International Finance - May-June 2023

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MAY - JUNE 2023

VOLUME 23

ISSUE 34

GCC's Security Transformation

As the global economy continues to deal with the banking turmoil in 2023, there is a new buzz in the market called 'Municipal Bonds', also known as 'munis.' These bonds have emerged as popular among investors for being low-risk investments and not being subjected to federal taxes in the United States. Yes, there are certain disadvantages to buying these bonds, but they are reliable and income-producing ones, just the kind of financial products one needs to have in his/her portfolio to make it a welldiversified one.

Talking about buzz, cloud computing, which represents the delivery of different services through the internet, has continued to hog the headlines, by providing users with a series of functions including email, storage, backup, data retrieval, app creation and testing, data analysis, audio and video streaming, and delivering software on demand. Although it is still a relatively new technology, cloud computing is being utilised by a wide range of industries, including large corporations, small businesses, nonprofit organisations, governmental agencies, and even individual consumers.

Shifting our focus away from cloud computing, let’s talk about the hot trend of 2023, the AI revolution. Just like any other sector, AI has made a significant impact on the healthcare field, reshaping the way medical professionals diagnose, treat, and monitor patients. By enabling more individualised therapies and delivering more precise diagnoses, this technology is significantly enhancing healthcare research and outcomes.

This edition's cover story talks about the Saudi-based National Security Services Company (SAFE), which was founded in 2019 by the Kingdom's Public Investment Fund (PIF), with a vision of becoming the ultimate security partner within the country and in the GCC region, apart from leading the transformation of Saudi's security ecosystem.

editor@ifinancemag.com

www.internationalfinance.com

SAFE: GCC’S TRUSTED SECURITY PARTNER

SAFE provides top-notch security consulting to its clients and partners through innovative measures

BANKING AND FINANCE

50 IN CONVERSATION

'STUDY OF CONSUMER BEHAVIOUR IS CRUCIAL'

The study of consumer behaviour helps reduce the guesswork for businesses

42 INSIGHT

IS THAILAND ENVIRONMENTALLY SUSTAINABLE?

STAYING DIGITALLY SAFE FROM BANKING SCAMS

Banking scams are becoming increasingly common, and it's essential to protect oneself

24 74

METAVERSE TAKING OVER PROFESSIONAL WORKSPACES

Metaverse is going to lead the technological revolution in the hybrid office culture

TECHNOLOGY ECONOMY

Thailand does not have a good track record when it comes to committing to sustainability goals and combating climate change since 2012

CLOUD COMPUTING: THE FUTURE

IS NOW

With the help of cloud computing, users may process data without using computers or carrying around heavy equipment

64 84

FAMILY COMPANIES: NEW FILLIP FOR UAE

UAE introduced legal reforms, to help double family-owned businesses’ contribution to the nation's GDP to $320 billion by 2032

BUSINESS DOSSIER

56 LTC: Leading Lao’s telecommunication revolution from the front

78 Leading Saudi’s Economic Transformation

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# TRENDING

Optus new AI tool

Optus announces a new AI-powered speech feature, Optus Call Effects, which is the latest innovation on the Optus Living Network, designed to be fun and evolve the way friends and family connect over the traditional phone call. Optus Call Effects will help Australians add some joy to their everyday phone calls with playful skills. Whether you're tossing a coin to decide who should book the concert, asking the crystal ball if you'd like to attend on that date, or just wanting to quickly decide what to order for takeout on Saturday night - Optus Call Effects helps clients make simple decisions.

US inflation below 5% Ulster Bank to shut down

Prices for milk, airline tickets and new cars fell in the US last month, helping to push inflation to its lowest level in two years. Official figures show that inflation, the rate at which prices are rising, was 4.9% in the 12 months to April. That was down from 5% in March and marks the 10th consecutive month that price increases have slowed. The decline comes after the US Federal Reserve raised interest rates sharply in a bid to bring inflation under control. US inflation peaked at 9.1% last June - the highest since 1981. It is likely that the central bank will pause further interest rate hikes.

Ulster Bank will close its entire branch network in the Republic of Ireland. In 2021, the bank's parent company, Nat West, announced it was withdrawing from the Republic of Ireland. Since then, the bank has sold its loan portfolio to other banks and financial institutions. The move will not affect the banks' separate operations in Northern Ireland. The bank has 63 branches in the republic. The bank says 99% of its personal accounts and 91% of business accounts are now either closed or inactive. The bank's performance did not properly recover from the impact of the banking crisis.

The Xiaomi TV Box S is now available in the UK and EU via AliExpress. The 4K Ultra HD Streaming Media Player supports Dolby Vision and HDR10+ visual formats and Dolby Atmos and DTS-HD audio technology. Compared to the older model, the new streaming hub uses Google TV rather than Android TV, providing the same access to streaming services such as Disney+ and Apple TV. Alternatively, users can use Chromecast to share content from their smartphone to the TV.

WB teams up for HBCUs ECONOMY

Ones to Watch

JENSEN HUANG

CEO OF NVIDIA CORPORATION

Huang's company added $184 Billion to its market capitalization following the quarterly report, more than the entire value of Intel. It is the biggest gain ever for any US stock

The World Bank Group signed a memorandum of understanding with the Milken Institute to work together to drive more inclusive and sustainable engagement with historically black colleges and universities (HBCUs). The partnership will create career development opportunities for students and subject matter experts and promote social and economic development. The new agreement follows a memorandum of understanding signed in September

2022 between the World Bank Group and six Historically Black Colleges and Universities (HBCUs) in the United States.

Former World Bank Group President David Malpass said, “As we recognize the huge challenges facing development, the exchange of people, ideas, and skills will be vital. The World Bank Group is building partnership platforms globally that connect educational institutions and people."

By the Numbers

CHANGPENG ZHAO

CEO OF BINANCE

Changpeng Zhao recently says that his company is unlikely to buy up any banking institutions, despite a growing worry of crypto companies being debanked, including Binance’s own operation in Australia

MOHAMED KHADIRI

CEO OF BANK OF SHARJAH Bank of Sharjah has appointed Mohamed Khadiri as its CEO starting May 17, 2023. He has earlier worked for banks like Salomon Smith Barney, Citibank, Barclays and HSBC

Mohamed Khadiri Image: bankofsharjah.com

The year-on-year, sales grew just 1.6%, well below the CPI of 4.9%

After growing 8.7% in 2022, Saudi Arabia's GDP is set to reach 2.2% by the end of this year

US retail sales rose 0.4%

In the United States, consumers barely kept pace with inflation in April as retail sales rose but fell short of expectations, the Commerce Department reported. The expanded sales report showed an increase of 0.4%, below the Dow Jones estimate of 0.8%. Excluding auto-related numbers, sales rose 0.4%, in line with expectations. Since the figures are not adjusted for inflation, the overall increase was the same as the monthly CPI increase of 0.4%.

The year-on-year, sales grew just 1.6%, well below the CPI of 4.9%. A 0.8% drop in gasoline sales slowed spending numbers. The sporting goods, music and bookstores fell 3.3%, while furniture and home furnishings fell 0.7%. Other stores retailers were the top performers, up 2.4%, while online sales rose 1.2% and health and personal care retailers were up 0.9%. Food and beverage sales increased 0.6% and are up 9.4% on a 12-month basis.

Lydia Boussour, senior economist at EY-Parthenon said, "Retail sales posted a modest rebound in April, but the gain mostly reflected

higher prices and a sustained turnaround is unlikely with consumer fundamentals turning less supportive."

Although the report suggested consumers are struggling, it was the first positive reading since January and followed a 0.7% decline in March. The control group, which excludes autos, gas stations, building material and utility stores, and food & beverage establishments, was also up 0.7%, ahead of the 0.4% expectation.

Ronnie Walker, an economist at Goldman Sachs said that the report was stronger than previous assumptions and suggests upside potential for the outlook for consumption. Treasury yields rose after the report as the initial reaction focused more on the positive ex-auto numbers, although stocks were lower in morning trade. Consumers still have a tough road ahead.

There are signs that interest rates will rise. In fact, Atlanta Federal Reserve Chairman Raphael Bostic said that he thinks a rate hike is more likely than the cuts that markets had been pricing in before the end of the year. Consumers have borrowed more to cope with persistently high levels of inflation due to which debt rose to $17 trillion dollars.

Saudi non-oil sector to grow 4.7%

According to the World Bank, Saudi Arabia's non-oil sector is expected to grow 4.7% in 2023 as the Kingdom's Vision 2030 goal of diversifying the economy away from oil gains strength. This forecast comes despite an expected slowdown in the Gulf Cooperation Council economy due to lower oil and gas yields and sluggish global economic growth. The gross domestic product of the GCC countries is expected to grow by 2.5% in 2023 and by 7.2% in 2024, up from 4.3%. This figure was observed in 2022.

A projected 1.3% contraction in hydrocarbon GDP will be the main reason behind the slowdown in the Gulf region, the report said. This is largely due to the announcement of production cuts by the organization of petroleum exporting countries and their allies, known as OPEC+, last month, as well as the global economic slowdown. Still, GCC non-oil sector growth is expected to reach 4.6% in 2023, supported by private consumption, fixed investment and loose fiscal policies, which will moderate the decline in oil activity.

"Improvement to the business climate and competitiveness, and the overall improvements in female labour force participation in the GCC countries, especially in Saudi Arabia, have all paid off, though further diversification efforts are still needed and are underway," the World Bank said.

After growing 8.7% in 2022, Saudi Arabia's GDP is set to reach 2.2% by the end of this year as the oil sector's contribution to GDP is expected to fall by 2%.

In March, the regional director of the Gulf Cooperation Council at the World Bank noted that the Gulf countries will see global economic growth double this year, with Saudi Arabia and the United Arab Emirates taking the lead.

Issam Abu Suleiman explained that the Gulf countries are expected to grow by 3.7% in 2023, higher than the World Bank's estimate of 2.5%. He pointed out that the GCC region has generally performed very well after the pandemic and that the main challenge is the vaccination efforts, which have been completed quickly compared to other countries in the region.

In a tweet, Pei wrote that early tests showed that the Phone (2) opened apps twice as fast as the phone (1)

China surpassed Germany to take second place in the global export of automobiles last year

Nothing Phone (2) gets new upgrade Thailand economy grew 2.7% in Q1

Carl Pei, founder of consumer electronics brand Nothing, said that their Phone (2) will be powered by the Snapdragon 8-series chipset, a clear upgrade from the Phone (1).

In a tweet, Pei wrote that early tests showed that the Phone (2) opened apps twice as fast as the phone (1), "an impressive 80% improvement in overall performance." The Snapdragon 8+ Gen 1 feature is capable of capturing over 4,000 times more camera data than the ISP used in the Phone (1).

"There has been a lot of discussion ever since we announced that Phone (2) will have a Snapdragon 8 Series chipset. Well here's some news - it's going to be the premium-tier powerhouse Snapdragon 8+ Gen 1," Pei posted.

Thailand's economy grew 2.7% in the first quarter of the year, thanks to a recovery in tourism and higher agricultural production, according to the country's economic planning agency. This was the sixth consecutive period of expansion, accelerating from 1.4% growth in the year according to data released by the Office of the National Economic and Social Development Council (NESDC).

