International Finance - May 2021 by International Finance

May 2021

Issue 22 Volume 18

UK £4 Europe ¤5.35

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HOW CAN THE WORLD GET BACK ON ITS FEET? Vaccination is key for global economic recovery but vaccine disparity is now a growing concern that needs addressal

Going green with sustainable aviation fuel

Southeast Asia enters digital banking era

AI is transforming the healthcare International Financeindustry | May 2021 | 1

CORPORATE SUSTAINABILITY ATTAINED THROUGH SERVICE EXCELLENCE

Corporate Sustainability

Asia Responsible Enterprise Awards

Achieve Glory and Excellence World's Top 100 Most Valuable Insurance Brands Brand Finance Insurance 100 2020

Social Inclusion Award

Na�onal Recogni�on

Only One Awarded in the Insurance Industry

Na�onal Brand Yushan Award

8 Awards from The Asset

Best Life Insurance Brand, Taiwan

Global Brands Awards 2020

5 awards from Micro Insurance Contest

Taiwan Corporate Sustainability Awards 2020

Financial Supervisory Commission Insurance Contest 2020

Best Digital Insurance Experience and Digital Insurer of the Year, Taiwan

New Insurance Product and Claims Ini�a�ve of the Year, Taiwan

ESG Investor of the Year for Insurers and Insurance Investor of the Year, Taiwan Editors’ Triple Star

Investor of the Year- Insurance Company, and Green Project of the Year, Asia Paciﬁc Green Project of the Year, Taiwan

The Asset Triple A Digital Awards 2020

The Asset Triple A Sustainable Inves�ng Awards 2020

Insurance Asia Awards 2020

The Asset Triple A Infrastructure Awards 2020

Taiwan Life Insurance Co., Ltd. www.taiwanlife.com

Top 100 in the world Brand Finance Insurance 100

Digital Innova�on

IDC Digital Transforma�on Awards

MAY 2021 VOLUME 17 ISSUE 22

EDITOR’S NOTE SAMUEL ABRAHAM EDITOR, INTERNATIONAL FINANCE

Fastest recession recovery in 80 years

lmost every person in this world has been affected by the Covid-19 pandemic in some capacity. Even though economic activities have resumed in almost every part of the world, the pandemic is not over yet. In March 2020, the whole world entered a state of lockdown to curb the spread of the virus. So, what can we do to avoid future lockdowns? How can the world get back on its feet? The answer to this is mass vaccination. Even though the global economy is forecasted to grow by 6 percent this year, there is a growing concern that vaccine disparity could derail global economic growth. Also, uncertainties with the Delta variant looms large. This issue of International Finance Magazine explores the factors that will ensure the fastest recession recovery in 80 years. While the pandemic battered economies globally, Vietnam’s economy grew by 2.9 percent year-on-year. Vietnam has recorded remarkable growth over the years, but can its new leadership sustain its stellar growth? The issue also explores how the technologies are shaping industries at various levels. 5G is driving digitalisation in oil and gas and the pandemic has fast-tracked the application of AI in healthcare. Meanwhile, China is making headway with its digital yuan and positioning itself as a leader in the digital economy. Further, we also explore what makes Southeast Asia a fertile ground for a digital banking boom and what’s driving Dubai’s real estate recovery? The July issue also features an exclusive interview with João Del Valle, CEO of EBANX, the newest unicorn in Latin America.

sabraham@ifinancemag.com www.internationalfinance.com

International Finance | May 2021 | 3

INSIDE

IF MAY 2021

IN CONVERSATION AMERICA IS 54 CENTRAL THE NEXT BIG THING

e-commerce and digital payments are still in early stages

IS GLOBAL ECONOMIC RECOVERY ON TRACK? Vaccination is key for global economic recovery but vaccine disparity is now a growing concern that needs addressal Economy

HEALTHCARE

feature Vietnam economy

ANALYSIS

New leaders Vietnam GDP

14 China’s digital yuan could be

ECONOMY

AI IS TRANSFORMING HEALTHCARE

VIETNAM’S NEW LEADERSHIP

AI is becoming more and more common within healthcare and leveling up

Newly elected leaders filled the positions of the Newly elected leaders filled the President and the Prime Minister positions of the General Secretary, Prime Minister, President and Chairman of the National Assembly General secretary of the Communist Party of Vietnam, Pham Minh Chinh

BANKING AND FINANCE

REAL ESTATE

midst the ongoing Covid-19 pandemic, on April 5th, 2021, the National Assembly of Vietnam elected the country's four leaders who will hold key positions over the next five years. While Nguyen Phu Trong was re-elected for the third time as the general secretary of the Communist Party of Vietnam, Pham Minh Chinh was elected as the Prime Minister. Nguyen Xuan Phuc was chosen as the newly elected President, and Vuong Dinh Hue was appointed as

the Chairman of the National Assembly. In 2020, economies across the world were battered because of the pandemic. However, Vietnam’s economic success in 2020 caught global attention. Vietnam was the top-performing Asian economy last year, and according to government estimates, the Vietnamese economy grew by 2.9 percent year-on-year. What’s

84 | March 2021 | International Finance

feature Vietnam economy

the future of money

Can Vietnam’s new Southeast Asia’s growing digital leadership transition banking landscape sustain its stellar Going green with sustainable aviation fuel IF Correspondent

remarkable is that while some of the biggest economies were battling recessions, Vietnam did not report a single quarter of contraction in 2020, a period plagued by lockdowns, border closure and economic distress. Interestingly, in the last decade, Vietnam achieved impressive yearly GDP growth of six percent or higher, reaching a 10 year high of 7.1 percent in 2018. Once one of the poorest economies in the world, now Vietnam’s impressive growth counters China. Top brands such as Nike and Samsung have established their manufacturing hub in the country. So how did Vietnam achieve this remarkable feat? This was achieved through a series of social and economic reforms, liberalisation, domestic reforms through deregulation and investments in human and physical capital. The new leadership in place has a daunting task in their hand. Not only they need to maintain Vietnam’s impressive economic growth but they need to steer the economy through a pandemic. Earlier this year, World Bank released reports acknowledging Vietnam's transition from centrally planned to a market economy and is recognised as the most dynamic emerging country in the Southeast Asia region. The World Bank's data from 2002 to 2018 proves that the GDP has increased 2.7 times, yet, Vietnam reported per capita income to be $2,700 in 2019. Vietnam took initiatives to alleviate poverty from 70 percent to less than six percent during this period, a remarkable achievement. Vietnam’s impressive economic growth has been facilitated by export-oriented manufacturing and the resurgence of domestic demand. The country has a considerable number of young people population with a life expectancy of 76 years. According to the World Bank,

BUSINESS DOSSIER

about 26 percent of the population will be from the middle class by 2026.

Vietnam under new leadership Newly appointed Prime Minister Pham Minh Chinh has prioritised the transformation and development of Vietnam’s economy to a digital-based economy. The Resolution of the XIII Congress of the Party has revealed the blueprint for the new regime that seeks to transform the economy by undertaking six key tasks and three strategic breakthroughs. Under the leadership of Chinh, Vietnam will invest in science and technology development and create a more conducive environment for business development as well as for manufacturing concerns. PM Chinh’s have prioritised national defence, sovereignty, territorial integrity, social order and safety amid unstable situations in the South China Sea. However, the bigger task in the hand of the newly elected prime minister is to lay down a constructive plan to build on recess success and develop Vietnam into a modern state with a fully developed economy in league with countries like South Korea, Japan and the western countries. It will prove to be monumental and such transition will need to be guided by the vision of the new leadership and has to be aided by suitable economic and social developmental policies. While the current political leadership needs to kickstart the gargantuan project, the chances are high that the targets won’t be achieved in its lifetime. Therefore, PM Chinh would also need to oversee the commencement and successful implementation of the Five Year Economic and Social

24 Bangkok Life Assurance

Most Innovative Company

38 Committed to developing a

sustainable business model

52 An asset class that has stood

the test of time

International Finance | March 2021 | 85

66 Most Socially Responsible

Company - BA Securities

74 Petkim ‘Best Working Capital

DIGITAL IDENTITY IN FINANCE

WHAT’S DRIVING DUBAI’S REAL ESTATE

Management'

The new digital process can help and empower people to heal our society from the pandemic

Dubai’s real estate market has already picked up and sales are on a high at the moment

4 | May 2021 | International Finance

80 Telecom starts the Deployment of 5G in Argentina

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THOUGHT LEADERSHIP MARIUS GALDIKAS FINTECHS TO SET BENCHMARKS

Fintechs are used to challenging – as well as being challenged by – the status quo

LILIANE MUNEZERO HOW RENEWABLE ENERGY IS EMPOWERING WOMEN IN RURAL AFRICA? Providing renew. energy as a catalyst for development can't be achieved without including women

Director & Publisher Sunil Bhat Editor Samuel Abraham Editorial Adriana Coopens, Jessica Smith, Lacy De Schmidt, Pritam Bordoloi Production Merlin Cruz Design & Layout Vikas Kapoor Technical Team Prashanth V Acharya, Bharath Kumar

INSIGHT

5G TO DRIVE OIL & GAS DIGITALISATION

5G brings a whole host of opportunities and developments that has the potential to transform the whole industry

Business Analysts Alice Parker, Sid Nathan, Sarah Jones, Christy John, Gwen Morgan, Alex Carter, Janet George, Indra Kala, Kevin Raj, Rohit Samuel, Priscilla Salt, Kshama Paul Business Development Manager Steve Martin Business Development Sunny Shah, Sid Jain, Ryan Cooper Accounts Angela Mathews Registered Office INTERNATIONAL FINANCE is the trading name of INTERNATIONAL FINANCE Publications Ltd 843 Finchley Road, London, NW11 8NA Phone +44 (0) 208 123 9436 Fax +44 (0) 208 181 6550

REGULAR EDITOR'S NOTE

03 06 08

Fastest recession recovery in 80 years

TRENDING Vodafone UK launches 5G standalone

NEWS Amazon to launches healthcare accelerator

Email info@ifinancemag.com Press Contact editor@ifinancemag.com Associate Office Zredhi Solutions Pvt. Ltd. 5th Floor, Sai Complex, #114/1, M G Road, Bengaluru 560001 Ph: +91-80-409901144

International Finance | May 2021 | 5

# TRENDING HEALTHCARE

OPEC may boost production as oil market tightens

Amazon launches healthcare accelerator Amazon Web Services (AWS) announced that it will launch a new accelerator programme focusing on the digital health space. The accelerator will provide 10 startups operating in the US with an opportunity to participate in a four-week crash course that includes technical training, business development and mentorship. AWS Health Accelerator’s first cohort is held in partnership with KidsX, a pediatric-focused digital health incubator. Applications are now open and healthcare startups have time till July 23rd 2021 to apply.

OPEC+ is said to be discussing the possibility of further boosting the production as the oil market tightens. Moscow mulls to propose that the group should ease a global supply deficit by increasing the output. At the same time, other OPEC+ nations are also discussing a hike in August. OPEC and its allies are in the process of reviving two million barrels per day (bpd) of idle production from May to July.

At a Glance GDP of Brazil in current prices from 2018-2022 (in US billion dollars)

2018

1916.93

China aims to be a leader in blockchain TEC HNOLOGY The government of

China has accelerated its blockchain development to become a world leader in the technology by 2025. It will be embracing distributed databases with the help of an ‘advanced blockchain industrial system.’ China is looking forward to incorporating blockchain technology into its economic and development strategies. Additionally, China is also planning to establish industry standards, tax incentives and intellectual property protection to support the blockchain industry.

6 | May 2021 | International Finance

Saudi real estate is rebounding from 2020

2018 2019

1877.11 1916.93

R E AL E S TAT E After the ease of the

Covid-19 restrictions, the newfound focus on living in an apartment and the growth of e-commerce has positively impacted the warehouse and the retail sector spurring a rebound in the real estate market of the Kingdom of Saudi Arabia. Thus the real estate developers are introducing a higher proportion of apartments and townhouses within their megaprojects. The reopening of international movement is also spurring a rebound in the hospitality sector.

2020

1434.08 2021

1491.77 2022

1636.41 Source: Statista

NEWS | INSIGHTS | UPDATES | DATA

Ones to Watch

MARKETS

Didi raises $4.4 bn in US IPO China-based ride-hailing firm Didi Global has raised $4.4 billion in its US initial public offering (IPO). It was reported that Didi sold around 317 million American Depository Shares (ADS) at $14 per share, which is higher than the planned 288 million. The company has been targeting a valuation of $67 billion in its New York Stock Exchange debut, however, Didi could be valued at near $73 billion. Didi investor order book was oversubscribed multiple times

Since Alibaba’s $25 billion debut in 2014, Didi’s could be the largest listing by a Chinese company in the US. SoftBank Group, Uber Technologies and Tencent Holdings include Didi’s top backers with a combined stake of 40 percent. Didi operates with a mobile application that allows users to book private cars, taxis, carpool features, and the international version of the same offer food delivery services.

By the Numbers

CHENG WEI FOUNDER AND CEO OF DIDI Under his leadership, the Chinese mobile transportation platform with global operation, is set for one of the biggest IPOs of the decade and will be listed under the New York Stock Exchange.

FAHAD AL HASSAWI CEO OF DU Du has appointed Fahad as the CEO, who took office in June. His formal tenure starts at the same time when the company is going through a major restructuring of operations.

Fully vaccinated percent of the population Israel 59% Chile 42% US 41% UK 38% Qatar 38% Source: Our World in Data

THASUNDA BROWN DUCKETT PRESIDENT AND CEO AT TIAA Thasunda took over the office in May 2021 after serving as the CEO of Chase Consumer Banking. She is a Fortune 100 provider of secure retirements and outcome-focused investment solutions.

International Finance | May 2021 | 7

IN THE NEWS

Vodafone launched its ultrafast 5G Standalone network technology in London, Manchester and Cardiff

FINANCE

BANKING

INDUSTRY

TECHNOLOGY

Vodafone UK launches 5G network Vodafone UK has announced the pilot of its ultrafast 5G Standalone (SA) network technology in cities such as London, Manchester and Cardiff. The pilot follows the 2020 trial at Coventry University. The commercial pilot will be testing the new capabilities that are being introduced as part of the 5G standalone technologies like slicing. It is based on the deployment of a cloud-native dual-mode 5G Core in partnership with Ericsson. It will help partners to check the new SA-enabled devices on a live network. A dedicated slice has already been configured for Coventry University with low-latency services to provide virtual reality distance learning to run the trial. Andrea Dona, Chief Network Officer, Vodafone UK said that delivering 5G Standalone for the UK is an important step forward for customers and the company's partners. It delivers new features, such as new levels of reliability, latency and flexibility, are a gamechanger for customers and developers looking to create new applications. She said, “This complements our investments

8 | May 2021 | International Finance

in Multi-access edge compute (MEC) capabilities, the Internet of Things (IoT), Mobile Private Networks (MPN) and OpenRAN. When we bring all these technologies together, we open up entirely new possibilities for customers, and move beyond being a core connectivity provider to being a true digital champion.” Recently, Vodafone Spain has chosen Ericsson as its technology partner to deploy the first pre-commercial network 5G Core Standalone (SA) in Spain. Ericsson will support Vodafone's entire cloud-native 5G Core for standalone 5G network applications included in this launch. According to Ericsson’s website, it's dual-mode 5G Core will allow Vodafone to develop and test new use cases leveraging the characteristics of 5G standalone technology, enabling their customers to experience 5G’s full potential. The provided dual-mode 5G Core solution includes products from Ericsson’s Cloud Packet Core and Cloud Unified Data Management and Policy portfolios, offers a common multi-access and cloud-native platform that supports 5G and as well as previous generations for optimised footprint and TCO efficiency.

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IN THE NEWS

Oil giant Aramco recently concluded the sale of its first dollar-denominated Islamic bond

FINANCE

BANKING

INDUSTRY

TECHNOLOGY

Aramco raises $6 bn from bond sale Saudi Arabia-based oil giant Aramco recently concluded the sale of its first dollar-denominated Islamic bond or Sukuk. The sale of Sukuk by Aramco started on June 7 and the transaction settled on June 17, 2021 with the Sukuk admitted to the official list of the UK Financial Conduct Authority, for trading on the London Stock Exchange’s main market, according to Aramco's website. Saudi Aramco has hired a large group of banking giants for its Islamic bond sale. The active book-runners on the deal are Alinma Invest, Al Rajhi Capital, BNP Paribas, Citi, First Abu Dhabi Bank, Goldman Sachs International, HSBC, JPMorgan, Morgan Stanley, NCB Capital, Riyad Capital, SMBC Nikko and Standard Chartered Bank. Passive book-runners on the deal include Albilad Capital, AlJazira Capital, Alistithmar Capital, ANB Invest, Credit Agricole, Dubai Islamic Bank, Emirates NBD Capital, GIB Capital, MUFG, Saudi Fransi Capital and Societe Generale among others.

10 | May 2021 | International Finance

Aramco placed $1 billion in a three-year tranche on the Islamic bond called Sukuk and around $2 billion in a five-year tranche and $3 billion in a ten-year tranche. Reportedly, the oil giant has been very active on the debt market in recent months after the 2020 crisis took a toll on its profits and revenues. Previously, Aramco raised $12 billion by selling bonds in 2019 and an $8 billion offering in November last year, however, they were not Islamic bonds. Aramco is raising money to help pay an annual dividend of $75 billion. Aramco President & CEO, Amin H. Nasser said, “We are very pleased with the global investment community’s response to Aramco’s first international dollar Sukuk, which attracted demand 20 times the initial targeted issuance size. The outcome demonstrates further evidence of Aramco’s unique value proposition, which is underwritten by its operational and financial resilience. This is of course made possible by our employees, who continue to make a difference by safely and reliably delivering energy to the world.”

IN THE NEWS

FINANCE

BANKING

INDUSTRY

TECHNOLOGY

Italian insurer Generali buys AXA’s insurance business in Malaysia

Dubai-based port operator DP World will develop and expand the Berbera Port in Somaliland.

Bitcoin a legal tender in El Salvador?

Generali to buy AXA’s Malaysian unit

President of El Salvador Nayib Bukele announced that a new law has been passed to make bitcoin a legal tender effective from September 7, 2021. Not only that, Bukele has now attached incentives for those dealing in bitcoin in the country, contrary to crypto restrictions in other parts of the world. He said that bitcoin has a market cap of $680 billion dollars and if even 1 percent of it is invested in El Salvador, that would increase its GDP by 25 percent. This shall make El Salvador the first country worldwide to adopt bitcoin as legal tender. The country plans to launch the scheme and give $30 dollars' worth of bitcoins to every citizen who signs up when the law comes into force.

Italy-based insurer Generali has recently bought AXA’s insurance business in Malaysia in a deal worth $312 million. According to the deal, AXA will sell its 49.99 percent stake in AXA Affin General Insurance and its 49 percent stake in AXA Affin Life Insurance. AXA earlier revealed that the deal will be closed in the second quarter of 2022. The deal will see Generali become the second-biggest player in Malaysia’s property and casualty insurance market. It will also pave the way for the Italian insurer to enter the life insurance sector in Malaysia. Earlier this year, Generali also completed the acquisition of AXA’s property and casualty insurance and life and savings businesses in Greece for around €167 million.

Bitcoin—a better performing asset class in 2019?

12 | May 2021 | International Finance

Covid-19 impact on African aviation sector

International passengers

2019 74 million 2020 39 million Source: Coindesk

Domestic passengers

2019 41 million 2020 15 million

DP World develops new terminal

Japan provides 6 mn vaccines

Dubai-based port operator and logistics company DP World has recently invested $442 million to develop and expand the Berbera Port in Somaliland. The integrated logistics provider and the Government of Somaliland together have opened the new container terminal. The first phase of the planned expansion to develop the port into a major regional trade hub to serve the Horn of Africa has been completed. On its website, the firm has stated that the new container terminal will be 17 meters deep draft, a quay of 400 meters and three ship-to-shore (STS) gantry cranes. It can handle large container vessels and increase the port’s container capacity from 150,000 Twenty-Foot Equivalent Units (TEUs) to 500,000 TEUs annually.

Japan has announced that it will donate 6 million AstraZeneca Covid-19 vaccines to Southeast Asian countries. The nation has planned to send an additional two million vaccine doses to Taiwan and Vietnam and one million doses each to Thailand, Malaysia, Indonesia and the Philippines. Sri Lanka will also receive around 1.45 million doses of the vaccine from Japan. Similarly, Nepal is also expected to receive around 1 million doses. The Covid-19 vaccine donation is expected to help Japan increase its diplomatic influence globally as nations worldwide are being asked to contribute more doses to the COVAX scheme, a global initiative by the World Health Organisation (WHO), for sharing the Covid-19 vaccine doses to cover the 200 million shortfall.

Greenhouse gas emissions by sector, 2019 data

Energy Supply Business Transport Source: BEIS, 2020

22% 17% 26%

Residential 15% Agriculture 10% Waste management 04% Public 02%| International Finance | May 2021

TECHNOLOGY

ANALYSIS

CHINESE ECONOMY CHINESE DIGITAL MONEY

A digital currency will allow China to track spending in real-time, along with the money that is not linked to the dollar, which has become the yardstick of financial measurement

China’s digital yuan could be the future of money JESSICA SMITH

Around thousands of years ago, when the only form of currency the world knew were coins, China invented the paper currency. Come 2021 and the country is again leading the race when it comes to digital currencies. What’s being debated is whether The Xiong’an China’s CBDC project have branch of the the capability to shake the Agricultural pillars of American power? Bank of China Well, one can argue that in Hebei money has already become launched its virtual ever since credit first digital cards and digital payment yuan-based apps such as PayPal, Google hardware Pay, WeChat have come very wallet close to eliminate the need for physical currency, but in its essence, those are just ways to move money electronically. What China is doing is turning the legal tender into a computer code. Cryptocurrencies such as Bitcoin, Dogecoin, and Ethereum have already shown a potential digital future for money, though they exist outside the traditional global financial realm and are yet to become the legal tender. However, China’s version of digital money will be controlled by its central bank and the same body will also issue the new electronic currency. This is

14 | May 2021 | International Finance

expected to give the Chinese government major new tools that will help them monitor both its economy and its people. Additionally, the digital yuan will also cancel out one of bitcoin’s major drawbacks, i.e., anonymity for the user.

China is leading the digital currency race China is fairly far ahead when it comes to the testing the digital yuan and has done these tests in several regions in the past year, along with setting up a legal framework for the CBDC with the help of various global finance regulators. Xiong’an is one of the first four regions that debuted China’s CBDC. The Xiong’an branch of the Agricultural Bank of China in Hebei launched its first digital yuan-based hardware wallet which was developed by the Party Working Committee of the Xiong’an New Area and the PBoC’s branch in Shijiazhuang in February 2021. Recently, China took a major step in its central bank digital currency (CBDC) tests by debuting blockchain-enabled salary payments with digital yuan at Xiong’an. One might ask why there is so much excitement surrounding the Chinese digital yuan? Well, it’s primarily because tokenised money is completely controlled, similar to physical cash. People might use an ATM to draw the amount of money needed from our accounts, but as soon as we do, the bank

20 2035

owes us less and the state owes us more. Similarly, digital cash has been conceptualised the same way. When we transfer money from our savings account to the digital wallet, the commercial bank steps out of the picture and the central bank takes in the role. Tokenised money makes credit risks disappear from settlements and the transactions remain primarily anonymous unless the concerned authority wants to check for money laundering. As predicted by financial experts, the digital yuan might be heading for a soft launch coinciding with the 2022 Beijing Winter Olympics.

