great signs of recovery in the economy… [but] this is also on the back of an IMF programme. When Ghana is under an IMF programme, the evidence is there, the country does well but when we exit the programme, then the fiscal indiscipline comes in and the cycle continues,” Baffour said.

Despite Inflation moderating and Cedi stabilising against the US dollar, on the back of IMF-supported reforms, they proved to be too little, too late for the incumbent New Patriotic Party, as the latter had to suffer a defeat.

While both the NPP and the National Democratic Congress put economy at

the centrestage of their election campaigns, as per Professor Theophilus Acheampong, the proposed spending plans, if implemented, likely lead to Ghana breaching its debt sustainability thresholds. This would threaten the implementation of the current IMF programme which runs until 2026.

"The key concern remains whether Ghana will be able to live within its means going forward by reducing corruption and waste in government spending. This will avoid the procyclical boom-bust behaviour especially tied to the electoral cycle," he noted.

In short, the incoming government will have very little fiscal space to use to meet the several promises, including on infrastructure provision and the several tax breaks, announced in the National Democratic Congress' pre-election manifestos.

As per Rabah Arezki, who is a former chief economist and vice president at the African Development Bank and former chief economist of the World Bank’s Middle East and North Africa region, a more expedient debt resolution for Ghana is a necessary condition for an economic reset.

"One key objective for Ghana is to rebalance its structure of external capital away from external debt and toward foreign direct investment. This would shift the international investment position away from debt and toward equity. That accrued foreign direct investment would bring much more stability to its external financing, a needed boost to productivity, economic growth, and job creation that Ghanaians have been longing for. But Ghana must also achieve a radical governance shift in key sectors to deliver that economic growth," the analyst commented.

Ghana’s export structure is domi-

Source: Statista

nated by three commodities—gold, oil, and cocoa—constituting respectively 47.7%, 26.1%, and about 10% of its total merchandise exports. The country is also the world’s second-largest producer of cocoa, and the cocoa sector employs millions of workers, apart from having a Cocoa Board, a statecontrolled organisation that supports the production, processing, and marketing of cocoa. Yet, the African nation has been structurally unable to develop efficient production and move up the value chain by transforming cocoa beans. In spite of skyrocketing cocoa prices, expected to last until 2026, the cocoa industry has been unable to attract financing, and investment has plummeted. This sector may immediately require policy support from Mahama to become a true growth engine.

Talking about Ghana's oil sector, investors have been wary about the

business climate in the country. The gold sector, on the other hand, also enjoys rising prices and is mostly controlled by private operators.

"The government is eager to boost production and attract more investment, but the gold sector throughout the continent is faced with major transparency challenges, with gold smuggling leading to significant losses in government revenues. What’s more, illegal mining is causing environmental and health challenges, including river pollution. To reset its economy, Ghana needs to inject radical transparency in these key sectors to maximise government revenues and benefits to its citizens. Ghana also needs to achieve a better balance between the need for private sector investment and the state’s role in regulating investment in these sectors," Arezki continued.

Mahama will need to work toward

achieving macroeconomic stability while boosting the competitiveness of the country’s economy. Yet, poverty is already rampant, with inflation further eroding the purchasing power of the country’s impoverished population. Therefore, the sequencing of reforms must account for that social context. The new administration will need to focus on increasing transparency and removing corporate subsidies—whether public or private—rather than removing household subsidies, which many rely on for subsistence. However, in Arezki's opinion, for its reform agenda to work, Ghana must receive all the support it can get from the international community to expedite its debt restructuring.

Is Victoria struggling with unemployment?

Victoria's unemployment rate is high when compared to the rest of Australia and is on the rise

IF CORRESPONDENT

In Victoria, the early 1990s were difficult. The economy was in serious decline, the population was declining, jobs were being lost, and the unemployment rate was soaring to the highest level in the nation. The blame was placed on a long-term Labour government for letting the state debt get out of control. "Australia's Mexico without the sunshine" was a common joke at the time about Victoria.

Is it happening all over again?

The Victorian economy is in trouble, according to business leaders quoted in a piece published in December 2024 as part of a series on the state by the Australian Financial Review.

The most recent unemployment statistics were cited as evidence. Victoria has the highest unemployment rate in the nation at 4%, having increased over the past year. Stunting home prices and an increase in business failures were also mentioned.

One article in the Financial Review looked at the decline in conferences, while another earlier in the month highlighted data indicating a declining rate of Victorian business start-ups. All this was referred to as evidence of a state struggling under the weight of $8.6 billion in levies

imposed in the Labour Party’s 2023 budget to curb a mountain of state debt that is forecast to reach $188 billion by 2028.

The same themes were echoed in a feature on Victoria that was published by The Australian.

"What the hell has gone wrong with Victoria?" was the question posed to the readers. Taxation and public debt were major contributors to the impending economic disaster. The Australian deemed the state to be at best, trapped in stagnation, forcing it to cover falling private investment and expenditure with ever greater public largesse. And at worst as the spending and debt build-up sets off the alarms, a vicious spiral is triggered until the whole Ponzi scheme collapses.

However, are things really that bad? What is the real picture of the economy?

Some positive signs

Indeed, Victoria's unemployment rate is high when compared to the rest of the nation and is on the rise. However, it has remained

INSIGHT VICTORIA

steady for the past four months, which is indicative of the effects of interest rate hikes over the preceding two years.

In addition, the increase over the past 40 years has come from a very low base and is still at a historically low level, far below the 1990s highs.

The population in the labour force is still increasing at a steady rate. Now, the participation rate is at its highest level ever. In seasonally adjusted terms, the labour force grew by 20,000 last month, and nearly all the new hires found work.

There has been a noticeable increase in employment since the pandemic ended. In seasonally adjusted

employment has grown by 268,000, or 8%, since January 2023. This growth represents 37% of the total number of jobs created in Australia during that period.

Although

is declining, it still exceeds

the population share of the state and is based on an incredibly high starting point. In July, Victoria accounted for 55% of all jobs created nationally.

According to the Australian Financial Review, the most recent employment figures were "unexpectedly strong."

What about business insolvencies?

Insolvencies in Victoria have increased, rising 61% in September over the same month the previous year. In Australia, however, they are also growing at a faster rate, with the national number increasing by 70%.

We cannot determine whether the number of conferences in Victoria is increasing or decreasing because there is no reliable database to make that determination.

Furthermore, although Victoria may have lagged behind other states in

terms of the number of new start-ups per 1,000 businesses, the total number of businesses has grown by over 31,000, or 3%, since the year started.

How are house prices and rents holding up?

Indeed, the cost of homes is falling. Several new property taxes included in the 2023–2024 state budget to help pay for pandemic-related debt are at least partially to blame for the fact that they are currently about 20% below their peak during the pandemic.

High interest rates have made housing more affordable than ever before, which is good news for those who are eager to purchase their first home. This decline in home values contrasts with a rise in rental income during the same time frame.

The median rents in Victoria have risen by 13.3% in the past 12 months and by 4.3% in the following quarter.

Perhaps helping those who believe that the economy is in trouble, the rental stock dropped for the first time in the March quarter.

However, that decline only amounted to 2.7% of the stock, or hardly 10,000 homes. Someone had to buy those properties, and most of them were probably sold to first-time purchasers who had no overall impact on the rental market due to their changing tenure. Such a wealth redistribution might not be a bad thing.

Debt is high – but so is infrastructure spending

Victoria's economy, like the rest of the nation, has undoubtedly been slowing down. When it raised interest rates last year, the Reserve Bank aimed for precisely that result. However, there is scant evidence that Victoria is reverting to the catastrophic course of the early 1990s.

Because of a severe recession at the time, state debt increased alarmingly. This time, the state's debt has increased significantly, primarily to finance a pipeline project of a magnitude never before seen in the state.

Spending on infrastructure has increased fivefold in the last ten years, reaching $25 billion annually. Many jobs are included in those figures, and soon, a large portion of that infrastructure will be operational, increasing the state's economic potential.

The surprisingly strong economy of Victoria is influenced by several factors. One key element is the return of international students, which has contributed to a net increase in international migration of 152,000 people in the year ending March 2024. This figure represents nearly 30% of the total population growth in Australia.

However, some people argue that Victoria has become a "poor state" due

to rapid population growth driven by migration, a lack of output growth, and a long-term decline in household income per capita.

To address these issues, Treasurer Tim Pallas is hopeful that the increased investment in debt-funded infrastructure will provide the necessary boost in productivity.

While various indicators show that the economy of Victoria is slowing, this trend is consistent with a national pattern. A closer examination of the data reveals some growth indicators, suggesting that there is no immediate cause for concern.

During his first term, Trump implemented numerous tariffs aimed at levelling the playing field for American manufacturers

Trump's America First: Trade, taxes, & growth

IF CORRESPONDENT

As Donald Trump prepares to re-enter the White House in January 2025, the world is closely watching to see what "Trump 2.0" has in store for the American economy. The Republican’s campaign highlighted a range of promises to rejuvenate the US economy, with themes of "Make America Great Again" and "America First" still at the forefront. But what does that mean for America’s economic future, and how will these promises impact not only the United States but also the global market? Let’s take a closer look at Trump’s economic history, his new initiatives, and the road ahead.