The improvement was attributed to the steady expansion of the service sector, fueled by the country's growing number of foreign arrivals, and the agricultural sector due to higher returns, the NESDC said. It is noted that the NESDC maintained its gross domestic product forecast this year in the range of 2.7% to 3.7%.

of internet users who have ever experienced any cybercrime

China becomes top car exporter

China says it has become the world's largest exporter of cars after overtaking Japan in the first three months of the year. Official figures released show that China exported 1.07 million vehicles during the period, up 58% compared to the first quarter of 2022.

At the same time, Japan's exports of vehicles increased marginally by 6% from a year earlier to 9,54,185. Sales to Russia and the need for electric vehicles helped China's exports grow. China surpassed Germany to take second place in the global export of automobiles last year. China shipped 3.2 million vehicles in 2022, compared to Germany's 2.6 million, according to the General Administration of Customs in China.

UN urged to halt plastic use

Over 150 civil society groups and academics from around the world, including ethologist, anthropologist and UN Messenger of Peace Dr. Jane Goodall, have signed an open letter urging the UN to act now to prevent the fossil fuel industry from undermining negotiations on an effective global plastics treaty.

The letter comes as delegates prepare for the second round of Global Plastics Contract (INC2) negotiations. Countries are expected to commit to a legally-binding agreement to end plastic pollution by 2025, and the fossil fuel industry has been actively promoting it both directly and through industry groups such as the Association to End Plastic Waste and American Chemistry Council (ACC) to weaken the use.

Estimate cost from cybersecurity Worldwide 2013-2022

Municipal bonds' main selling feature is their exemption from federal taxes

Muni Bonds: Investments you need

IF CORRESPONDENT

Municipal bonds, sometimes known as "munis," are popular among investors for being low-risk investments and not being subjected to federal taxes. There are disadvantages to buying munis, even though reliable, income-producing bonds should have a place in any well-diversified portfolio. Therefore, before including muni bonds in their investment strategy, those interested in buying them need to consider several things.

A muni is an investment in debt, just like any other bond. The investor lends a chunk to a government/ public organization in exchange for receiving a consistent stream of interest payments

Knowledge about these bonds

A loan to a state, local government, or an organization under their authority is known as a municipal bond. A government or agency may issue these bonds to pay for ongoing costs or to carry out a specific public project. A muni is an investment in debt, just like any other bond. The investor lends a chunk to a government/public organization in exchange for receiving a consistent stream of interest payments.

Reasons behind the investment

Bond purchases enable investors to preserve their cash while generating a consistent income stream (from interest payments). Investors

allocate a portion of their total holdings to bonds to counteract the higher risks associated with practically every other sort of investment. The goal of diversity is to achieve this, investments with low risk serve to offset any losses from investments with higher risk. However, even bonds carry some risk. The possibility of an issuer defaulting on its obligations exists.

By looking at the bond's rating, investors can determine the risk level of a bond they are contemplating. Three bond rating companies, Moody's Investors Service, S&P Global, and Fitch Ratings, assign ratings to all bonds sold in the United States. A study of the issuers' creditworthiness is the foundation for bond ratings.

What sets these bonds apart

Municipal bonds' main selling feature is their exemption from federal taxes. Municipal bonds are subject to taxation in some states but not all. Unsurprisingly, it is complicated. Bond interest is irrelevant because seven states do not have any income taxes at all. While some jurisdictions tax out-of-state bonds, other governments do not tax in-state bonds. Before making a decision, consider municipal bonds carefully and weigh them against alternative options for investing your money.

Tax-free municipal bonds are only sometimes wholly tax-free. As said, state income taxes can apply to the interest. In addition, your muni

bond interest will be included in calculating your adjusted gross income if you receive Social Security, which could result in a rise in your Social Security income subject to taxation. Less frequently, the deminimus tax and the alternative minimum tax may have tax ramifications.

Tax-free municipal bonds aim to increase your overall rate of return on investment. To reduce your tax liability, be careful not to choose a subpar return on your investment. Like any bonds, municipal bonds are subject to interest rate risk. The risk increases with the bond's term length. You forfeit a better rate if interest rates rise while your bond remains outstanding.

Muni and Corporate Bonds returns

Federal law grants tax-exempt status to bonds that finance local and state projects. Additionally, buyers of bonds from their states or municipalities may not be subject to local or state taxes on the interest. As a result, some municipal matters are triple tax-free. Lower interest yields offset these tax benefits. Ordinarily, the coupon rates on municipal bonds are lower than those on corporate offerings with identical ratings and maturities.

When considering munis, investors should use the tax-equivalent-yield calculation to evaluate the taxable investment-grade and government bonds yields. The yield that a taxable bond needs to have to match or beat a municipal bond's tax-adjusted yield is known as the tax-equivalent yield (TEY). Tax-Free yield equals 1 - (Tax Rate - Tax Equivalent Yield). Municipal bonds are often more advantageous for higher-income investors as they result in more outstanding tax obligations.

Rate of interest risk

Governments that issue muni bonds in the US run a minimal chance of default. However, investors who intend to sell their bonds on the secondary market should be aware that bonds carry interest rate risk by their very nature. Long-term investors may even risk losing their initial investment if interest rates decline. For example, bondholders who sell 30-year issues may not get the total face value of the bond back.

Risk of purchasing power

Annual inflation in the United States over the previous ten years has varied from a low of 0.7% (in 2015) to a high of 7% (in 2021). In all other cases, it was

2.3% or less. As a result, a 20-year municipal bond with a 2.5% yield to an investor in the 25% tax bracket, or a 3.3% tax-equivalent yield, would provide annual returns that would exceed inflation until 2021, at which point it would fall short of doing so. The expected inflation rate in 2023 is 5%, down from 2022's 6.5% rate. A purchasing-power risk is the most significant possible negative to making a long-term bond investment. Ultimately, you'll receive your money back, but it might be worth less than it once did. Strictly sticking to low-yielding municipal bonds is a safe strategy, but it may also mean forgoing gains that outpace inflation and preserve your spending power. A balance between (relatively riskier) stocks and municipal bonds can reduce that risk.

Default danger

In all municipal securities rated by Moody's Investor Service between 1970 and 2018, 0.16% missed investor payments. Due to this, investors consider municipal bonds to be a generally safe choice. The COVID-19 outbreak, which caused commercial activities and taxable receipts to cease along with it, served as the ultimate test of muni bonds' resilience. The total default rate increased year over year to just 0.05% of the $3.9 trillion in outstanding municipal bonds.

Call danger

Investors take on additional risks when buying bonds that include callable options. It indicates that the issuer can cancel the transaction, settle the debt, and halt interest

payments. The issuer needs that option to issue a new bond at a lower interest rate if interest rates decrease significantly. Municipal bonds are typically callable. Although their investors will receive their money back, they must find a new place to put it. As a result, they will receive less money from a new bond investment.

Tax traps for municipal bonds

Tax-free municipal bonds are not always wholly tax-free. Senior citizens seeking a reliable source of post-retirement income need to find bonds particularly alluring. That makes Social Security income the most typical trap for buyers of municipal bonds. Although muni bond income is not subject to federal income tax, it is included in the investor's adjusted gross income. Therefore, the amount of the taxpayer's Social Security income subject to tax can increase with an increase in adjusted gross income.

The alternative minimum tax, which explicitly targets taxpayers with significant income from taxsheltered sources, can also apply to high-income persons.

How to invest in tax-free municipal bond funds

An investor can buy and sell bonds through an online brokerage account. A full-service brokerage or a bank is the other option for buying them. A mutual or exchange-traded fund that invests in municipal bonds provides an additional choice. By the end of 2021, municipal bond rates were growing, along with interest rates. A 10-year AAA-rated municipal bonds had a return of 2.15% as of April 16, 2023, down from 2.30% a week earlier. Compared to the previous week, a 20-year AAArated bond returned 3.00% instead of 3.15%. Bonds with a 30-year AAA rating returned 3.20% as opposed to 3.35% the previous week.

Why do investors buy municipal bonds?

• Investors purchase municipal bonds because of the stability of the municipal bond market

• State and local governments have issued bonds for centuries – they are a well-known and well–regulated financial instrument

• Municipal bonds are an extremely safe investment

• The 40-year default rate for corporate bonds is higher than 11%

• Not a single AAA-rated municipal bond defaulted during that time

• The exclusion of interest from federal income tax provides tax savings to investors

Source: munibondsforamerica.org

Municipal bonds may cause losses

If the issuer defaults, you could lose the money you invested in municipal bonds. However, considering that COVID destroyed local tax receipts in 2020, defaults on municipal bonds only represented 0.05% of the $3.9 trillion in outstanding debt at that time; this danger is vanishingly tiny. Additionally, muni bonds could cost you money if you sell them at the wrong moment on the secondary market. Considering the current rates for new issues, the total dollar amount of the outstanding interest payments will decide your price.

Which states and municipal bonds are the best?

Muni bonds rated AAA are the best available from any issuer. One of the major rating agencies has rated the bonds that these state and local governments around the country

have issued as AAA. When a government experiences financial difficulties, it's bond ratings decrease (but it will also offer a lower interest rate to entice buyers).

Three of the city of Detroit's general obligation bonds have payments due after its bankruptcy in 2013. That means that year, it was in charge of three of the seven defaults on municipal bonds rated by Moody's Investors. Since then, the city has been able to turn around its "negative" prognosis, which S&P Global revised to a "stable" outlook as of January 2021. Its outstanding debt had a BB+ rating.

One of the most significant municipal bonds is one with a rating of AAA or very near to it. One of the worst kinds of bonds is a local government on the verge of bankruptcy issues. Bond mutual funds or exchange-traded funds (ETFs) are options for investors who want to avoid monitoring the finances of the state and local

governments they invest in. It will be run by someone compensated for caring for such things.

The bonds are considered as safe as long as the bond issuer isn't financially ruined. The best defence for a bond investor is caution. Defaults are uncommon, although they do occur. An issuer with an AAA, AA, or A rating is in good financial standing. Compare the municipal bond's actual return to other investment options. Of course, saving money on taxes is always wonderful, but not at the expense of earning a higher return elsewhere for a similar risk, like in premium corporate bonds.

For investors looking to generate a steady source of income, particularly throughout their retirement years, municipal or corporate bonds are an excellent solution. Compared to nearly any other option, particularly stocks, highly rated bonds are incredibly safe investments. The tax-free status of municipal bonds is true to its advertising. However, this does not imply that a muni bond's overall return will be your most excellent choice. You must still exercise due diligence to select the finest municipal, corporate, or combination of the two bonds for you. Another option is to invest in a bond ETF or mutual fund and delegate the decision-making to someone else.

editor@ifinancemag.com

IF CORRESPONDENT

Avariety of forces are buckling down on banks, many of which are accelerating. Long-term factors like demographic aging and climate change are becoming more prominent. Markets have become unstable as a result of shocking occurrences like the COVID-19 outbreak and the crisis in Ukraine. Banks are evolving their business models in response to these forces of change in order to engage clients in highly dynamic digital environments and fulfil new societal expectations. More fundamentally, the industry's quick development and hazy future raise a fundamental question: What is the purpose of banks?