The digital dynamism It goes without saying that China’s bold move hasn’t surprised anyone, especially after it has positioned itself in the market as a nearly cashless society. Back in 2000, there were around 23 million internet users in the country and that number quickly rose up to 900 million in 2020. It is safe to assume that most of the users consume technology primarily with the help of a mobile phone. As a result of this technical boom, China developed a comparable physical communication infrastructure. This directly resulted in China’s hugely successful

e-commerce and online-to-offline platforms, which brought together the two major digital players of the field- Alipay and Tenpay, that developed the WeChat pay service. WeChat pay service allowed an almost hassle-free shopping experience that included everyday transactions like accessing public transport. Ever since the need for digital payments has gained momentum, central banks from all over the world started exploring digital currencies. At present, they are being studied by 85 percent of Central Banks. In October, the Bank for International Settlements (BIS) released a report, along with seven other central banks like the European Central Bank, the Bank of England, the US Federal Reserve and the Bank of Japan, where they assessed the feasibility of CBDCs. The report also focused on how digital currencies can co-exist along with cash and other forms of payments and what steps need to be taken so that no harm comes to financial stability. Other points that the report focused on how to improve financial stability, innovation, and efficiency. Other smaller nations like Sweden and Thailand are staging their own digital currency trials, and the Bahamas have already launched its first digital currency. As the world becomes more digital and

International Finance | May 2021 | 15

TECHNOLOGY

ANALYSIS

CHINESE ECONOMY CHINESE DIGITAL MONEY

commercial transactions shift even more to digital platforms, Digital Currency Electronic Payment (DCEP) potential will continue to increase. At present, the Chinese currency accounts for about 4 percent of global transactions and DCEP definitely has the potential to further innovate the domestic and global commerce for Chinese companies. Additionally, it could also provide safeguards against fraudulent transactions.

CBDC and its impact on China’s business landscape In recent years, China has moved rapidly in its efforts to become a cashless economy. Thanks to online payment platforms like Alibaba’s Alipay and WeChat Pay which are essentially digital wallets. China’s new digital currency is expected to be a tool that the Chinese authorities can keep a track of the technology companies that operate mobile payment platforms. The People’s Bank of China will issue the digital currency to commercial banks, which will then provide DCEP to individuals. If the Chinese government is able to popularise the use of DCEP, it stands to gain a lot of economic and political benefits. DCEP can also help boost the internationalisation of the renminbi, which is a key longterm goal of China’s leaders. From what we know, Beijing’s plan is that DCEP would eventually replace physical money significantly, which, in turn, will reduce the cost of securing and maintaining physical cash supplies, as it could free up 0.5 percent of China’s GDP. DCEP is expected to work without

16 | May 2021 | International Finance

the need for a bank account or the internet. This might bring in new sources of economic growth and opportunities for greater financial inclusion. Till 2017, 20 percent of Chinese adults did not own a bank account, something which is required to access many institutional financial services and to use mobile payment platforms. DCEP can open up new opportunities for borrowing, saving, and investing services to individuals who don’t have an account. Additionally, DCEP is expected to attract new users in China’s e-commerce market. In 2020, standing at $21.1 trillion, the Chinese e-commerce market is estimated to be the largest in the world, which is more than twice the size of North America’s combined e-commerce market and more than three times the size of Europe’s.

Can the digital yuan compete with the US dollar? According to financial experts, China’s move to a digital currency, focusing on blockchain technology is intended to displace the dollar at some point. At present, 88 percent of the global trade interactions are done in US dollars, followed by the Euro the Japanese yen, the British pound sterling, the Canadian dollar, the Australian dollar, and the Swiss franc. Only about four percent of the global trade currency uses Chinese currency as a medium of exchange. Therefore, it is natural for some analysts to argue that the CBDC has no chance to compete with the American dollar as the data clearly shows that the world lacks

Digital money growth

2013 2014 2015 2016 2017 2018

0 35 102 153 200 272

Mobile payment transaction volume (in Trillion RMB) Source- CKGSB

confidence in the yuan. In order to solve this problem, it looks like China is forging ahead in the direction of implementing digital currency as a major token in order to displace the dollar. Given that China is one of the largest economies in the world, this move will definitely have some implications for the US economy. Back in 1994, the US currency was made to be the reserve currency for global trade. Ever since the currency has dominated the market as it is relatively stable and easily transferable. One of the primary outcomes of this decision was that the US now could monitor financial transactions and penalise entities that violated global democratic norms. These transactions are monitored through the Society for Worldwide Interbank Financial Telecommunications (SWIFT) in Belgium. It is a messaging platform that keeps an eye on electronic

payments between international banks. After the 9/11 attacks, the US has used these sanctions to restrict individuals, companies, or countries from funding terrorists as well as violating human rights norms. It is a known fact that digital currencies allow direct money transfers between global banks that could theoretically bypass the SWIFT monitoring system and have backing by central banks. An alternative governmentbacked currency that is directly transferable would allow countries that are sanctioned by the US to buy and sell with China. The Chinese government is particularly interested in bypassing the SWIFT monitoring system because the list of Chinese politicians, individuals, and companies on the US sanctions list continues to increase. Similarly, China has also sanctioned a large

number of US politicians. But since the US dollar is still the global currency for trade, US sanctions are far more consequential than China’s sanctions.

The evolving landscape The popularity and the demand for virtual currencies is increasing in different sectors, along with crypto and private digital currencies, along with DCEP. The digital yuan already has the legitimacy of a legal tender and the payments made while using it is different from the ones people do use Alipay or WeChat. The services provided by the latter may settle transactions very quickly for customers, but behind the scenes are ledgers of large numbers of transactions between the banks of the buyers that are originally settled hours or even days later. The digital yuan neutralises the need for these banks, Additionally,

there is no need for paying a service fee and in theory, the speed of payments can be even faster. When compared to cryptocurrencies like Bitcoin and the likes, the CBDC is backed by the government, which means its issuing is the same as the issuance of cash in circulation, making it just as secure. It will also give the government a much better grip over the money supply and officials can see all the transactions taking place at any given time. Finally, it seems likely that in China, many companies will soon start running in an environment where a large number of transactions will be done using the CBDC. It is important for business leaders to keep an eye out to see how these Chinese pilots evolve and how they are adjusting to the adoption of digital currency. Analysts predict that if all goes well, there is a solid chance that over time, the number of individual transactions through DCEP will soon surpass the B2B usage. While there is no denying this the digital yuan still has a long way to go, but its path seems to be clear as of now. In 2021, China will test digital money among the mass and 2022 could very well mark the digital unveiling of its progress, hopefully at the Beijing Olympic, 2022. Reports suggest that global athletes and event attendees will be using the digital yuan and as the prized Olympians of our world will strive towards winning that coveted gold medal, there might be a bigger global economic prize waiting in full display, for the first time in history.

editor@ifinancemag.com

International Finance | May 2021 | 17

TECHNOLOGY

FEATURE HEALTHCARE

AI HEALTHCARE HEALTHCARE TECHNOLOGY

AI is transforming the healthcare industry 18 | May 2021 | International Finance

FEATURE AI HEALTHCARE

AI is becoming more and more mainstream within healthcare and leveling up in terms of its ability with each year that passes

PRITAM BORDOLOI

A Global market size for artificial intelligence in healthcare

2016 $1098 million 2017 $1426 million 2025 $28046 million (f) f= Forecast

Source: Statista

Market Size

rtificial intelligence (AI) is the tech of the future and is leading to remarkable developments in many sectors, be it Tesla’s autonomous vehicles or IBM Watson, moving AI from theory to commercial applications. AI has come a long way since it was first established as a field in 1956, and AI in healthcare has the potential to transform the industry and the change is already underway. Accenture said that growth in the AI healthcare market is expected to reach $6.6 billion by 2021. Similarly, according to a recent report "Artificial Intelligence (AI) in Healthcare Market 20202026", the global market for AI in healthcare is projected to have a CAGR of around 51.5 percent during the mentioned period. The Covid-19 pandemic has also expedited the use of AI in the healthcare sector. An increased emphasis is now being given to the use of modern technologies such as the use of brain-computer interfaces (BCIs), arterial spin labeling (ASL) imaging, biomarkers and natural language processing (NLP). Healthcare organisations across continents are ramping up the use of technology in healthcare and AI is at the forefront. It enables analysing complex medical data by utilising software and algorithms and achieve results. Since the pandemic, we have seen that many healthcare startups, digital healthcare service providers

International Finance | May 2021 | 19

TECHNOLOGY

FEATURE HEALTHCARE

and even universities are emphasising AI and collaborating for its integration in the healthcare industry. Demand for healthcare is increasing every year and we are noticing emerging trends of manpower shortages. AI can solve this problem. The advancement of technologies in other fields especially in telecommunication is also significant. Since the pandemic, telehealth as a sector has boomed. In the near future, AI could deliver healthcare services through a mobile phone.

Role of AI in healthcare Today, there are numerous applications of AI in the market when it comes to healthcare. But the primary role of AI in healthcare is to increase efficiency, to help deliver healthcare services in a much better way and to help save lives. AI helps perform sophisticated and complex task at a much faster pace, in an efficient manner and at lower cost. It is changing how we deliver healthcare. From chronic diseases, cancer to radiology and risk assessment, AI helps healthcare workers or medical practitioners better understand the day-to-day patterns and needs of their patients. AI can help study complex medical data in an efficient manner and this allows the medical practitioners to provide their services in a much better way, offer solid feedback as well as guidance and support. PwC mentioned in a report that AI is already being used to detect diseases, such as cancer, more accurately in their early stages. According to the American Cancer Society, a high proportion of mammograms yield false results, leading to 1 in 2 healthy women being told they have cancer. The use of AI is enabling the review and translation of mammograms 30 times faster with 99

20 | May 2021 | International Finance

AI HEALTHCARE HEALTHCARE TECHNOLOGY

FEATURE AI HEALTHCARE

We have only touched the tip of the iceberg in terms of the impact AI has brought to healthcare.” Revenue from AI systems in healthcare worldwide

2013 2014 2015 2016 2017 2018 2019 2020 2021

$507 million $633.8 million $811.1 million $1065.1 million $1438.4 million $2002.7 million $2882 million $4298.2 million $8882.2 million

percent accuracy, reducing the need for unnecessary biopsies. At present, algorithms do a far better job than radiologists at detecting malignant tumours in patients. According to PwC, AI can help clinicians take a more comprehensive approach for disease management, better coordinate care plans and help patients to better manage and comply with their longterm treatment programmes. AI is also used for minimising errors and control disease progression. We are living in the age of information and data is vital. Tech giants such as Google or social media giants such as Facebook use advanced AI to collect and store consumer data. Similarly, healthcare data is also crucial. In the age of digitalisation, electronic health record (EHR) developers are now using AI to create more intuitive interfaces to store health records. These interfaces present medical records of the patient, from various providers, test labs, imagining labs, pharmacies in real-time which can be used by the patient’s doctor as per requirement. A sophisticated AI-based EHR software can also draw conclusive analysis, identify risks, evaluate health conditions and even auto-book you an appointment. Mads Jarner Brevadt, CEO and cofounder of Radiobotics told International Finance, ” We have only touched the tip of the iceberg in terms of the impact AI has brought to healthcare.” His startup uses AI to help 3 main groups of clinicians Radiologists, Orthopaedic Surgeons and Emergency Care staff. AI is becoming more and more common within healthcare and leveling up in terms of its ability with each year that passes. AI is being used to make the administrative side of healthcare more efficient and intelligent. “This has

both saved money and had an impact on hospitals' waiting times. Yet, the impact AI can bring towards clinical healthcare delivery, enabling us to diagnose and treat at a pace and of a quality that would have been unthinkable just a few years ago. As AI is built using data, it truly allows us to live up to the ideals of evidence-based medicine that we have long preached about,” he added.

Implementing AI in healthcare, what are the hurdles? Even though we are at a primitive stage of AI development, it has been fastpaced. As we move ahead and break AI barriers, the question of AI singularity will get asked more often. Singularity by definition is a hypothetical point in time at which technological growth becomes uncontrollable and irreversible. In short, does it mean AI will replace humans? While we may not have a definite answer to that question, there are chances that we may not hit singularity at all. When it comes to AI in healthcare, there are a few challenges that the industry needs to overcome to make AI more mainstream in healthcare. The biggest concern that arises at this point in time is privacy. Data privacy is a growing concern in the modern-day and for AI to be efficient, it needs to collect a lot of data. So, amid privacy concerns, how willing will a patient be to share his or her medical data? Also, for years, many have raised concerns about the ethical implications of data storage and data security. Along with privacy, there is also the issue of regulation. While regulations differ from jurisdiction to jurisdiction, regulations related to the use of AI are not clear or strong enough. Recently, the European Union (EU) introduced its ‘Proposal for a Regulation on a

International Finance | May 2021 | 21

TECHNOLOGY

FEATURE HEALTHCARE

European approach for Artificial Intelligence,’ which stresses on the importance and creation of the first-ever legal framework on AI. Another very important challenge that needs to be addressed is the black box problem. AI interprets the data available and offers a conclusion, however, we may not know how AI reached that conclusion. While addressing the needs of his patients, a doctor should be able to understand and explain to his patients why a certain procedure that was recommended by an algorithm will help them overcome their medical issues. Understanding how the AI algorithm works is key. From an industry point of view, Mads said, “I think the answer to this question is two-folded. On the production side, access to data is a barrier we need to overcome. Data is truly the lifeblood of innovation in AI and the bedrock on which all technology is built upon. We will only unleash the true potential of AI when we have access to high-quality data with which we can have the bestperforming AI. This will ultimately benefit us all as citizens and patients. “The other challenge which I see is the change readiness of healthcare staff. We expect a lot from this group of people who are often overworked and suffer from burnout. Investment in change always has a human capital investment alongside to make sure the change realises its maximum benefit. As healthcare systems, we need to give these staff allocated time in which to invest in change programs, both from when we are providing our healthcare staff their education and when they are practising clinically.”

How AI is fighting Covid-19? Given the highly infectious nature of

22 | May 2021 | International Finance

AI HEALTHCARE HEALTHCARE TECHNOLOGY

the Covid-19 virus, AI can help reduce transmissions by reducing human contact. AI is not only playing a crucial role in protecting frontline healthcare workers, but it is also helping to identify high-risk patients at an earlier stage. Today, we are witnessing multiple AIpowered projects with technologies such as machine learning and big data being constantly used across a broad range of fields to manage the different scenarios caused by the pandemic. Interestingly, a team of leading scientists at the University of Liverpool, UK, has used machine learning to predict where the next novel coronavirus could emerge. According to them, this could help them predict or even prevent a future pandemic. AI is also being used extensively by healthcare workers to predict the transmission rate as well as track the spread of the virus across the globe. In Singapore, amid a manpower crisis, NCS helped deploy AIpowered thermal cameras to carry out manual, one-to-one temperature measurements with handheld scanners. This drastically reduced the need for manpower. Similarly, NCS also coimplemented the Robotic Process Automation (RPA) solution to automate the admission, discharge and transfer of patients in and out of the Community Care Facility (CCF), again solving the problem of manpower crisis. In France, startup Clevy is using augmented assistance to help diagnose Covid-19 symptoms without having to leave the comfort of their premises. MIT-IBM Watson AI lab is involved in multiple projects to help fight the spread of the Covid-19 pandemic. One of these projects includes identifying sepsis in Covid-19 patients as it can prove to be life-threatening.

Machine learning to predict where the next novel coronavirus could emerge. This can be done by analysing white blood cells (WBC) of Covid-19 patients by using machine learning. This early diagnosis will offer doctors valuable time while treating the patients. Tech giants such as Google, Microsoft and Apple are also involved in initiatives including contact tracing, drug development, remote communications between patients and clinicians among others. AI also played a big role in the development of Covid-19 vaccines as well. MIT’s website says a machine learning model developed jointly by Janssen and MIT data scientists played a key role in the clinical trial process for the Johnson & Johnson Covid-19 vaccine. One thing is very clear. The pandemic in many ways has been a teleporter to the future. Many of the barriers which were long-standing in healthcare preventing large-scale digital transformation

FEATURE AI HEALTHCARE

began to be reduced as the world came to terms with the crisis that we faced. “This increased the appetite for digital innovation in general and accelerated progress in AI in healthcare to a large extent,” Mads said. “We are now facing another crisis in healthcare, that is how to treat all of the patients whose conditions have not been treated during the pandemic. I think this is another crisis where AI can help to equip clinicians with the tools to treat these patients more effectively. This is another opportunity for AI in healthcare to shine and once again prove that this is not only an area of ‘hype’ but can deliver real tangible impact,” he added.

The future of AI in healthcare AI indeed has an important role to play which will define how we deliver healthcare services in the future.

Currently, we see that the potential of AI is growing exponentially. Mads said, “This is great news for all industries but I think healthcare is uniquely positioned to feel the positive impact that AI can have. If you look at where Radiobotics helps most, Radiology departments, we are seeing right now a drastic imbalance between the number of Radiologists available to report, and the number of reports in which to be completed. “This of course has a negative impact on our Radiologists as well as patients. AI tools deployed in this environment can help correct for this imbalance and ultimately increase patient outcomes. In the next five years, I would love to see AI deployed and doing repetitive rulebased tasks for which it is best at, and clinicians gifted with more time to treat our patients. Looking even further into the future, I would like AI to be deployed

to increase preventative medicine, so figuring out how we best keep patients well rather than treating them when they are sick. “ While it is without doubt, we can claim that AI will achieve great heights when it comes to healthcare, the greatest challenge for the industry is to ensure AI can be successfully integrated to deliver sophisticated healthcare services and at scale. For widespread adoption to take place, the challenges such as privacy, regulation and data collection must be addressed. With regard to AI technology making humans obsolete, we can be quite confident that it won’t happen. Reality is over time; human efforts will still be required to deliver top class healthcare services but not at the same capacity. Moreover, human interaction with regard to healthcare would shift to delivering more human skills such as empathy, persuasion and big-picture integration. As a global community, the sheer number of patients who require support is increasing year on year. “We do not have the manpower to deliver this care that is required. We are fortunate that the amount of medical innovation that is coming to the market each year is helping to address this shortfall. I am confident that this level of medical innovation is not slowly down any time soon, that we can meet the healthcare challenges of tomorrow and the future is bright for the healthcare sector,” Mads added. So far, AI-powered solutions have only taken small steps in the healthcare industry. For AI to have a largescale impact on the global healthcare industry, we will have to wait for a couple of more years.

editor@ifinancemag.com

International Finance | May 2021 | 23

Business Dossier - Bangkok Insurance

Bangkok Life Assurance wins

Most Innovative Health Insurance Company Bangkok Life Assurance is renowned for its innovative schemes and services to battle the Covid-19 pandemic

ince the onset of the Covid-19 pandemic, livelihoods of people worldwide including most industries and businesses are taking a hard hit and Thailand was no exception. Consumer needs have changed as a result of the pandemic, especially in healthcare and finance. Life and health insurance companies aim to keep up with the change of trends and the need to create new and personalised products and services to meet the clients’ expectations. Simultaneously, the working systems and services are to be improved to maximise efficiency in order to serve clients. Bangkok Life Assurance is a long-standing life insurer in Thailand for more than 70 years. The company is fully committed to developing diverse health insurance plans, aiming to cover all the needs of all segments and assist clients with their financial planning during times of uncertainty. The company also strives to develop quality health-related services to meet international standards and assure quality health standards. In recognition of its achievements, Bangkok Life Assurance has been awarded ‘Most Innovative Health Insurance Company’ by the International Finance Awards 2020. ML Jiraseth Sukhasvasti, President and Chief Executive Officer of BLA Plc said, “BLA is deeply honoured to receive the Most Innovative Health Insurance Company award from International Finance. This is a result of our continuous effort in developing health insurance products and services to meet clients’ 24 | May 2021 | International Finance

needs and delivering the best services.” He also added that “In 2020, we have introduced BLA Smart CI, a life insurance plan with supplementary contract coverage for 20 critical illnesses which are the top health conditions affecting Thai people, including cancer, coronary artery disease, chronic kidney failure, Alzheimer’s disease and Parkinson’s disease.” He further added that the company seeks health risk protection before illness occurs, thus the insurance plan was launched along with the BLA Healthy Life application. The application can be downloaded to both smartphone and/or smartwatch devices to record the insurer’s health status and walking data. Steps walked by a user will be accumulated into points and can be used to redeem insurance premium discounts in the succeeding year along with other privileges. The plan aims to reduce the expenses arising from unexpected health issues, encourage the insured clients to exercise by walking, and live a more active lifestyle lower the risk of illness.

Pandemic plans and schemes

The onset of the Covid-19 pandemic in 2020 have raised concerns over health and well-being in both Thailand and on a global level. People tend to be equally worried about their health and finances. The pandemic has affected people physically and psychologically. It is noteworthy that Bangkok Life Assurance provided its policyholders with additional coverage for hospitalisation

daily compensation of up to 30 days for inpatient treatment due to Covid-19 infection, without charging an extra insurance premium. The company has also proposed new services to adapt to the challenge of Covid-19 and suit the new normal lifestyle of its clients. The services include online voice confirmation, e-services, e-policy, e-receipt, e-claim, telemedicine and ways to bridge loans.

Features of the application

Online Voice Confirmation (OVC): Through this feature, the BLA agent will be able to make face-toface sales proposals through the smart application. In response, clients can confirm their insurance request through OVC to comply with the social distancing approach. e-services: e-policy, e-receipt, e-claim: During the onset of the pandemic, the company encouraged its clients to opt for documents in electronic form, so that they can be more mindful of climate change and environmental issues. This also reduces contact with physical documents and waste to conserve the environment. Additionally, BLA also provides an opportunity to its clients who adopt e-services to help build the International Medical Science Center for the Elderly under the supervision of the Faculty of Medicine Siriraj Hospital, Mahidol University. Telemedicine: The company had teamed up with leading private hospital groups to provide remote

healthcare services (telemedicine) for patients through electronic audio and visual means. This also helped to facilitate medical consultation and treatment follow-up for the policyholder and make compensation claims at any given point of time. Bridging Loan: The company also introduced a scheme that the insured whose policies would mature in 2020 were eligible to take an interest-free loan from the policies to pay for the first premium instalment of a new policy to receive additional and continuous protection. The mission of Bangkok Life Assurance is to deliver its motto of ‘Live a Happier Life’. The company seems to be determined to keep enhancing the quality of its products, services, insurance agents and financial advisors to become the leader in health insurance and enable people from all parts of society to have a good quality of life, financial security, and happiness in every situation. The company is determined to be a leader in establishing financial security for all groups of people and protecting their value of life by offering financial advice and impressive service through its sincere agents, partners and employees who are experts in the field. The innovative steps it takes towards facing the Covid-19 pandemic and create a suitable environment for the policyholders to adjust to the new normal has helped the people of Thailand to keep their peace of mind during these difficult times.