Setting the economic stage

To understand what Trump 2.0 might mean for the American economy, it's helpful to revisit his first term. Between 2017 and early 2020, the world’s largest economy experienced several economic shifts. Trump inherited a steadily growing economy from the Barack Obama administration, but his focus was on accelerating that growth through deregulation, tax cuts, and protectionist trade policies. Key features of Trump’s first term included the passage of the Tax Cuts and Jobs Act (TCJA) in 2017, which slashed corporate tax rates from 35% to 21%, and introduced a range of deductions for individuals.

The TCJA was seen by many as a pro-business move that invigorated American companies, increased corporate profits, and temporarily boosted the stock market. GDP growth, which averaged around 2.3% in Trump's first three years, was propelled by these tax changes. However, it wasn’t without its costs—critics argued that the tax cuts primarily benefited the wealthy and corporations while significantly increasing the deficit. By early 2020, the COVID-19 pandemic brought a sudden halt to economic growth, leading to mass unemployment and a sharp decline in productivity.

Despite this setback, Trump consistently highlighted the "roaring economy" before the pandemic, and his promises in 2024 have focused on rekindling that same momentum with additional structural changes. Trump 2.0 promises to be a dynamic combination of fiscal policies, trade adjustments, regulatory overhauls, and new strategic initiatives.

In his 2024 election campaign, Trump placed his priority on transforming the American economy by emphasising innovation, reducing the role of federal oversight, and bringing

industries back to the United States. His key economic policies revolve around a few distinct areas: tax reform, deregulation, trade negotiations, and the newly created Department of Government Efficiency (DOGE). Each of these initiatives has profound implications for the economy.

Taxation policies: Cutting down to grow up

Trump has promised to expand tax relief for the middle class by introducing a 15% flat tax rate for those earning under $150,000 annually. This approach aims to boost consumer spending, believing that individuals will pump their increased disposable income back into the economy, spurring demand and growth. Trump has repeatedly argued that the middle class is the backbone of the American economy, and his proposed tax cuts are designed to directly inject more disposable income into their pockets.

Corporations are also set to benefit, with the Republican proposing an "ultra-competitive" rate of 15% for businesses. Trump argues that reducing the corporate tax rate will bring companies and manufacturing jobs back to American soil, counteracting offshoring that took place over the last two decades. He has highlighted the importance of reshoring, pledging incentives to encourage companies to move their supply chains back to the United States. Furthermore, Trump has proposed targeted tax credits for industries such as technology, pharmaceuticals, and renewable energy, in a bid to make the world’s largest economy a leader in critical sectors. While Trump's first round of tax cuts helped propel short-term growth, they also contributed to an expanded deficit— now estimated at over $33 trillion. Analysts are concerned that doubling

down on tax cuts may stimulate growth in the short term but add to the longterm debt burden, eventually leading to inflationary pressures and reduced fiscal flexibility. They also highlight concerns about income inequality, as reduced government revenues may result in cuts to social welfare programmes.

Despite these concerns, Trump maintains that his policies will be a net positive for the country. By incentivising productivity and economic participation, he believes that a growing economy will eventually offset the deficits. He has hinted at potential spending cuts in non-essential government sectors to balance the budget, though specific details remain vague.

Furthermore, Trump has proposed expanding tax incentives for research and development (R&D) to promote innovation and technological advancements, which he claims will keep American companies at the cutting edge of global competition.

Avoiding or rekindling a trade war?

During his first term, Trump implemented numerous tariffs aimed at levelling the playing field for American manufacturers. Dubbed a trade war by many, his efforts to renegotiate trade terms—particularly with China—left a lasting impact on US industries and global relations. Many industries faced increased input costs, and retaliatory tariffs affected American farmers who lost significant access to export markets. The US-China trade war saw billions of dollars of agricultural goods rotting, as farmers struggled to find new buyers.

In Trump 2.0, his campaign rhetoric suggests that he is ready to resume his hardline approach. He believes that trade deficits weaken the American economy

and is expected to impose higher tariffs on goods from countries deemed to be “engaging in unfair trade practices.” His advisors have floated the concept of a "universal tariff" of 10% on all imports, which would generate revenue for the government and, ostensibly, encourage American businesses to purchase domestically produced goods. Trump has also stressed the need for better intellectual property protections and stronger trade enforcement measures to prevent foreign competitors from gaining an unfair advantage.

This strategy, however, is fraught with risks. Many economists argue that higher tariffs could hurt American consumers by raising prices on everyday goods and limiting access to foreign markets. American manufacturers who rely on imported parts and components could face higher production costs, making their products less competitive domestically and internationally.

The long-term effects of a broader tariff policy could damage key sectors like technology, automotive, and agriculture. Additionally, a renewed trade war could impact relationships with traditional allies and trading partners, leading to economic uncertainty both in the United States and abroad.

Moreover, there are concerns that Trump's aggressive trade policies could isolate the US from global economic alliances. With countries like China and India strengthening their bilateral ties, the US risks being left out of key economic agreements that could shape the future of global trade.

Trump has indicated that he wants to renegotiate major trade agreements, including the USMCA and deals with the European Union, to enhance American leverage. However, the unpredictability of such negotiations could lead to market

Source: Statista

instability, making businesses hesitant to invest in long-term projects.

Additionally, Trump has proposed the formation of an "Economic Patriot Coalition," a partnership between the government and key industries to ensure that the United States maintains leadership in strategic areas like semiconductors, 5G, and artificial intelligence. This coalition aims to counter perceived threats from countries like China and ensure that American industries have the necessary resources to thrive on the global stage.

The trade tensions between the United States and China are likely to result in increased tariffs on products like smartphones, laptops, and various electronic components. This move would not only lead to higher production costs for American tech companies but also

make it more expensive for consumers to purchase these devices.

Companies like Apple, which rely heavily on Chinese manufacturing, would need to either absorb these additional costs or pass them onto customers, ultimately making gadgets like iPhones and MacBooks more expensive for the average American. Additionally, the semiconductor industry, which plays a critical role in the development of everything from consumer electronics to electric vehicles, would face severe disruptions, driving up costs in related sectors.

Agricultural products are also likely to be significantly affected by the re-escalation of trade tensions. In the first iteration of the trade war, China retaliated by imposing tariffs on American agricultural goods, such as soybeans, pork, and dairy, which hit American farmers particularly hard. With a return to trade confrontation, American farmers could once again find themselves struggling to sell their produce, facing a restricted market for exports. This would result in excess supply, driving down prices domestically and leaving farmers with decreased incomes. Industries related to food production and processing might also feel the ripple effects as the market reacts to fluctuating supply and demand dynamics, leading to financial instability in rural communities across the United States.

DOGE: Musk and Ramaswamy’s role

One of the more intriguing aspects of Trump’s new economic plan is the creation of the "Department of Government Efficiency" (DOGE). This newly minted entity is designed to root out inefficiencies across federal programmes and modernise government operations.

Trump has tapped Elon Musk, the CEO of Tesla and SpaceX, and Vivek Ramaswamy, the biotech entrepreneur and author, to lead this effort.

DOGE aims to streamline government bureaucracy by introducing private-sector practices into federal operations. Musk’s track record of innovation and Ramaswamy’s business acumen are seen by Trump as critical assets in modernising the federal government. Trump has stressed that DOGE will identify areas where public spending can be reduced, increase accountability, and utilise technology to enhance productivity.

Defence procurement, health services, and public infrastructure projects are expected to be the focus of DOGE's efficiency mandate. Additionally, there are proposals to integrate AI technologies across several departments to reduce waste, fraud, and inefficiencies.

Analysts, however, are split on what DOGE can realistically achieve. Proponents argue that Musk and Ramaswamy’s entrepreneurial vision could help overhaul outdated systems and make the government more responsive.

By incorporating AI, data-driven

decision-making, and other advanced technologies, DOGE could potentially save taxpayers billions of dollars annually. Supporters of DOGE point to Musk's success in disrupting the automotive and aerospace industries, suggesting that the same principles could be applied to outdated government processes.

On the other hand, critics claim that the plan is overly ambitious. Governing a country as diverse and large as the United States requires a different approach compared to running a private company. Some have argued that Musk’s sometimes controversial business style, paired with Ramaswamy’s lack of experience in governance, could hinder rather than help.

Labour unions are also wary of potential job cuts and are prepared to resist changes that might erode job security for government workers. Additionally, there are concerns about privacy and data security, especially if AI systems play a central role in government decision-making.

DOGE also faces institutional inertia. Implementing sweeping changes across federal bureaucracies is often met with resistance, and it remains unclear whether Musk and

Ramaswamy can navigate the political landscape to bring about real, lasting reform. The challenge will not only be to propose new efficiencies but also to ensure they are adopted in a way that is fair and transparent. Many government agencies have systems in place that are decades old, and transitioning them to new platforms without disruption will require technological prowess and political finesse.