A new SAS-sponsored study by Economist Impact predicts three potential futures for banking, examining the risks and opportunities ahead. Depending on the sequence of events that take place between now and 2035, any of the scenarios are conceivable. The objective of the study is to shed light on how banks might change their purpose and business strategies to benefit consumers, shareholders, communities, and the environment. The study makes it evident that the banks are at a turning point in dealing with issues like climate change, economic dispersion, and chronic economic and social injustices.

Yuxin Lin, Senior Manager of Policy and Insights at Economist Impact said, “The sector’s rapid evolution amidst prevailing uncertainty begs a fundamental question: What is the purpose of banks?”

How banking leaders answer this question – and

There are indications that major banks are adapting to the future of banking by becoming more digitally friendly

the business decisions they make as a result – will redefine the entire industry.

Alex Kwiatkowski, Director of Global Financial Services at SAS said, "Banks have the power to elevate not just our global economy but all of humankind. By embracing technology and innovation with intention, banks can pave a more purpose-driven path, where higher purpose and profitability go hand-inhand. And if they don’t embrace this fully, a golden opportunity to make a genuine difference will be squandered, potentially with very serious consequences.”

Scenario one: Can transformed banks regain public trust?

Banks have had issues with their reputations ever since the 2008 financial crisis. According to the 2022 Edelman Trust Barometer, financial services presently inspire confidence in just over half (54%) of the general public, making them one of the least trustworthy industries. Flashing forward to 2035, Scenario one envisions a world where banks wield digital transformation to rehabilitate their image. Banks have backed consumer-focused regulation and improved safeguards against cybercrime and data privacy. More open banking and collaborations that spark profitable new offers are fueled by increased transparency and consumer protections, which boost public confidence. Every aspect of clients' financial lives are seamlessly integrated via digital platforms in personalized, adaptable ways.

Stu Bradley, Senior Vice President of Fraud and Security Intelligence at SAS said, “Consumer trust, built over many years, can be lost in an instant. As digitization accelerates, it is critical that banks create hyper-personalized

engagement as they address rising risks. In balancing customer experience and risk, an enterprise decisions approach – where fraud, risk and engagement decisions integrate holistically across the customer journey – can cut costs and streamline banks’ IT infrastructures, while boosting revenue and customer retention.”

Scenario two: Might banks catalyze cross-industry climate action and power the green transition?

It will take unprecedented levels of global cooperation and teamwork to address the climate crisis. The United Nations claims that states' present pledges to cut greenhouse gas emissions are far insufficient to keep global warming to 1.5°C over pre-industrial levels. Action that is swift and firm is necessary to prevent the worst effects of climate change. Scenario two foresees that in 2035, the world community will be committed to addressing climate change, and decolonization will be a top priority for infrastructure, transportation, and energy. Cities have been redesigned to be more resilient to the effects of the climate. Green technologies and affordable renewable energy sources are becoming the norm.

Troy Haines, Senior Vice President and Head of Risk Research and Quantitative Solutions at SAS said, "Climate leadership in the banking sector will drive greater cross-industry progress toward net-zero emissions by 2050 – and it starts now with better analytics, modelling and management of climate risk. In enhancing their ability to model climate risk scenarios and understand potential impacts to their balance sheets and capital, banks can help propel the green transition and advance worldwide climate resilience".

Scenario three: How will banks fare in a geopolitical fragmented world?

Economic and market uncertainty continues even as the world seeks to put the worst of COVID-19 in the rearview mirror. The pandemic's aftermath has exacerbated rivalries among the world's economic superpowers while overtaxing developing nations, whose citizens bear disproportionate burdens. Against this backdrop, it isn’t hard to imagine Scenario three, which depicts a geopolitically contentious world stage in 2035, colored by divergent interests and a retreat of multilateralism among the world’s economic giants. The World Trade Organization has been displaced by bilateral and regional accords. The emergence of digital currencies and rivals’ alternative payment methods has shattered the global financial system.

Theodora Lau, Founder of Unconventional Ventures says, "Deglobalisation, accelerated by recent global events, will likely widen the staggering societal inequalities that plague us today. Indisputably, banking and money are at the heart of it all. Each of us has a role to play in championing a more inclusive and sustainable future with our actions of today".

How fintech challenges banks

The use of personal finance applications has increased recently. The app game is being played by everyone in the banking industry; app providers range from banks that offer their own services to lone developers that make stand-alone saving, budgeting, or money management apps. It is anticipated that the use of personal finance applications will be at its peak in the coming future. These app providers offer current accounts that can only be handled from a phone or tablet, and

BANKING AND FINANCE FEATURE BANKING ECONOMIST IMPACT OPEN BANKING

Banking in 2035: Climate action paradigm shift

The world is on track to limit global warming to 1.5°C by the end of the century, preventing the most catastrophic effects of climate change

Decarbonisation is taking hold in infrastructure, transport and energy—major urban areas around the world have been redesigned to become energy efficient and climate resilient

Public transport options, including electric buses and subways, are widely accessible, and half the vehicles on the road are now electric or hybrid

Business travel has sharply declined as colleagues are now closely connected across borders, while consumers consciously avoid air travel to reduce their carbon footprint

Consumer and investor pressure pushed businesses to integrate Environmental, social and governance issues into their core strategy

Governments introduced a carbon tax and mandated climate-related disclosures

Strengthened public-private partnerships accelerated breakthroughs in climate technologies

staff members give customer support via a live chat service. The option to temporarily block your card from your app in the event of loss or theft is one of the major improvements offered by challenger banks with app-based business models. Instead of phoning customer support for replacements, clients can order a replacement with a few taps on the screen. The services offered by conventional banks might be improved with such straightforward changes. By allowing consumers to just take photos of their checks rather than bringing them into the branch, some traditional banks already assist their clients in this way.

Conventional banks are catching up

There are indications that major banks

are adapting to the future of banking by becoming more digitally friendly. For instance, Hello bank! by BNP Paribas Fortis which operates in France, Belgium, and Germany was the first bank to exclusively handle accounts through an app. In keeping with a shifting consumer landscape, Hello Bank! offers assistance and support to its clients via a variety of social media platforms, including an online forum.

Additionally, a lot of these services make international banking simpler than before. The number of apps that assist users in managing their finances on a daily basis has increased in other places. Yolt, for instance, enables users to integrate all of their accounts and monitor them in a single app while also getting advice on their weekly or monthly

budget. Standalone savings apps are becoming increasingly common, too. This includes applications that add the difference between the amount a user spends on each transaction and the nearest unit to their savings account. If customers are unable to afford to set aside hundreds of pounds or euros each month, such straightforward developments can give them a new, simple option to save money.

Open banking

Increased awareness of how banks communicate with (and inform) their customers is one of the long-term repercussions of the 2008 financial crisis. The European Union's Payment Services Directive went into effect in 2018. The order upholds restrictions on how users can access their financial data. This is open banking, which gives banks a plethora of new ways to interact with customers and gives consumers a greater understanding of their money. Open banking basically implies that companies that offer online accounts (such as credit and savings cards) must allow their clients to securely exchange data (such as expenditure) with outside companies (such as budgeting applications), if the client so chooses.

Consumer education regarding the advantages of open banking still needs to be done in great detail. Furthermore, banks must appropriately embrace the various ways in which they might exploit these innovations. This suggests that the coming years could be significant for the banking industry's future because several governments are now approving operating more open banking.

editor@ifinancemag.com

It goes without saying that the biggest disadvantage of investing in teenage is the possibility of losing some or all of your money

An investment guide for teens

IF CORRESPONDENT

Experts say that teenagers and people who may not yet be of legal adult age should invest for a variety of reasons. The biggest advantage is the time they have to let their investments grow and expand in value. It might be confusing sometimes from where to begin, but it need not be as young people can start their investment journey with the help of a variety of strategies and tools. In this article, International Finance outlines the key information that teenagers should be aware of before investing.

Some people might believe that those who are not yet considered legal adults should not invest. However, there are no age restrictions for investing, unlike at a casino or a pub. Although opening a brokerage account typically requires that you be at least 18 years old, investors under the age of 18 still have a variety of options available to them, though they may need to work with an adult or receive varying levels of supervision.

The importance of investing early

Younger people have an advantage over older people beyond simply being permitted to invest; simply put, the earlier you start investing, the more time

your money has to grow. The force of compounding increases this early-mover advantage for younger investors. Starting to invest while time is on your side is even more advantageous since when you reinvest your capital gains and interest to produce more returns, the value of your account may increase.

A little example will help to highlight the benefits of starting early. Say you start saving for your retirement when you're 22 years old and start your career. When you reach retirement age, you would have $710,810.83 if you consistently saved $100 each month and earned a respectable 10% return on your investment (compound yearly). However, if you had begun investing when you were 15 years old, you would now have $1,396,690.23, or almost twice as much.

Riley Adams, a CPA and prominent authority on teen investing, is the creator and publisher of the popular website Young and the Invested. He believes that supporting young people's financial empowerment begins with educating them about the advantages of starting investments early.

"The one thing, the last true edge in investing, is really time in the market," Riley Adams explains. People who realize this edge and begin to take advantage of it sooner in life increase their chances of financial success.

Custodial accounts

A minor's investments in a custodial account are

Start saving for your retirement when you're 15 years old and start your career. When you reach retirement age, you would have $1,396,690.23 if you consistently saved $100 each month

managed by an adult on their behalf until they reach 18 or 21 years of age, depending on the state in the USA. Custodial accounts are an excellent way to transfer assets to a kid or teen under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA), but the custodian adult retains the legal obligation and the final say in investment decisions.

People younger than 18 can even get an early start on retirement planning through a custodial Roth individual retirement account (Roth IRA), but they will need earned income from a job or another paid activity to begin contributing. Although investment decisions are typically subject to the approval of the adult co-owner, there are joint brokerage accounts that permit minors to share legal ownership with an adult. These accounts may encourage younger people to play a more active role in society.

Are you ready to invest?

The advantages of investing while you are young are clear enough, but some teenagers might

still be unsure about their readiness to make the plunge. When deciding whether to make their first investments, teens may want to ask themselves the following questions: Do you have money from a job or another source that you won’t need to access immediately? Can you afford to lose this money if your investments do not play out as planned? If you are under the age of 18, do you have a parent or another adult willing to help you invest? Do you know what you are getting into? In other words, do you understand the investment you are considering and how it works?

Riley Adams claims that companies that teens deal with frequently can pique their interest in investing. Purchasing stock in a well-known corporation is a smart approach to entering the stock market while adhering to the maxim "invest in what you know."

"Being engaged with companies you see on a regular basis gets you interested, makes you want to understand how they tick, how they grow, how they make decisions. And then once you kind of understand that, digging a little deeper and asking the question of:

Do I think this is good, do I think this is going in the right direction, and then do I have money that I want to invest in it?" he said.

The risk of investing

Younger people should be aware of the benefits of making frequent and early investments, as well as the risks. It goes without saying that the biggest disadvantage of investing is the possibility of losing some or all of your money. While it is impossible to escape the reality of potential losses, you can control how much risk you are willing to take on by choosing investments that are riskier than others. Generally speaking, a riskier investment has a higher potential to yield higher returns.