International Finance | May 2021 | 25

How can the world get back on its feet? PRITAM BORDOLOI

Vaccination is key for global economic recovery but vaccine disparity is now a growing concern that needs addressal

26 | May 2021 | International Finance

COVER STORY GLOBAL ECONOMIC RECOVERY

t is, without doubt, 2020 was a catastrophic year for businesses and economies across the globe. Economic forecast for 2020 went for a toss when the coronavirus hit Wuhan in late 2019. Soon, the World Health Organisation (WHO) declared the Coronavirus crisis a pandemic as the virus soon found its way out of Wuhan and into Southeast Asia, the Middle East, Europe and gradually into Africa and the Americas. The Covid-19 pandemic landed a knockout blow on the global economy and now it needs to get back on its feet. Major economies such as China, the US and many Much of the recovery will depend on factors European countries reported such as fiscal policies, stimulus packages, economic contraction for employment growth and the vaccination 2020 as borders were sealed, drive. trades were disrupted, flights Vaccines key to global economic were grounded and people recovery were advised to stay indoors. Similar to World Bank, the IMF, in its World With economic activities Economic Outlook released in April 2021, halted across the globe, the said that the global economy is projected to global economy contracted recover in 2021 and 2022 with an anticipated GDP growth of 6 percent and 4.4 percent by 4.4 percent in 2020, respectively. The recovery of the global according to the International economy will depend on various factors, but Monetary Fund (IMF). mostly on the success of the global vaccination However, 2021 dawned and drive which is currently underway. Within according to the World Bank, months of the Covid-19 virus becoming a global crisis, funds were raised and the search the global economy is set to for a Covid-19 vaccine began. So far, around expand 5.6 percent this year, 20 vaccines have already been authorised in its strongest post-recession different parts of the world and many more pace in 80 years. This is a remain in development. So, how important is sharp upgrade compared to a widespread vaccine roll-out for the recovery of the global economy? its previous forecast made Professor Andrew Delios, Vice Dean, MSc in January 2021, where the Programmes, Professor of Strategy and Policy World Bank said that the at the National University of Singapore (NUS) global economy will grow by Business School told International Finance 4.1 percent during the period. that the vaccine roll-out is crucial. He said,

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ECONOMY

COVERSTORY GLOBAL ECONOMIC RECOVERY

COVID-19 VACCINATION

“What we have learned now is that the plans to control borders, test and trace only temporarily reduce the threat of the virus. As an invisible enemy, it is not possible to evade the spread of the virus in a jurisdiction for an extended length of time. The lessons have been hard, but they have also yielded the clear message that widespread vaccination is the only possible means to resume social and business life on a wide scale in a way analogous to pre-Covid. “Nearly 70-80 percent of the world needs to be vaccinated. “Nations need to independently build vaccine security, meaning, if at all possible, domestic vaccine manufacturing capabilities to contend with at least the next few years while Covid-19 vaccinations of various types become a routine part of life for everyone,” he added. Nuno Fernandes, who is a Professor of Finance at IESE Business School, chairman of the Board of Auditors of the Portuguese Central Bank (Banco de Portugal), Non-Executive (Member of Audit Committee) at the European Investment Bank, and a Research Associate of the European Corporate Governance Institute told International Finance, “Governments are risk-averse, and will therefore be reluctant to fully dispense with medical restrictions until they’re certain that no new outbreaks will occur. Without successful vaccination rollouts and the vast majority, or at least 70 percent, of adult populations being vaccinated, certain restrictions will stay in place.” Harald Fadinger, Professor of Economics at the University of Mannheim, Germany also echoes the same thought. He told International Finance that the vaccine roll-out is the single most important factor contributing to global economic recovery because it allows to phase out social distancing measures. The manufacturing sector is already booming in many economies since consumption has shifted from services to physical goods during the pandemic. He said, “Widespread vaccine rollout will

28 | May 2021 | International Finance

Europe Malta Iceland

Hungary

Belgium Netherland Spain Germany Portugal Italy

151.91 123.91 114.76 101.86 94.1 90.53 89.89 89.36 88.07 86.19 Source: Statista

enable fast recovery of the service sector which accounts for the largest share of GDP in most economies (many services require personal contact).” But the problem now is not vaccine development, but making the vaccine available to the 7.7 billion population. It is critical for a global economic recovery that the vaccine reaches every section of the society, especially the marginalised. In this regard, Neha Anna Thomas, Senior Economist & Programme Manager, Frost & Sullivan told International Finance that extensive vaccination is critical to global economic recovery in 2021 and 2022. A weak pace of vaccination stands to delay the lifting of economic restrictions as well as dampen consumer and business confidence. She said, “As information shows that the likelihood of mutation is linked to higher virus circulation, it becomes important to boost national vaccination campaigns in order to quell variants and prevent new Covid-19 waves and associated lockdowns. Proof of vaccination has now become especially important for the opening up of the global tourism sector, with vaccination proof to become increasingly important across other industries as well, especially those relying on in-person contact.”

COVERSTORY GLOBAL ECONOMIC RECOVERY

Number of Covid-19 vaccination doses administered in Europe (as of July 1, 2021)

Can vaccine disparity hinder economic growth? To make sure vaccine distribution is not uneven, WHO launched the Covid-19 Vaccines Global Access (COVAX) in April 2020. However, there is a disparity in the vaccination rates across continents. It is estimated nearly 50 percent of the adult population in the US has been fully vaccinated so far. In Europe, so far, nearly 30 percent of the adult population have received at least one dose of a Covid-19 vaccine, whereas, around 17 percent of them have been fully vaccinated. However, this is not so in the case of lower-income countries, where the rates remain as low as 1 percent of the population when it comes to the Covid-19 vaccine. In this regard, Neha Anna Thomas said, “Data clearly shows that there is a disparity in vaccine coverage across the global economy, with advanced economies seen to be taking a lead in vaccine coverage. To begin with, weaker progress in vaccination, particularly amongst prominent emerging markets which are fairly significant global GDP contributors, could potentially derail the pace of domestic recovery in these countries and in turn, directly impact global growth prospects. Disparities in the pace of vaccination would also negatively impact international tourism and cross-border

trade and investment flows. Finally, weaker vaccination programmess and higher virus circulation increases the risk of exposing global economies to newer mutations, necessitating recurrent lockdowns and restrictive measures.” Andrew Delios too has similar views. He agrees that a slow vaccination programme could hamper economic growth. That is why it is critical that government stresses the importance of vaccine security. They need to build independent capabilities to manufacture vaccines. They need to build relationships with pharmaceutical companies that permit licensed or other such sanctioned production of proven vaccines. Developing productive capacity is a much more manageable task than developing independent R&D skills. “Just as a nation does not want to be dependent on others for the basics of its food supply, it should not be for vaccine supply. If it is, it will always

International Finance | May 2021 | 29

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COVID-19 VACCINATION

be behind other nations in vaccinating its population and catching up those countries that are able to manufacture vaccines for their own populations,” he added.

Local fiscal and monetary policies also to play a pivotal role While inoculating the population is key, other factors such as stimulus packages and monetary policies will also play an important role. Businesses, irrespective of size, had to bear the brunt of the Covid-19 pandemic. Sectors such as aviation, hospitality and tourism were the hardest hit. Even though economic activities have resumed across the globe, many businesses are finding it hard to sustain their operations and are seeking government assistance. Safety nets such as business loans, job retention schemes and protection from eviction are important to help businesses, especially the small and mediumsized enterprises (SMEs). In Spain, the government announced an €11 billion economic relief package that includes €7 billion in direct aid to distressed businesses. Recently, France’s Finance Minister Bruno Le Maire announced a €3 billion fund that will primarily focus on supporting midsized and large companies emerge from the Covid-19 crisis. Through stimulus packages, it is also important that governments across the globe put money into the hand of the consumers to keep the wheels of the economy rolling. In March, the Japanese government announced $20 billion in reserve funds to offer financial support to struggling businesses and households. Harald Fadinger believes key factors that will contribute to the global economic recovery besides vaccine rollout will be the local fiscal and monetary policy stance. Taking the US as an example, he said the nation has seen extraordinary loose

30 | May 2021 | International Finance

2020 -3.5% US 2021 6.4% 2022 3.5%

Euro 2020 -6.6% 2021 4.4% Area

2022 3.8%

ME and 2020 -2.9% Central 2021 3.7% Asia 2022 3.8%

Sub 2020 -1.9% Saharan 2021 3.4% 2022 4%

Africa

Source: International Monetary Fund

monetary and fiscal policy. While US monetary policy is likely to tighten soon due to rising inflationary pressure, this is not the case for fiscal policy. He said, The situation in the EU is a bit different: while the ECB continues to support the economy strongly via asset purchases and ultra-low interest rates, fiscal policy has been somewhat less expansionary than in the US. Differences across EU economies in local fiscal space have led to variation in the generosity of fiscal measures used to preserve employment and prevent firm bankruptcies. “The EU's $750 billion recovery package will help to maintain a certain level of public investment and a relatively

COVERSTORY GLOBAL ECONOMIC RECOVERY

Growth projection

loose fiscal policy stance. However, a number of fiscally conservative EU countries are already putting pressure to go back to much tighter fiscal policy soon and to reduce public debt levels. Conservative economists, in particular in Germany, also (wrongly) worry about mounting inflationary pressure and lobby for a tightening of the ECB's monetary policy stance.” Similarly, Neha Anna Thomas said, “A strong vaccination campaign goes hand-in-hand with appropriate social distancing and other precautionary requirements. Enforcement of these measures, at the national and enterprise level, is important to both contain virus circulation as well as

boost consumer confidence levels for higher economic activity. “Stimulus packages will continue to play an important role in driving recovery. The US’s $1.9 trillion stimulus package, approved in March 2021, for example, significantly accelerated the country’s growth prospects. Frost & Sullivan revised its 2021 growth forecast for the US economy from 4.4 percent.” She also mentioned that while some countries are expected to continue to roll-out new stimulus packages in the second half of 2021, the global scale of stimulus support in 2021 is expected to be lesser compared to 2020. “Accommodative central bank monetary policies through 2021 and 2022 will also be important in supporting economic activity. Premature or drastic interest rate hikes could dampen the fragile economic recovery in some countries,” she said. Nuno Fernandes added that government spending is indeed needed, but it must be administered intelligently. According to him, it is vital to avoid zombie lending, or directing resources to companies that were struggling before the pandemic. “This was done, to disastrous results, during the financial crisis. And you can bet that politicians will remain tempted to rescue businesses with more political clout than financial viability. Recovery plans should instead focus on boosting innovation. After all, misdirected subsidisation is no way to fuel a healthy economy,” he added.

Joe Biden's $1.9 tn stimulus package to support global economic growth? The Organisation for Economic Co-operation and Development (OECD) forecasts that the world economy will expand 5.6 percent this year and the Paris-headquartered thinktank believes the US president Joe Biden’s $1.9 trillion stimulus package will lift global income by 1 percent this year. Similarly, IMF

International Finance | May 2021 | 31

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COVID-19 VACCINATION

spokesman Gerry Rice said that the stimulus package will help the US economy expand by five to six percent in the next couple of years. This means higher demand and at the same time an opportunity for other exporting nations to sell more products in the US market. The US has been one of the worst affected countries by the Covid-19 virus. The stimulus package includes $415 billion to fight the virus and around $440 billion for small businesses in the country. While the US economy is already on its recovery path, the stimulus package is expected to have a ‘spill over’ effect on the rest of the world. Sharing her views on this, Neha Anna Thomas also believes that the $1.9 trillion stimulus package will help support the global economy as well. With the US being a top global GDP contributor, a significant boost in the US economy will translate into stronger global growth. She said, “As a leading global goods importer, the stimulus package should especially help fuel stronger export demand for the US’s trade partners. The package encompasses $1400 in stimulus checks which should particularly help drive US consumer spending and import demand. 2020 data itself revealed how earlier rounds of stimulus checks helped drive US consumer demand. The US’s top goods import partners such as China, Mexico, Canada, Japan, and Germany stand to consequently benefit from a demand boost.” However, there are also growing concerns about the stimulus package overheating the US economy. Professor Andrew Delios believes the $1.9 trillion stimulus package has come at an interesting time. Independent of fiscal stimuli the US economy is already beginning to recover. Long closed or crippled industries like tourism or F&B are recovering and the recovery will be fast. "Moreover, Americans are flush with cash. With private sector growth, an

32 | May 2021 | International Finance

economy charged with liquidity and then a fiscal stimulus emerging as well, we have a dangerous combination that can lead to an overheated economy quickly. To me, the concern is not whether the stimulus package will turbocharge the US, the concern is whether it will overheat the US economy. As for the world economy, even though the US is the key nation in the world’s economy, the spill-overs will not be as substantial to heat the global economy. The effects of the stimulus should be largely local focusing on domestic business activity and domestic employment growth,” he added. Harald Fadinger added that rising inflationary pressure resulting from potentially over-expansive fiscal policy in the US could force the FED to raise interest rates. This may have a negative impact on emerging markets, in particular those with a weak balance of payment and lots of dollarised debt. In conjunction with the dangers from slow vaccine rollouts, this could well trigger a financial crisis in some emerging markets.

Global unemployment crisis and economic growth The International Labour Organisation (ILO), in its latest report, revealed that nearly 220 million will remain unemployed this year. The report further stated that the unemployment rate will be 5.7 percent in 2022 with an

COVERSTORY GLOBAL ECONOMIC RECOVERY

US president Joe Biden’s $1.9 trillion stimulus package will lift global income by 1 percent this year estimated 205 million unemployed people around the world. Employment growth enabled by widespread vaccine rollout is one of the most important criteria for global economic recovery. Harald Fadinger said that while other physical production factors such as capital have not been much affected by the pandemic, stay-at-home orders and social distancing measures have led to a large drop in employment and a resulting negative labor supply shock. Once this shock is reversed, recovery will be smooth and quick. This, however, requires that firms stay alive until workers can be allowed to go back to work. “If vaccine rollout is too slow, many firms will eventually go bankrupt. This will not only destroy matches between firms and workers but could also put at risk the local financial system, which would have to sustain large losses on outstanding loans. Thus, in poor economies with slow vaccine rollouts, the crisis could prolong and deepen,” he added. However, much depends on what is the nature of work going forward but clearly, unemployment is not positive for growth. Increasing employment levels both contribute to and reflect a global economic recovery. Andrew Delios said, “The world needs to put people back to work, however that work is defined. Employment growth is essential to the global economy’s recovery.”

Job losses can also be viewed as an indirect fall-out of the Covid-19 impact. New job creation will partially come about as a result of the containment of cases and lifting of restrictions. At the same time, job creation itself will contribute significantly to the economic recovery process. This is because employment opportunities will help put more disposable income into the hands of workers, thereby helping to boost demand for goods and services. Neha Anna Thomas said, “Additionally, with the lifting of restrictions, more businesses can move towards full operational levels, thereby reducing the need for government wage support to furloughed workers. These funds can instead be directed into infrastructure development and other activities that will help accelerate growth potential.” Nuno Fernandes also believes employment growth will play a strong role in the recovery. Lower-income households spend a greater share of their income on consumer purchases. Indeed, many households spend their entire salaries. That’s why jobs are so vital to keeping economies rolling. Wage growth is also critically important to growth. Unfortunately, we will at the same time have to come to terms with the fact that some of these jobs will not be coming back. Hotels, restaurants, cinemas, sports arenas and cultural venues are still facing an extremely uncertain future. Just as airlines stay afloat by packing people onto planes, the viability in these sectors depends on crowding people into confined spaces. Many people might avoid crowded places even after the crisis subsists. “The spread of the Delta variant has made this worryingly clear, as even some fully vaccinated people are exercising increased caution as compared to just a few weeks ago,” Nuno added. editor@ifinancemag.com

International Finance | May 2021 | 33

ECONOMY

FEATURE VIETNAM ECONOMY

NEW LEADERS VIETNAM GDP

Newly elected leaders filled the positions of the General Secretary, Prime Minister, President and Chairman of the National Assembly General secretary of the Communist Party of Vietnam, Pham Minh Chinh

34 | May 2021 | International Finance

the Chairman of the National Assembly. Vietnam’s economic performance in 2020 caught global attention. Vietnam was the top-performing Asian economy last year, and according to government estimates, the Vietnamese economy grew by 2.9 percent year-on-year. What’s remarkable is that while some of the biggest economies were battling recessions,

FEATURE VIETNAM ECONOMY

Can Vietnam’s new leadership sustain its stellar growth? ADRIANA COOPENS

Vietnam did not report a single quarter of contraction, a period plagued by lockdowns, border closure and economic distress. Interestingly, in the last decade, Vietnam achieved impressive yearly GDP growth of six percent or higher, reaching a 10-year-high of 7.1 percent in 2018. Once known as one of the poorest economies in the world, Vietnam’s impressive growth counters China. Top brands such as Nike and Samsung have established their manufacturing hubs in the country. So how did Vietnam achieve this remarkable feat? Vietnam reached this current peak through a series of social and economic reforms, liberalisation, domestic reforms through deregulation and investments in human and physical capital. The new leadership in place has a daunting task in their hand. Not only they need to maintain Vietnam’s impressive economic growth but they need to steer the economy through a pandemic. Earlier this year, World Bank released reports acknowledging Vietnam's transition from centrally planned to a market economy and is recognised as the most dynamic emerging country in the Southeast Asia region. The World Bank's data from 2002 to 2018 proves that the GDP has increased 2.7 times, yet, Vietnam reported per capita income to be $2,700 in 2019. Vietnam took initiatives to alleviate poverty from 70 percent to less than six percent during this period, a remarkable achievement. Vietnam’s impressive economic growth has been facilitated by export-oriented manufacturing and the resurgence of domestic demand. The country has a considerable number of young people population with a life expectancy of 76 years. According to the World Bank,

about 26 percent of the population will be from the middle class by 2026.

Vietnam under new leadership Newly appointed Prime Minister Pham Minh Chinh has prioritised the transformation and development of Vietnam’s economy to a digital-based economy. The Resolution of the XIII Congress of the Party has revealed the blueprint for the new regime that seeks to transform the economy by undertaking six key tasks and three strategic breakthroughs. Under the leadership of Chinh, Vietnam will invest in science and technological development and create a more conducive environment for business development as well as for manufacturing concerns. PM Chinh have prioritised national defence, sovereignty, territorial integrity, social order and safety amid unstable situations in the South China Sea. However, the bigger task in the hand of the newly elected prime minister is to lay down a constructive plan to build on recess success and develop Vietnam into a modern state with a fully developed economy in league with countries like South Korea, Japan and the western countries. It will prove to be monumental and such transition will need to be guided by the vision of the new leadership and has to be aided by suitable economic and social developmental policies. While the current political leadership needs to kickstart the gargantuan project, the chances are high that the targets won’t be achieved in its lifetime. Therefore, PM Chinh would also need to oversee the commencement and successful implementation of the Five Year Economic and Social

International Finance | May 2021 | 35

ECONOMY

FEATURE VIETNAM ECONOMY

NEW LEADERS VIETNAM GDP

Development Plan (2021-2025) and the Ten Year (2021-2030) Economic and Social Development Strategy. Institutions such as the World Bank and the International Monetary Fund (IMF) expressed their belief that Vietnam is pacing towards a more open and competitive economy. They also appreciated the steps taken to increase diversifying its economic relationship with various countries across the world. As a result, despite the pandemic, Vietnam showed an impressive economic growth of about three percent in 2020. The senior party leadership also agrees that the high growth rates pave the way for better living standards for the population. Thus, it is vital for them to work towards better economic management and integrate the country into the global supply chains. Furthermore, the new regime needs to continue provide structural and institutional support for the private sector that boosts the country's economy, Vietnam can be expected to adhere to its 2016-2020 economic reforms blueprint that outlines favourable conditions for the private sector.

Plans going forward While addressing the nation in his first speech, Prime Minister Pham Minh Chinh stated that he would protect the sovereignty and independence of the country. At the same time, he also wanted to maintain the anti-corruption drive to cleanse the economy to provide a better niche for growth and investment. Along with Finance Minister Ho Duc Phoc, the Prime Minister has formulated strong fundamentals to boost Vietnam's economic development and improve productivity. The macroeconomic policies can support the active labour market and

36 | May 2021 | International Finance

provide job training and a structural social safety net to address social and economic issues. Doi Moi, the economic reforms initiated after 1986 are afoot to provide better avenues for growth and active participation of the private sector to help build Vietnam as a sturdy economy of East Asia. Vietnam is viewed as a middleincome country that has developed a small and medium enterprises economy. The government of Vietnam has always shown efforts at multiple levels for liberalising the Vietnamese economy and improving its trade with the US and the EU markets because the benefits from those economies would be of large volume and would trickle down to the different sectors of the economy. Reports on the economy of the country state that it witnessed a growth of about 4.5 percent in the first quarter of 2021, marking an increased trade with the US. Thus the priority of the new leadership will eventually be focused more on the economy of the country. The government is also focused on improving English proficiency among entrepreneurs and easing foreign direct investment procedures in different provinces. In addition, commitments are made to build a better technological ecosystem that would provide capital and skilled labour for the network to thrive. Urbanisation and strong economic fundamentals are also increasing. The new leadership is also seen preparing to address challenges like waste management and support green technologies to address pollution challenges. Financial institutions also acknowledge Vietnam as a country that has graduated from an agriculturebased economy to a modern economy. This will boost the living standards due

GDP growth will exceed 6.5% in 2021 as a result of an increase in industrial production and a global economic recovery.

to substantial foreign investment and sufficient current account surpluses.