Furthermore, DOGE has also been tasked with exploring the feasibility of introducing a "Digital Dollar" to streamline transactions and enhance economic inclusivity. By leveraging blockchain technology, Trump hopes that the Digital Dollar could make government payments more efficient and reduce costs related to fraud and money laundering. This bold move has drawn mixed reactions from financial experts, who see potential benefits and significant risks in such a transition.

America First: The path forward

At the core of Trump's economic plan is the "America First" ethos. Trump has reiterated his promise to prioritise American companies and workers above international considerations. In practice, this means more focus on protectionist policies, heavy scrutiny of foreign trade deals, and incentives for American companies to manufacture goods domestically.

By focusing on domestic production, Trump aims to make the American economy less dependent on foreign countries and more resilient in times of global crises.

Trump’s plan also focuses heavily on energy independence, a theme carried over from his first term. He has pledged to remove regulatory barriers to fossil fuel extraction, particularly in states like Texas, Alaska, and the Dakotas, to

achieve what he calls "unmatched energy dominance."

This strategy aims to make the United States a net energy exporter once again, driving down costs domestically and leveraging energy as a diplomatic tool internationally. Trump’s vision extends beyond fossil fuels, as he has also called for increased investments in nuclear energy and other alternative energy forms that can provide baseload power without reliance on weather conditions.

However, this approach has already drawn criticism from environmental advocates. They argue that expanding fossil fuel production will have significant negative impacts on climate change, putting Washington at odds

with international environmental agreements.

In an era when the world is moving towards sustainable energy solutions, Trump's policies may face global backlash and affect relations with key allies committed to the green energy transition. Environmental groups are preparing to challenge any expansion of fossil fuel projects in court, which could delay Trump's energy agenda.

In addition, Trump has hinted at reshoring strategic industries such as pharmaceuticals and rare-earth minerals. The COVID-19 pandemic exposed vulnerabilities in supply chains, and Trump has argued that key sectors must be protected to ensure national security. To support this

reshoring effort, Trump has proposed the creation of "Strategic Industry Zones," offering tax breaks and grants to companies that build production facilities within these areas. These zones are designed to create highpaying jobs, especially in regions that have struggled with economic decline in recent years.

Trump has also put forward the "American Resilience Initiative," a comprehensive plan to invest in critical infrastructure projects across the country. The initiative focuses on upgrading the power grid, expanding broadband access in rural areas, and modernising transportation networks to make them more efficient and resilient. This infrastructure overhaul is

intended to create millions of jobs, spur economic activity, and ensure that the US infrastructure can withstand future challenges, including climate-related events and cyber threats.

Potential challenges ahead

While Trump’s promises of deregulation, tax relief, and trade policy reform sound attractive to many Americans, his second term comes with significant challenges. The deficit, which has ballooned in recent years, limits the government's ability to fund new initiatives or provide further economic stimulus without exacerbating fiscal strain. Moreover, America's relationships with its trading partners are likely to be tested as Trump seeks to impose tariffs that could lead to retaliatory measures. There is also the potential risk of a full-blown trade war if countries retaliate against the universal

tariff proposals.

Economists are divided on whether Trump's policies will yield long-term benefits for the country. Supporters argue that by reducing taxes and regulations, the US can sustain higher growth rates, attract investment, and create jobs—continuing the momentum from his pre-pandemic years. They point to the importance of regulatory freedom for small businesses and entrepreneurs, suggesting that fewer restrictions will result in more innovation and economic dynamism. Sceptics, however, believe that the growth would be unsustainable, ultimately adding to income inequality, raising the deficit, and leaving the economy vulnerable to trade shocks. They also warn of the potential for increased inflation if consumer spending rises too quickly without corresponding growth in supply.

The inclusion of DOGE, with its priority on efficiency and modernity, presents a wildcard. If successful, DOGE could streamline federal operations and potentially reduce public sector spending, thereby alleviating some fiscal pressures. However, the transition from privatesector leadership to effective governance of public programmes has historically been challenging. The effectiveness of Musk and Ramaswamy's leadership in a government context will play a significant role in determining whether DOGE can deliver on its promises. It remains to be seen if they can translate their private-sector success into publicsector efficiency while maintaining public trust and ensuring that no groups are left behind.

Whether Trump’s policies succeed will largely depend on how they are implemented and the global response to America’s protectionist stances. If Trump can navigate the complexities of global trade while delivering on his promises of economic prosperity at home, the US could experience a resurgence similar to the pre-pandemic years of his first term. However, the risks of escalating trade conflicts, rising deficits, and international isolation loom large. The establishment of DOGE, with its mix of high-profile leaders and ambitious goals, adds another layer of intrigue—and perhaps hope—that government can be made more efficient, though its success remains to be seen.

There is no doubt that the upcoming years will be filled with economic trials, shifting alliances, and bold initiatives. Whether these strategies will secure America’s dominance or lead to further complexities remains to be seen, but one thing is clear—Donald Trump is once again ready to redefine the trajectory of the American economy and its role in the global order.

Islamic Banking: A growing trend in South Africa

Shaheen Suliman, Head of Absa Islamic Banking, credited a segmented approach and full-service model behind a successful market presence

The Islamic Finance sector has experienced tremendous growth globally, and South Africa is no exception. Innovation in Islamic Finance has flourished here, thanks to greater standardisation and regulation. This has led to the creation of a variety of attractive products and solutions. According to the Banking Association of South Africa, Islamic Banking deposits managed by banks in South Africa have now surpassed R70 billion and continue to grow.

As a leader in the Islamic Finance sector, Absa Islamic Banking has embarked on a journey to distinguish itself from competitors through a segmented approach and comprehensive service offerings.

“At the heart of Absa Islamic Banking’s approach lies the realisation that customers’ needs are different, and the ability to meet (and exceed!) the unique requirements of retail, private and wealth customers as well as business, commercial and corporate clients through a full service-offering is key in building a truly client-centric business,” Absa Islamic Banking told the International Finance.

Absa Islamic Banking, which has recently been recognised as the “Best Islamic Banking Window - South Africa” by International Finance, reiterated

that its business is truly changing the game as far as customercentricity is concerned.

Shaheen Suliman, Head of Absa Islamic Banking, credited a segmented approach and full-service model behind a successful market presence.

For a Business Banking client, the Absa Islamic Banking team assesses the specific needs of the business owner and proposes holistic financial solutions that cater to their transactional banking, financing, and investing requirements.

Recently, clients in the wealth management segment have expressed a strong desire to invest in a manner that protects them from capital loss while ensuring participation in potential market upsides, all in a Shari’ahcompliant way.

Shaheen Suliman said, "With this problem statement, Absa in collaboration with BNP Paribas launched a first-of-its-kind Shari’ah-compliant Structured Note in the South African market, enabling clients to access exposure to offshore markets and the ability to leverage possible upside returns, while still enjoying capital protection. In addition, the product offered exposure to international markets without externalising funds."

“Similarly, many retail and business clients have expressed a desire to save money and

Absa in collaboration with BNP Paribas launched a first-ofits-kind Shari’ah-compliant Structured Note in the South African market, enabling clients to access exposure to offshore markets and the ability to leverage possible upside returns, while still enjoying capital protection

Shaheen Suliman

grow their capital in a Shari’ahcompliant manner, while still being in a position to access these savings in case of an emergency. One of the most popular solutions in the Absa Islamic Banking stable, the Absa Islamic Depositor Plus, was born against this backdrop,” he added.

Highlighting the seamless customer experience emphasised in Absa’s recent brand repositioning with the tagline, “Your Story Matters,” the team has also crafted bespoke solutions for clients wishing to align their portfolios with Islamic financial principles.

Shaheen Suliman added that, in line with the fundamental Islamic Finance principle of “Good for All,” Absa Islamic Banking aims to be a positive force in the communities it serves.

In early 2024, Absa Islamic Banking collaborated with the social enterprise Kusini Water to establish a water site at a primary school in Ventersburg, located in the Free State province of South Africa. This initiative focuses on providing reliable access to water and equipping local youth with the skills needed to actively participate in water sustainability efforts. The project involved drilling a borehole for the community and school, installing a water filtration system, and setting up a complete solar power system.

By offering a non-human intermediary, AI has successfully overcome barriers like shame and social stigma that often prevent people from seeking help

AI in the age of intelligence: A new era begins

IF CORRESPONDENT

In September 2024, Sam Altman, the CEO of OpenAI, proclaimed, "We have entered the Intelligence Age." He emphasised the transformative power of deep learning, a subset of artificial intelligence (AI), in learning from massive datasets and its potential to solve the complex problems of our age. His words echo a growing conviction that AI, armed with increasing volumes of data, can help us navigate the intricate and often chaotic challenges we face today.