All investors, young and old, must understand this trade-off in order to choose a strategy. But once more, being young has its benefits. Younger investors may afford to take more risks since they have more time to stay in the markets, which increases their potential gains. Younger investors have time to wait for the markets to rebound when the inevitable market downturn occurs.

This explains why conventional investment wisdom recommends taking more risks when pursuing distant goals while becoming more cautious as you get closer to the moment when you'll need to access your funds. However, no matter your age, it is important to discover your own style as an investor, ensuring that you are okay with the level of risk you’re facing.

"People have different risk tolerances, and I think you need to

be honest with yourself. If someone walks you through the logic of ‘You’re young, you should take on risk, you should let it grow’—but you just don’t feel comfortable with it, you absolutely should not do that. You should look for lower-risk investments that might not have as much upside but also might not have as much downside," Riley Adams advises.

Where teens can invest in

Once you have an understanding of your own risk tolerance, you can look into investments that have the qualities you think will best enable you to achieve your objectives. Here are a few of the more popular investment types, or asset classes, that you might choose to buy, depending on what you hope to achieve and when.

Stocks

A small portion of ownership,

or equity, in a publicly traded corporation, is acquired when you purchase a stock. Two possibilities exist for stocks to generate income: Many businesses give their shareholders payments known as dividends. The market's assessment of a company's value affects stock prices, and if the price of your stock rises, you may be able to sell it for a profit. Stocks can be risky due to their value fluctuations, or volatility as it is known in the market. It is possible that you will end up with shares that are not worth what you bought for them if the firm you invested in starts to struggle. Stocks are a good investment for younger people with better risk tolerance because of the higher potential profits that come with them.

Funds

While stocks represent a share in a single company, you can also buy shares of funds that invest in

Share of social media users invested in the stock market

Other investments

Source: Statista

In the United States, as of January 2023

multiple stocks and other types of assets. Mutual funds are managed by qualified money managers and invest in a variety of assets in accordance with a prospectusstated goal. Exchange-traded funds (ETFs) are similar to mutual funds in that they possess a variety of investments, but unlike mutual funds, they may be exchanged on the stock market and are intended to track a particular market index, industry, or other assets.

Younger investors have access to many benefits through funds. Funds provide builtin diversification because they combine numerous investments into one. In other words, investors automatically possess a variety of assets through a fund, protecting their investment from total loss in the event that one component loses value. While some mutual funds have high fees for managing the portfolio actively, passively

managed and index-tracking funds typically have low fees and a track record of generating good returns, especially over the long term.

Bonds

Bonds are an example of a debt instrument, as opposed to equity or ownership in a corporation. When you purchase a bond, you are essentially lending money to the bond issuer, who promises to repay you with interest and the principal you borrowed. Governments and corporations both issue bonds. Bonds are regarded as fixedincome investments as they offer predetermined payments over a specific time frame. They are especially helpful for investors who want to make a consistent income. They are less risky than stocks, though, and as a result have lower potential returns, which makes them unsuitable for young investors looking for long-term gain.

Some young investors could be better suited to other financial asset classes. For instance, certificates of deposit (CDs) let you invest money and earn a fixed interest rate over a set period of time. Similar to savings accounts in operation, CDs offer a greater interest rate because you commit to leaving the money alone for the duration of the investment. Compared to stocks or bonds, CDs are more conservative and have a smaller potential return while having a more moderate risk profile. There are yet more prospective investments on the list. From highrisk cryptocurrencies to derivatives including futures and options, there are plenty of ways to put your money to work. These products are better suited for experienced investors rather than those who are just starting because they are riskier and more complicated.

The bottom line

When it comes to investing, teens have the advantage because they have time on their side, even though they will need to work with a parent or another adult before investing. Teenagers have the chance to start accumulating their wealth early, thanks to custody accounts and joint accounts.

editor@ifinancemag.com

Staying digitally safe from banking scams

IF CORRESPONDENT

As technology advances, so do threat actors' methods to target unsuspecting victims. As a result, banking scams are becoming increasingly common, and it's essential to be aware of the dangers and take steps to protect oneself. This article will explore the most common types of 21stcentury banking scams and provide tips on how to avoid these crimes.

Phishing scams

Phishing scams are one of the most common ones. Under this method, the threat actors send fraudulent emails, texts, or social media messages from a legitimate source, such as a bank, to get the victim to disclose personal information/login credentials. Once scammers have this information, they can steal money or commit identity theft.

It's important to double-check the sender's email address or social media handle to avoid falling victim to phishing scams. Keep this simple thing in your mind, legitimate banks and financial institutions never ask for

Technology and banking scams are becoming increasingly sophisticated, and it's essential to be aware of the dangers and take steps to protect yourself

personal information/login credentials over email/social media. If you have doubts about the legitimacy of such emails/messages, contact your bank immediately.

Attacks of this nature are now becoming more frequent and sophisticated. SlashNext, a messaging security company, conducted a study in October 2022, under which it examined billions of link-based URLs, natural language messages, and attachments sent over email, mobile devices, and web browsers over six months and discovered more than 255 million threat elements. That represents a 61% rise in phishing assaults since 2021.

The survey also found an increasing use of personal and mobile communication channels among cybercriminals. Fraud and credential theft topping the list, while the attacks on mobile devices increased by 50%

According to Jess Burn, senior analyst at Forrester Research, "We've been seeing an increase in the use of voicemail and text as part of two-pronged phishing and BEC (business email compromise) campaigns."

The attackers either give the sender more credibility or make the request seem more urgent by leaving a voicemail or sending a text regarding the email they sent.

Burn said the company is getting a lot of questions from clients concerning BEC (Business Email Compromise) assaults in general.

"Bad actors are turning to traditional fraud to make money because geopolitical unrest is disrupting ransomware gang activity, and cryptocurrency, the preferred method of ransom payment, is imploding recently," he added. BEC is increasing, therefore.

Criminals launch phishing attacks during the sales and tax seasons. People

should be cautious of spearphishing, a more specialized variation of phishing that frequently employs topical lures.

Luke McNamara, principal analyst at cyber security consulting firm Mandiant Consulting, said that the topics and themes "might evolve with global or even seasonal events."

"For instance, given that it is the Christmas season, we can anticipate seeing more phishing lures relating to sales. Threat actors may similarly attempt to abuse users who are filing their taxes during regional tax seasons by sending phishing emails with tax-related subject lines,” the official commented.

According to McNamara, general phishing themes include emails purporting to be from technology vendors about account resets. In contrast, more targeted efforts by threat actors engaged in cyber espionage may use more particular phishing lures.

"More prolific criminal campaigns might leverage less specific themes," he noted.

Recognizing phishing emails

Ask yourself the following questions: Were you preparing for it? Before responding, clicking a link, or downloading any attached files, take a moment to consider your actions if the communication is from an unknown source. Who is the message's sender? Is this the email address you were hoping for? Cybercriminals may try to deceive you by using a similar email address. Please verify the email address's spelling, the domain's legitimacy, and whether it corresponds to the sender's name. Does it demand action from you Phishing emails typically instruct you to click a link, download an attachment, or reply with personal information. They frequently aim to instil a sense of urgency to elicit

Value of annual online banking fraud losses

a hasty and unreasonable response. Instead of clicking on the links they provide, you should always verify the email's legitimacy with information you can obtain independently. While conducting financial activities, avoid clicking on email links and instead log in to your bank account via the official website/app.

Ransomware & malware

Ransomware and malware are malicious programs that can infect your computer, phone, or other devices. This kind of software allows scammers access to your personal information/files, apart from locking you out of your device until you ransom the scammers.

Source: Statista | In the United Kingdom From 2011 to 2020 (In Million GBP)

BANKING AND FINANCE FEATURE BANKING DIGITAL SECURITY CYBERCRIMINALS

The effects of ransomware attacks are becoming more significant for 21stcentury businesses.

As ransomware-as-a-service (RaaS) grows increasingly common, even smaller businesses may now become cybercrime targets. RaaS has made launching software breaches simple and economical, even for inexperienced cyber criminals.

These medium and small businesses are particularly vulnerable as supply chain attacks increase by 663%. A cybercriminal may access the systems and clients’ data with a single malware attack. The scary part is that 70% of these malware attacks also involve ransomware, enabling cybercriminals

to demand payments from the targeted companies and their customers.

Businesses must be 24/7 ready for ransomware attacks. Here is what business leaders need to know about protecting their organizations from ransomware in 2023.

Who is susceptible to a ransomware assault?

In the past, when cybercriminals launched a malware assault, they frequently had a particular target in mind.

Cybercriminals wanted to steal large quantities of personally identifiable information (PII) or data with a more excellent resale value, like medical records and financial information, as

reselling PII was a significant factor in data breaches. As a result, skilled hackers usually preyed on huge companies with sizable databases containing priceless PII, such as banking and medical institutions in industrialized nations.

Cyberattacks are becoming more common and profitable because of ransomware's advent. Threat actors can simply make money by encrypting a company's data and extorting payment in exchange for its decryption. In addition, a new threat has emerged in the form of double extortion ransomware assaults, where cybercriminals get the ransom payment and then resell the targeted company’s confidential data on the dark web to increase their profits.

As RaaS gains popularity, the likelihood of a double extortion ransomware assault increases even further. Cybercriminals without technical expertise can now profit from ransomware attacks thanks to RaaS.

RaaS users are now targeting emerging markets rather than developed ones because cybercrime gangs frequently charge higher costs to attack businesses headquartered in wealthy nations.

It is understandable why thieves employ ransomware to steal 10 TB of data each month because of the potential for enormous payments.

Supply chains are rife with ransomware

A significant factor in the rising ransomware risk is the global supply chain.

Most businesses collaborate with hundreds, if not thousands, of outside vendors and service providers, including MSPs (Managed Service Providers) that handle their cybersecurity. However, a cybercriminal only needs one vulnerable endpoint to introduce malicious software

BANKING AND FINANCE FEATURE BANKING DIGITAL SECURITY CYBERCRIMINALS

into a network or application, placing the business and its customers at risk.

MSPs must safeguard their clients' IT infrastructure from malware because they oversee their security. An attacker who gains unauthorized access to an MSP's network can also readily access the IT infrastructures of the target’s clients. The MSP and its clients are then vulnerable to ransomware attacks.

A 2021 ransomware attack on the MSP software provider Kaseya sought a $70 million ransom payment to restore the data of as many as 70 of the business’s clients. However, because the software stored information on each MSP's customers, the assault affected 1,500 companies in at least 17 nations.

Ransomware is widespread now

Anyone can rent professional ransomware tools, purchase instructional DIY kits to create and launch attacks or employ a criminal organization to deploy ransomware assaults, thanks to RaaS. Additionally, RaaS is accessible and economical for nascent cybercriminals because these malicious source codes are available for as little as $39.

To collect RaaS income, several cybercrime gangs are adopting a subscription affiliate model with profit sharing. A threat actor is now paying a monthly subscription to gain access to the ransomware tools, code, and deployment help. The gang automatically takes a portion of the ransom money each time a cybercriminal uses the gang's harmful code to retrieve a ransom.