Fighting the virus in 2021 Vietnam not only successfully navigated the pandemic on the economic front but also when it comes to the spread of the virus in the country. So far, Vietnam has recorded around 13,530 cases of Covid-19 in the country, with 69 deaths. This is attributed to strong economic fundamentals, decisive containment measures and welltargeted government support. Vietnam introduced containment measures with the help of aggressive contact tracing, targeted testing, and the isolation of cases suspected of Covid-19 infection. These swift moves of the government helped to maintain low recorded rates of infections and death rates on a per capita basis. The newly elected government prioritises vaccinating its population against Covid-19 and preventing the spread of the virus in work spaces. By accelerating the vaccination rollout,

Prime Minister Pham Minh Chinh

Vietnam can sustain growth, prevent a decline in income and economic conditions and at the same time prevent the pandemic from affecting consumer spending behaviour and lifestyle in the long run. However, Vietnam estimates that it would take around $1.1 billion to procure sufficient Covid-19 vaccines to inoculate the entire population. The vaccine expense will further strain the state's budget. Vietnam's Ministry of Finance had already stated that it has managed to allocate about $608.9 million and will need $487.1 million to buy the required jabs. Thus, in order to help the country procure vaccines, Vietnam launched a public fund in early June. Many see the Covid-19 Vaccine Fund as a timely and suitable initiative of the government to mobilise resources available to fight against the virus. Bank transfers, various channels, and an official website for the National Covid-19 Vaccine Fund are introduced to receive donations from individuals,

Image: thanhnien.vn

FEATURE VIETNAM ECONOMY

businesses, and organisations in Vietnam and abroad. The fund would exceptionally ease the limited state budget and financially back the country to import, research, manufacture and distribute vaccines. To maintain growth, the government has promised to pay attention to attracting foreign direct investment through multilateral relations and take advantage of the bilateral and multilateral agreements the country has signed in the past.

Vietnam’s growth outlook optimistic for 2021 Despite mass vaccination programme underway in many places, Covid-19 cases are rising globally, and a fourth wave is looming large. Vietnam prided itself from keeping Covid-19 cases very low until now. Yet economists predict that the GDP growth will exceed 6.5 percent in 2021 as a result of an increase in industrial production and global economic recovery. Towards the end of 2021, the domestic production sector

in Vietnam can also expect a 17 to 18 percent surge as the manufacturing and processing rates are soaring. The industrial production index in the first five months of 2021 was at 9.9 percent year-on-year, and the manufacturing and processing were at 12.6 percent. Total retail sales of goods and services reached 7.6 percent yearon-year. From a bigger picture, the US, China and the EU are bouncing back from the pandemic, and it has also increased the global credit demand. This is an opportunity for Vietnam to boost its exports. Furthermore, the economic growth of the US remains positive, strengthening the shipments from Vietnam more robust. RongViet Securities Corporation (VDSC) recently released a forecast that stated GDP would grow by 7.2 percent in the second quarter of 2021 and 6.5 percent for the year as a whole. The IMF also predicted Vietnam’s GDP growth to be 6.5 percent in 2021 and the per capita income to be more than $3,750 by 2023. Its economy is expected to return to pre-pandemic levels by the second half of 2021 despite the recent resurgence in Covid-19. Based on the factors listed above, we can say that Vietnam provides a positive outlook going forward. The improvements in policy-making settings and supporting the credit metrics can also contribute to the economy’s growth. Notably, even the weaknesses are balanced against the strong growth prospects and external position. Thus the new leadership’s focus on trade and economics could bring about positive changes and exponential growth.

editor@ifinancemag.com

International Finance | May 2021 | 37

Business Dossier - The Access Bank UK Limited

Committed to developing a sustainable business model

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

This is reflected in our moderate appetite for risk, our passion for customer service and our commitment to building long-term relationships by working in partnership with our customers

38 | May 2021 | International Finance

he Access Bank UK Limited is a wholly-owned subsidiary of Access Bank Plc, a Nigerian Stock Exchange-listed company, which provides trade finance, commercial banking, private banking and asset management products and services to customers in their dealings with the Organisation for Economic Cooperation and Development (OECD) markets and support companies wishing to invest in and trade in Sub-Saharan Africa, MENA and Asian markets. The Access Bank UK Limited is authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA. The Access Bank UK Limited’s Dubai Branch is situated in the iconic Gate Building of Dubai International Financial Centre (DIFC) and is regulated by the Dubai Financial Services Authority (DFSA). Like its parent, the bank is committed to developing a sustainable business model for the environment in which it operates. This is reflected in its moderate appetite for risk, passion for customer service and commitment to developing long-term relationships by working in partnership with its customers. The Access Bank UK Limited also plays a key role in the Group’s vision to be the world’s most respected African bank. As such, it refuses to chase unsustainable yields as a route to growth. Instead, the bank focuses on growing its business through the strength of its customer relationship. In 2018 the bank became a direct member of the three key UK payment clearing systems: Bacs (Bankers’ Automated Clearing Services), C&CCC (Cheque and Credit Clearing Company’s Image Clearing System) and Faster Payments. The Access Bank UK Limited’s Chief Executive Officer and Managing Director, Jamie Simmonds said, “This is a great landmark for us, enabling us to build a sustainable platform with direct entry into the UK payment clearing system. This will enable us to enhance the level of service our customers receive. We have a clear commitment to strong customer service and we anticipate and respond quickly to market needs with the right technology, products and services. Joining the UK payment clearing system is a clear example of meeting the needs of our customers”. The Access Bank UK Limited provides a number of services to support business activities in Sub-Saharan Africa and across the world. Recently, the bank was awarded Confirming Bank status by the International Finance Corporation as part of their Global Trade Finance Programme, thereby strengthening its Trade Finance capabilities even further. It was also the first Nigerian Bank in the UK to be appointed as correspondent bank to the Central Bank of Nigeria to undertake infrastructure work on behalf of the Nigerian government. It issues Letters of Credit on behalf of the Nigerian government and Nigerian National Petroleum Corporation (NNPC). The bank’s commercial banking team offers relationship-based service to its corporate and individual customers. It also offers a wide range of products and services with a choice of competitive rates, market leading systems and top-quality service.

Its Global Private Bank has been built around its passion for delivering excellent service. The Access Bank UK Limited is known to deliver innovative investment solutions to its discerning clients that value trust, integrity and accountability as well as investment performance. The bank undertakes a proactive approach to product and service delivery and offers unique investment solutions, which are tailored to its customers’ needs by a highly experienced private banking team. 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 Sub-Saharan Africa. The DIFC Branch is committed to building a long-lasting relationship 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 its presence in the UK and Nigeria delivers a wealth of expertise that significantly benefits its customers. The bank develops long-term relationships by working

have now advanced our status to Platinum. We believe that our consistently low staff turnover rate reflects in part the advances we have made in training and development. The Bank is currently working in partnership with the Chartered Institute of Personnel & Development (CIPD) programmes,” Jamie Simmonds added. The Access Bank UK Limited has released its Report and Statutory Accounts for 2020, titled “Strength and resilience” which highlights its strong operational performance by the main Strategic Business Units and continued growth and expansion in Sub-Saharan Africa and the MENA region. The Bank has demonstrated yet another year of significant all-round growth, achieving and exceeding targets for all of the main growth strategies. The $100 million income milestone was reached for the first time in the bank’s history, with 18 percent year-on-year growth to $100.8 million. The Trade Finance operation continues to be the Bank’s largest SBU and is also a confirming bank for

ubai, the newest SBU, was also a significant performer, with income reaching $10.1 million, an uplift of 35 percent year-on-year

closely with its customers to understand their goals in order to create a strategy designed to satisfy their needs. It provides constant support and development opportunities for its employees, which reflects in their dedication and professionalism. The bank is led by a team of accomplished individuals determined to deliver superior financial solutions for business and individuals. Its staff are highly experienced and many have spent time working in the Sub-Saharan, West African and international marketplaces and are committed to diversifying its workforce. What’s unique about the bank is that it encourages a sense of individual ownership while also fostering team spirit, which in turn, help employees realise their potential through the provision of continuous learning opportunities and the tools and training to support professional growth. “Our people are fundamental to our bank’s continued development. They provide the skills that deliver our focus on service and customer relationships. Reflecting this, during the year we selectively recruited additional members to the team and also invested more in professional development. We were the first Nigerian bank to achieve investors in People accreditation. We

Access Bank Plc and the Group. Trade finance income grew by 28 percent year-on-year to $51.5 million, of which $24.9 million were accounted for by correspondent banking. Commercial Banking income has reached $30.6 million while asset management income rose by 27 percent to $3.3 million. Dubai, the newest SBU, was also a significant performer, with income reaching $10.1 million, an increase of 35 percent year-on-year. This success is founded on our strong relationship model and testament to the trust a growing number of important Middle Eastern clients have shown in us as the gateway to Nigeria and the rest of Africa. Commenting on the recently published results, Jamie Simmonds said, “A defining year for the Bank, one in which we adapted at speed to ensure that we could meet the challenges created by Covid-19 and emerge with a strong underlying financial performance, thanks in large measure to our robust business model, underlying cultural strength and all-round resilience”. Herbert Wigwe, Chairman and Non-Executive Director, added, “Our staff showed extraordinary dedication, in supporting our customers when they needed it most”.

International Finance | May 2021 | 39

BANKING AND FINANCE

ANALYSIS

DIGITAL BANKING SOUTHEAST ASIA DIGITAL BANKING

Digital banking in Southeast Asia is being driven by disruptive technologies, digital penetration and evolving customer expectation

Southeast Asia’s growing digital banking landscape PRITAM BORDOLOI

Banking as we know it is changing. Challenger banks are emerging in most markets across the globe and with their disruptive technologies, they are redefining banking. In the present day, we have stepped into the era of digital banking and we are heading The biggest towards a foreseeable future market is where brick and mortar Indonesia, banks may cease to exist. which has Bill Gates once said, “We around need banking, but we don't 42 million need banks anymore.” The underbanked global digital banking market and 92 million size is forecasted to reach unbanked $30750 million by 2026, from adults. $9098.7million in 2019, at a compound annual growth rate (CAGR) of 19 percent during 2021-2026, according to a Valuates report. More than 200 digital banks have popped up across the globe since 2010. While the trend started in Europe and the UK, the digital banking space in Southeast Asia is growing. Out of the 200 plus digital banks, nearly 50 of them are based in the Asia Pacific region. Digital is becoming mainstream and digital banking is being driven by disruptive technologies, digital penetration and evolving customer expectation. The Covid-19 pandemic has also given

40 | May 2021 | International Finance

digital banking a significant push. According to a research report, nearly 70 percent of adults in Southeast Asia were underbanked or unbanked. The biggest market is Indonesia, which has around 42 million underbanked and 92 million unbanked adults. Also, there is a huge funding gap when it comes to small and medium and smallsized businesses in the region. Digital banking solves these problems. Another survey has also revealed that the lack of personalised advice, higher fees and an unattractive image are the reasons for consumers to shift from traditional banks in Southeast Asia. While the changes in terms of banking have been tremendous, traditional banks have been equally slow to adapt to these changes. A Roland Berger report has revealed that around 18 percent of the bank branches in Southeast Asia will be closed by 2030, which is around 9,000 branches. The report further forecasts that the most significant market consolidations include Indonesia, Thailand and Malaysia, as these economies move towards continued growth along with increasing internet penetration, digitalisation and the growing irrelevance of brick-and-mortar branches.

Why digital banking is on the rise? Few industries have seen the magnitude of

technological disruption than the financial sector. Digital banks have the ability to satisfy evolving customer needs in a much better way. Also, the traditional bank’s inability to adapt to the changes is playing a role in the rise of digital banks across the globe. It is estimated that currently, around 2.5 billion people are using digital banking services. However, according to toa Juniper Research’s report, almost 53 percent of the world’s population will access digital banking by 2026. The neobanks or challenger banks offer similar services as traditional banks such as savings accounts, payment and money transfer services, and financial education solutions, among other segments but more efficiently. Some of these digital banks also offer money lending services in partnership with other banks and credit union services. In the case of a digital bank, a customer can almost carry out any financial activities from the comfort of his home. This is not the case when it comes to traditional banks. Customers do need to

visit the branch from time to time. Even though many traditional banks have understood the importance of digitalisation, the process of digital adaptation is slow. Greg Krasnov, founder and CEO of Tonik told International Finance that the main advantage of purely digital banks over traditional players is being able to reallocate investments to more quick wins for the customer. He said, “For instance, Tonik offers the highest interest rate for time deposits in the Philippines at 6 percent per annum. “Whereas more brick-and-mortar banks have to invest in operational expenses such as maintaining and staffing these branches and other infrastructure, we do not have this need and can easily invest in features that enable customers to save and earn bigger with their money. Accessibility and security are also huge factors for customers to prefer digital banks.” Financial services are literally at ones’ fingertips in digital banking, usually in the form of a secured mobile app and device. As such, digital banks heavily invest in making their core banking services and security solutions as robust and user-friendly as

International Finance | May 2021 | 41

BANKING AND FINANCE

ANALYSIS

DIGITAL BANKING SOUTHEAST ASIA DIGITAL BANKING

Global IT spending by banks (in billions) possible through partnering with internationally recognised names such as Mastercard, Finastra and Amazon Cloud Services.

What makes Southeast Asia a fertile ground for a digital banking boom? Some of the world’s most emerging economies are in Southeast Asia. Economies such as Vietnam are growing at a substantial rate. Economies such as Thailand, the Philippines are Singapore are now opening their doors to digital banking. With a population of 675 million as of July 19, 2021, the region is ripe for disruption. It is estimated that Southeast Asia’s population will reach 721 million by 2030, positioning it as one of the most populous regional markets in the world behind China and India. Also, a huge middle class is emerging in the region that holds a large disposable income. The number of people categorised as middle-class is expected to more than double from 24 percent to 51 percent in 2030, from 135 million people to 334 million people. Economic growth in emerging markets continues to outpace global averages. The combined gross domestic product (GDP) of Malaysia, Indonesia, the Philippines, Singapore, Thailand could reach an estimated $4.3 trillion by 2030. This positions the region as the sixthlargest global economic bloc. Greg Krasnov believes that the region holds great potential in terms of unbanked and underserved markets. It is very exciting for new fintech players or neobanks to leverage this diverse, digitally

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savvy and predominantly young region in terms of offering more attractive deposits and consumer lending propositions. For instance, there is over 70 percent of the adult population in the Philippines alone is underserved by traditional banks in the country. He said, “We are talking about a market with potential values of up to $140 billion in retail deposits and $100 billion in lending. This is largely caused by lack of more competitive rates and returns from older and bigger players in the country which we aim to address with our gamechanging offers” Southeast Asia is also blessed with supportive regulators who share the vision of propelling the region to digitalisation and financial inclusion. Governments in the region have understood how digital banking can propel the region’s economic growth. Greg Krasnov said, “Our close collaboration with the BSP in the Philippines has been instrumental in our continuous growth and acquisition. We have been witnessing similar developments in other countries such as Singapore, Malaysia and Indonesia which should make the industry more dynamic and competitive in the next few years.”

Digital banking landscape in SEA Over the last couple of years, the digital banking landscape in Southeast Asia has expanded rapidly. In the Philippines, its central bank granted digital banking licences to Tonik and UNObank. State-backed Overseas Filipino Bank received its digital

2018

2020

2019

2021

261.1 284.5 272.6 296.5 Source: Celent

banking licence in March 2020. Tonik went live in March this year. Previously, Tonik was operating in the country with a rural banking license. Greg Krasnov said, “Tonik is the first private neobank in the Philippines to secure an official digital bank license from the Bangko Sentral ng Pilipinas (BSP). We offer accessible, flexible, and inclusive financial services, including industry-leading deposit interest rates of up to 6 percent per annum, and unique saving features such our Solo Stash and Group Stash products. “Being a purely digital neobank, we make these services available on a highly secure platform through our mobile app. This allows for more convenience as customers can open a fully functional Tonik account in under five minutes via the app using only one valid ID and a selfie – a far cry from the often tedious process that they are accustomed to with traditional banks.” Last year, the Monetary Authority of Singapore (MAS) approved the country’s first digital

Number of customer accounts at selected digital banks worldwide as of 2020

WeBank Paytm MyBank NuBank Revolut KakaoBank Tinkoff Bank Chime N26 Monzo

China India China Brazil UK South Korea Russia China Germany UK

200 57 29 25 13 12 10 8 6 5

Source: Statista

banking licenses. The central bank issued two types of licences- digital full bank license (DFB) and digital wholesale bank license (DWB). The licences went to a consortium of Singapore-based telco Singtel and Grab, Sea Limited, Ant Financial and another consortium of Greenland Financial, Linklogis Hong Kong and Beijing Co-operative Equity Investment Fund Management. In Malaysia, the central bank released its Licensing Framework for Digital Banks earlier this year. It is estimated that around 40 different parties have applied for digital banking licences in the country. The applicants include telecom company Axiata through a tie-up with local bank RHB Group; real estate firm Sunway, low-cost carrier AirAsia and tech company Green Packet. Malaysia plans to hand five digital banking licenses in the first quarter of 2022. Meanwhile, Thailand is one of the few Southeast Asian economies that has not unveiled a digital banking roadmap as of yet. However, plans to issue digital banking licences are

in the pipeline. Last year, the Bank of Thailand (BoT) said that it was exploring the possibility of issuing digital bank licenses. While it can be argued there is a lack of urgency to promote digital banking in Thailand from the authorities, it is primarily due to the fact that 80 percent of Thai adults have an account at a formal financial institution, as per the World Bank. In Indonesia, there are already seven digital banks and another seven are still waiting for licences from the Financial Services Authority (OJK). The digital banking market in Indonesia, in particular, is ripe because of the 145 million millennials, who account for more than half of the country’s population.

Digital banks to propagate in most emerging SEA markets The paradigm shift in consumer behavior and demand presents itself as a major opportunity for digital banking institutions to tap into this growing market of both banked and especially unbanked consumers in the Southeast Asian region. Digital

banks or neobanks will continue to propagate in most emerging Southeast Asian markets. Rapid customer take-up in the region proves that more customers in this part of the world are hungry for financial enablers that make banking simplified, nonintimidating, digitaldriven, and actually make their money grow. “The new normal has transformed consumer banking behavior in many ways, and we can expect that the future will continue to be in the direction of digital,” Greg Krasnov said. Similar events are also unfolding in Singapore, Malaysia and Indonesia with regulators granting more digital bank licenses and setting up frameworks for new challengers. Customers will continue to be on the lookout for and choose banks that encourage a more human relationship built on mutual trust, speed and convenience, rather than usual transactional interactions that are often tedious and frustrating. Traditional banks are also adapting to the rapid changes. To meet the changing expectations of their customers in the rapidly evolving landscape, the incumbents are creating their own low-cost operating models that can win in a low-growth future environment. The number of digital banks launched by traditional banks across the globe has doubled over the last decade, catering to a marketplace where digital is substantially becoming mainstream. editor@ifinancemag.com

International Finance | May 2021 | 43

BANKING AND FINANCE

FEATURE FINANCE

DIGITAL IDENTITY DIGITAL IDENTITY FINANCIAL SERVICES

Digital identity acting as a catalyst for financial services 44 | May 2021 | International Finance

FEATURE DIGITAL IDENTITY FINANCIAL SERVICES

The new digital process can help and empower people to heal our society from the pandemic

JESSICA SMITH

igital identification or digital ID is a way to unlock access to banking, government benefits, education, and many other critical services. At present time, digital identity has become a critical focal point while discussing global policies as governments, digital platform companies, foundations, and international organisations push for solutions that include more of the population into the formal economy. According to experts, our current identity system is neither efficient nor effective enough for everyone involved. Data showed that there are around 1.7 billion people who still do not have access to bank accounts and one billion people do not have legally recognised identities. As the economy progresses, financial service providers need to be at the centre of discussions and play a critical role in the new digital identity ecosystem. Governments and economies globally are doing everything they can to include their citizens in the formal economy. In an effort to do so, there have been several national initiatives that have been rolled out that have successfully improved global inclusion. Countries like India, Kenya, and China have managed to include around 80 percent of their citizens in the formal economy and it’s important to remember that each of these countries is fundamentally different from one another.

International Finance | May 2021 | 45

BANKING AND FINANCE

FEATURE FINANCE

DIGITAL IDENTITY DIGITAL IDENTITY FINANCIAL SERVICES

Adults without access to bank accounts in 2019 China heavily relies on national technology companies using smartphone applications that are connected to financial accounts that make financial transactions. On the other hand, India, the largest democracy in the world has managed to create the largest single digital biometric ID programme in the world for citizen and public welfare. Kenya is known for its mobile money model that primarily provides customised financial services through mobile money accounts. These are examples of how nations have managed to digitally include their citizens in the formal economy while creating a digital footprint for their citizens that were previously underserved and financially excluded. Still, there is a large chunk of the world population that is still without bank accounts, and they are especially from third world countries. The information about an underserved individual that exists online can be used by the concerned government to leverage this digital data to create digital personas. This data can also be used to gain market insights, personalize customer engagements, and provide a fictional transaction process. While some of the world economies have managed to increase inclusion, there are still concerns about privacy, active usage, and gender gap. But interoperable digital identities have the potential to overcome these issues. A well-designed digital identity not only enables civic and social empowerment but also leads to real and possible economic gains. By extending a full digital identity coverage, any economy stands a chance to unlock economic value that is equivalent to 3 to 13 percent of gross domestic product (GDP) in 2030. It goes without saying that this value

46 | May 2021 | International Finance

is neither certain nor automatic, but, with the help of careful system design and solid policies that help to promote potential sources of economic value may help translate these to the GDP. Along with careful system design and policies that help promote uptake and minimise risks, digital identity can prove to be the key for inclusive growth, and offer quantifiable economic benefits to individuals that is beyond significant noneconomic benefits.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

China India Pakistan Indonesia Nigeria Mexico Bangladesh Vietnam Brazil Philippines

Source: Forbes

What are the opportunities for digital identification? According to a report published by the World Bank, almost one billion people worldwide do not have access to bank accounts and another 3.4 billion have legal IDs that have limited use when it comes to the digital identity and inclusion sphere. The remaining 3.2 billion have a legally identifiable ID and participate in the digital economy but may not be able to use it effectively and efficiently online. In some areas of the world, this figure is much more saturated, and for others, it’s comparatively sparse. According to reports, nearly half of the adult population of some countries in sub-Saharan Africa are unable to open a bank account as they lack documentation. The primary cluster of such people includes lowincome minorities, immigrants, rural farmers, refugees and stateless persons. Elderly people and the young population with limited sources of income can also find them restricted. These types of consumers often find themselves unable to fully engage in the digital economy, and as a result, their business opportunities, housing options and other socio-economic choices are limited.

224 million 191 million 99 million 6.6 million 62.7 million 58.7 million 57.9 million 49.3 million 48.4 million 46 million

If the government finds ways to make this part of the population open to the opportunities for digital identity, it promotes inclusion, which, in turn, provides greater access to goods and services that reduces fraud, protects rights, and increases transparency. Digital inclusion will also promote digitisation and drive efficiencies. The value created through digital identity is growing as technology advances, cost implementation declines, and global access to the internet and smartphones increase. The foundation on which digital inclusion is built rises and drops every day. More than four billion people currently have access to the internet, and nearly a quarterbillion new users came online for the first time in 2017. The technology on which digital depends has now become more affordable, thereby making it possible for emerging economies to go ahead in a much easier manner.