AI is uniquely positioned to cut through emotional biases. As opposed to human beings who bring their past experiences, prejudices, and emotional baggage to each decision, AI systems evaluate problems with a neutral lens

However, sceptics argue that humans are fundamentally irrational, driven more by emotion and self-interest than reason, and thus limit the utility of AI. While these concerns are valid, they are only part of the story. AI, with its capacity for pattern recognition, forecasting, and providing insightful recommendations, holds the key to a more prosperous world, even amid human irrationality.

Let's explore how AI can enhance the world, even in the face of human irrationality. We'll highlight datadriven examples and demonstrate how AI can complement humanity's emotional and often unpredictable nature.

Irrationality meets intelligence

Human beings are emotional creatures, as political upheavals, misinformation campaigns, and divisive social movements have vividly demonstrated.

The recent US election, which saw a significant spread of conspiracy theories and misinformation, underscores that people are often driven by visceral emotions rather than logic or data. Nonetheless, these tendencies do not negate the value AI can offer in creating a more intelligent and effective decisionmaking framework.

AI is uniquely positioned to cut through emotional biases. As opposed to human beings who bring their past experiences, prejudices, and emotional baggage to each decision, AI systems evaluate problems with a neutral lens. They can process complex datasets with an impartial focus, providing recommendations and predictions untarnished by personal biases. By acting as an objective tool, AI can guide human decision-making in ways that account for but are not overly swayed by our irrational tendencies.

Consider climate change—an issue that is complex, multi-faceted, and undeniably urgent. Despite decades of accumulating evidence, action on climate change has often been delayed due to political wrangling, economic interests, and even outright denial—all reflections of human irrationality. AI can circumvent some of these barriers by providing accurate climate modelling, predictive analytics, and optimisation strategies that help policymakers make informed decisions.

In a 2020 Google report, researchers described how AI models have been used to predict deforestation in the Amazon rainforest. By combining satellite images with machine learning algorithms, AI can identify areas at risk of illegal logging, allowing authorities to intervene before it's too late. This predictive capability is crucial in a context where

political or economic considerations may otherwise delay action. In Germany, AI-enabled systems have also helped to optimise wind turbine efficiency by analysing weather patterns in real-time, resulting in a notable increase in renewable energy production.

Healthcare: AI navigates complexities with ease

The healthcare sector represents another area where human irrationality—such as mistrust in medical systems or biases against new treatments—can lead to poor outcomes. However, AI can help healthcare professionals improve diagnosis, optimise treatment plans, and ultimately enhance patient outcomes, even in the face of human hesitance.

AI models such as IBM's Watson have demonstrated how AI can assist in diagnosing diseases, including rare cancers, by evaluating a patient's symptoms against vast medical literature— something no single physician could achieve alone.

In the COVID-19 pandemic, AI played an essential role in tracking virus spread, predicting hotspots, and even assisting pharmaceutical companies in expediting vaccine development. In fact, the vaccine's rapid development was, in part, thanks to algorithms that helped identify effective molecular compounds in record time.

AI also addresses mental health issues, an area fraught with stigma and misunderstanding. Applications like Woebot and Wysa, which are AI-

driven chatbot therapists, provide emotional support to individuals who may feel uncomfortable seeking traditional therapy.

Despite the emotional complexity of mental health, these AI tools have proven effective for many users, providing cognitive behavioural therapy techniques, mood tracking, and supportive dialogue without any judgment. By offering a non-human intermediary, artificial intelligence has successfully overcome barriers like shame and social stigma that often prevent people from seeking help.

Leveraging AI for peace and security

Human irrationality has also led to countless global conflicts, where emotions like fear, anger, and a sense of injustice drive people to violence. Traditional diplomacy has its limits, often subject to political pressures, historical grievances, and the whims of national leaders. AI, on the other hand, can serve as a stabilising influence in international relations by analysing data on socio-economic conditions, public sentiment, and historical conflicts to predict potential flashpoints and recommend interventions.

For instance, the AI for Peace initiative—a collaboration involving the United Nations and various NGOs—has used machine learning models to predict conflicts in African regions based on data related to food scarcity, economic disparity, and historical violence. These insights have allowed for proactive diplomatic interventions and resource

allocation, potentially averting conflicts before they spiral out of control.

In Ukraine, AI has been instrumental in predicting Russian troop movements using satellite imagery, allowing the Ukrainian military and its allies to prepare defensive strategies. By providing real-time, reliable data, AI helps mitigate the impact of emotionally charged decisions made under duress. Thus, while AI alone cannot stop conflicts, it provides rational insight that can support and inform human peacebuilding efforts.

AI has sometimes been criticised for perpetuating inequality, as seen in the controversial case of Australia's Robodebt programme. This artificial inteligence-driven initiative wrongly accused many welfare recipients of owing debt, causing widespread distress.

It's essential to acknowledge that AI is not infallible; rather, it reflects

the values and biases programmed into it by human developers. However, the key lesson from Robodebt is not that AI is inherently flawed, but that ethical considerations must be integral to its design.

When AI is designed thoughtfully and deployed ethically, it can be a powerful tool to reduce inequities.

For instance, India's Aadhaar programme, which utilises biometrics and AI for identity verification, has helped to streamline welfare distribution, reducing fraud and ensuring that subsidies reach those most in need.

The United States has seen similar successes with AI tools for identifying at-risk students, helping schools allocate resources more effectively to support their educational progress.

Reforming the criminal justice system

Human irrationality in the form of prejudice and bias is particularly evident in the criminal justice system,

where racial and socioeconomic factors often play a role in sentencing. AI can help mitigate these biases when used correctly. In the United States, risk assessment tools are being used to predict the likelihood of reoffending, and help judges make more informed bail and parole decisions.

A well-known issue with early AI systems in criminal justice was that they learnt from historical data, which already contained systemic biases. This led to unfair predictions that disproportionately affected marginalised communities. Addressing this requires better data collection practices, more diverse development teams, and ongoing audits to ensure fairness. When properly managed, AI can bring a level of consistency and rational evaluation that human judges, often influenced by emotions, may struggle to maintain.

In the UK, for example, the

Durham Constabulary has used the Harm Assessment Risk Tool (HART) to predict low-risk offenders and divert them from prosecution, favouring rehabilitation programmes. This approach focuses on reducing reoffending rates, ultimately benefiting both individuals and society. AI's objective analysis can thus contribute to a more rational, equitable justice system, reducing reliance on subjective human judgment.

Supporting rational public discourse

One of the primary arguments against AI's efficacy is its role in amplifying misinformation, which can significantly fuel human irrationality. AI-driven algorithms have indeed contributed to the spread of fake news, as seen in the manipulation of social media platforms during elections. However, AI can also be part of the solution in combating misinformation.

AI models developed by companies like Factmata and Logically are being used to identify and flag false information in real-time, helping platforms like Twitter and Facebook reduce the spread of fake news. These tools use natural language processing to analyse news articles and social media posts, identifying misleading content with a high degree of accuracy.

Furthermore, artificial intelligence-driven recommendation systems can be adjusted to prioritise verified information and promote high-quality content. Facebook, for example, has made changes to its news feed algorithm to promote more reliable sources, reducing the visibility of clickbait and misleading headlines.

By providing data-driven in-

Source: Statista

sights, AI helps individuals and organisations understand the broader consequences of their actions, offering a more rational basis for ethical deliberation. For instance, companies are increasingly using artificial intelligence to conduct ethical impact assessments before launching new products.

AI can model potential environmental impacts, assess supply chain risks, and even predict social backlash—providing leaders with the information they need to make more conscientious decisions. AI becomes a partner in ethical reasoning, expanding the scope of human considerations without replacing the essential moral compass that individuals and societies must provide.

Human-AI collaboration has already led to remarkable innovations, such as autonomous vehicles that promise to reduce the 1.35 million fatalities caused annually by traffic accidents, the majority of which are due to human error. Here, AI's

rational capabilities compensate for human flaws, helping create safer and more efficient transportation systems.

AI and the future of human flourishing

The fear that AI will lead us to an era dominated by cold rationality devoid of human values—a dystopia imagined by theorists like Theodor Adorno and Max Horkheimer— overlooks the potential for AI to enhance human flourishing. AI is a tool, and its impact depends on how we choose to use it. It can be leveraged for purposes that align with human values: improving healthcare, reducing inequality, mitigating climate change, and fostering peace.

AI is also increasingly being used in creative fields. Tools like OpenAI's DALL-E and GPT-4 are helping artists, writers, and filmmakers explore new forms of creative expression. These AI systems are not replacing human creativity but expanding its horizons, offering novel ideas and techniques humans can build upon. The interplay between human emotion and AI-generated inspiration exemplifies how rational algorithms and human creativity can coexist and enhance one another.

The Intelligence Age doesn't replace empathy, emotion, or creativity but complements them. Guided wisely, it can address pressing challenges. By combining AI's datadriven reasoning with human values, we can aim for a future where intelligence and emotion are balanced for the collective good.