This strategy makes smaller businesses and organizations in developing nations more susceptible to ransomware. These businesses have become vulnerable targets for a new generation of cybercriminals trying to make a profit, even though attacks

on these companies are typically not profitable for significant cybercrime gangs. These attacks are inexpensive to deploy, and their attacks are now costing businesses millions of dollars in ransom payments, clean-up expenses, compliance fines, and lost revenue.

How criminals disseminate ransomware

Cybercriminals frequently combine their methods when trying to gain access to IT infrastructure and introduce dangerous ransomware. Others utilize various techniques to locate flaws and obtain credentials to boost their chances of success. At the same time, some may use ransomware assaults in the hopes of discovering zero-day vulnerabilities.

Phishing assaults, undoubtedly the most popular means to steal passwords or spread malicious URLs, increased by 120% in Q3 of 2022. It is customary for cyber attackers to initiate phishing attempts and obtain access to an IT environment before spreading ransomware because stolen credentials are routinely the top cause of breaches.

Cybercriminals frequently target MSPs to access their clients' systems and spread other ransomware because many MSPs manage access permissions for the methods of their clients.

Knowing cybersecurity trends is only half the battle won

Unfortunately, cybercriminals always seem to be one step ahead when exploiting weaknesses. To stay current, learning about cybersecurity trends like ransomware-as-a-service is essential, but being aware of them is just half the battle won.

ATM skimming

ATM skimming is when scammers place

a device on an ATM to capture your card information and PIN as you use the machine. This information is then used to make fraudulent purchases/ withdrawals from your account.

To avoid falling victim to ATM skimming, it's important to always check the ATM for any signs of tampering, such as loose or extra attachments. Also, cover your hand as you enter your PIN to prevent scammers from visually capturing it.

Skimming is illegally installing equipment on petrol pumps, ATMs, and point-of-sale terminals to steal information, such as card numbers and PINs. With this data, fraudsters can create fake credit or debit cards. According to estimates, skimming results in more than $1 billion in annual financial losses.

Pump skimming for fuel

The typical location of fuel pump skimmers is in the machine's internal

wiring, out of the customer's view. The gadgets used for data collection save information for subsequent wifi or download.

Guidelines to avoid pump skimming

Select a fuel pump closer to the store and in the attendant's line of sight. Skimmers are less likely to target these pumps. Use a debit card instead of a credit card. Cover the keypad while entering your PIN. Instead of paying at the pump, think about performing the procedure in another secure premise with the attendant. Contact your bank immediately if you believe you've been a victim of skimming.

ATM and Point of Sale skimming

Devices for ATM skimmers often cover the original card reader. A few skimming gadgets are located near exposed cables, in the terminal, or in the card reader. ATMs with pinhole cameras

capture a user entering their PIN. The placement of pinhole cameras varies greatly. When recording PINs, keypad overlays occasionally take the place of pinhole cameras. This is because Keypad overlays keep track of user keystrokes.

Skimming equipment stores information for eventual wireless transfer or download.

Tips to avoid falling prey to such crimes

Before using the cards, check the POS terminals, ATMs, and other card readers. Look for anything that is off-centre, bent, broken, or scraped. If you find anything strange, avoid using card readers. Before inputting your PIN, tug on the keypad's edges. Cover the keypad after entering your PIN to prevent cameras from recording your entry. Use ATMs which are indoors, well-lit, and away from any threats. If you are using ATMs in tourist destinations, watch out for skimming devices. Use chip-enabled cards. Devices that steal chip data are less common than those that steal magnetic stripe data. Be cautious while using your debit card with linked accounts. Instead, use a credit card. Immediately contact your bank if the ATM doesn't return your card after you cancel a transaction.

Impersonation scams

In this scenario, scammers pose as bank employees/another authority figure to gain your trust and access to your personal information. For example, they may call or email you, claiming to be from your bank, and ask for your personal information/login credentials.

Credit card fraud was one of the most widespread types of fraud in the United States in 2021, according to complaints received by the Federal Trade Commission (FTC). However, that

statistic only provides a partial picture of the issue.

The Nilson Report, which tracks the payments sector, predicted that over the next ten years, losses in the United States from card fraud would reach $165.1 billion, affecting every age group. According to Insider Intelligence, only one sort of credit card fraud, card-notpresent fraud involving online, over-thephone, and mail-order transactions, will be responsible for an average estimated $5.72 billion in losses in the world’s largest economy in 2022 and beyond. When someone uses a credit card to make an illicit purchase, such as purchasing goods on Amazon, this is known as credit card fraud. Other types of credit card fraud include identity theft, using stolen cards, and card-notpresent fraud. While credit card fraud is a significant issue, there are precautions to avoid being one of the statistics.

Theft of identity

Identity theft occurs when fraud or another crime is conducted using your personal information, such as your credit card or Social Security number. The Federal Trade Commission received around 1.4 million reports of identity theft in 2021.

Conclusion

Technology and banking scams are becoming increasingly sophisticated, and it's essential to be aware of the dangers and take steps to protect yourself. Always remember to be vigilant and never disclose your personal information or login credentials unless you're confident you're dealing with a legitimate source. Stay safe out there!

Banking concerns for US property market

IF CORRESPONDENT

The markets have not wholly recovered from the COVID fallouts. As a result, some are concerned that another economic slowdown would increase worries about a recession.

The recent financial crisis, sparked by the failure of three prominent American regional banks, has resulted in a slowdown in commercial real estate as borrowers worry that these lenders will reduce their capital supplies. Analysts and real estate professionals warned this could slow the sector’s further growth.

In the same week, both Silicon Valley Bank and Signature Bank failed. First Republic Bank followed the same direction soon.

Large lenders to developers and owners of office buildings, rental apartments, shopping centres, and other commercial properties had accounts at Signature and First Republic.

Small banks own 4.4 times more exposure to US CRE loans than their larger counterparts as compared to big banks. CRE loans account for 28.7% of assets at those small banks, compared to only 6.5% at big banks. A sizable portion of those loans will need to be refinanced, further compounding problems for

borrowers in the context of rising interest rates.

The office sector has a unique set of difficulties. Stronger fundamentals exist in several other CRE industries. Additionally, we don't think prospective losses in the office sector will jeopardize the stability of nearby banks. The office sector is a minor portion of the economy in terms of GDP and wealth.

Nevertheless, the small bank lending channel more broadly does provide a macro risk, as tighter lending requirements and issues with profitability in the banking industry might limit the amount of financing available and drive up the cost for small and medium-sized firms. However, it is challenging to estimate this risk properly and there is a lot of uncertainty regarding potential offsets.

The struggling office sector is under increasing strain due to rising rates. Early on in the COVID phase, vacancies surged, and they have continued to rise ever since. The office vacancy rate, 12.5% as of 2023, is comparable to 2010, one year after the global financial crisis. The volume of office sales is currently getting close to its post-GFC lows.

The increase in remote work is the main cause of these difficulties. Even though more workers started returning to their workplaces in 2022, the overall amount of remote work is still seven times more than before the COVID period. Moreover, it's not difficult to imagine the pain in the office sector getting worse given the Federal Reserve's historically quick pace of interest rate increases

One of the largest commercial real estate lenders in the New York metropolitan area before its bankruptcy was Signature

The struggling office sector is under increasing strain due to rising rates. The volume of office sales is currently getting close to its postGFC lows

over the past year, as well as the acceleration of layoffs in professional and business services and the obsolescence of older office buildings.

However, investors must keep in mind that there are two parts to the office market. Geographically specific challenges are arising and differently affecting property vintages, with Chicago and San Francisco facing far greater challenges than Miami, Raleigh, and Columbus. Newer office construction especially that completed after 2010 is experiencing significantly higher net absorption rates than earlier construction.

Increasing rates and limiting credit availability will inevitably cause problems for some borrowers. Although the sector's current liquidation rate is low, it is anticipated that over the next ten years, the total number of commercial mortgage-backed securities (CMBS) liquidations for the office sector will climb to about 20% (with total losses anticipated to be about 8.5%).

The trend shows that this level of hardship is comparable to the sector's levels in the years following the GFC, but, more importantly, it will

likely take many years to manifest. Borrowers will probably make use of loan extension options shortly. Looking further out, it is anticipated that in 2025–2027, CMBS loan maturities will become increasingly difficult.

According to Trepp, a commercial real estate data company, First Republic had the ninth-largest loan portfolio in that market in the United States. Similarly, Signature had the tenth-largest loan portfolio before it failed.

In addition to offering most commercial real estate loans to businesses, midsize and regional banks are also part of a much larger market. Typically, banks package their loans into intricate financial products and sell them to investors to acquire additional funds to make new loans.

This implies that a reduction in lending may change how investors behave. An industry body estimates that commercial real estate made $2.3 trillion in economic contributions to the United States in 2022. However, analysts worry about a new recession because the industry hasn't fully recovered from the pandemic's damage.

"It's a perfect storm right now," declared Varuna Bhattacharyya, a real estate attorney with Bryan Cave Leighton Paisner in New York who primarily represents banks.

"We were already in a place with a much lower rate of originations," Varuna Bhattacharyya said about the new loan applications that banks handle. So it's challenging to avoid experiencing some worry and panic.

According to Varuna Bhattacharyya, lenders will be even more careful when approving loans for brand-new building projects other than the most high-profile 'trophy deals.'

Borrowers now worry that banks will become more cautious about making loans. Even though the panic has generally subsided for now, regional banks may still be plagued for months by the possibility of another operational failure.

When new loan applications nearly reached a standstill in the fourth quarter of 2020, commercial real estate lending had started to recover from the depths of the COVID lockdowns for much of the previous year. In contrast, according to Trepp, the annual rate of commercial real estate loan origination by dollar volume increased by 18% in the fourth quarter of 2022.

Lending to the commercial real estate sector started to slow in January 2023, even before the Federal Deposit Insurance Corporation intervened to take over Silicon Valley and Signature.

According to Matthew Anderson, a managing director at Trepp, the commercial real estate loan growth rate in 2023

has already decreased by 50% compared to 2022 on an annual basis. He claimed that the Federal Reserve's interest rate increases, which were beginning to impact the commercial real estate market, were partially to blame for the downturn. Moreover, since Silicon Valley and Signature's failures, lending has likely decreased even further, according to Matthew Anderson. However, he added that the impact's duration and depth are still uncertain.

Commercial real estate encompasses mortgages, building loans, and loans designed expressly for operating apartment complexes with multiple dwelling units. Commercial mortgagebacked securities, a market worth over $72 billion in 2022, are the so-called securitized products that include bank loans. It's a different situation in 2023, though, as issuance of such bonds has decreased by 78% from 2022.

Daniel Klein, the president of Klein Enterprises, a Marylandbased company that manages commercial real estate, had recently discussed a construction loan for a new project with several banks. He claimed that one of the banks abruptly withdrew a term sheet for a loan after the banks failed.