Risks of digital identity Much like other technologies like

FEATURE DIGITAL IDENTITY FINANCIAL SERVICES

nuclear energy and GPS, digital identity can either be used to create value or inflict harm. Without taking necessary precautions, digital identity operators who have nefarious intentions stand the opportunity to gain access and misuse data. There are a lot of such examples available online where the digital identity has been misused, including serious crimes like tracking or persecuting ethnic and religious groups. Hence, if improperly implemented and designed, digital identity could be used in more targeted ways like unlawful collection and storage of data, manipulation of votes, social control of particular groups through surveillance, and restricting the access and use of payments, travel, and social media. But, in order to minimise the occurrence of such incidents, steps like data minimization and proportionality, well-controlled processes, and an established rule of law is necessary. In order to promote sustainable digital ID systems that minimise risks, the

World Bank Group and the Center for Global Development came up with ten principles for the identification of sustainable development goals that are endorsed by the Bill and Melinda Gates Foundation. Even then, when digital identity is used to create value and promote inclusive growth, there are two risk factors that need to be addressed. Firstly, digital identity is naturally exposed to the already-existing risk that is present in other digital technologies with large-scale population-level usage. Additionally, connectivity and information sharing, which is the very basis of creating value also comes with their own set of challenges. Even if there is a data breach at social media or credit agencies, failure of technical systems, and the ever-looming concern behind the control and misuse of personal data provide a lot to worry for policymakers around the world. The cybersecurity threat is one of the potential reasons that is becoming an increasing risk

that threatens the digital identity landscape. A report of International Data Corporation forecasts that by 2025, the global datasphere will grow to 163 zettabytes, which is ten times the number witnessed in 2016. Additionally, shifting regulations and consumer preferences are focusing more on data privacy and control for all digital systems. Secondly, the risks that come with conventional ID programs can also be found in digital identities like human errors, unauthorized credential use, and the exclusion of individuals. While digital identity can effectively minimise those risks by reducing the opportunity for manual errors. Last, but not least, some risks associated with conventional IDs will appear in new ways when used in the digital sphere. For example, people who don’t have sufficient access to technology or are not very well-versed, or those who lack trust or confidence in a digital identity system stand a chance to be entirely excluded unless presented with some suitable manual options.

International Finance | May 2021 | 47

BANKING AND FINANCE

FEATURE FINANCE

DIGITAL IDENTITY DIGITAL IDENTITY FINANCIAL SERVICES

Valid methods of payment The primary method of payment will still be an omnichannel system that helps merchants accept any kind of payment through any channel, at a checkout counter or on a mobile device. But this method is quite complex, there are reports about PayPal getting close to bringing together Braintree - its iZettle acquisition - and its online checkout button. In the US, a lot of fintech startups offer technology that allows companies to connect directly to customers’ bank accounts. This improves the growth of new digital-financial services. In the present scenario, debit and credit cards make up a smaller proportion of transactions, and new economies such as Nigeria and the Philippines can facilitate directly to a network of multirail payments services. As emerging economies do their best to catch up to Europe and the US, cross-border payments will also rise, thereby attracting global businesses with compelling cost propositions and better services. In this scenario, automation will also play an important role, where they can ensure instant payments that are compliant with cross-border antimoney laundering regulations. If this process is implemented correctly, some studies have shown that B2B cross-border payments alone can grow by 30 percent over the next year and can reach $35 million by 2022. The financial crisis of 2008 in turn created a global panel of regulators which is now known as the Financial Regulatory Board. A similar group should be built that

48 | May 2021 | International Finance

2019 fintech data distribution 1. Personal finance 2. Wall Street 3. Crypto 4. Investment 5. Lending 6. Payments 7. Real Estate

16% 12% 9% 12% 10% 27% 14%

Financial inclusion in Latam and the Caribbean (On a scale of 0 to 100, with 100 as the best possible score)

Columbia Uruguay Argentina Mexico Brazil Chile Venezuela

82 78 74 74 71 66 33

Digital identity has massive untapped potential capable of addressing systemic challenges and removing barriers of limited access to digital.

can monitor global digital assets, which can be made possible by digital IDs. The group will help develop data model standards, regulation and policies, and build around the General Data Protection Regulation that is already present in Europe by fostering better data-sharing legislation across the world. This board can also provide group members the platform to share best practices and monitor risks in digital commerce and health care for example. With this board in place, data trusts could be built that can manage the data of both businesses and individuals.

Digital identity can open opportunities to greater inclusion As discussed above, digital identity has massive untapped potential capable of addressing systemic challenges and removing barriers of limited availability to digital access. Firstly, a legally recognised digital identity can replace the use of physical documents. With the implementation of the correct technology that can achieve regulatory compliance such as verifying proof of address using GPS can allow an individual to meet the necessary steps to open a transaction account, which will pave the way for larger financial opportunities. Additionally, the availability of digital identity would make it easier for financial institutions to procure obscure data on customer activity. These insights will also allow to grant an individual the necessary credit, who otherwise would be denied.

FEATURE DIGITAL IDENTITY FINANCIAL SERVICES

More importantly, a digital ID can also support services such as digital signatures that will help lenders properly obtain customer consent. Last but not the least, digital ID will lead to cost-effective customer onboarding that can be conducted remotely and it will greatly increase the number of financial providers who will be able to increase their financial services to marginalized groups. According to a report by Mckinsey, the data gathered from 23 countries found that in 2030, digital ID has the potential to create economic value equivalent to 6 percent of GDP in emerging economies on a per-country basis and 3 percent in established economies. In established economies, a large amount of processes are already digitised and the potential for improvement is more limited, thereby making the need for advanced digital identity even more pronounced with data sharing features. Digital identities can also unlock some noneconomic values which will

help in the progression of ideals that are impossible to capture with the help of quantitative analysis, like inclusion, rights, protection, and transparency. Digital identity can also promote increased and more inclusive access to education, healthcare, and labor markets. For example, in Estonia, over 30 percent of individuals vote online, and out of that, 20 percent say that they would never vote at a physical polling place.

How to capture the value of Digital ID? It goes without saying that capturing the value and potential of digital ID is neither certain nor automatic. The help of careful system design and wellplaced government policies are essential in order to promote uptake, minimise risks that are associated with large scale personal data capturing or systematic exclusion. Some basic conditions to keep in mind before the implementation of digital ID include a minimal level of digital infrastructure, sufficient trust in

the ID provider, and a policy landscape that provides safeguards to individuals. In order to unlock the potential of digital ID, both the government and its individual citizens will need to broadly adopt and use digital ID programs. The approach might vary from country to country, but adoption of the program and usage will only happen if the digital ID provides more value than the status quo, if the general consensus is positive, and if initial registration is relatively easy. According to experts, it will be clearer what happens in the new data economy. If there is the right kind of public-private partnership in place, more wealth will be generated for a significantly greater population around the world than today. In this, initiatives like digital identity can amplify it greatly. It is absolutely imperative that both businesses and government should act now and make digital IDs a focus for their digital transformation, which is undoubtedly a catalyst that will usher in a brand new way of working and new industries. At present, the debate around digital payment should focus on how to make the best use of real-time, cross-border transactions. It is possible for digital ID to tap into this section, but working out how this system works with the existing payment rails is a critical step. This is going to take some time for sure, but if a successful digital ID implementation happens, the world economy will surely benefit from it.

editor@ifinancemag.com

International Finance | May 2021 | 49

BANKING AND FINANCE

FINTECH

FINANCIAL MARKETS FINTECH COVID-19

Fintechs are used to challenging – as well as being challenged by – the status quo

MARIUS GALDIKAS CEO AT CONNECTPAY

Fintechs to set benchmarks During the pandemic, the fintech sector proved to be more resilient and better equipped to adapt to the sudden digital shift. While others may have been struggling to maintain operational capacity under newlyfound pressures, fintechs leveraged the circumstances to further drive innovation and fill in the emerging gaps in provided services. Quite a few risks that may hinder the financial industry’s growth remain, thus when will the market recover to its full extent is still uncertain. In light of fintech-resilience, there are a few lessons that could be learned and incorporated into other financial institutions’ practices, which could aid in facilitating recovery for the entire market.

Get used to diving head-first Fintechs are used to challenging – as well as being challenged by – the status quo. After all, at their core is the desire to identify opportunities, which lay dormant in the market, and look for ways to help them see the light of day. Thus, in a way, the pandemiccaused turmoil has not caught them off guard. This approach, albeit, cannot be adopted overnight but is something that FIs could utilise to become more economic-resilient. One of the ways to put the idea to use would be to re-examine their current product suite and scan for any untapped possibilities. It is

50 | May 2021 | International Finance

important not to be eager to dismiss unlikely ones, too: what now seems improbable may one day become the new normal.

Increasing operational flexibility The pandemic was a ruthless wake-up call for everyone who thought focusing on digital service accessibility was not yet a priority. Following a wave of brick-and-mortar shutdowns, consumers shifted to digital alternatives to keep track and manage their finances. For instance, in Europe alone, there has been a 72 percent increase in the use of financial and mobile banking apps. Struggling to shift their focus to digital-first, many traditional finance institutions were weighted down by complex and, in some cases, inefficient legacy systems, which fintechs are not burdened by. As technology is part of their DNA, they implement new solutions faster – thereby enabling them to quickly bounce back even in an economic slowdown. Now, they have set a standard to follow in terms of digital service efficiency. FIs should leverage this digitalisation momentum to further drive their own growth, either utilising in-house resources, or, perhaps, even seeking out partnerships with fintechs.

Prioritising customer experience While traditional players are still in the early-

stages of adapting a more personalised approach, Fintechs are already putting customers in the spotlight. In fact, a survey by PwC found that 53 percent of banking sector representatives believed their business to be consumer-centric, compared with 80 percent of fintech sector respondents. In addition, fintechs often utilise more digital communication channels, such as social media, enabling them to build a better connection with their customers. The thing is, because of that consumers now have the same expectations of approachability and communication for other financial service providers they use as well. Therefore not having a presence in the online world robs FIs of potentially significant advantage to reach and retain a wider target audience.

Embracing regulation While some FIs complain regulation may be hindering their growth, Fintechs look for ways to navigate through regulatory hurdles by reinventing their approach to fit into the compliance framework. As the regulatory landscape for them is evolving ever so quickly, they have learned to embrace these changes, provided the regulator is keen on fostering a dialogue with the market players. Relationship between FIs and the regulator should

not be viewed from the point of constraint, rather perceived as a mutual effort to manage associated risks. All in all, the key is focusing on building bridges and not diffusing responsibility.

Benchmarks to follow The current circumstances highlighted the resilience, ingenuity and adaptability of fintechs. As we move slowly towards post-pandemic recovery, reflecting upon these practices may aid others working in the financial sector to equip themselves with the right tools and mindset to thrive in the aftermath and not succumb to external pressures. Marius is a business and technology executive with 15+ years of proven track record in developing digital products and accelerating growth in various enterprises. Experienced in Global Finance industry, Marius is proficient at delivering highly scalable and reliable systems and platforms.

editor@ifinancemag.com

International Finance | May 2021 | 51

Business Dossier - La Trobe Financial

An asset class that has stood the test of time

The resilience of the Australian residential property market provides opportunities for income during volatile times 52 | May 2021 | International Finance

roperty forms the backbone of investment strategies and retirement plans for millions of ordinary Australians. It offers investable opportunities both for equity (home/investment property ownership) and via credit vehicles (mortgage-secured loan portfolios), with access to the A$2.5 trillion residential and commercial mortgage market. In its rebuilding stage following the pandemic, Australia stands out compared to the sporadic viral outbreaks occurring across the globe. We are reminded of the ever-present and heightened risk faced by markets, communities and the broader economy. In Australia, financial markets are emerging to pre-Covid-19 levels and vaccine rollouts are commencing worldwide. But volatility remains elevated and

interest rates are at emergency levels globally. In this context, investors remain focused on identifying lowvolatility, income-generating assets. Low volatility yield with strong risk protection is what every investor looks for, particularly in such times and it does not matter what kind of investor you are. Since 1952, La Trobe Financial has been working with a diverse range of investors. Banks, international pension funds and local fund managers all trust La Trobe Financial with their money, as do retail and professional investors alike With $12 billion in assets under management (AUM), La Trobe Financial is one of Australia’s leading asset managers specialising in funding and investment solutions. The firm’s performance track-record in times of volatility and low rates has been a proven performer for seven decades. La Trobe Financial is 75 percent owned by Blackstone, one of the world’s leading investment firms with AUM of $619 billion and 25 percent owned by senior management. Investment accounts that have stood the test of time Our approach has been refined over years of continuous

operation and a number of economic cycles. We have serviced institutional and retail mandates exceeding A$36 billion, covering more than 205,000 customers. Throughout this period, we have delivered targeted returns to all our portfolio investors, whether institutional or in our pooled portfolio offerings in the Credit Fund, without loss of a single cent of capital This is an unprecedented track record of consistent performance for investors. The La Trobe Australian Credit Fund now stands at $5.6 billion in AUM (as at April 2021) and invests in diversified portfolios of residential and commercial registered first mortgage loans, with all security properties located in Australia. The objective of our retail Credit Fund offerings has long been to provide investors with a choice of low volatility and consistent income generating investments. The Credit Fund’s continued outperformance in times of volatility and low interest rates, continues to attract investors. One of our flagship investment accounts, the 12 Month Term Account, holds the highest ratings of any fund in the sector and has been described by independent ratings agency, Zenith Investment Partners, as “a well-diversified, well managed mortgage pool.” Our high quality borrower portfolios are enhanced by our strong security position – a conservative maximum loan to value ratio of 75 percent, and a low weighted average of 63.9 percent as at 28 February 2021. The 12 Month Term Account has operated through a

Over the past five years, La Trobe Financial has delivered more than A$596 million in interest income to investors in the Credit Fund. range of political and economic conditions, such as the GFC and most recently the volatility of Covid-19. The resilience of the Credit Fund’s assets and the strength of the underlying strategy has been demonstrated throughout each of these events, again with no capital losses for investors and all monthly distributions being made on time and in full. In addition, over the last five years, La Trobe Financial has delivered more than A$596 million in interest income to investors in the Credit Fund. The continued hunt for diversified sources of low volatility income will be a key driver of investment strategies in the years ahead, as a properly diversified portfolio using managed funds provides the best opportunity for success. With investors likely to engage more with managed fund strategies in the year ahead, it is important to consider the alignment of objectives, transparency and diversification of benefits that fund managers can offer. What differentiates La Trobe Financial as an asset manager from its peers is its disciplined investment philosophy built on seven decades of experience in its chosen asset class. Its rigorous credit assessment process targets a portfolio of small exposures, highly diversified by geography and sector and with strictly controlled loan to valuation ratios. La Trobe Financial clearly understands its role as an asset manager and is clearly focused on delivering with distinction. The team is driven by the need for consistent performance. In a world of volatility, La Trobe Financial is entirely committed to remaining outstanding stewards of investors’ capital. International Finance | May 2021 | 53

BANKING AND FINANCE

IN CONVERSATION

JOÃO DEL VALLE CEO AND CO-FOUNDER, EBANX

The central American population has high levels of connectivity and digitisation, but e-commerce and digital payments are still in early stages

Central America is the next big thing PRITAM BORDOLOI

In Latin America (LatAm), e-commerce is booming and it is one of the fastest-growing markets in the world. EBANX, a Brazilian payment gateway established in 2012, so far, has helped connect global businesses with buyers in Latin America. It offers an endto-end payment solution across the entire e-commerce transaction flow, without the need for a local entity. Valued at over $1 billion after its latest funding round, EBANX’s impressive list of clients includes big names such as AliExpress, Wish, Gearbest, Pipedrive, Spotify, Amazon, Uber and Airbnb. Headquartered in Curitiba, the State of Paraná, EBANX also operates in Argentina, Columbia, Ecuador, Chile and Peru among other LatAm markets. It is believed that EBANX handled nearly $3.5 billion in volume and 150 million transactions last year. In an interview with International Finance, newly appointed EBANX chief executive officer and co-founder João Del Valle said that the unicorn wants to be the leading payments company in LatAm. Brazil, where EBANX is based, is the largest e-commerce market in LatAm. In 2020, its online shopping revenue amounted to R$126.3 billion despite the pandemic and economic uncertainties. The e-commerce market in LatAm grew by 8.49 percent and reached $200 billion in market value n 2020, according to the study by EBANX. The region is also home to more than 650 million people and 33 different markets. Two of the largest markets in the region, Brazil and Mexico, alone have populations of around 210 million and 130 million respectively. This shows the immense potential of the sector and hence it is attracting global e-commerce retailers into the region. The size of the e-commerce

54 | May 2021 | International Finance

FINTECH BRAZIL FINTECH

market in Latin America is immense and there is still a large part of the population that still does not shop on an e-commerce platform. This is good news for the sector because it provides scope for the online market to grow. Another important factor to consider is internet penetration in Latin America. According to Statista, as of the first month in 2021, at least eight out of ten people living in the countries such as the Bahamas, Chile, Barbados, Costa Rica, St. Kitts and Nevis, and Argentina were online. In contrast, less than half of the population in countries such as Nicaragua, Honduras, and Haiti had access to the internet. The regional average of Latin America and the Caribbean stood at 64.13 percent. Since the pandemic has forced people to stay at home, a greater emphasis has been given to technology and people are going online to satisfy their wants. Recently, EBANX has shifted its focus to Central America and wants to grow its presence in the region. João Del Valle believes Central America has the perfect foundation for the exponential growth of e-commerce. By bringing its technological solutions to the region, EBANX wants to attract global e-commerce giants into the region’s market. In this

exclusive interview, João Del Valle discusses the launch of EBANX ONE, his vision for the company and the company’s plans going forward.

IF: Can you tell us a bit more about EBANX ONE? João Del Valle: The launch of EBANX ONE is an exciting milestone for EBANX, since it consolidates, in one single platform, all we've been doing for almost ten years regarding payments, security and technology in Latin America. ONE is a unique solution in the market that unifies international and domestic settlement, paying and payout services, for companies with local or international operations, so they can seize the full potential of Latin America by adding or switching between countries and business models, with full flexibility. This is something extremely complex, especially in LatAm, where each country has its own regulations and norms – and this is why no competitor has anything like it. The flexibility of ONE is the big thing and the big news; it’s everything that global enterprise merchants want, because it allows them to expand to any other country in LatAm with just one click, at a speed that doesn’t exist in the market, and with the

International Finance | May 2021 | 55

BANKING AND FINANCE

IN CONVERSATION

JOÃO DEL VALLE CEO AND CO-FOUNDER, EBANX

We want to be a bridge between global companies and LatAm, helping them to best seize the region's opportunities and pushing further the financial inclusion in the region

business model they prefer. ONE also marks a revolution in EBANX's business model: from now on, we are not only a crossborder payments company; we deal with any and all types of payment in LatAm. All of this was only possible due to EBANX's deep expertise in the Latin American market, which enabled the development of our own technology, with high consistency, speed and quality of execution, in addition to a unique FX solution and global payment reconciliation that addresses all the complexity of the LatAm markets. Finally, I'd like to stress that the launch of ONE follows the expansion of EBANX to new Latin American markets, in the midst of a unique moment of financial and digital inclusion in the region. All of this demonstrates our commitment to LatAm, and to increasingly generate access for LatAm consumers.

What is your vision for the company? EBANX wants to be the leading payments company in Latin America, giving access to the best products and services worldwide. We want to be a bridge between global companies and LatAm, helping them to best seize the region's opportunities and pushing further the financial inclusion in the region. All of this, of course, with high levels of technology and security, with a built-from-scratch payments platform and an optimal payment performance that only our extensive and deep network on the ground can provide. With the launch of EBANX ONE and the expansion into new markets, we expect to grow our processing volume five times over the next three years.

Can you tell us about your plans in Central America? Central America is the next big thing when it comes to Latin America: after Brazil, Mexico, Argentina and other major markets, global companies are now aiming

56 | May 2021 | International Finance

for Central America as a great yet unexplored market, with a huge demand for digital products and services. It's the go-to market in LatAm. And why? Because Central America has the perfect foundation for the exponential growth of e-commerce. Its population has high levels of connectivity and digitisation, but e-commerce and digital payments are still in early stages, with few localised payment options and online stores. In other words, we have rapid digitization and a population eager to consume global products and services. EBANX comes to Central America to help drive this process, connecting with local players and opening the region for global companies. We want to actively participate in digital growth in the region, and also learn with consumers and the local ecosystem. We have launched operations in Costa Rica, and we'll be in El Salvador, Panama, Guatemala and the Dominican Republic within the next few months. We believe that Central America is not only under looked by global companies, but it is still underserved in terms of digital products and services. EBANX's entrance into the region is going to create a real impact on Latin Americans' lives, and a real bridge to the region for businesses. We are very excited about this possibility.

Also, share your insights with regard to the e-commerce sector in Latam. Do you see the market becoming one of the fastest-growing markets in the world? Absolutely. Latin America is already the fastestgrowing digital market in the world, according to data from EBANX and AMI (Americas Market Intelligence): the region grew 18 percent in 2020, pushed by the digital inclusion during the pandemic, and reached $210 billion in market value. This year, it should accelerate 32 percent, with rapid growth of online retail and digital products and services, such as streaming, online gaming, and SaaS. More than 50 million people joined e-commerce during the pandemic in LatAm, a jump of up to 30 percent in some countries. Mobile shopping is booming, people got used to buying online during the pandemic, and this trend will continue to be true. Although these are very impressive numbers, there is still a lot of room to grow in Latin America.

FINTECH BRAZIL FINTECH

E-commerce, for instance, only represents six percent of total retail sales in the region. Digital payments have just gained traction, with the use of digital wallets and instant payments in Brazil, for example. This is why our focus at EBANX is 100 percent within the LatAm region. Latin America is the place to be in 2021 for e-commerce. EBANX wants to offer the best payment solution to our merchants, so they can offer the best payment experience to their Latin American consumers.

Can you shed some light on the financial and digital inclusion in Brazil, and also Latam? This is a unique moment in Latin America in terms of digitization and financial inclusion. The pandemic had a hard hit throughout the region, and unfortunately, it still rages in many countries. But it also pushed forward access to financial products and services, and especially to digital payments. In Brazil, for instance, millions of people had access to their first digital account, thanks to the governmental emergency aid, which was deposited in a federal bank

digital account. Digital wallets have boomed: in Brazil, you see QR codes everywhere, which people use to pay for groceries, pharmacy and even for their daily bread through their cellphones. Brazilian's instant payments system, Pix, was also launched during the pandemic, with great success. And we see the same movement in other Latin American countries where fintech companies offering new products day by day, new regulations being published to boost competition, instant payments helping to democratize financial services throughout LatAm. It's a very exciting moment to be in Latin America.