The infostealers, RedLine and META, targeted millions of victims worldwide, making it one of the largest malware platforms globally

New infostealers target global businesses

n November 2024, millions of customers of the American pop culture merchandise and clothing line "Hot Topic" were notified that their data had been compromised in a data breach. The breach notification service "Have I Been Pwned" (HIBP) alerted 57 million affected individuals about the compromise of their data.

According to HIBP, the breach occurred on October 19, following which on October 21, a threat actor operating under the alias “Satanic” claimed responsibility for the breach. In a post on the cybercrime forum BreachForums, Satanic claimed to have stolen 350 million user records from Hot Topic and its affiliated brands, Box Lunch and Torrid.

According to a report by cybersecurity firm Hudson Rock, the hacker initially attempted to sell the database for $20,000 and demanded a $100,000 ransom from Hot Topic to take down the information. When TechCrunch accessed a post on BreachForums, Satanic was seen offering

The menace called infostealing

As per Check Point Software’s October 2024 Global Threat Index, cybercriminals are leveraging increasingly sophisticated attack methods, including the strategic deployment of infostealers. The report also took cognisance of the ‘Lumma Stealer’ malware, which leverages fake CAPTCHA pages to infiltrate systems through phishing and cracked game downloads. The method has surged to the fourth rank in Check Point’s monthly global malware rankings. Once installed, the menace exfiltrates sensitive data, underscoring the effectiveness of today’s infostealers.

The report revealed that a new version of 'Necro' has moved up to the second position in the mobile malware rankings for October. This malware infects popular applications, including game mods available on Google Play, and has affected over 11 million devices. It employs obfuscation techniques to evade detection and utilises steganography to conceal information within another message or physical object, thereby hiding its payloads.

Then there is "New Glove Stealer," a malware that can bypass Google Chrome's Application-Bound (AppBound) encryption to steal browser cookies. Gen Digital security researchers, who first spotted the threat element, while investigating a recent phishing campaign, said the information-stealing malware is "relatively simple and contains minimal obfuscation or protection mechanisms," indicating that it's very likely in its early development stages.

The Glove Stealer .NET malware has the capability to extract and exfiltrate cookies from both Firefox and Chromium-based browsers, such as

Chrome, Edge, Brave, Yandex, and Opera. It can also steal cryptocurrency wallets from browser extensions, 2FA session tokens from applications like Google, Microsoft, Aegis, and LastPass, as well as password data from Bitwarden, LastPass, and KeePass. Additionally, it can access emails from mail clients like Thunderbird.

But that’s not all. Cybercriminals are deploying a new information-stealing malware on Windows systems that employs the "Bring Your Own Vulnerable Driver" (BYOVD) technique. This allows them to extract victims’ browser data, software information, credit card details, and other system data.

Kaspersky Labs, a global cybersecurity company, has recorded over 11,000 attack attempts in the past three months across several countries, including Russia, China, India, Brazil, and Mexico. The malware is also equipped with a crypto-mining module, which exploits the computing resources of infected systems.

Let's explore the vast cybercrime industry that thrives on informationstealing attacks, targeting large businesses and posing a significant threat to the global economy.

A dark mess

According to award-winning investigative journalist Joseph Cox, on October 20, a hacker who calls themselves Dark X said they logged in to a server and stole the personal data of 350 million Hot Topic customers. The following day, Dark X listed the data for sale on an underground forum. The day after that, Dark X said Hot Topic kicked them out.

"Dark X told me that the apparent breach, which is possibly the largest hack of a consumer retailer ever, was

partly due to luck. They just happened to get login credentials from a developer who had access to Hot Topic’s crown jewels. To prove it, Dark X sent me the developer’s login credentials for Snowflake, a data warehousing tool that hackers have repeatedly targeted recently. Alon Gal from cybersecurity firm Hudson Rock, which first found the link between infostealers and the Hot Topic breach, said he was sent the same set of credentials by the hacker," Cox wrote in his article for The Wired, as he interacted with the threat actor.

"The luck part is true. But the claimed Hot Topic hack is also the latest breach directly connected to a sprawling underground industry that has made hacking some of the most important companies in the world child’s play," he added.

In July 2024, hackers broke into a cloud platform used by AT&T and downloaded call and text records of “nearly all” of AT&T’s cellular customers across a several month period. In the same month, American ticket sales and distribution company Ticketmaster witnessed a similar incident, in which the hacking group that breached the venture released new data that they said could be used to create more than 38,000 concert tickets nationwide, including to sought after shows like Olivia Rodrigo, Bruce Springsteen, Hamilton, Tyler Childers, the Jonas Brothers, and Los Angeles Dodgers games.

The data would allow someone to create and print a ticket already sold to someone else, creating a situation where Ticketmaster and venues might have to sort out which tickets are from legitimate

buyers and which are not. A month prior, American Luxury retailer Neiman Marcus confirmed a data breach after hackers attempted to sell the company's database stolen in recent Snowflake data theft attacks, impacting 64,472 people.

As per Cox, these were not entirely isolated incidents, as through these attacks, infostealers created a complex yet dangerous online ecosystem, where crimes are now getting committed through the method of pillaging passwords and cookies stored in the victims’ browsers.

"There are Russian malware coders continually updating their code; teams of professionals who use glitzy advertising to hire contractors to spread the malware across YouTube, TikTok, or GitHub; and Englishspeaking teenagers on the other side

of the world who then use the harvested credentials to break into corporations. At the end of October, a collaboration of law enforcement agencies announced an operation against two of the world’s most prevalent stealers. But the market has been able to grow and mature so much that now law enforcement action against even one part of it is unlikely to make any lasting dent in the spread of infostealers," he wrote.

How the ecosystem works

Online publication 404 Media interviewed malware developers, tracked the hackers who use the stolen credentials, and reviewed manuals instructing recruits how to spread the malware, thereby mapping out the infostealing ecosystem. The result is the creation of an innocent-looking piece of software, downloading which can lead to a data breach at a multibillion-dollar company, putting Google and other tech giants in an ever-escalating cat-and-mouse game with the malware developers to keep people and companies safe.

The infostealer ecosystem starts with the malware itself. Dozens of these exist, with names like Nexus, Aurora, META, and Raccoon. The most widespread infostealer is one called RedLine, according to cybersecurity firm Recorded Future. As per Cox, having a prepackaged piece of malware also dramatically lowers the barrier to entry for a budding new hacker. The administrator of LummaC2, which Recorded Future says is in the top 10 of infostealers, told the investigative journalist that it welcomes both beginner and experienced hackers.

"Initially, many of these developers were interested in stealing credentials or keys related to cryptocurrency wallets. Armed with those, hackers could empty

a victim’s digital wallets and make a quick buck. Many today still market their tools as being able to steal Bitcoin and have even introduced OCR to detect seed phrases in images. But recently those same developers and their associates figured out that all of the other stuff stored in a browser—passwords to the victim’s place of work, for example— could generate a secondary stream of revenue," Cox wrote.

“Malware developers and their clients have realised that personal and corporate credentials, such as login details for online accounts, financial data, and other sensitive information, hold substantial value on the black market,” RussianPanda, an independent security researcher who follows infostealers closely, told 404 Media, while adding, "Infostealer creators pivoted to capture this information too."

As per 404 Media, "The exhaust from cryptocurrency-focused heists has created an entirely new industry in its own right that is causing even more destruction across healthcare, tech, and other industries."

There are "Data Stealers," who then sell these collected sensitive credentials and cookies, or logs, via bots on Telegram. What is known to us as a messaging app, becomes a critical selling point for these teams. The entire process from buying to selling stolen logs is automated through Telegram bots.

In July 2024, Google Chrome rolled out an update that was designed to lock applications other than Chrome, including malware, from accessing cookie data. For a moment, Chrome had the upper hand against the infostealers. Some malware developers made their grievances known more explicitly. In one update, a pair of infostealers included the phrase “ChromeF**kNewCookies” in their

malware’s code.

“It's a little bit of a cat and mouse, but we think that this is a game that we want to play as much as we can if the outcomes remain positive. We want to protect users, obviously, as much as we can,” Will Harris, staff software engineer on Google Chrome, told Cox.

However, the fight is not that easy, when it comes to securing Chrome itself and protecting more data from infostealers.

Tech giants, especially Google, need to practice “disruption,” where the researchers will remain constantly updated about the evolving piracy techniques adopted by the infostealers and devise the perfect countermeasures, which in turn will constrain the tools available to the malware developers.

"Releasing updates one by one on a regular basis, rather than all at once, can also disrupt the malware developers. Instead of the criminal coders knowing what they need to fix all in one go, they can never be quite sure what Google is going to clamp down on next, wasting more of their time," wrote Cox.

"After one update, a lot of the customers of a stealer were extremely upset, and they [the malware makers] had to work nights on coming up with a bypass,” Harris said, while adding that one stealer, called Vidar, increased the cost of its tool too. The staff software engineer on Google Chrome also pointed specifically to Microsoft Windows to explain his point.