Daniel Klein, whose familyowned company oversees around 60 office, retail, and apartment buildings, claimed that the bank had yet to justify its choice and was unsure whether the recent troubles in the banking industry had played a role. In the coming months, he predicted, as midsize banks become wary following the failures

of Silicon Valley Bank and the Signature, loan terms from lenders will become more onerous.

"Banks are generally being more conservative than they were six or nine months ago. However, we've had good fortune. We have a lot of established local banking links." he said.

According to Michael E. Lefkowitz, a real estate attorney with Rosenberg & Estis in New York, regional banks are an essential component of the commercial real estate ecosystem because their bankers spend a lot of time building connections with real estate developers and managers. However, large banks typically do not offer such "high-level service" to middlemarket real estate companies.

When the FDIC revealed that it had sold virtually all of the

ANALYSIS REAL ESTATE US PROPERTY MARKET INDUSTRY

remaining deposits at Signature Bank to a subsidiary of a peer, New York Community Bancorp, which is also a significant commercial real estate lender, some of the worries of real estate lenders eased a little bit. Following money withdrawals from the bank by corporate clients, including real estate companies and cryptocurrency investors, the banking authority took control of Signature on March 12, 2023.

One of the largest commercial real estate lenders in the New York metropolitan area before its bankruptcy was Signature.

A sign of precisely how many customers fled the bank before authorities intervened on March 12 to stop the flow was the $34 billion in client deposits that New York Community Bancorp acquired upon purchasing some

of Signature's assets, down from the $88 billion that Signature held before the bank ran.

There are concerns about whether other banks will step forward to fill the hole created by the demise of Signature, even with the selling of banking deposits to New York Community Bancorp.

According to the FDIC, New York Community Bancorp purchased loans totalling around $12.9 billion from Signature, most of which were business loans to healthcare organizations and wasn't a part of Signature's sizable commercial real estate portfolio. Therefore, the FDIC must still find a buyer for Signature's primary portfolio of commercial real estate loans.

The FDIC official stated that the company "has not characterised the types of loans left behind" and

that they will be "disposed of at a later date."

Matthew Anderson of Trepp said, "I believe this indicates that Signature's commercial real estate portfolio is still in limbo."

First Republic's home base in San Francisco, where Trepp utilizes an indicator to gauge the likelihood of default on bank-owned office complex loans, had the most trouble.

In anticipation of more Federal Reserve interest rate hikes and renewed calls for regulators to become more rigorous in monitoring bank risk-taking, banks are likely to reduce lending to retain capital and improve their balance sheets. Any reduction in new credit could delay the beginning of commercial construction and bring the economy closer to a recession.

Bank regulators will need to monitor banks keeping too many commercial real estate loans in their portfolios as they attempt to stabilize the financial system. This can lead to its own set of issues in a slowing economy.

The credit rating firm Moody's Investors Service reported in 2022 that 27 regional banks already have significant concentrations of these loans on their balance sheets. According to the paper, the problem might become severe for banks if the economy enters a recession.

editor@ifinancemag.com

SAFE:

SAFE provides top-notch security consulting to its clients and partners through innovative measures

IF CORRESPONDENT

GCC’s trusted security partner

With a mission to promote and transform the security services sector through a consultative approach, SAFE has been changing client perceptions and future expectations by offering best-in-class security solutions, while combining world-class technology with the expertise of well-trained and distinguished security personnel.

SAFE has four business objectives: Direct uplifting of Saudi's security industry, maximising the integration of security elements, supporting national security initiatives, and creating a commercial sustainable platform.

“Our ambition at SAFE, is to be a trustworthy and honourable front of our country, society, and entities that we protect. Through promoting integration between the qualified individuals and the latest technology and security solutions, as well as legislations aiming to meet our customers’ safety aspirations and needs by integrated security solutions," remarked SAFE CEO

Turki Bin Matooq Althonayan.

Knowing A-Z of SAFE

SAFE's primary goal is to develop and upgrade the quality and service provided in private civilian security in the Kingdom, with the help of an executive and professional team with extensive experience and successes in the security field. The end target is to ensure that clients understand their security requirements accurately and induct solutions as per those needs.

SAFE provides top-notch security consulting to its clients and partners through innovative measures, while also bringing experts on board to draw up solutions in the private security sector. SAFE branches are deployed in the Kingdom's major cities as part of its strategy of being close to clients.

SAFE also focuses on providing integrated security services with technical and continuous training and supporting security staff in the field through SAFE Reginal Control Center (SRCC), in

THE NATIONAL SECURITY SERVICES COMPANY (SAFE)

The National Security Services Company (SAFE), which was founded in 2019 by the Public Investment Fund (PIF) and started operations in December 2020, has a vision of becoming the ultimate security partner, while leading the transformation of Saudi Arabia's security ecosystem.

Turki Bin Matooq Althonayan, CEO, SAFE

order to guide them and monitor their performances on an ongoing basis.

In June, 2021, SAFE signed various MoUs in the fields of aerospace and defence, in order to advance integrated security solutions in the Kingdom. The agreement has established a framework for the creation of command centres for security, development of training services including high-technology security and operations, as well as providing security consultations in the country.

The company is now working closely with international industry partners and key players to strengthen the Kingdom’s capacity in delivering integrated security solutions.

Talking about SAFE's specialisation, the venture has a professional advisory and consultancy team which provides conceptual advisory and technical solution designs across a range of complex and highrisk environments. The team comprises technically accomplished and independent professionals, who bring their prior experiences of working in successful security programs to the table.

Armed with the knowledge of emerging technologies and best industrial practices, SAFE professionals help their clients to transition into efficient and reliable automated security services.

SAFE's core security consultancy elements are 'Risk Mapping', 'Security Master Plan Design', 'Implementation' and 'Oversight'.

SAFE is eager to minimise your future risks and threats through our trusted advisors and consultants to provide you with integrated solutions to overcome your security challenges," remarked by the GM of Advisory and Consulting Mustafa M. Jan, while describing its 'Comprehensive Consultancy Approach'.

The approach involves three stages: ‘Conceive Security Design’ (where the blueprints for the master planning and security architecture design get done for the clients), ‘Site Assessment’ (process containing effective and comprehensive reviews of client's business assets and drawing up threat and risk management mechanisms) and ‘Build and Integrate’ (The final stage involving integration and convergence of security mechanisms at the client's premises, apart from the routine project management functions).

SAFE has displayed a demonstrable, proven track record of providing consultancy services to a wide range of projects across the sectors like smart cities, air and seaports, government services, residential and commercial property markets, and last but not least, sports and mass events.

SAFE's security solutions

"SAFE believes in meeting and exceeding customer expectations. We understand that as a business-to-business service; managing all perspectives of quality, brand, and cost can be an enormous task, hence; there is always room for improvement and the key to success is the commitment to continual development. This is achieved through the integration of state-of-theart technology, careful selection of staff, extensive training, dedicated account management, and layers of communication channels. We are always keen to listen to our clients, and their customers about their SAFE Experience," the company commented.

SAFE's security professionals undergo extensive screening and intensive training, as part of their certification process. Armed with the latest radio communication devices, and non-lethal weapons according to the client’s/ project’s risk level, these professionals follow best practices as per international standards.

SAFE's specialised security offerings for clients include 'SAFE Cash Management Services', 'K-9 Services', 'Events Security Services', 'Maritime Security', 'Fire & Safety Services' and 'VVIP Protection'.

Exploring SAFE Reginal Control Centre (SRCC)

Manea Al Shetawi, Chief Operations Officer, said, “For any operation to be successful, one of the key elements is effective communication. The faster the information is exchanged, the quicker the response in terms of resolving an incident, accident, or any issue for that matter. As such, the establishment and operation of a SRCC is deemed

THE NATIONAL SECURITY SERVICES COMPANY (SAFE)

INDUSTRY COVER STORY SECURITY ECOSYSTEM

an absolute essential, to enable us to deliver our concept of Security Solutions. The SRCC being an integral part of SAFE, supports the business operations as well as provides cost-efficient and technically reliable services to our clients. It is designed to manage services from one platform and can perform multiple functions.”

Fahad Al Ghamdi, Head of Command & Control Centre, said, “Our Reginal Control Center is linked to the client’s security tech infrastructures with a backup service for onsite Security Operation Center (SOC) to provide 24/7 coverage by monitoring with real-time information feeds around the clock, latest technologies including CCTV cameras and unmanned systems (both aerial and ground), sensor-tracking systems and intrusion detection, as well as life safety equipment, linkage with first responders and relevant authorities and patrol vehicles tracking.”

How SAFE trains its employees?

Candidates go through rigorous training at the SAFE academy, before being certified and

Our ambition at SAFE, is to be a trustworthy and honourable front of our country, society, and entities that we protect. Through promoting integration between the qualified individuals and the latest technology and security solutions, as well as legislations aiming to meet our customers

accredited for the job as per international standards.

SAFE is licenced by International Federation of Protection Officer (IFPO) to provide international accredited courses in various languages (Arabic, English and other).

"The fast-changing threat and risk spectrum necessitate skills enhancement for security professionals to remain future fit, as well as, abreast of industry best practices," commented SAFE on its staff training program, while continuing, "With an intent to enhance competency and service standards for the security industry in the Kingdom, we have partnered with global organizations for the bringing state of the art education and training resources for our staff and those of our business partners i.e., the clients."

SAFE’s security professionals get three layers of training, namely fundamental, specialised and supervisory, thus covering all the bases as per the industry requirements. Its tailored curriculum, training methodologies, world-class expertise, and

purpose-built facilities transform the Saudi Nationals into top notch professionals equipped with the skills to meet the industry demands.

Some of the certificate courses in SAFE Academy include:

Certified Protection Officer (CPO): This course is designed for security officers and aspirants who wish to learn more about security/asset protection strategies and emerging trends.

Certified in Security Supervision & Management (CSSM): This course is designed to match the job descriptions of the security supervisor/ manager. The program is suitable for those wanting to advance their career in security and earn leadership roles in that particular hierarchy.

Certified Protection Professional (CPP): This one provides knowledge and management skills in seven key domains. It gives the candidate a true competitive advantage, enhancing career opportunities and performance.

Physical Security Professional (PSP): A course designed to conduct physical security surveys to identify vulnerabilities and perform cost analysis

for the selection of integrated physical security measures.

SAFE's Roadmap for 'Vision 2030'

The incorporation of the company was part of the investment strategy of Saudi Public Investment Fund (PIF), with the goal of contributing to the objectives of diversifying the Kingdom's economy under 'Vision 2030', through the development of promising sectors.

"SAFE will contribute to achieving PIF's effort to build a diversified local and international investment portfolio that will enhance the strength of the Saudi economy, diversify sources of income, and achieve long-term economic returns for KSA and its citizens, in order to reflect the Kingdom's vision 2030, as it will support the empowerment of the private security sector in KSA, the localisation of knowledge in this sector and the provision of jobs, in addition to supporting small and mediumsized companies,” the company stated, while talking about its roadmap of contributing to the goals of 'Vision 2030'.

"SAFE is taking care of its employees in

order to provide quality and care to its clients. In this aspect, the company is offering programs that ensure continuity and the accumulation of knowledge for security personnel, including: Clear career paths, Social Insurance, Medical Insurance, Certified and Continuous Training and Compensation," it added further.