Can you tell us about EBANX’s technology that provides seamless risk management, fraud control and compliance? Security is a key value for us at EBANX, and this is why we developed a fraud prevention strategy, EBANX Shield, specially tailored for Latin American markets. Using in-house technology and our extensive database, we keep the merchant's operation safe in all countries, while guaranteeing optimal

International Finance | May 2021 | 57

BANKING AND FINANCE

IN CONVERSATION

JOÃO DEL VALLE CEO AND CO-FOUNDER, EBANX

EBANX has a much lower chargeback rate than the overall market: it was 0.42 percent in 2020 in all LatAm countries, whereas the benchmark rate for the region was 1.7 percent.

payment performance. We are very proud to say that EBANX has a much lower chargeback rate than the overall market: it was 0.42 percent in 2020 in all LatAm countries, whereas the benchmark rate for the region was 1.7 percent. This means not only more safety but also more TPV to our merchants. EBANX's direct connections with Latin American local acquirers, banks and other players help us to deliver the best fraud prevention strategy. Here's the importance of having Latin American DNA: there is no way of approaching fraud in Latin America in the same way as other regions, and there is no one-size-fits-all fraud prevention strategy for all Latin American countries. Each country requires a single and custom strategy due to fraudsters' varying behavior market to market, as well as local players' approach to fraud.

What major challenges you had to overcome in your journey from a startup to a unicorn? I would say that the biggest challenge was, and still is, to scale the company while attracting talented, senior people to work with. As the company grows, the challenges also scale, and you need more experienced people. To attract these people, and to retain the ones who work with you, is a challenge itself. It's an ongoing battle, to be true. EBANX has recently raised a $430 million investment round from Advent International, and part of this investment is going to be used in talent attraction. This is crucial for us to keep growing and offering the best payment service in Latin America.

e-wallets, e-commerce, SaaS, BaaS, cloud companies, all of these industries were deeply impacted by the pandemic. And, since LatAm still had a huge gap in terms of financial inclusion, with almost half of its adult population not having a bank account, it was only natural to see a boom of fintech companies, in order to fill that gap and provide access to digital products and services. There is huge demand and room to grow – and, as a consequence, investment is pouring throughout the region. We had a record in venture capital funding in Latin America during Q1 2021, mostly driven by fintech companies. Of course, the first hit of the pandemic was hard in the whole region, and it continues that way. Businesses had to adapt, go digital, many of them closed, and there is unemployment, on top of the health crisis. But we also believe that the pandemic brought an opportunity to give access to millions of people to e-commerce, digital payments and digital products and services, and this will definitely change the way Latin Americans buy and live. At EBANX, we saw the lower downs in our processing volumes in late March, April and May 2020, mainly in the retail vertical. But this behavior quickly pointed out to a change: not much time later, in May, we surveyed our Brazilian consumers about purchases on international retailers. Most maintained their average spending and intended to increase it in a post-pandemic scenario. We saw the same movement in Mexico. At the same time, we had merchants that grew impressively, like online games. Today not only the physical goods vertical recovered, but it's growing, as well as the digital goods vertical. Latin America is a 600 million people region, with a $5 trillion GDP. We continue to believe that Latin America has a great outlook, and a fruitful scenario for companies that sell SaaS, BaaS, streaming, and digital products and services in general.

What is the outlook of the fintech sector in Latam? How has Covid-19 impacted it? Covid-19 accelerated the demand for digital products and services in Latin America, due to social isolation measures. Digital payments, banking solutions,

58 | May 2021 | International Finance

editor@ifinancemag.com

INDUSTRY

ANALYSIS

AVIATION SUSTAINABLE AVIATION FUEL

Many carriers have tried biofuel or green flights and have been successful, but it hasn’t become mainstream just yet

Going green with sustainable aviation fuel IF CORRESPONDENT

During the early years of the aviation industry, luxury and speed were the main drivers of intercontinental travel. Efficiency has always been a primary contributor that made air travel more prominent. In the current era, airplane engines are at the cutting edge of efficiency, and aircraft are more aerodynamic and lighter than before. As The aviation environmental concerns industry rise with climate change, contributes the aviation industry is up to two embarking on a new journey percent of the to make aviation green or world's carbon carbon neutral. emissions. As customer awareness grows, their demand increases. Climate change is real and taking a flight means you are increasing carbon footprint. Many demand change and a lot is going on at this moment from hydrogen-powered electric flights and battery-powered flights to sustainable aviation fuel (SAF). However, all these solutions are still in the development stage and it will be a while before they could become commercially available. Sustainable Aviation Fuel, on the other hand, is a solution that is already available today. It is compatible with existing aircraft engines and airport infrastructure and does not require any extra investments into these. The carbon

60 | May 2021 | International Finance

emissions from the aviation industry contributes to about two percent of the world’s carbon emissions. It is a challenge and a growing concerns for climate change has forced the industry to seek alternatives. Carriers across the globe are researching on SAF for reduced carbon emissions. Even though SAF has been in practice since 2008, it's been used in small or insignificant amounts. But things are changing.

What has happened so far For a long time, air travel's primary source was fossil-derived liquid fuel. Even though it has been proved to be a reliable power source for several years, it contributes significantly to climate change. This led to the need to transition from traditional fossil jet fuel to alternative sources of energy. Sustainable aviation fuel can reduce carbon emissions by 80 percent compared to fossil fuel. Another advantage of SAF is that it can be blended with traditional fossil jet fuel to substitute the existing fuels without redesigning the engine or the aircraft. Aviation analyst Ameya Joshi and the founder of Network Thoughts, told International Finance that SAF is the future of aviation. However, the time taken towards achieving this is slower than anticipated. He added, “A lot of airlines have tried biofuel or green flights and have been successful, but it hasn’t become mainstream just yet.”

The first-ever flight that operated using SAF flew from London to Amsterdam in 2008. The commercial aircraft, Virgin Atlantic Boeing 747, flew using a 20 percent mix of biofuel derived from coconut and babassu oil. Since then, several airlines have operated using SAF or biofuel. Between 2011 and 2015, about 22 airlines served over 2,500 commercial passenger flights with blends of up to 50 percent SAF. The alternate fuel was produced from feedstock, used cooking oil, jatropha, camelina, algae and sugarcane. In 2016, Norway-based Oslo Airport installed a regular, sustainable fuel supply through the common hydrant system. Finland-based alternative fuel producer Neste, Netherlands-based supplier SkyNRG and Air BP of the UK were involved in the installation. In the same year, Chicago-based United Airlines became the first airline to introduce SAF into normal business operations. Some airports such as Oslo, Stockholm, Brisbane and Los Angeles also agreed to provide SAF through their hydrant system. Finland-based oil refining and marketing company Neste, which is also the world's leading producer of renewable diesel and sustainable aviation fuel, has launched the first in-flight 100 percent sustainable aviation fuel emissions study on commercial passenger jet. According to a press release, Neste is investing approximately €190 million to upgrade its refineries which will enable it to produce up to 500,000 tonnes of SAF per annum.

Carbon Emissions from Aviation Industry 2019 Vs. 2050 (metric tonnes carbon dioxide)

Region

2019 2050

China

138.8 371.6

Europe

232.2 337.5

Middle East

76.9 134.5

Africa

37.9 117.8

Latin America 37.7 70.1 Source: www.statista.com

Sustainable aviation fuel can help achieve climate goals In 2009, the aviation industry adopted a set of goals to mitigate carbon dioxide emissions. The International Air Transport Association (IATA) introduced a fourpillar action plan to achieve these emission goals. One of them was the deployment of sustainable aviation fuel. In the year before the pandemic, the aviation industry produced 915 million tonnes of carbon dioxide and approximately contributed two percent of emissions globally. SAF comes as a game-changer in reducing the carbon footprint and other alternatives to traditional

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AVIATION SUSTAINABLE AVIATION FUEL

fuels such as hydrogen-powered and electric-powered flights. In this regard, Jonathan Wood, Vice-President Renewable Aviation of Neste, told International Finance, “Neste MY Sustainable Aviation Fuel is a jet fuel made from sustainably sourced, renewable waste and residue raw materials. It can be used as a drop-in fuel and is blended with fossil jet fuel and certified to meet ASTM jet fuel specifications. “SAFs, in its neat form and over the life cycle, reduces life cycle greenhouse gas emissions by up to 80 percent compared to fossil jet fuel use (calculated with established life cycle assessment LCA methodologies, among which EU RED and CORSIA).” In 2016, IATA implemented the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). This was put in action to help the industry reduce carbon dioxide emissions to half by 2050. Carbon offsetting is when a company or an organisation compensates for their carbon emissions by purchasing credits from the carbon market. These carbon credits are generated by projects that reduce carbon emissions in any part of the world. IATA estimated that without CORSIA, the carbon footprint of international aviation would increase from 600 million tonnes in 2020 to almost 900 million tonnes by 2035. Initially, the scheme was intended to be based on the average emission of 2019 and 2020. However, due to the Covid-19 pandemic, the UN decided to calculate the baseline only from the emissions data of 2019, which would be more accurate in

62 | May 2021 | International Finance

Ranking of total airline carbon emissions in the EU airlines (MtCO2)

Lufhansa, Germany

19.11

British Airways, UK

18.38 14.39 12.28 10.03

Air France, France

Ryanair, Ireland

KLM, Netherlands

Source: Transport and Environment

nature without the border crossing restrictions that hindered the aviation industry in 2020. Wood added that aviation would remain vital for global business. Thus the aviation industry must look into the options to reduce carbon emissions, especially postpandemic, to benefit the economic recovery. He said, “SAF provides an immediate greenhouse gas reduction, and it is available today, so the airline industry can start achieving their climate goals today. “In addition to reducing life cycle greenhouse gas emissions related to the use of conventional jet fuel, sustainable aviation fuels

also provide additional non-CO2 benefits. Local emissions are reduced as the use of SAF produces less particulate and sulphur emissions. The reduction in soot particulate emissions also leads to reduced contrail cirrus, which has additional climate benefits.” However, there are also some skepticism associated with sustainable aviation fuels and its ability to meet climate change goals. In this regard, Jason Chua, co-founder and Chief Strategy Officer at Universal Hydrogen told International Finance, “While synthetic aviation fuel (SAF) is considered a ‘green fuel,’ the best SAF implementations abate less than 40 percent of net emissions. “SAF have demonstrated at best 80 percent offsetting of in-flight emissions, a 50 percent blend with traditional fuels, and immense areas of biomass. They have a long way to go toward carbon neutral and may never get there. SAF also do not mitigate NOx emissions which, at altitude, have a significant global warming impact.” “In order to meet Paris Agreement commitments, you must take the carbon out of the fuel source. We considered numerous sustainable energy sources - from nuclear and wind power to batteries, hydrogen, and SAFs. It quickly became clear that the best, and only long-term answer to the aviation industry’s carbon emissions problem, is green hydrogen,” he added.

Production and its effects on the environment The production of SAF is from sustainable feedstocks and is quite similar to the traditional aviation

fuel. The feedstock of SAF range from municipal solid waste: from households and businesses, cellulosic waste: excess wood, agricultural and forestry residues, used cooking oil, cameline: an energy crop with high lipid oil content, jatropha: a plant that produces seeds that contain inedible lipid oil that can be used to produce fuel, halophytes: salt marsh grasses and other saline habitat species, algae and non-biological alternative fuels. SAF is subjected to laboratory, ground and flight tests under internationally recognised standards to substitute fossil fuels. This alternative should suffice the qualities and characteristics of the traditional jet fuel to be eligible to replace it. The substitution ensures that the manufacturers need not rebuild or redesign the aircraft to benefit from SAF. Likewise, even the suppliers and airports can avoid rebuilding their fuel delivery systems. Once the SAF undergoes approval and certification, it is safe to be used as aircraft fuel. The production of SAF, however, stirred concerns about deforestation among environmentalists. Certain biofuels that are produced from non-sustainable feedstocks might lead to deforestation. Palm oil is one prime example. Fuels produced in this manner are called drop-in fuels, which can be automatically incorporated into existing airport fueling systems. It meets the sustainability criteria like reducing lifecycle carbon emissions, limited freshwater requirements, elimination of competition with needed food production and no deforestation. Commenting on the environmental concerns, Ameya Joshi said,

Passenger CO2 emissions in departure countries 2019

23% China

13% 4.1% 3.3% 2.9% UK

Japan

Germany

Source: The International Council on Clean Transportation

“SAF from organic material does risk deforestation. However, afforestation is a known way of taking care of deforestation and is used in a couple of countries for decades. Since SAF cannot be created from just about anything in the forest, there will be dedicated plantations that will be used for the purpose.” In this context, Wood added, “Neste’s sustainable aviation fuel is produced 100 percent from renewable waste and residue raw materials. Neste's use of waste and residues mitigate the deforestation risk as their use reduces the need

for land use changes. Neste has a very clear stand against actions that cause deforestation. We engage in proactive sustainability projects beyond our own supply chains to mitigate deforestation risk.”

Decarbonisation action from the governments Due to the pandemic, carbon emissions from the aviation industry have reduced, however, the numbers are expected to grow in the coming years due to increase in air travel. Moving forward, the role of governments in limiting the carbon emissions of aviation becomes crucial. Despite the success of a recent long-haul flight, SAF is currently limited to power short and medium-haul flights owing to financial constraints. Governments and industrialists worldwide recognise the importance of a long-term plan to avoid the slow burn disaster of climate change. Implementing a systems-thinking perspective over reactionary policies in a short-term framework is challenging, and the transition of the aviation sector is also not easy. Effective collaboration of the public and private sectors across national borders can provide a lasting change. Yet, the power of implementation and designing long-term visions for sustainable aviation fuel for the aviation industry or other environmental policies are in the hands of the individual governments. Regulatory harmonisation is essential to enable efficient operations and technology deployment, especially in an international sector like aviation.

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However, in supporting SAF, the available feedstock and energy sources vary significantly by geography. It is crucial that each economy devises marketappropriate policies to face the challenges. The Air Transport Action Group (ATAG) recently released a report titled Powering the Future of Flight. It presented six steps for the governments to help the aviation industry move towards a more sustainable path. The steps include foster research into new feedstock sources and refining processes, derisk public and private investments in SAF, providing incentives for airlines to use SAF from an early stage, encourage stakeholders to commit to robust international sustainability criteria, understand local green growth opportunities and establish coalitions encompassing all parts of the supply chain. So far, Europe has taken the lead in supporting the development of sustainable aviation fuel. From 2020, the Renewable Energy Directive (RED) II (2020-2030) will apply a multiplier for producers making SAF rather than ground transport fuel. Moving towards the path of net-zero aviation, the UK government announced the Green Fuel, Green Skies competition in March 2021. The aviation companies that produce SAF from wastes are supported by the government under the scheme. For the development of SAF production plants at scale, companies will be able to bid for a share of £15 million. A commission instituted by the Swedish government proposed a reduction

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obligation, Flightpath 2019. It sets a requirement for fuel producers to reduce their emissions by greater uptake of bio-jet fuel. Along with a blending mandate for each year from 2021 to 2030, the long-term goal of the Swedish government is to use 100 percent SAF by 2045. The Norwegian government has also announced a blending mandate which requires jet fuel suppliers to blend at least 0.5 percent of SAF from 2020. It also aims to use 30 percent of SAF by 2035. To develop the SAF industry, the French government launched a roadmap that forecasts fossil fuel to be replaced with two percent of SAF from 2025, five percent in 2030 and 50 percent in 2050. Aviation Initiative for Renewable Energy in Germany (AIREG) aims to substitute 10 percent of kerosene fuel with SAF nationwide

by 2025. Under EU RED II, Spain also proposed an initiative called ‘the balanced compromise’. About two percent of the total supply of aviation fuel will be replaced with SAF in 2025. In Indonesia, the biofuel mandate aims to use two percent of bio-jet energy for aviation by 2018, three percent by 2020 and five percent by 2025.

The future of sustainable aviation fuel Currently, there are seven approved sustainable aviation fuel pathways that use a combination of different processes and feedstocks. Every pathway has an advantage ranging from the availability and cost of feedstock, cost of processes and carbon reductions. SAF pathways can help the aviation industry reduce carbon emissions and achieve the goals set by IATA.

Ranking of total airline carbon emissions in the EU airlines (MtCO2)

Japan

China

Germany

7.9% 2.7%

4.4% 2.7% UK

3.9% Source: The International Council on Clean Transportation

Joshi stated that “The next five years should see airlines along with aircraft and engine manufacturers invest in more research towards what kind of blend is possible and the benefits it sees over short, medium and long haul sectors.” However, there will be some scale back on investments and research as the aviation industry has suffered the most in the pandemic situation, he added. SAF can soon be considered to be used as a mainstream fuel throughout the nation in few countries worldwide. The ever-changing prices of crude oil and the demand and supply are some of the limitations of using it in the aviation industry. SAF as an alternative fuel proves to have a more diverse geographic supply as its production is not limited to the drilling of fossil fuels. Feedstocks of this sustainable

option, generated from wastes, can be grown or produced anywhere in the world and transported easily into the supply chains. The aviation industry depends on a single energy source. The fluctuating price of crude oil makes it difficult to plan aviation budgets for the long term. SAF reduces the aviation industry's exposure to fuel cost volatility. On a social level, SAF can help developing countries strategise waste management systems, which are a primary environmental concern. It also helps in creating job opportunities. SAF provides multiple economic benefits to geographic locations that are marginal or unviable land for food crops. At the same time, it has to be suitable to grow SAF crops. The massive generation of municipal waste is also a potential SAF producing source. Thus, developing countries will benefit the most from SAF production without negatively impacting their local food production ability. In 2019, The World Economic Forum launched the Clean Skies for Tomorrow (CST) initiative as a coalition across the value chain of aviation to boost the transition to net-zero flying 2050. It partnered with senior leaders from the industry, government and civil society to draft principles to achieve zero-emissions aviation through sustainable aviation fuels (SAF) and other clean propulsion technologies. Wood said, “We see a growing demand for SAF in the market, which is why we are expanding our production capacity. Neste’s current MY Sustainable Aviation

Fuel production capacity is 100,000 tonnes (approximately 34 million gallons) annually. With the investment projects at Neste’s Singapore and Rotterdam refineries, Neste will have the capacity to produce some 1.5 million tonnes (515 million gallons) of SAF annually by the end of 2023.” In conclusion, the history of the aviation industry is on the verge of making a remarkable step to promote sustainability. Yet, the challenge of commercialising SAF still prevails. It is highly possible that a significant supply of alternative fuel in the traditional jet fuel mix can be achieved in the near future. With the help of their governments, stakeholders and airlines should identify feedstock and fuel suppliers to enhance the low-carbon and alternate future for flight. SAF could improve air quality and meet emission targets set by international aviation associations and state governments for a sustainable future. As soon as the environmental benefits and commercial demands are highlighted, the SAF supply chain can be expected to be prevalent in the industry.

editor@ifinancemag.com

International Finance | May 2021 | 65

IF Advertorial - BA Securities, Philippines

Most socially responsible company BA Securities is a leading stock brokerage in the Philippines focusing on institutional clients and high-net-worth individuals in the APAC

BA Securities is a leading stock brokerage firm in the Philippines operating under the BA Group of Companies. The company focuses on institutional clients and also on individuals of high-net-worth in the Asia Pacific region. The company basically provides investors with research, analysis, sale, trade execution and post-trade services to help clients achieve their financial goals. BA Securities was awarded ‘Most Socially Responsible Company’ in the Securities and Brokerage Industry by International Finance. BA Securities was incorporated in November 1989 and gained its Philippine Stock Exchange (PSE) broker seat in 1993. The company started stock market trading operations in October 1993. Primarily it is listed as a broker that handles stocks, bonds, online trading, fund portfolio management and other transactions involving 66 | May 2021 | International Finance

securities. It is one among the 18 brokers that are eligible to trade dollar-denominated securities. The Exchange Commission licensed BA Securities as a broker and dealer and it is registered with the Central Bank of Philippines as a non-bank financial intermediary of non-quasi banking functions. It is considered to be one of the few stockbrokers authorised by the Bureau of Treasury to trade Small Denominated Bonds that are listed in the PSE. About 30,000 clients including the Philippines’ largest fund managers, banks and other financial institutions along with high-net-worth individuals rely on BA Securities to help them manage their investments. It is the first brokerage to provide PSETradex, the online trading platform of the PSE. In August 2013 BASecOnline was launched letting investors trade and monitor their portfolios on the go.

BA Foundation, aims to provide opportunities for its employees, their families and people in need to improve their quality of life and to alleviate their cause through education, scholarship, training, assistance, humanitarian aid and formation programs Covid contributions to the country: BA Foundation, Inc. was established by the Ang family to promote the integral human development of the poor and marginalised population. It aims to provide opportunities for its employees, their families and people in need to improve their quality of life and to alleviate their cause through education, scholarship, training, assistance, humanitarian aid and formation programs. It also conducts livelihood training activities, non-formal education projects and scholarship assistance programs for the accomplishments of its objectives. During the Covid-19 pandemic, BA Foundation donated personal protective equipment (PPEs) to numerous hospitals, governmental organisations and private agencies to protect frontline workers. The company also supported the University of the Philippines (UP) through its funding and donations to the UP Confucius Institute. It also supported the University’s varsity players by donating a muchneeded varsity bus. It is to note that the Foundation also supports charitable institutions including Fr. Al’s Children Foundation, the International Bazaar Foundation, Philippine Cancer Society, UP Foundation, Buddhist Compassion Relief Tzu Chi Foundation, Johann Strauss Society of the Philippines Foundation and Consular Corps of the Philippines. Most socially responsible company BA Securities is the successor broker of PJB Pacific Securities Philippines and Keppel Securities Philippines (KSPI), which later took over Sun Hung Kai Securities (Phil.) and Amsteel Securities. When KSPI ceased operating in 2001, its business was transferred to BA Securities along with those of Sun Hug Kai and Amsteel Securities.

Being awarded the “Most Socially Responsible Company 2020” in the Securities and Brokerage Industry, BA Securities’ chief executive officer said, “Our company strives to not only provide topnotch services and products but also seek to serve the community. This award may further assure the clients that they are provided with award-winning standards. We are grateful that these standards are duly recognized and indicate that our company is fully committed to delivering quality services.” BA Securities ranks among the top 20 out of 180+ trading participants of the PSE. Apart from its successful business dealings, the company makes sure to give back to the community through its Corporate Social Responsibility (CSR) programmes. The company has also been recognised and has received several awards for this feat. In the year 2015, BA Securities received the ‘Lagging Kasangga Award’ from the Employers Confederation of the Philippines (ECOP) for promoting sustainable partnership, championing employers’ agenda and corporate social responsibility channelled through a wide-reaching business organisation. In 2018, BA Securities received the ‘Achievement Award and the Global Excellence Award’ from the International Chamber of Commerce and Industry Philippines (ICCP) in recognition of their outstanding leadership and valuable contributions to the financial sector and for its numerous corporate social responsibility efforts, which 'greatly aid in the pursuit of advocacies and programs geared towards business and community development.' It also received the ‘Presidential Excellence Award’ from the Philippine Chamber of Commerce and Industry (PCCI), the highest award to be conferred by the PCCI.