“When you compare Windows with, say, Android, or ChromeOS, or even macOS, those platforms have this strong application isolation. Meaning, that malware has a harder time stealing data from other parts of the system. We noticed on Windows, which was obviously a major platform for us, that these protections didn’t exist,” Harris noted.

A dazzling recruitment drive

Any prolific ecosystem thrives on an equally good recruitment drive. This is what Cox wrote about how the universe of infostealers gets new people onboard, "With electronic rap music playing in the background, a man stretches his hands forward and leans back into a chair. The camera pans around their alleged apartment: huge floor-to-ceiling windows in a large dining room, wood-panelled floors, and a funky chandelier. In another shot, the man opens a laptop, types away, and then takes a sip of what looks like w****y. The implication: this could be you if we work together. This is one of a dizzying number of adverts on an underground forum called Lolz where 'traffers' (organised cybercrime workers responsible for redirecting victims’ traffic to malicious content operated by others) gather to look for new recruits."

Mostly the “traffers” section-related recruitment happens to onboard "contractors," who can help spread the malware or get traffic, with teams vying for attention in a crowded marketplace.

Each tries to one-up the other with outrageous advertising and branding. They use names such as “Billionaire Boys Club,” “Baphomet,” and “Chemodan.”

The adverts include animated GIFs of computer-generated luxury cars or private jets. Another for “Cryptoland Team” shows a knight in armour looking down at a skeleton in a hood writing on parchment paper.

"Each team's ad lists the brand of infostealers its members use, what split of the profits a collaborator can expect, and whether they allow an associate to take any extra exfiltrated logs. And most explicitly say that anyone they work with is prohibited from targeting the Commonwealth of Independent States (CIS), or former members of the Soviet Union, which includes Belarus, Ukraine, and Russia. Collaborators then leave reviews and screenshots proving they’ve made money working with the team," Cox wrote.

Many of these teams accept new applications through their own Telegram bots. Some of them require applicants

Source: Statista

to have prior experience. For instance, 404 Media successfully navigated the application process for two trafficker teams by answering a few basic questions. Following that, the bots provided links to the manuals of the respective teams, which outline how to spread the malware.

One manual from Baphomet recommends bundling the stealer into cheating software for Roblox. It then describes how to set up a YouTube video advertising the cheat, and by extension helps propagate the malware.

Another advert from a traffic team claims to work with TikTok, Telegram, Instagram, Twitter, Facebook, YouTube, YouTube Shorts, email newsletters, bloggers, and influencers. Many of the team's manuals reflect this and recommend distributing info stealers via other social media sites or point to GitHub as an effective trafficking method.

In October 2024, a global operation, supported by Eurojust (European Union Agency for Criminal Justice Cooperation), led to the takedown of

servers of infostealers. The infostealers, RedLine and META, targeted millions of victims worldwide, making it one of the largest malware platforms globally. An international coalition of authorities from the Netherlands, the United States, Belgium, Portugal, the United Kingdom and Australia shut down three servers in the Netherlands, seized two domains, unsealed charges in the United States and took two people into custody in Belgium.

Will the news send any shockwave in the world of infostealing? Probably not, unless and until such coordinated globallevel law enforcing operations become the new normal, in sync with the efforts of the tech giants to hire more researchers who constantly keep themselves updated with the evolving piracy techniques and come up with the perfect countermeasures.

editor@ifinancemag.com

MEDGULF & Saudi Pro League: A winning team

MEDGULF has defined the partnership with the Saudi Pro League as a phenomenon which has rapidly become the focus of the sporting world

In 2023, the Saudi Pro League entered into a sponsorship agreement with MEDGULF, a prominent insurance company based in the Kingdom. This partnership is set to continue through the end of the 2024-25 season.

The sponsorship aims to simultaneously promote health awareness and sports development. It aligns with Saudi Arabia’s Vision 2030 objectives, which focus on economic, social, and cultural diversification.

MEDGULF has defined this partnership as a phenomenon which has rapidly become "the focus of the sporting world." The company’s investment in sports is an investment in health that actively contributes to raising the quality of life.

MEDGULF CEO Umar Al-Mahmoud said, "Through our engagement with the sports community, we aim to raise health insurance awareness among Saudi football fans. By hosting events and activations in partnership with the Saudi Pro League, we also seek to elevate health programmes and insurance standards within the sports industry."

Mediterranean & Gulf Cooperative Insurance and Reinsurance Company (MEDGULF) has positioned itself as one of the leading insurance companies in the Kingdom. With a wide range of cooperative insurance and reinsurance services, including Health, Motor, Property, and more, the venture offers comprehensive coverage options.

A game-changing partnership

According to the Saudi Pro League association, “Approximately 80% of the Saudi population are actively engaged with football," suggesting that the partnership with MEDGULF will raise crucial awareness among the Gulf nation's population.

MEDGULF is also aiming to enhance its brand awareness among Saudi football fans by presenting events, activations, and offers in conjunction with the partnership of the Saudi Pro League, thereby aligning itself with the "Saudi Vision 2030," which aims to improve the quality of life for Saudi citizens by transforming the Kingdom's health sector.

When it comes to MEDGULF's health insurance solutions, the venture was one of the first insurance companies to offer group health insurance plans in the Kingdom. Right now it is providing products suiting the needs of various business organisations, ensuring the most appropriate health care for employees and their families. The coverage takes care of medical consultation,

prescriptions, diagnostic lab tests, surgeries and in-network hospital admissions.

The MEDGULF group health insurance plans, which has an extensive network on a global level including the best hospitals and health care providers across the Kingdom for over 1,000,000 insured individuals, come with benefits like direct settlement for pre-planned treatments, personal insurance cards and MEDGULF innetwork booklets, direct settlement for payment claims and 24/7 emergency hotline.

An unmatched product line-up

MEDGULF also offers health insurance for Small & Medium Enterprise employees and their families, through the Riadi programme. The customisation in Riadi gives its users the right to manage and change their health insurance plans in a way that fits their needs and desires to match the budget.

The policy, which also comes with faster issuance rates, provides various categories to fit a company’s budget, giving the latter

the freedom to manage and change the benefits of their plans in a way that meets the business leaders' needs to suit the company's employees and budget.

Aligning with Vision 2030’s goal of enhancing the quality of life for Saudi citizens through health sector transformation, MEDGULF has launched the ‘Salem Programme.’ This initiative aims to boost client satisfaction in three key areas: Insurance & Customer Services, Medical Care, and Preventive Care.

Under the “Salem Programme,” MEDGULF has introduced several innovative services, including “Medical Refill” for proactive medication management for clients with chronic diseases, “Medical Second Opinion” in collaboration with Assist America for access to American hospitals, “Chat with a Doctor” for live consultations, “Doctor on the Phone” for advice on chronic diseases, maternity and child care, family health, nutrition, and ageing, as well as “International Medical Care,” “Telemedicine,” “At Home Vaccination,” and “Health Awareness Sessions.”

DEEPAK NARAYANAN PRACTUS FOUNDER & CEO

AI can process massive datasets but managing ambiguity and making ethical decisions? That’s a human forte

AI: A tool, not a job-stealer

Artificial intelligence (AI) is no longer just a buzzword; it’s a transformative force reshaping industries and redefining the way we work and live. While its ability to automate repetitive tasks sparks awe, it also stirs unease about its potential to displace jobs. Are we on the brink of a mass unemployment crisis, or are we witnessing the dawn of a new era of collaboration between humans and machines? The answer lies somewhere in between, offering both challenges and opportunities as we navigate this unprecedented shift.

AI’s rapid rise: A double-edged sword

AI’s rise has been both revolutionary and unsettling. By automating tasks, AI is transforming industries at an unprecedented pace. For example, chatbots like ChatGPT are redefining customer service, reducing reliance on traditional call centres. But this efficiency comes with a cost – a McKinsey report estimates that by 2030, AI could displace 400 to 800 million jobs globally.

I’ve personally experienced this AI efficiency - and frustration - when spending 20 minutes convincing a bot that my credit card wasn’t stolen. Its response? “I understand your concern.” Clearly, it didn’t.

Creativity and EQ: Humans excel where AI fumbles

Take parenting, for instance. AI can paint a beautiful picture but it can’t argue with my toddler about why broccoli is non-negotiable for dinner. That’s creativity at its finest! According to the World Economic Forum,

97 million new jobs requiring creativity and problemsolving are expected to emerge by 2025.

AI is brilliant at data analysis but falters when it comes to creativity, empathy, and nuanced decisionmaking. Sure, AI can generate art but can it craft a novel that leaves you sobbing or compose a song that gives you goosebumps?

Empathy remains one of AI’s glaring shortcomings. Jobs that require emotional intelligence, like therapists, teachers, and customer-facing roles, are safe – for now. Imagine pouring your heart out to an AI therapist only to hear, “I see your point.” Not quite the comfort you’d hope for.