"SAFE was established to achieve three dimensions: the urgent need for some security sectors, those to which the private sector does not contribute, and the reinforcing of the role of privatisation, i.e., the conversion of some private enterprises. SAFE will focus on four key points: Security consultancy because any security work begins with a good risk assessment, then we move on to the integration that will occur from an operational or technical aspect through the SRCC to respond and monitor any event. The third point is internationally approved training and development, and finally, security solutions, and we will seek to develop the remaining part, not only providing the service, but also supporting the owners of current companies to contribute by providing them with a supporting layer in this sector," the company remarked.

SAFE has a commitment to contribute and empower the Kingdom's private security ecosystem by transforming it into an attractive

SAFE has a commitment to contribute and empower the Kingdom's private security ecosystem by transforming it into an attractive profession for the citizens, a profession which will enable the Saudi youth to have clear career path, with state-of-the-art training and qualification opportunities

profession for the citizens, a profession which will enable the Saudi youth to have clear career path, with state-of-the-art training and qualification opportunities.

"We are working on ensuring that this goal is achieved by adhering to a number of elements, first, the selection of our employees carefully according to the highest security standards. The recruitment process goes through setting high standards in proportion to the requirements of clients, and through the stages of behaviour and appearance tests and personal interviews, then a security survey and medical examination. Followed by the training of our staff at the best security institutes, where our employees are given intensive training," SAFE elaborated further, while talking about implementing programs that ensure the continuity and Knowledge accumulation for security officials, so that they can look after the client with less supervision.

editor@ifinancemag.com

Is Thailand environmentally sustainable?

IF CORRESPONDENT

According to Germanwatch, an independent development and environmental organisation, Thailand is ranked ninth in the "extreme risk" category of countries that are most vulnerable to the effects of climate change over the next 30 years. Thailand is highly vulnerable to the effects of climate change. The nation is threatened by rising sea levels, which pose a threat to Bangkok, the nation's capital, which is on average 1.5 metres above sea level. Thailand's 6% of GDP and 30% of all jobs are in the agricultural industry. Therefore, extreme and unpredictable weather patterns, such as drought and flooding, are crucial, especially for the rural population.

Around less than 1% of the world's emissions come from Thailand, and per-person emissions are lower than average, but recent years have seen an increase in air quality-related worries. Thailand's

carbon dioxide (CO2) emissions increased by 0.8% yearly from 2011–21, which is greater than the global average of 0.6% but still less than the Asia–Pacific average of 1.8%, according to statistics from the BP Statistical Review of World Energy 2022.

The International Energy Agency predicts that CO2 emissions will reach their peak before 2030. Thailand gains from having a large portion of the service sector, which produces less pollution than industry. Nevertheless, 36% of Thailand's CO2 emissions were from power generation, followed by industry (30%) and transportation (28%). This highlights Thailand’s need to diversify the energy source of its manufacturing industry by moving away from fossil fuel-based power, as well as expanding the fleet of low carbon transport.

Thailand continues to be heavily dependent on

Thailand does not have a good track record when it comes to committing to sustainability goals and combating climate change

fossil fuels. The country's energy use was strongly skewed towards oil and natural gas, which together accounted for 77% of all energy consumption in 2021, according to data from the BP assessment. Overall energy consumption includes coal at 17%, which is low compared to the average for Asia-Pacific at 47%, which was mostly driven by high usage in China (55%), India (57%) and Indonesia (39%). Similar to regional peers, renewable energy consumption took up only 6.3% of the total, but between 2011 and 2021, it increased significantly, averaging 18% annually.

A sense of urgency is rising

Thailand does not have a good track record when it comes to committing to sustainability goals and combating climate change. The nation has a history of demonstrating insufficient commitment despite having strong intentions, according to the Climate Efforts Tracker, a research organisation that tracks government efforts to prevent climate change. The Thai government most recently established targets for carbon neutrality by 2050 and a net-zero GHG emission target in 2065 at the Glasgow UN Climate

Change Conference in 2021, ranking Thailand among the laggards. It did not sign an agreement to end deforestation by 2030.

However, there are indications that the situation is becoming worse. The rise in gas and oil prices brought on by the conflict in Ukraine and the political unrest in Myanmar—Thailand's main natural gas supplier—add the need to increase renewable energy in the mix, in addition to the concern for the environment.

A noticeable policy change towards a more ambitious goal and higher priority for the promotion of sustainable practice became apparent in 2022. Thailand's second updated nationally determined contribution, which included a more aggressive goal to cut its greenhouse gas emissions by 30%–40% from the predicted business-as-usual level by 2030, was revealed in November 2022. The Thailand government also announced a revised version of its Long-Term Low Greenhouse Gas Emissions Development Strategy, which proposed accelerated efforts to combat greenhouse emissions.

In response to worldwide criticism of Thailand's lack of action, the BCG model, in place since

INSIGHT THAILAND CLIMATE CHANGE INDUSTRY

Solar photovoltaic installed capacity

Total renewable energy installed capacity

2021, attempts to demonstrate a better public commitment to climate change risk and sustainability. During the meeting of the Asia-Pacific Economic Cooperation in November 2022, it was given a more prominent position as a cornerstone of economic policy. The government's initiatives actually concentrate on four economic sectors: food and agriculture, health care and wellness, energy, materials, and biochemicals, as well as tourism and the "creative" economy. In order to increase interest in the industries where Thailand currently has an edge, the BCG policy effort blends Thailand's sustainable drive with an investment promotion policy. The Climate Change Act, which is now in draught form, is another measure that suggests that change-related actions have advanced.

Regulators are also developing finance industry policies to assist sustainable practices. The Securities Exchange Commission and the Bank of Thailand, the country's central bank, are currently working on the Thailand Taxonomy, a set of standards that will serve as the foundation for a system of sustainable financial services and the development of related products.

Thailand's solar energy market

The Thai solar energy market is anticipated to grow

at a CAGR of 8.5%, between 2022 to 2027. The COVID-19 pandemic slightly affected the solar photovoltaic (PV) installations in the country during Q1 and Q2 of 2020, but due to lockdown limitations, supply chain disruptions, decreased solar PV output, and delayed project implementation. The 45 MW floating solar farm's operation was delayed by the government-run Electricity Generating Authority of Thailand (EGAT). During the projection period, the solar energy market in Thailand is anticipated to be driven by elements such as significant government support for solar power development in the form of feed-in tariffs, the Alternative Energy Development Plan (AEDP), and falling prices for solar PV systems.

The ground-mounted solar PV category holds the largest proportion of the country's solar energy market due to the installed capacity of ground-mounted solar PV and the huge number of forthcoming projects in Thailand. The region is anticipated to increase the chances for solar energy firms to develop solar PV facilities over the next few years because it has an aim of decreasing GHG emissions to 20.8% by 2030. Additionally, the area has ambitions to lessen its reliance on foreign fossil fuels like crude oil and use renewable energy sources like solar to cut costs associated with imported oil. The market is also driven by favourable

Source: International Renewable Energy Agency | In Megawatts, Thailand

GDP from the electricity, gas, steam, and air conditioning supply sector Thailand crude oil production

Thailand's reliance on fossil fuel

government policies, particularly those developed by the Ministry of Thailand to promote the production of electricity based on renewable resources.

The solar PV segment is predicted to hold the greatest market share during the projection period due to the decreasing cost of solar modules and the ability of these systems to be used for a variety of purposes, including the production of electricity and water heating.

The installed solar PV capacity in Thailand increased from 1,420 MW in 2015 to around 2,983 MW in 2020, according to the International Renewable Energy Agency (IRENA), registering a growth of almost 11% over the course of the year. Large-scale solar PV installation deployments in India, notably for utility projects, are to blame for the growth. The Indian government intends to boost installed solar PV capacity as well.

Meanwhile, a 12 MW solar rooftop PV project was launched by BCPG Public Company Limited (BCPG) in 2020 and is situated on the roof of Chiang Mai University in Thailand. In December 2021, Dezhou Dingzhuang floating solar photovoltaic park's second phase (120 MW) was connected by Huaneng Power International Inc. The plant has a 320 MW installed capacity overall, and the project can produce about 550 million kWh of power annually.

New opportunities in renewable energy sectors

The pathway to carbon neutrality and net zero will be challenging and will require a strong political will to see it through. According to a report by Economist Intelligence, Thailand should create an energy transition plan for the transport and energy sectors in particular. The country's power sector, which accounts for the majority of its emissions, has to shift away from natural gas (coal's role has already diminished over time) and towards renewables, particularly solar and wind in the long term. The transformation requires new infrastructure, including grid management, energy storage, and efficiency enhancement. If fossil fuels are used for direct consumption, Thailand's heavy industries and manufacturing sectors that are export-oriented will also need to increase their energy efficiency.

Thailand will need to increase the effectiveness of its public transport system and encourage electrification through infrastructure, such as charging stations, as well as financial incentives for consumers and also have to reduce emissions from the agricultural sector.

Source:

ANALYSIS CHINA JACK MA INDUSTRY

From 2020 to 2021, private flights nearly tripled and emissions more than quadrupled

Jack Ma: China's visionary entrepreneur

IF CORRESPONDENT

Chinese billionaire Jack Ma has experienced failures throughout his life. The 57-year-old tech business magnet once admitted, "I failed at strange stuff like a vital primary school test twice. First, I failed the middle school exam three times in a row. Later, I attempted and failed for three years of university. When KFC opened in China, I applied. 23 out of 24 applicants for the job were selected. The only person who didn't was me. Harvard denied my application ten times."

The situation reached a breaking point in November 2022 when officials abruptly stopped Ant Group's first public offering (IPO), valued at over $200 billion

Jack Ma used these constant rejections to forge a stronger foundation for Alibaba Group Holding, which he co-founded in 1999. Additionally, it gave him the desire to think strategically and unconventionally, enabling him to transform Alibaba into a Chinese tech conglomerate with a market capitalization of $284.35 billion as of January 2023.

Market observers were not surprised by Jack Ma's announcement that he would relinquish control of Ant Group, a unit of Alibaba. This action will appease Chinese authorities, who have been increasing their pressure on the corporation to

reorganize its intricate organizational structure as per the requirements of the People's Bank of China.

The business claimed it was changing its ownership structure to guarantee that "no shareholder, alone or jointly with other parties, will have control over Ant Group." To "further enhance the stability of our corporate structure and sustainability of our long-term development," the statement stated Jack Ma will now only control 6.2% of the voting rights.

After dealing with opposition from Chinese regulatory officials for over two years, the billionaire had debated separating the fintech from Alibaba for some time.

The situation reached a breaking point in November 2022 when officials abruptly stopped Ant Group's first public offering (IPO), valued at over $200 billion. This was put on hold after China's financial watchdogs cracked down on Chinese stocks listed on US exchanges.

So how did China's most well-known and flamboyant corporate icon lose favour and end up on the government's bad books?

A tale of rags to riches

Jack Ma, born in 1964 in Zhejiang, China, was an inquisitive child from an early age. However, when he was a teenager and eager to study English, he worked as a tour guide for foreign tourists to improve his command of the language since he

believed this was a more effective method than memorizing words from a book.