International Finance | May 2021 | 67

Dubai housing prices will see a rise for the first time in six years in 2021

68 | May 2021 | International Finance

INDUSTRY

FEATURE REAL ESTATE

DUBAI REAL ESTATE DUBAI REAL ESTATE RECOVERY

FEATURE SUBMARINE FIBRE OPTIC CABLE

What’s driving Dubai’s real estate recovery? IF CORRESPONDENT

Top 5 areas for Dubai with highest ROI for apartments 1. International City

10%

2. Dubai Investment Park 8.7% 3. Liwan

4. Discovery Gardens

5. Dubai Sports City

Source: Dubai Properties

ubai’s real estate market was once regarded as the stars on which the investors pinned all their hopes. Looking back, the rise and fall of the market have been equally spectacular. Given the plethora of unsold homes and scant prospects, the recovery for the real estate sector in the oil-rich country seems like a long one. Shares in Emaar Properties, an industry bellwether and the developer of Burj Khalifa, the world’s tallest tower, have dropped almost 80 percent from their 2014 peak. Before this, the average real-estate price in the emirate was 30 percent higher. Back in 2017, a similar slump was recorded by Damac Properties Dubai. Additionally, Union Properties is talking to restructure debts and is currently trading at a 90 percent discount from its 2005 level. Thanks to cheap valuations and expectations of government support, not even a majority of buy recommendations from analysts are enough to change the current sentiment. Additionally, the companies have also created a supply glut. It is only worsening because many expatriate workers have exited and account for the majority of the city’s population. In recent years, the scrutiny levels have increased after shareholders of Arabtec Holding, which helped

to build the Burj Khalifa voted to dissolve the firm. The company drawing its curtains certainly sends an alarming message for the construction industry in the UAE, warned the experts. Apart from the slump created due to the above-mentioned reasons, the

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DUBAI REAL ESTATE DUBAI REAL ESTATE RECOVERY

macroeconomic sector has also added to the city’s real estate woes. Dubai’s economy witnessed a sharp contraction in 2020 due to a steep decline in the travel and aviation sector as both have become more vulnerable to the effects of Covid-19. Market analysts have predicted that the city’s gross domestic product (GDP) will take till 2023 to reach the numbers of 2019. Additionally, the geopolitical tensions are adding extra worry on the plates of investors which is already overflowing. Some of the major stocks in the sectors were already sold at times of rising tension in the region, for example when the oil tankers in the Gulf of Oman were attacked last year. Since Dubai is already a business hub for many multinationals, the majority of the real estate business comes from international investors, as well as second home buyers which are planning to migrate to the city in the near future. Mohab Samak, Managing Director of the Engel & Völkers Market Center Dubai told International Finance, “With EXPO 2020 coming to Dubai paired with the coming 50th anniversary of the UAE formation, we are expecting a lot of business that will be driven towards the real estate sector. Another factor is the payment plans provided directly from the developers which will help buyers to save the bank interest. Developers like Emaar are now providing a ‘balloon payment option’ which allows the buyer to pay 50 percent of the property value 3 years after the handover.”

Dubai residential prices on the rise for the first time since 2014 As predicted by numerous market analysts, Dubai house prices will see a rise for the first time in six years in 2021. This is primarily due to the swift vaccine

70 | May 2021 | International Finance

rollout programme that has lifted spirits for overall economic recovery. The real estate market of Dubai has been weak for years due to the excessive oversupply along with low economic growth. But recently, the second-wealthiest emirate in UAE, eased Covid-19 restrictions and allowed hotels to operate at full capacity, raising hopes for a region heavily dependent on tourism. Improved investor confidence can already be seen and there has been a boost in demand as supply has gained a steady pace. Mohab Samak said that Dubai’s real estate market has already picked up and sales are on a high at the moment leading to an increase in transactions in the coming months. As per Dubai Land Department, the real estate transactions are up by 34.5 percent which is the highest number of total residential

transactions since 2015. “UAE government's initiative in crisis management during the pandemic, steady currency rate during the pandemic, support measures helped in ease of doing business, long term residency law, etc. have helped Dubai get back on track,” he said. Prime Dubai properties have also risen in the last few months as buyers take the advantage of low prices, easy credit, and an open economy. Dubai’s economy was expected to grow by four percent in 2021 after an estimated 6.2 percent contraction last year. The real estate market contributes up to eight percent in the economy has seen a recent improvement. Experts and market analysts say that the real estate market has been quite buoyant since the second half of 2020

FEATURE DUBAI REAL ESTATE

Residential supply units in UAE (in thousands) 2015- 460 2016- 480 2017- 497 2018- 519 2019- 542 Source: Mordor Intelligence

and continues to get better. As more government incentives show better results, this is expected to have a positive effect on the housing market. The only potential downside of this is the current pandemic is lingering on longer than expected and it keeps affecting the economic growth and tourism in Dubai. Speaking about the sale of luxury apartments finally picking up, Mohab Samak said, “Sales of luxury villas, sea-view apartments and secondhand family houses have jumped, reenergising the Dubai real estate market which saw a sharp fall in activity before the pandemic. As movement restrictions eased in mid-2020, capital values in Dubai began to witness positive growth trends, with April 2021 having a sevenyear record monthly growth rate of 1.2 percent. Villas, particularly high-

end ones, saw the best capital value performance of up to 3 percent, monthon-month.” Along with low prices, relaxed mortgages and the popularity of more spacious properties have also increased, especially after the work-from-home has become a regular phenomenon after the pandemic. It has driven the secondary market sales transactions in Dubai to record highs every month since September. Given the dominance of secondary transactions, it very well marks a fundamental market shift for Dubai. While off-plan sales dominated previously, several developers slowed or halted new projects last year, including big names like Emaar Properties’ Dubai Creek Harbour, a luxury development of waterfront apartments designed to house 200,000 people.

Recently, Dubai’s villa property market has posted its best performance in seven years as the demand for residential spaces continues to grow. ValuStrat, a citywide price index that tracks price movements of villas and apartments across the nation recorded that it went up by 3.8 percent during the second quarter of 2021, which helped the emirate equate the residential capital losses almost entirely that it suffered in the previous year. The primary growth was recorded in the villa segment as it registered an annual increase of 6.3 percent and a quarterly increase of 7 percent, which is the highest since 2014.

Vaccines, visas is driving recovery As the Covid-19 pandemic pushed almost the entire world workforce working from our homes, slowly things are getting back to normal. This year in March, the UAE cabinet approved a new remote work visa system that allows employees from anywhere in the world to live and work remotely from the Emirates. The cabinet also approved a multiple-entry tourist visa system for all nationalities to strengthen the nation’s status as an international economic capital. The cabinet will also take the advantage of a global trend over the past year that has seen an increasing number of people working not just from home, but opting for places that provide a better quality of life, and have a better work-life balance. According to a survey by Savills FIT, it indicated that while demand for office space remains strong, the way it was previously used is rapidly changing. According to a Citrix survey, a large number of people believe that permanent employees will become rare by 2035. In the past half a year, various mid-to-senior level executives, as well

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DUBAI REAL ESTATE DUBAI REAL ESTATE RECOVERY

as high net worth individuals, have moved to the UAE and Dubai and others are expected to follow the same. With the introduction of the latest Visa scheme, individuals will have more control over their residency status as they won’t be bound to the traditional sponsorship given by the companies. This announcement comes at a time when the UAE is slowly recovering from the Covid-19 pandemic and as the real estate market picking up its pace. The key local markets have already crossed the 50 percent occupancy threshold due to domestic and international demand. Dubai’s real estate market also recorded 3,787 sales transactions worth Dh7.43 billion in February, 13.8 per cent more than in January in terms of volume and 8.9 per cent more in terms of value. The construction sector also recorded the fastest growth since 2019 and experts say that other non-oil sectors are expected to gain further momentum from the second quarter of 2021, as global travel will resume and travel restrictions will be eased. Additionally, with the swift vaccine rollout and the reduced number of new Covid-19 infections, things are finally looking better. In February this year, the total number of Covid-19 infections in the UAE fell by 22 percent and it currently ranks second globally in the daily Covid-19 vaccine distribution rate per 100 people. Needless to say, the UAE has done quite well in their efforts of handling the pandemic and was among the first countries to open its borders for business and tourism. The country also introduced quite a few measures to support and improve the ease of doing business along with making changes to laws allowing long-term residence. For

72 | May 2021 | International Finance

example, the recent Visa announcement has further cemented the leadership of the region as a place to stay and do business. Recently, the UAE also became the most vaccinated nation in the world and till last week, the nation has administered above 15.53 million vaccine doses. According to a report by National Emergency Crisis and Disaster Management Authority (NCEMA), 64 percent of residents are fully vaccinated against Covid-19, while 74 percent have received at least one dose. The UAE has also overtaken Seychelles, which vaccinated around 71.7 percent of its population and in May, the country also overtook Israel when it comes to vaccination administration rates. The

UAE offers Covid-19 vaccines to citizens and expatriates for free and aims to inoculate 100 per cent of the eligible population by the end of the year.

Dubai Expo 2020 is expected to fast-track economic recovery The business condition in Dubai is expected to see a positive change in the third quarter of 2021 as the confidence in the companies and investors grows once again, according to a survey conducted by Dubai Chamber. Around 66 percent of respondents expect to see better business conditions during the quarter, compared to 51 percent who said the same in the previous quarter. In the same survey, around 66 percent of business leaders were also optimistic about the business

FEATURE DUBAI REAL ESTATE

Dubai property slump 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

environment, compared to 48 percent in the second quarter. Dubai Expo 2020 is expected to fast track Dubai’s economic recovery and boost its appeal once again among foreign investors and companies. The Expo is expected to foster the economic growth by attracting visitors and boost its travel and tourism sector. The organizers expect nearly 25 million total physical visits between October and March 2022, especially since its expected that the flight restrictions from India will also be lifted. In terms of business optimism, around 57 percent of business leaders said they expect a recovery in oil prices to positively affect the business environment in the third quarter. Dubai

is known to have one of the world’s fastest vaccination campaigns, but even then, the daily count of fresh Covid-19 hovers around 2,000 as of this writing. The health ministry of Dubai revealed that around 73.8 percent of the UAE's population has received one vaccine dose while 63.7 percent are fully vaccinated. While the market has shown some signs of recovery, there have been several cutbacks that have affected developers negatively. When asked about what is the future of the real estate industry in Dubai for the next five years, Samak said, “With the EXPO coming to Dubai, we are expecting more numbers of businesses to be set up in Dubai which will increase the job opportunities that in turn will lead to an increase in demand for the real estate

$33 billion $45 billion $22 billion $18 billion $20 billion $40 billion $37 billion $35 billion $27 billion $30 billion $10 billion

sector combining both residential and commercial sectors. Additionally, Dubai has always been recognized for its unique and spectacular projects and there is always room for a lot more developments that will be upcoming shortly.” There is no doubt that the Dubai real estate market is gaining momentum as the emirate emerges from a Covid-19 induced slowdown. The second-richest emirate of Dubai is sure to witness a strong rebound in the second half due to stimulus packages, visa reforms and strong demand from end-users and investors, experts say. Leading experts and analysts also say that the residential sector has already bottomed out and offers good opportunities for developers on premium properties. The prices for villas and townhouses have already witnessed an upward trend in past seven months and apartment prices have also started reflecting the stable trend. editor@ifinancemag.com

International Finance | May 2021 | 73

Remarkable performance earns Petkim

‘Best Working Capital Management Award’

SOCAR Turkey was recognised in two categories at this year’s International Finance Awards. The company was the recipient of the ‘Best Working Capital Management Award’ and Betül Sarıkaya, Chief Financial Officer (CFO) at SOCAR Turkey Gas Business Unit, won in the ‘Best Woman FCO Award’ category.

Uninterrupted production amid the pandemic

While the pandemic has brought major global disruption, it has also led to declines in production in almost all major sectors. The petrochemical industry was no exception. Worldwide, many facilities had to either halt or cut down production due to the pandemic but Petkim managed to continue production without interruption during this challenging period. The most important factor that has helped Petkim continue its production uninterruptedly has been its infrastructure that allows integrated operation with the STAR Refinery which is another subsidiary of SOCAR Turkey. As Turkey’s first and only integrated petrochemical company, Petkim continued supplying high-quality naphtha, which is its main raw material, directly from STAR Refinery at a time when the supply of petrochemical products slowed down globally. 74 | May 2021 | International Finance

Development in-line with budget targets continued

Petkim continued its operations seamlessly during a challenging period, ensuring a balanced management of the fluctuations in global prices with effective working capital management. During this period, global raw material prices fell behind the increases in product prices, allowing for a reduction in net financial costs to help maintain development in line with budget targets. The on-point steps taken during this period of successful management of financial operations provided Petkim with competitive advantages in the global petrochemicals market.

Petkim’s strong performance reflected in the figures

The continuity achieved in production during the pandemic was also reflected in Petkim’s figures for the first quarter of 2021. Capacity utilisation stood at a high level of 92 percent in the first quarter of the

Business Dossier - Petkim

Petkim was recognised for the successful financial performance during the challenging pandemic period year at Petkim, while total revenues reached TRY 5billion. During the period, Petkim also successfully met its planned sales targets and achieved TRY892 million in net profits. During this period, EBITDA (operational profits) figures grew by 56 percent quarter-over-quarter. Throughout the pandemic, Petkim continued its operations ceaselessly while also allocating resources for new investments. In the first quarter, the amount of additional investments made for productivity growth also reached TRY131 million. Despite the restrictions brought in by the pandemic, Petkim prioritised its debt payments with the goal of supporting financial sustainability for all stakeholders and demonstrated its strong financial structure with TRY478 million in net payments it made in the first quarter of 2021.

Integration successfully completed

The remarkable performance achieved by Petkim during such a challenging period was because of its successful integration with the STAR Refinery along with the practices that bolstered operational productivity with innovative solutions. Results obtained from digital transformation that predated the pandemic at Petkim and other SOCAR

Turkey Group companies as well as the innovative practices rapidly adopted in operations boosted productivity and performance. The speed and flexibility introduced in business processes by the structural steps taken and innovative practices also provided Petkim with a competitive edge in the global petrochemicals market. All these improvements, launched with an inclusive perspective everywhere from operational areas to administrative units were the factors that made a positive contribution in Petkim’s financial performance. Successful activities on a vast operational chain extending from supply and production to sales and marketing processes combined with an effective financial management to bring global awards to Petkim.

Awards received during challenging times mean even more

Expressing their pride with receiving two awards from International Finance, Elchin Ibadov, Head of Finance at SOCAR Turkey Refinery and Petrochemicals Business Unit & CFO of Petkim said, “It means even more that we received these awards during a challenging period for the entire world due to pandemic. As Turkey’s first and only integrated petrochemical facility, Petkim enjoyed the advantage of having the uninterrupted supply of high-quality petrochemical raw materials through its integrated operation with yet another SOCAR Turkey group company, STAR Refinery. This allowed Petkim to save considerably on logistics costs as well. “Correct management of FX and interest rate risks as well as financial instruments, optimisation of operational costs and effective business capital management have allowed Petkim to achieve

Results obtained from digital transformation that predated the pandemic at Petkim and other SOCAR Turkey Group companies as well as the innovative practices rapidly adopted in operations extremely successful financial results. We are immensely pleased with the recognition in the Best Working Capital Management category of the performance posted in inventory, receivables, cash and debt management by Petkim, which boosted its operational profitability by 21 percent year-over-year to TRY1.9 billion.” International Finance | May 2021 | 75

INDUSTRY

IN CONVERSATION

BUDI HANDOKO CHIEF OPERATING OFFICER, SHIPPER

Indonesia’s e-commerce GMV value is predicted to grow from $32 bn to $83 bn in 2025

Indonesian logistics sector needs to embrace digitalisation IF CORRESPONDENT

Indonesia’s e-commerce market is one of the biggest in the world, but the logistics sector remains fragmented. To sustain the growth of its e-commerce sector, the logistics sector needs to embrace digitalisation. Since Indonesia is an archipelago, comprising more than 17000 islands, logistics still remains a key challenge in the region. However, the Indonesian freight and logistics market is expected to grow by a Compound Annual Growth Rate (CAGR) of 10.27 percent between 2020 and 2025. Co-founders Phil Opamuratawongse and Budi Handoko launched Shipper in 2017 which offers end-to-end logistics solutions ranging from warehousing, line haul, first mile, last mile, as well as cross border delivery. In the exclusive interview with International Finance, Shipper Chief Operating Officer (COO) Budi Handoko said that what Shipper brings to the table is efficiency. Indonesia’s logistics sector is still behind its neighboring countries, such as Malaysia, Thailand and Vietnam, in terms of the sector’s competitiveness and efficiencies. In a 2018 report, World Bank mentioned that Indonesia’s Logistic Performance Index scored only 3.2 out of 6. Some of the major factors for such low rankings were lack of transportation infrastructure, bureaucracy and complicated regulations. Several Southeast Asian e-commerce giants such as Tokopedia, Lazada, Shopee Indonesia and BukaLapak operate in the country, and the growing market means the demand for warehouses will increase along with volume. At the same time, the country’s internet penetration rate is also increasing. Given the opportunities in the Indonesian e-commerce market, many foreign investors are channeling their money into the e-commerce logistics

76 | May 2021 | International Finance

LOGISTICS INDONESIA E-COMMERCE DELIVERY

sector. Investors understand there is money to be made and they have identified the right avenue. Shipper, which has a presence in presence in 70 cities across Indonesia, around 2,500 logistics providers and around 50 fulfillment centers, raised $63 million in its Series B round which saw participation from investors such as DST Global partners and Sequoia Capital India. According to Budi Handoko, Shipper will use the funds to expand its team as well as upgrade its tech capabilities. There is an opportunity for growth and development in the logistics sector in the country and one thing is very clear, as Budi Handoko pointed out, digital transformation is key for the logistics sector in Indonesia to evolve. While startups like Shipper are leading the charge, the logistics sector is set to mature but the overhaul will happen in the long run. There is a gap in the logistics market and it can be filled with digital transformation, which is key. In this exclusive interview Budi Handoko discusses the Indonesian logistics market, challenges ahead as well as the outlook of the logistics sector in Indonesia.

merce markets in the world. However, the logistics sector in Indonesia is very fragmented. Do you see the logistics sector in Indonesia changing in the next couple of years?

IF: Indonesia is one of the fastest-growing e-com-

The rapid growth of e-commerce has definitely created

Budi Handoko: Indonesia’s e-commerce GMV value is predicted to grow from $32 billion to $83 billion in 2025, therefore the headwinds are driving the need for more efficient logistics. The logistics sector needs to adapt and capitalise these huge opportunities and this is exactly what we want to contribute; supporting Indonesia’s growing digital economy in the logistic sector for the long run. In building Shipper, we want to build an adaptive digital ecosystem by powering commerce and its supply chain through technology and data. We are offering an integrated end-to-end logistics solution with our digital logistics platform and working together with numerous partners to inject more efficiency in the traditional supply chain. This will hopefully structure the unstructured world of logistics eventually.

What are the challenges that the Indonesian logistics sector needs to overcome to support its booming e-commerce industry?

International Finance | May 2021 | 77

INDUSTRY

IN CONVERSATION

BUDI HANDOKO CHIEF OPERATING OFFICER, SHIPPER

Our SMEs customers are happy because we provide free pick-up services to their homes and make it easy for them to track and manage their inventory through our fulfilment centers. We have around 110,000 delivery orders processed per day.

massive opportunities as well as challenges in the logistics world. E-commerce as an industry is actually, believe it or not, still in its very early stages in Indonesia if compared to other developed economies. I think the core issues at the top would be infrastructure connectivity, digital talents, and the fragmented players. To overcome these, we need to work together with the government, business players, as well as academia to facilitate an adaptive digital ecosystem to structure the unstructured world of logistics. As our aim is to offer end-to-end logistics solutions for businesses of all sizes, we are certain that the logistic sector in Indonesia needs to be more integrated, user friendly for the customers and systemically well-organized, by involving technology.

How can Shipper solve some of these problems? Indonesia’s logistics costs remain the highest compared to other countries in the region, adding up to 40 percent more on top of a customer’s total purchase amount in tier-two and tier-three cities. To address some of the inefficiencies, Shipper’s data-driven, tech-enabled and asset-light approach to consolidating fragmentation in Indonesia’s logistics market has enabled us to build a readily scalable network in four years that would have taken other companies years to build. We have seen that the value for sellers using Shipper’s network has been compelling as their logistics costs can be reduced by 15 to 20 percent , time saved in managing logistics for their business, and by extension enabling SME sellers to deliver a better experience for their customers. We can fulfill these benefits by offering end-to-end logistics solutions ranging from warehousing, line haul, first mile and last mile delivery, and cross border. We provide advantages in technology, speed, and flexible-customisable solutions. There were a lot of pain points for customers, which drove me to come up with

78 | May 2021 | International Finance

a simple solution that can enable those customers to ‘free to choose’ any logistics services they need with a click of a button.

Shipper recently raised around $63 million in its Series B funding round? Do you plan to raise additional funds in the near future? Also, do you have plans to expand your business to other markets in Southeast Asia or beyond? Our Series B financing comes less than a year after Shipper secured its Series A financing in June 2020 which will enable us to further invest in technology and significantly expand our logistics network. As our business continues to grow, as reflected in our investors' confidence through the funding rounds, additional funds will be essential. We are confident that we have a great future ahead of us and it is our hope that we will be able to bring our values and solutions to other SEA markets in the near future, and it is just a matter of time before we expand globally.

There are numerous logistics service providers in Indonesia operating at different capacities. What value proposition Shipper has to offer that differentiates it from its competitors? Apart from the end-to-end solution for all sizes of business, our competitive advantages also include the speed and the flexibility of delivering customizable solutions to our partners and customers. I’m also happy to share with you that Shipper is backed by more than 1,900 talented employees who work hand-inhand to deliver success to our customers. More importantly, collaboration is our passion. We are aggregating a vast network of logistics with our logistics partners in a win-win situation. Whether it is local or foreign logistics companies, we see them as potential partners which will unlock more business opportunities in the future.

Can you explain the benefits of Shipper’s API integration system to SMEs and MSMEs? Different businesses have different needs and we are striving to provide an integrated and seamless logistics experience for all of them. One of our values is that customers really come first, so I’m happy to let you know that we have happy

LOGISTICS INDONESIA E-COMMERCE DELIVERY

customers. Our SMEs customers are happy because we provide free pick-up services to their homes and make it easy for them to track and manage their inventory through our fulfilment centers. We have around 110,000 delivery orders processed per day. Those services are complemented by our API integration services whereby online sellers or e-commerce platforms can tap directly into Shipper’s logistics network in one click. It reduces cost and time to look for the best delivery services available in the market.

In your opinion, how vital is it for the logistics sector to embrace digital transformation? In short, it is a must have for the logistics sector to embrace digital transformation. The Pandemic is one of the forcing factors for the digital transformation to be implemented in the logistics industry. It amplifies the “stay at home” economy during this difficult time. But nevertheless, a digital era has come, regardless of any situations. This has become our current, and future life. And driven by this e-commerce growth, Shipper is here to support Indonesia’s digital economy by play-

ing a leading role in building highly digitalized logistics services.