The human touch in complex decision-making

AI can process massive datasets but managing ambiguity and making ethical decisions? That’s a human forte. Autonomous cars, for instance, still rely on humans for judgment calls in life-or-death scenarios. An AI might suggest firing Bob for inefficiency but it doesn’t know Bob is the guy who fixes the coffee machine every morning, keeping the office caffeinated and functional. That's a value AI can’t measure.

AI: Shaping jobs of the future

Instead of outright replacing jobs, AI often enhances them, allowing humans to focus on higher-value tasks. Doctors, for example, use AI for diagnosis, freeing up time for patient care. PwC estimates AI could contribute $15.7 trillion to the global economy by 2030, creating more jobs than it eliminates.

Think of AI as a microwave – great for repetitive tasks but someone still needs to cook the lasagna.

Why AI can’t fully replace humans

Despite its capabilities, AI lacks intuition, ethical judgment, and independent innovation. While AI defeated humans at chess, it didn’t invent the game in the first place. Trust, rapport, and collaboration are irreplaceable. Sales professionals, for instance, thrive on building relationships - something AI struggles with. AI might remind you of your anniversary but it won’t pick up your partner’s favourite chocolate. That’s human intuition.

And let’s not forget AI’s missteps. An AI once wrote an essay on “the benefits of eating homework” when asked for a homework excuse. If AI ruled the world, wedding toasts might become PowerPoint decks on ‘Efficient Marriage KPIs’!"

A call for coexistence, not competition

Rather than competing, humans and AI should collaborate. AI can analyse billions of healthcare records but a doctor’s intuition saves lives. An IBM survey found that 87% of executives surveyed believe employees are more likely to be augmented than replaced by generative

AI. Think of AI as a sous-chef – it chops the onions, and you create the masterpiece.

Ultimately, AI will reshape jobs rather than replace them entirely. It may take over routine tasks, but it will never steal our coffee breaks or replicate the camaraderie of office banter. So, will AI take over human jobs? Not entirely. The future lies in embracing this partnership— harnessing AI's strengths while cherishing the uniquely human qualities that no machine can replicate: creativity, empathy, and intuition.

Deepak Narayanan is the founder and CEO of Practus, and is on a mission to redefine the consulting industry by delivering measurable ROI. With a vision to achieve an enterprise valuation of $1 billion by 2030, Deepak has been committed to helping customers solve business problems using technology as an enabler to improve profitability, cash flow and enterprise valuations. He is a chartered accountant and an Alumnus of Harvard Business School, apart from being recognised as one of the Top 25 CEOs in the prestigious Top 100 list of Great People Manager Study 2023

Photo Credits: Allen Control Systems

The Bullfrog’s design revolves around a rotating turret that can pinpoint and track fast-moving targets using electro-optical sensors

Bullfrog & Robot Dogs: Gun warfare gets AI push

IF CORRESPONDENT

Amid the growing threat of low-cost adversary drones targeting American troops, the US military is redefining its arsenal to counter an ever-present danger: death from above. In a world where technology advances faster than rules can be written, it’s hardly surprising that a new kind of weapon, one enabled by artificial intelligence, is making its debut. The AI-driven Bullfrog autonomous gun turret has been the new addition to the Pentagon’s counterdrone defence.

The weapon system, named Bullfrog, isn’t just any machine gun; it’s designed to be autonomous, capable of knocking small drones out of the sky with precision only a robot can deliver. This development, though significant, makes one question how future battlefields will look and whether humans will still be the primary actors in times of conflict. Let’s dive into how this system works, its potential, and the ethical dilemmas it raises.

Growing threat of drone warfare

The use of small, agile drones as offensive tools has exploded over recent years, especially evident during the Russia-Ukraine conflict. These cheap, commercially available drones are transformed into deadly weapons, posing a significant challenge to modern militaries. In response, the US Department of Defence has rapidly accelerated the development of counterdrone technology.

American troops abroad face an evolving landscape of threats from these weaponized adversary drones— unmanned aerial systems that are agile, cost-effective, and relatively expendable. From buzzing around battlefields to serving as the eyes of an enemy sniper or even delivering explosive payloads, these small aerial threats have introduced a fresh level of complexity to ground operations. The Department of Defence (DoD) has therefore been seeking ways to combat these drones more effectively, without exhausting its supply of costly missiles or traditional munitions.

Introducing the Bullfrog: A technological leap

Enter Bullfrog, a new AI-enabled autonomous gun system developed by Allen Control Systems (ACS). Debuted during the Technology Readiness Experimentation (T-REX) event in TECHNOLOGY FEATURE BULLFROG

August, the Bullfrog is essentially a 7.62-mm M240 machine gun mounted on a custom-designed turret equipped with electro-optical sensors and proprietary artificial intelligence. What sets it apart is its precision, accuracy, and autonomous capabilities— features that could radically change the way drones are dealt with on the battlefield.

"The Bullfrog Gun Turret is an autonomous system designed to detect, identify, and neutralise hostile drones, including Class 1 to Class 3 UAVs. Compact and lightweight, weighing less than 400 pounds, the system is well-suited for mobile operations or the protection of strategic sites, such as critical infrastructure. Operating on a standard 24V DC power supply, the Bullfrog integrates easily with NATO vehicles and can operate in passive mode to reduce detection risks during deployment," Global Defence News explained about the product.

ACS’ Bullfrog uses computer vision and advanced robotics to lock onto and destroy targets, performing far beyond the capabilities of even highly trained marksmen. Instead of relying on human intuition and muscle coordination, it utilises an advanced system to precisely aim and fire, dynamically adjusting for fast-moving aerial targets.

According to ACS co-founder and CEO Steve Simoni, the impetus for Bullfrog was observing the proliferation of drones during the Russian invasion of Ukraine, when Ukrainian soldiers were seen firing traditional AK-47s into the air, trying to hit drones with limited success.

Simoni and his co-founder Luke Allen, both former Navy veterans, saw a gap—a robotics problem begging to be solved. They believed that by employing artificial intelligence and modern-day computer vision, they could build

a system that consistently delivers pinpoint accuracy. After all, shooting a small drone out of the sky is not something any ordinary marksman can achieve. However, as ACS demonstrated, it’s precisely what a robot can do.

Precision at a cost: The Bullfrog’s capabilities

The Bullfrog’s design revolves around a rotating turret that can pinpoint and track fast-moving targets using electrooptical sensors. Unlike traditional gun turrets like the Common Remotely Operated Weapon Station (CROWS), the Bullfrog was designed with precision and efficiency in mind. This system isn’t about saturating an area with bullets— it’s about targeted strikes.

During the Technology Readiness Experimentation 2024 (TREX 242) event, held by the United States Department of Defence (DoD) at Camp Atterbury, Indiana, from August 19–26, the Bullfrog showcased its capabilities. It emerged as the only system in the DoD arsenal capable of autonomously detecting, tracking, identifying, and neutralising drones while completing the critical kill chain with precision. The integration of advanced artificial intelligence, computer vision, and Allen Control System’s proprietary software enabled the Bullfrog to effectively utilise the standard M240 machine gun while maintaining a low size, weight, and power profile (Low SWaP).

The system uses advanced Linuxbased software, supporting integration with third-party command-and-control (C2) systems and radars. This open architecture enables bidirectional data and target track communication. Using a database trained on millions of annotated images, the system ensures exceptional detection accuracy with a false negative rate of less than 2%.

Footage from the Bullfrog’s trials

shows the system mounted on a truck, precisely locking onto small drones and taking them down with only a few well-placed shots. ACS claims that their system can knock a drone out of the sky with just two shots from 200 yards away—a feat impossible for human soldiers.

This makes the Bullfrog unique compared to the bulky 15-foot-tall Phalanx Close-In Weapon System (CIWS), primarily designed to deliver a “cloud of bullets” at incoming missile threats. The Bullfrog, by contrast, relies

on pinpoint accuracy and uses minimal ammunition, making it a cheaper and more efficient solution.

"Demonstrations included engagements against multiple drone swarms at various distances, capturing the attention of over 30 key stakeholders, including members of Congress, DoD officials, and senior representatives from special forces, the Marines, and counterdrone programmes. The consistent performance of the Bullfrog at TREX generated significant interest from government stakeholders, indicating

potential for expedited operational deployment. Notable attendees included Congressman Greg Pence, the Honourable Heidi Shyu, Under Secretary of Defence for Research and Engineering, and senior representatives from Army Futures Command and the Joint Counter-small Unmanned Aircraft Systems Office," Global Defence News reported.

Cost-effectiveness and flexibility

A key advantage of the Bullfrog over other solutions is its cost-effectiveness.

FEATURE BULLFROG

The system uses standard 7.62-mm rounds to target drones, making it a more affordable option compared to costly anti-air missiles or directed-energy weapons. While promising, directedenergy systems like high-powered lasers and microwaves are still experimental and rely on complex technology.

According to Steve Simoni, the cost-per-kill ratio associated with the Bullfrog is comparable to those of laser and microwave systems, without the demanding maintenance and logistical concerns that accompany directedenergy weapons. In other words, Bullfrog could be the Pentagon’s most cost-effective solution for eliminating masses of cheap, small drones.

Moreover, the Bullfrog is lighter, weighing less than 400 pounds, compared to the hulking CIWS. Its small size gives it flexibility, making it suitable for moving tactical vehicles like the Joint Light Tactical Vehicle (JLTV), thus providing mobile defence against aerial threats. This versatility is crucial, particularly in today’s conflict zones, where the ability to quickly adapt and relocate resources can be the difference between mission success and failure.

Keeping a human in the loop

Despite the remarkable capabilities of the Bullfrog, its development brings up questions that military planners, lawmakers, and ethicists have long pondered—should machines be allowed to make life-and-death decisions without human intervention? This ethical conundrum has been a point of significant debate as autonomous systems become increasingly prevalent in the defence sector.

Currently, the Bullfrog has been designed to maintain a human “in the loop.” In other words, while the system autonomously tracks and aims at targets,

it requires human authorisation to pull the trigger. However, ACS officials have confirmed that the Bullfrog could operate fully autonomously if required, leaving open the possibility for future use in scenarios where direct human oversight may not be practical.

The Pentagon’s existing policy on autonomous weapons emphasises human control over lethal decisionmaking. But as technology advances, the temptation to remove human operators entirely becomes stronger, particularly when considering the speed and precision required to intercept a fast-moving, unpredictable drone. With adversaries also investing in autonomous systems, there is mounting pressure to reduce response times— something that may be achieved only by removing human delay.

Yet, it’s this “uncharted territory” that worries many experts. The removal of human oversight in lethal operations introduces the potential for errors in identification, accidental engagements, and ethical violations. One of the primary concerns is determining friend from foe accurately. Mistakes in identifying targets could result in friendly fire incidents, civilian casualties, and violations of the laws of war.

Pentagon’s Replicator initiative and the Bullfrog’s role

The timing of the Bullfrog’s debut aligns with the Pentagon’s broader efforts to counter aerial threats. The Replicator initiative, launched by the Pentagon, aims to enhance US military drone and counter-drone capabilities, particularly in anticipation of conflicts involving powerful adversaries like Russia and China. The initiative focuses on deploying low-cost, attritable drones and improving defence capabilities against small unmanned aerial systems. TECHNOLOGY

Bullfrog could play a crucial role in this vision, providing a practical solution for ground units to defend themselves against small drones. The system’s simplicity in design—with fewer moving parts than missile systems or directed-energy platforms—makes it an ideal candidate for deployment in a range of combat situations. Mike Clementi, a former congressional defence appropriator, noted that systems like the Bullfrog that can be integrated across various platforms and employ existing rounds could offer a significant advantage over other highmaintenance solutions.

Emerging counter-drone arsenal

The Bullfrog is far from the only counter-drone technology being tested or deployed by the US military. The Army has pursued various avenues to make small arms more effective against unmanned airborne threats. These approaches range from rifle-mounted GPS and radio frequency jammers, which disorient incoming drones, to enhanced ammunition designed to

replicate shotgun effects—a proven method of countering drones in Ukraine.

Other ongoing initiatives include larger-calibre solutions like the XM914 30-mm chain gun, missile systems such as Raytheon’s Coyote interceptor, and more exotic directed-energy weapons. Directed-energy weapons, such as high-energy lasers and high-powered microwaves, are particularly promising because they offer near-instantaneous destruction at an incredibly low cost per shot. However, they remain experimental and their effectiveness under different conditions, such as in cloudy or dusty environments, has yet to be fully validated.

with other counter-drone defences, and function in conjunction with electronic warfare systems that jam drone signals.

The future of battlefield autonomy

Source: Statista

Given this crowded field of counterdrone options, the Bullfrog’s potential lies in its ability to provide an effective balance between cost, simplicity, and reliability. Rather than requiring complex energy systems or additional personnel training, it represents an extension of the traditional machine gun into the autonomous era. Its adaptability makes it particularly valuable—it can be used on different platforms, integrated

As the Bullfrog enters the spotlight, ACS envisions an even more ambitious future. The company plans to further enhance the system, incorporating longer-range capabilities and the ability to track and shoot drones moving in more complex acceleration patterns. ACS aims to create a layered defence network where multiple Bullfrog systems can operate together, providing comprehensive coverage for military convoys and outposts.

In the future, we might see a battlefield where most of the combat is executed by autonomous robotic systems. A convoy of vehicles, each equipped with Bullfrog turrets, could use AI-driven coordination to efficiently deal with incoming aerial threats, regardless of the terrain or movement of the convoy. These systems would focus on drone defence while freeing up

soldiers to concentrate on other missioncritical activities.

This vision paints a picture of the battlefield of tomorrow—one where robotics and AI work in tandem, transforming the nature of warfare into a contest between autonomous systems.

ACS’s Steve Simoni even suggests that future conflicts will involve “autonomous robots like ours shooting each other,” reducing the need for direct human engagement.

Robot Dogs armed with AIenabled rifles

When it comes to redefining 21st century

warfare, the United States Army, along with the Bullfrog experiment, is also working on another project, where a "Robot Dog," armed with an AI-enabled gun turret, is currently getting tested in the Middle East as a fresh counter-drone capability for US service members.

Photos published to the Defence Visual Information Distribution Service in in November 2024 showed a Ghost Robotics Vision 60 QuadrupedalUnmanned Ground Vehicle, or Q-UGV, armed with what appears to be an AR15/M16-pattern rifle on a rotating turret undergoing "rehearsals" at the Red Sands Integrated Experimentation Centre in

Saudi Arabia in mid-September as part of a recent counter-unmanned aerial system exercise.

"The specialised gun turret, which features a large electro-optical targeting system with "Lone Wolf" emblazoned across the side, appears to be the same artificial intelligence-enabled system that the Army recently put through its paces during Operation Hard Kill, a separate counter-UAS exercise led by the service's Combat Capabilities Development Command, or DEVCOM, and the 10th Mountain Division at Fort Drum, New York, in August," Softonic stated.

FEATURE BULLFROG

A US Army Central spokesman told Military.com that the armed Robot Dog was one of several “non-counter-sUAS” systems tested alongside 15 counterdrone platforms at Red Sands during the September test and that the gun engaged several static ground targets, but declined to elaborate on its potential applications.

The Department of Defence has been steadily integrating Robot Dogs into its operations over the past few years. Q-UGVs now perform a range of tasks, including explosive ordnance disposal, enhancing perimeter security at sensitive installations, and boosting intelligence, surveillance, target acquisition, and reconnaissance capabilities for US service members deployed in challenging environments.

While still relatively new technology, Robot Dogs have already proven capable of going places inhospitable to human troops and performing tedious jobs such as perimeter patrols longer, without taking rest.

Beyond these operations, the Pentagon has increasingly experimented with mounting weapons systems on Robot Dogs. The Marine Corps has tested quadrupedal robots outfitted with both Onyx Industries' SENTRY remote weapon system and the M72 LAW antitank rocket launcher, while the Army has considered outfitting mechanised canines with the new 6.8mm XM7 rifle the service recently fielded under its Next Generation Squad Weapon

programme to replace the M4 carbine.

Challenges and controversies

Despite the promise of AI and robotics, the deployment of autonomous weaponry remains controversial. Fully autonomous systems could provide unprecedented levels of precision, but they also risk dehumanising the battlefield. If systems like Bullfrog were allowed to operate without any human intervention, it could open up a Pandora’s box of moral and ethical issues.

Without human judgment, AI systems can make mistakes that have devastating consequences. For instance, determining whether a drone is a friend or a foe is a complicated process that requires understanding the context— something AI currently struggles with.

Factors like electronic interference, environmental conditions, and the lack of reliable identification signals could lead to tragic outcomes. The question of accountability also looms large—who is responsible when an autonomous weapon system makes a mistake? Is it the operator, the manufacturer, or the military command?

Moreover, autonomous weapons have the potential to increase the likelihood of war. Nations might be more willing to engage in conflict if their human forces are not directly at risk. The lower perceived cost of conflict could lead to more frequent skirmishes or even full-scale wars, fundamentally

changing international relations.

The Bullfrog represents a significant step forward in counter-drone technology—one that could revolutionise how militaries around the world handle the growing drone threat. Combining traditional firearms with cutting-edge AI, bridges the gap between conventional warfare tools and futuristic autonomous capabilities.

However, as the world grapples with this new frontier, there’s a critical need for a balanced approach. Military innovation must be tempered by ethical responsibility and sound judgment. While the prospect of autonomous weapons is undoubtedly exciting, the complexities they introduce require careful consideration. The future of warfare may be fought with robots, but humanity must remain accountable, especially when lives are at stake.

As the Pentagon continues to evaluate its arsenal in light of emerging threats, the developments of Bullfrog and Robot Dogs could serve as a turning point in modern warfare. It reflects both the promise and the perils of autonomous systems in military operations, urging us to rethink how we approach conflict, defence, and, ultimately, the value we place on human oversight.

editor@ifinancemag.com