What is the outlook of the logistics sector in Indonesia, especially e-commerce delivery? If we use China as a benchmark, at the moment China’s e-commerce penetration rate is at 24 percent while Indonesia is at 6 percent. And in terms of parcel volume, China is at 170 million (~10 percent population) while Indonesia is at 5 million with a population around 240 million. Therefore Indonesia’s potential growth can be 6x and 4x respectively in terms of penetration rate and parcel volume compared to China. I believe that digital logistics platforms will play a very important role in the logistics industry for years ahead. It offers clients and partners to select the best logistics provider for their business needs, with very competitive advantages in technology, speed and flexible-customizable solutions.

editor@ifinancemag.com

International Finance | May 2021 | 79

Business Dossier - Telecom Argentina

Leading innovation in the region

Roberto Nobile, CEO, Telecom

The leading connectivity and entertainment Very few countries have started deploying Telecom solutions provider in the region, with a fifth-generation mobile networks. Argentina, starts the presence in Argentina, Uruguay and Paraguay, with the support of Telecom, is one of them. continues to invest in infrastructure built The 5G network is a platform that will drive deploymentof on cutting-edge technology to evolve the the introduction of new services, use cases services it provides to its more than 29 million and ecosystems that converge and have the 5G in Argentina customers. potential to change the world. The business Huawei and Nokia are Telecom's opportunities associated with these networks technology partners in these first steps of the 5g are closer than ever. network in Argentina, and both companies have Telecom Argentina became the first Argentine supported Telecom Argentina in a series of trials and company to turn on a 5G network in this South demos since 2018. American country, putting into operation ten mobile The company also has the support of various antennas that enable using this service through DSS multilateral organisations and international and (Dynamic Spectrum Sharing) technology, in Buenos Aires national financial institutions that have allowed it to City and Rosario City in Santa Fe Province, two of the optimise its capital structure through the issuance and country’s main urban centers. 80 | May 2021 | International Finance

exchange of negotiable obligations, the make investment decisions based on the refinancing of loans and the granting of availability of this technology.” new credit facilities for the deployment of infrastructure and digital transformation At the forefront of technology and projects. Because of its credit and financial innovation strength, it has been able to continuously Telecom has been a pioneer in scale up its investments in infrastructure experimenting with 5G technology, and digital transformation, leading the way preparing for when the technical and in 5G technology. regulatory conditions needed for the full Telecom has succeeded in keeping the deployment of the service are in place. company's operations stable in the face Since 2018, the company has been of the challenges posed by the Covid-19 conducting various trials with its technology pandemic, and has continued with its partners Huawei and Nokia to make Telecom continues to investment plan, which over the last four tangible the possibilities that the fifth invest in cutting-edge years has amounted to $4.36 billion. generation of mobile phones will bring. The The company focused on expanding and technology to evolve the preparation not only requires ‘turning on’ enhancing fixed and mobile networks, 5G base stations: to ensure good service, services it provides to bringing 4G, i.e., mobile internet, to all the current 4G network is being improved its more than 29 million capital cities in the provinces and other in terms of coverage, availability and large cities throughout the country, and capacity. Today Telecom's 4G network is customers accessible by 95 percent of the country’s extending its deployment to more than population and the 4.5G upgrade is active 1800 towns, while expanding coverage in 100 percent of the 4G network. and broadband capacity. This has enabled “Our vision is to go beyond connectivity,” says a large part of the population to work from home, study Telecom CEO Nobile. “That is why we started on a from home, stay informed and stay in touch with their journey of technological and cultural transformation loved ones. to position ourselves as an ecosystem of platforms and services that leverage on that connectivity IoT and Smart Cities: The Challenges Ahead as a competitive advantage, to continue evolving The 5G network is a major platform for the telecom our products and services, focusing on the digital industry evolution, particularly the development of and convergent experience of our customers. This IoT (Internet of Things), mainly due to its features of transformation we are implementing with a rapid high speed of response (100 times higher speed than pace, allows us to evolve further, not only to face the browsing over the 4G network), low latency, and support challenges of today but also to anticipate the changes for multiple devices connected at the same time. of tomorrow, in an increasingly interconnected and Telecom CEO Roberto Nobile commented, “2020 digital world.” was a pivotal year for everyone – it was demonstrated The launch of the 5G network is the result of that the future is built on information technology. At a business transformation that the company has Telecom, we were up to the challenge and did our undertaken based on three strategic pillars: networks, best to keep Argentines connected, enabling them to with the latest technology available to become continue working, studying and getting entertainment from their homes. We invested heavily to transform our future-proof; IT infrastructure, upgrading all systems mobile network into the best 4G network in the country. with world-class partners to be at the forefront of the Now we are taking our connectivity efforts to the next industry; and its mindset, the way to understand the level by turning on the first 5G network in Argentina. 5G business to make it sustainable in the medium and technology is the future of our industry, and it will also long term, aligned with global trends regardless of the be a driver of the country’s growth and the development circumstances. of essential infrastructure for the digital economy. With 5G technology, the country's economy will become more competitive, which is vital because companies will International Finance | May 2021 | 81

INDUSTRY

INSIGHT

OIL AND GAS

5G brings a whole host of opportunities and developments that has the potential to transform the whole industry

5G to drive oil & gas digitalisation IF CORRESPONDENT

Globally, oil and gas industries have continued to grow, no matter what the economy is like. According to experts, the oil and gas industry is expected to grow at an average rate of 1.6 percent every year, till 2024. It has also been predicted that the oil and gas sector will emerge as a frontrunner in terms of migration too. Since it is a highly diversified field that deals with complex operations, processes, and infrastructure, it looks like the oil and natural gas industry is the desired leader when it comes to industry transformation. Coming to demand, as far as oil is concerned, the primary supply will keep coming from the transportation industry. Going by the global market trends, there is growth noticed in offshore platforms in the deep sea. The remote platforms of the oil and gas industry, harsh sea conditions strong and unpredictable winds, water, extreme temperatures, and distance from the shore are some of the challenges that will definitely be addressed with a stronger communication system. There are a lot of oil and gas platforms that depend on the connection with satellite links. Not only are these expensive, but it is also difficult to implement them in such remote and harsh

82 | May 2021 | International Finance

locations. Each surrounding vessel requires a link that needs to establish a connection between the vessel and the offshore platform and the estimated cost to do so could cross $200,000 annually, which is not a small amount. Additionally, it only provides voice communications within a restricted range of a few miles, and that too, not in real-time. If communication tech is developed, the options for offshore communications will evolve too. 5G is one of the leading technologies that is bound to make significant changes for oil and gas companies by providing lightning speed and low latency communication between drilling sites, vessels, and offshore platforms.

How 5G can change the oil and gas industry? As the sector grows annually, it has been noticed that the need for efficiency and agility in oil exploration and production is ever-increasing, which, in turn, is driving the need for digital initiatives. Due to the pandemic, the oil industry has found itself in a precarious position by seeing lesser demands and lowered prices. However, at the same time, the pandemic has also created a

INSIGHT 5G OIL AND GAS

Global 5G Infrastructure market share, 2019

Brunei 60.3% Kuwait 46.5% Libya 43.8%

42.2% Saudi Arabia 32% Singapore 31.5% Algeria 25.3% Kazakhstan 18.9% Source: Statista Ivory Coast 11.7%

The Republic of Congo

great opportunity for the sector to modernise their infrastructure and build more efficient operations. And this is where 5G can swoop in and change the game. According to Frost and Sullivan, 5G is a critical component for the digital transformation of the industry. For instance, the oil and gas industry has struggled historically with seismic data collection, and doing it the right way took a lot of time and manual labour. With 5G in place, these problems will have an easy solution. For example, Huawei recently helped one of its oil and gas clients install a 5G network that provided high bandwidth, better connectivity, and low latency, which helped them streamline their data collection process. As a result, the oil and gas company was able to avail of lightning-fast seismic data retrieval and was able to reduce manual labor to collect the data. While the 5G network is unbelievably fast, it does a lot more than that. The network can be used as a stepping stone for any oil and gas company tech infrastructure, including cloud computing, big data analytics, robot and drone inspection augmented and virtual reality. Additionally, it can also be used for Industrial Internet of Things (IIoT)

and artificial intelligence use cases. Evidently, 5G has an amazing untapped potential that could completely revolutionise the oil and gas sector, thereby enabling industry players to optimise their performance and get in position until the demand gets back its natural stature.

5G has the potential to remotely manage unmanned oil production platforms Given the already much-hyped benefits of the network, the management of unmanned production platforms is a fairly realistic possibility. But this cannot be achieved with 4G/LTE networks. It is absolutely imperative for the oil and gas sector to have reliable, secure, and resilient networks that provide a seamless connectivity for easy communication which is essential for their daily operations. The latest projects are developed on highly efficient computing platforms which require high bandwidth to deliver sensitive information to the control center. Ever since the inception of these projects, network developers have tried evolving in order to deliver cost-effective technologies without compromising on network performance and

International Finance | May 2021 | 83

INDUSTRY

INSIGHT

OIL AND GAS

Natural gas production in 2018 (in billion cubic meters) USA Russia

248.5

Iran Qatar China Canada Australia Norway Saudi Arabia Algeria

725.5

863

248.5 176 172 171.1 131.1 119.2 95.9

reliability. Multiprotocol Label Switching (MPLS), along with Virtual Private Network (VPNs) have been successfully fulfilling these requirements by converging applications. Additionally, LAN-based Ethernet, WiFi, and LTE technologies are now being used to their full potential and are providing a starting point for increasing demand and transformative automation using 5G networks. With the help of 5G network, enterprises’ private and exclusive networks can now be configured in a much more efficient manner to meet the performance requirements. Additionally, the network slicing feature of 5G alone is expected to further strengthen the network performance requirements along with data privacy, real-time control, massive connectivity, and high bandwidth needs. The 5G technology has gone live at a time when the oil and gas industry is going through some seismic transformations. Looking from an automation perspective, many industrial processes are already automated, and the oil and gas industry continues to strive for better efficiency and production speed by leveraging existing and newage communication networks like 5G.

84 | May 2021 | International Finance

5G doesn’t define the industrial process, instead, it acts as an enabler of new use cases and operating models. To begin with, 5G networks offer immense opportunity to replicate the confusing and wired system of various controllers, switches, sensors, and actuators. With a wider 5G adoption, there will be several opportunities to integrate it as an integral part of the evolution of industrial automation as production lines, machines, and processes are improved and redesigned. One of the immediate opportunities to leverage is the use of 5G that will replace the traditional LAN connections. While it can be argued that LTE and WiFi are capable of doing the same, it doesn’t support layer 1-2 performance which is absolutely essential for high bandwidth-intensive applications. Therefore, 5G can be used to meet these critical requirements. Additionally, it has been observed that there is an increased interest of oil and gas companies in IIoT, and this comes with its own set of complexities. The IIoT companies require extreme mobile broadband, ultra-reliable low latency, massive IoT systems. Now the devices in oil and gas enterprises, i.e. sensors, automated guided vehicles, untethered AR / VR, security cameras, robotic controls

INSIGHT 5G OIL AND GAS

Daily demand for crude oil, in million barrels per day

92.7

94.9 96.2

2014

2015

2016

97.9 99.3 100.3 101.6

2017

2018 2019

2020 Source: International Data Agency

generate a very different set of requirements throughput, mobility, latency, density, availability, and power. LTE and WiFi can meet some of these requirements, but there are some that fall under the category of URLLC (ultra-reliable low latency communication) and they can be only addressed with the help of a 5G network. The 5G network comes with an entire range of uses in the oil and gas industry, and we are still discovering its potential in terms of use cases. Having said that, oil and gas industries could definitely benefit from what is being done by their peers in the global market and use it to replicate those wherever possible.

Implementing 5G in the industry Another important factor to keep in mind here is how efficiently telecom industries can deliver public 5G services at remote locations. The network also provides provisions for organisations such as oil and gas companies or oil field service companies where they help them set up private 5G to help them solve their network and connectivity challenges faced by the remote assets. These companies also have the option to sell their 5G network services to

other organisations. Tech and telecommunications company Infrastructure Networks (INET) recently announced that they have completed a major expansion of Infrastructure Networks, which has led to the additional capacity of their private networks. It also helped them double their geographical coverage and to make their network ready for 5G. At present, it covers 130,000 miles across four major energy basins like Permian/ Delaware in West Texas and Southeast New Mexico; Eagle Ford in South Texas; Scoop/Stack in Oklahoma; and Bakken in North Dakota. The company also partnered with Nokia to expand and upgrade by taking the help of Nokia’s airscale RAN (radio access network). INET’s LTE network is well-positioned to meet the critical needs of the industrial sector that includes drilling, production, and midstream operations. Additionally, the company also has partners that specialise in advanced analytics providers, thereby letting them to scale their innovative technology much faster. Operators, drillers and oilfield service companies can now get in tune with automation, artificial intelligence analytics and machine learning.

International Finance | May 2021 | 85

INSIGHT

INDUSTRY

OIL AND GAS

Biggest oil companies in the world in 2020 (in billion)

$280.7 $271.1

PetroChina Sinopec

$229.7

Saudi Aramco

$180 $178.2 $170.2

BP Exxon mobile Royal Dutch Shell

$119.7

Total

$94.4 $90.5

Chevron Gazprom Marathon Petroleum

$75

Providing video surveillance and analytics with 5G Everyone with the slightest idea of how the oil and gas industry works will know that security is of utmost importance. Wireless video surveillance is one of the most effective ways to ensure the area and the drilling platform are safe and secure. Market experts estimate that the global video surveillance market will cross $60 billion by the end of 2025. With the help of wireless broadband, mounting cameras on drones, land vehicles, and in places that are difficult to reach through fixed cables are being made possible. These cameras can be used to deliver footage that can drive critical awareness and decision-making for a wide range of situations. For example, drone-mounted cameras can help address seismic changes, fires, and natural disasters more accurately. Additionally, with its help, terminal operators could inspect container ships to make sure it’s safe even before they reach the port. Video analytics can also act as an important contributor to enhance the quality, security, and efficiency by letting the users know about intrusion detection, automatic fault detection, and control of robots. Similarly, it can

86 | May 2021 | International Finance

also be used for search and rescue operations and to survey remote areas without the need for human interference. It is common knowledge that wireless video surveillance takes up a lot of bandwidth capacity, and the oil and natural gas enterprises would definitely need the help of 5G to deploy high-resolution and high-density cameras. The companies would also need 5G to combine 4K cameras with video analytics and support precise operations.

5G challenges for the oil and gas industry While implementing 5G, the first barrier that might be faced will be the cost expectation and perceptions with the technology. The next challenge would be the 5G rollout and availability. Since 5G is not available everywhere and it is even less available outside of urban areas, where many oil and gas companies operate. 5G is still emerging in different parts of the world in different times. There are a number of different spectrum frequencies with different licensing and usage schemes that will be eventually addressed by all chipsets, but the industry is not there yet. This, in turn, creates a challenging atmosphere for global

INSIGHT 5G OIL AND GAS

Top tech priorities for the oil and gas sector

60%

Automated production

47%

Automated inspection

59%

Predictive maintenance

40%

Supply Chain optimisation

54%

Automated exploration

39%

Environmental risk detection

52%

Operations optimisation

35%

Asset Management

Source: Ecosystm blogs

oil and gas operators who would need to think about different chipsets for their drills and other equipment in various parts of the world. Then there is also the ever-looming threat of security. If 5G is implemented in the oil and gas industry, the number of devices will be increasing from 10 to 100 times per person, which will lead to more vulnerabilities. And lastly, when it comes to local gas stations, they are often independently owned and have their own technology solutions that will need to seamlessly blend together.

5G has the potential to drive digitalisation Keeping aside a few cases, the application of 5G in this sector has primarily been a hit and miss. While the oil and gas industry has experimented with some of the use cases, but only a handful of the operators have managed to bring the network to a scale where it meets the limits of existing connectivity. However, we expect things to change as 5G has the potential to drive digitalisation of the oil and gas industry. Throughout the years, the oil and gas industry has continued to transform itself amid extensive challenges. Apart from the smooth execution of

Number of Machine-toMachine (M2M) connections (in billion)

2014- 0.4 2015- 0.6 2016- 0.8 2017- 1.1 2018- 1.5 2019- 2 2020- 2.6 2021- 3.3 Source: Mordor Intelligence

operations, there is also a massive opportunity for the sector to transform its communication and application in order to enjoy the full benefits of the 5G network. Experts say that oil and gas enterprises should expand their network to new oil fields. Having said that, it is important for the oil and gas sector to innovate at a faster pace and implement this technology in new and existing oil fields. While the introduction of 5G communication brings a whole new prospect for business within the oil and gas sector, it is important to keep in mind that the process to adopt this technology shouldn’t be rushed. As experts have suggested, businesses should assess all the benefits and the risks when they decide to integrate 5G communications in their projects. This can be done by consulting closely with the company’s IT team or they can also choose to bring in external IT experts and security professionals to ensure the safest adoption of 5G technologies within their own operations.

editor@ifinancemag.com

International Finance | May 2021 | 87

INDUSTRY

ENERGY

WOMEN EMPOWERMENT AFRICA RENEWABLE ENERGY

LILIANE M. NDABANEZE CHABUKA CO-FOUNDER AND CEO OF WIDENERGY AFRICA

Providing renewable energy as a catalyst for development cannot be achieved without including women

How renewable energy is empowering women in rural Africa? Despite the fact that the story for the need for ‘empowering women' is being told time and time again, tangible progress is yet to be achieved. We have about 759 million people around the world that have no access to electricity. In Zambia, the national access to electricity averages at 31 percent, 67 percent of which is made up of the urban population and only 4 percent of the rural population. Renewable energy is an affordable path to electrification, especially in a country like Zambia, given its low density that makes rural electrification a huge challenge. Given the significant role of the woman in African societies and Zambia in particular (whether she is employed in the formal or informal sector), at WidEnergy we believe that providing renewable energy as a catalyst for development cannot be achieved without including women. There is a need to identify and remove structural gender-specific barriers that women face, alleviating energy- poverty, and increasing their participation and leadership in developing gender-responsive energy policies.

Reducing gender gap is key Empowering women in rural Africa is achievable if the government makes an intentional decision to reduce the huge existing gender gap in the renewable sector. Women

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represent 32 percent of workers in renewables, according to a new survey and analysis conducted by the International Renewable Energy Agency (IRENA). This compares to 22 percent reported in traditional energy industries like oil and gas and over 48 percent in global labour force participation. Involving women in the renewable energy sector will bring systematic change and will significantly improve their quality of life. Empowering women at community levels will strengthen economic, equitable pace and social progress. It goes without saying that such progress will need a strong commitment from governments. At WidEnergy, we pride ourselves in our unique last mile distribution operation structure. We conduct direct sales in local communities, done by our door-to-door sales agents that we recruit and train. In an effort to make diversity and inclusion a reality, which have proven to significantly contribute to both great customer experience and women empowerment, 40 percent of our sales agents are women - they own the sales and the on-boarding process. This strategy has enabled our female sales team to leverage their natural ability to relate with the social context of our customers, gain confidence in their contribution to building better communities and establish solid and longlasting relationships with our customers. Our

female agents benefit from the fact that they become known and respected in both their neighbourhood and communities. They have reported feeling empowered by the work they do coupled with the fact that they also get to empower fellow females in their communities - a leadership attribute that gives them tremendous satisfaction. Similarly, in most of the rural off grid areas in Zambia, where we operate, women are the real agents of change. they promote the use of renewable energy by explaining to their fellow neighbours who are still using unclean energy, often times through live experiences, how such energy is harmful to their health and has long-term consequences on the environment. They showcase the use of solar home systems within cooperatives, saving groups and other already existing female-led structures in their communities. Considering the majority of households are run by women, with the man as main provider (i.e. hardly involved in the day-to-day home nitty-gritties), having female agents explain how using the solar home system enables longer hours of study for the children, better health for the whole family and better quality life is more relatable and allows the customers to freely engage while they might have been shy and unable to fully engage with a male agent. This gives

Women representation

22% Oil and gas

32%

48%

Renewables

Global labour force

our female agents a platform and ability to inspire their communities. In addition to earning money for their households, the newly empowered women also increase the usage of clean energy. Household by household.

Leading from the front At WidEnergy we value gender equality of our beneficiaries. We provide them with affordable and quality access to renewable energy. Since our Solar Home System kits are bundled up with mobile phones, it gives our beneficiaries (56 percent of which are female) more opportunities to access other digital platforms such as Mobile Money, recently classified

International Finance | May 2021 | 89

INDUSTRY

ENERGY

WOMEN EMPOWERMENT AFRICA RENEWABLE ENERGY

as one of the catalysts of sustainable development by the GSMA and the UN. Access to renewable energy has given our female beneficiaries an opportunity to sustain and scale up their small business activities. Such is the case of our customer turned Sales Agent—Patricia, from Chibombo who runs a small shop selling fast moving products. She narrates how with the savings she made from operating longer hours at the shop and at the small tavern she owns, she has been able to send her kids to school and built herself and her two children a better home. Patricia says that the best reward is being able to provide for her family. Being empowered has given her a voice, and she has seen first-hand the effect it has on her as well as her community. Rachel was our first female sales agent for our Solar Home System kits, back in 2018. She is a mother of 9 who took up the challenge of becoming a sales agent, defying the belief that it is a ‘male’ job. Rachel has purchased a solar home system for her home enabling her to improve her life and that of her household from the commissions she receives from selling Solar Home System. Women in the rural areas face the brunt of all the challenges associated with energy poverty. Prior to becoming a sales agent, Rachel explained to us the challenges she faced, like time management, having to waste long hours gathering wood and preparing dinner for the family in the dark. This entrepreneurship opportunity allowed her to change her story– it allowed her to be the talk of the town—in a good way as she quickly became the focal point where people could access clean energy. She easily tells the story of an empowered woman, and the ripple effects of it, in terms of savings in the households, improvement in her children’s education, better health, and family quality time.

Advocating renewable energy through direct consumption In my opinion, empowering women is enabling them to tell the story themselves: it's allowing them to become advocates for sustainable energy, empowering them with knowledge and employment. Renewable energy can empower women in rural off-grid areas. These women are in most cases, the direct consumers and beneficiaries of renewable,

90 | May 2021 | International Finance

Renewable energy can empower women in rural off grid areas. These women are in most cases, the direct consumers and beneficiaries of renewable, clean energy.

clean energy. To achieve this, we need to create an environment that would enable the industry to create better employment and entrepreneurship opportunities for women in off grid rural communities. At WidEnergy Africa, we are empowering women with our last mile distribution model of clean, reliable and affordable energy solutions, one household at a time. We do believe that improving the lives of the many who have no access to electricity and enabling them to have better health and better education for their children will allow us to change the narrative on the African continent. Liliane M. Ndabaneze Chabuka: Co-founder and CEO of WidEnergy Africa Ltd. Passionate about women empowerment. Working hard in a male-dominated industry, towards making women the champions in clean energy distribution and active agents for climate change

editor@ifinancemag.com

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92 | May 2021 | International Finance

International Finance - May 2021

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