Later, he attempted to enrol at Hangzhou Teachers College by taking the entrance exam but failed twice. However, Jack Ma didn't give up, and in 1984 he was accepted into the college. He received his English degree four years later, and from then, he taught English at Hangzhou Dianzi University until 1993.

It is nearly impossible to hold a self-starter down for an extended time. So by starting Haibo Translation Agency in 1994, Jack Ma used his English proficiency to offer translation and interpreting services.

A year later, while on an official trip to the US on behalf of the city of Hangzhou, he observed Americans using the internet to fulfil most of their demands, including communication, shopping, informational needs, and entertainment.

Jack Ma came home and established China Pages in 1995, an online directory for local businesses looking for international clients, after being astounded by how technology could change lives, livelihoods, lifestyles, and the economy.

Many referred to it as China's first indigenous Internet start-up. He, however, departed it after only two years and went on to lead a government-backed Internet business until 1999.

He created Alibaba Group Holding in 1999 as a B2B website to aid in transactions between small firms when the impulse to go it alone won out. Jack Ma upset Applecart business by charging users a small cost to become verified as trustworthy vendors on the network and an additional fee for selling to consumers overseas.

When he once visited a bank, the employees refused to process an online transaction because they claimed it was a financial product. This caused the former teacher to become a technocrat, and he subsequently stated in a lecture, "If a Chinese company didn't go into payments, some overseas company would come to do it, and we'd end up the victims. So I went to hear Clinton speak about the importance of leadership when I was at Davos. That meant doing something brave that you believe in, which won't harm your country or your consumers. Then I had my realization, and decided to give it my all.”

As a result, Alipay began operating as a third party in online transactions in 2003. With 1.3 billion users as

of 2013, it had eclipsed Paypal's 377 million users to take the top spot among mobile payment platforms worldwide, ahead of Apple Pay's 507 million users and Google Pay's 421 million.

Contrary to trend

Jack Ma focused on the 2003-launched consumer-focused platform Taobao after seeing the success of Alibaba's B2B website. Severe Acute Respiratory Syndrome (SARS) broke out in China that year, almost decimating the nation’s economy, as the government had to put lockdown to stop the spread of the disease. His never-say-die attitude showed itself once more. Despite challenges faced by China, he and a core group of techies launched the site after finishing its development at his apartment. This decision turned the company's fortunes around.

As more Chinese people shifted to online purchasing due to the self-imposed quarantine, Taobao established a solid foothold in the e-commerce industry. By 2006, it had surpassed eBay as the most popular e-commerce site in the nation, and by 2020, it was generating $56 billion in yearly revenue from over 600 million members.

Investors stream in

The expansion of Alibaba was not unnoticed. The year 2005 saw Yahoo investing $1 billion in the business, acquiring a 40% interest, while Softbank acquired another 30% interest. This gave the two firms a place at the table of the internet behemoth that was now

well-known throughout China. Jack Ma had finally made it to the big leagues, thanks to this coalition, earning him the title of "China's New Internet King" in the New York Times.

With the help of these favourable conditions, the e-commerce business raised $1.5 billion when it went public in 2007 on the Hong Kong stock exchange. However, the Chinese central bank published new third-party Internet payment provider regulations in 2010. It stated that these entities needed to apply for and obtain licenses from the People's Bank of China to continue operating.

Jack Ma kept a 46% share in the financial services company and split off Alipay into a separate company. This led to a protracted dispute with Yahoo, which asserted that his decision to divide the company without informing it beforehand resulted in a sharp decline in the value of Yahoo's stock.

Despite these developments, visionary entrepreneur-backed Alibaba applied for a $25 billion IPO in the US in 2014. However, there needed to be more clarity regarding the connection between Alibaba and Alipay, and concerns surfaced on how the parent firm would profit from the public offering.

Later, the Chinese conglomerate clarified in its revised draft prospectus that Alibaba no longer had "an ownership interest in or control over Alipay or its current parent company." In addition, it acknowledged that Jack Ma still owned 46% of Small and Micro Financial Services firm (SMFSC), the parent firm of Alipay.

Alibaba Revenue & Advertising Statistics

The Ant continues to march Jack Ma gained recognition over time as the person who built a tech behemoth and the best brand representative for contemporary China. From former German Chancellor Angela Merkel to twice-elected American President Barack Obama, he embodied the nation's significant technological advancements and economic prosperity.

The administration at home, though, was keeping a close eye on his expanding political views. Jack Ma attended the Bund Summit in October 2020, and things started going awry for him. In his address, he attacked the Chinese regulatory market, saying, "Good innovation is not afraid of regulation, but is afraid of being subjected to yesterday's way to regulate."

ANALYSIS CHINA JACK MA INDUSTRY

• In 2021, Alibaba spent $7.73 Billion on advertising

• Alibaba’s year-on-year growth is estimated at 29%

• Alibaba’s revenue increased by 22.91% between 2021 and 2022

• In 2022, Alibaba’s revenue is expected to reach $134.567 Billion

• In 2021, Alibaba made 87% of its revenue from eCommerce sales

• In 2021, Alibaba made $473.68 Billion from retail eCommerce in China

• In 2021, Alibaba earned $9.8 Billion in GMV from its Chinese marketplaces

• Alibaba’s revenue from subscriptions grew by 60.4% between 2018 and 2020

Source: thrivemyway.com

The man, the prophet Jack Ma continues to be a visionary in the business realm, and players in the industry and politicians hold him in high regard despite his blunders in the political sphere.

He talked more about wanting to do more than manage a business as he met more fellow thinkers from diverse streams. He had a strong love for philanthropy and innovation, focusing on education in rural China as a nod to his earlier career as a teacher.

"In the future, there will be a competition for creativity, imagination, learning, and independent thought rather than for information. If you think like a machine, trouble will eventually arise," Jack Ma said.

The Chinese billionaire may have been attempting to be humorous when he compared the nation to a "pawn market" and accused it of adhering to outdated business practices. But the dictatorial government was anything but amused.

Jack Ma's comments were an outright rebuke of Chinese President Xi Jinping's determination to end monopolistic activities to "prevent the disorderly expansion of capital."

of the ongoing geopolitical verbal battle between China and the US, which has been more heated after COVID's breakout, as US officials began closely scrutinizing Chinese businesses' listings on their bourses.

To reach investors in mainland China for Ant Group's initial public offering (IPO), the e-commerce giant said it would add a primary listing in Hong Kong to its New York presence. This came after the e-commerce behemoth paid a massive $2.8 billion fine due to regulatory scrutiny in China.

He also stated in one of his talks that after 20 years of making people more like machines, robots will resemble people in the next 20 years.

Jack Ma formally resigned from his position as Alibaba's executive chairman in 2019. In an open statement announcing his departure, he said, "I still have many goals to pursue. Those who know me well understand that I dislike being idle. As I am still young and the world is vast, I want to experience new things.”

In retaliation, the Chinese antitrust authorities investigated Alibaba's practice of pressuring vendors to sell exclusively through its platform. Ant Group representatives were called in for a meeting to discuss consumer rights and competition. Additionally, Alibaba found itself in the crossfire editor@ifinancemag.com

Jack Ma stayed out of the spotlight after the reaction from the administration and disappeared for a while. Then, according to Reuters, the Chinese financial authorities cautiously approved Ant Group's request to resume its dual public listing in July 2022.

His decision to relinquish control of Ant Group is just another step in his departure from the vast empire he has created, leaving behind a lasting legacy.

Having an understanding of the consumers of a business allows for the development of products/services that match the consumers’ needs, wants, and/or preferences

Omar H. Fares is a Lecturer at the Ted Rogers School of Retail Management. Omar Fares earned his Bachelor of Commerce and Master of Science in Management from Toronto Metropolitan University. His main research interest is in the consumer behaviour area, particularly focusing on consumers' interaction with novel digital innovations and the impact of digital innovations on retailers.

Omar Fares published his research in different impactful journals, such as Computers in Human Behavior, the Journal of Financial Services Marketing, and the Journal of Global Scholars of Marketing Science. His professional background combines expertise in sales, market research and planning, corporate strategizing, and leadership & training in the banking and retail sectors. Omar Fares worked for many leading institutions such as Walmart, CIBC, and Fairstone Bank (Previously Duo Bank).

In his interview with the International Finance Magazine, Omar Fares shares his insights about consumer behaviour, marketing strategies, Retail Sales Management, the importance of digital marketing, and much more.

IF: Why is studying consumer behaviour important for a business?

Omar H. Fares : The study of consumer behaviour is critical for the success/survivability of businesses. Having an understanding of the consumers of a business allows for the development of products/services that match the consumers’ needs, wants, and/or preferences.

For instance, in the past, businesses would develop products/services and then try to find the right customer (based on different variables) that would likely engage with their offering. However, with the evolution of

CL RAMAKRISHNAN

'Study of consumer behaviour is crucial'

IN CONVERSATION OMAR H. FARES LECTURER, TED ROGERS SCHOOL OF RETAIL MANAGEMENT

the study of consumer behaviour, businesses now engage their customers first (surveys/ focus groups/ experiments) and work backwards on product/ service development and design. Such an approach helps businesses avoid losses that can otherwise be critical for the businesses' success/survivability.

More importantly, the study of consumer behaviour helps reduce the guesswork for businesses and allows for data-driven strategic decisions which may benefit businesses in the following ways: save money, save time, enhance brand image, and deliver the right product/service to the right customer.

It is also important to note that the study of consumer behaviour is as important to consumers as it is to businesses. The study of consumer behaviour may benefit customers in the following ways: more products/services that satisfy their needs/wants/ preferences and manage their own behaviour, by understanding the motives and drivers of an individual’s decisions one can work to manage their behavioural actions for optimal results. This may equate to extra savings of time and money.

As each consumer is different, how can a company master the art of predicting the customers' demands?

With the growing complexity of consumer behaviour (i.e., consumers are getting smarter, have access to more data, and are able to share information on a wider scale), predicting consumer demand is more and more complex. One of the key ways businesses can predict and understand consumer demands is through market segmentation. Market segmentation refers to the process of dividing consumers into groups with similar characteristics and traits. While appreciating that each individual is different, the process of market segmentation helps in narrowing the gap between guesswork and likelihood estimations that is driven by data. Based on this, the question becomes how consumers differ and how can a business segment its consumers.

Consumers can be segmented/divided/grouped based on four characteristics:

Demographic characteristics: Refer to the process of dividing the market based on characteristics such as age, gender, income, level of education, occupation, etc.

Geographical characteristics: Refers to the process of dividing the market based on location.

Behavioural characteristics: Refers to the process of dividing the market based on actual behaviour such as usage rate, loyalty, purchase occasion, etc.

Psychographic characteristics: Refers to the process of dividing the market based on consumers' personalities, values, and attitudes.

The process of segmenting may allow businesses to better predict consumer demand and deliver offerings at the right time and place. One of the key challenges businesses face however is the lack of statistical skills to effectively segment their consumers. While data availability became less of a concern for businesses, the main issue may be around how to effectively use the data to segment consumers and therefore target and position products/services more effectively.

It is important to note that such segmentation approaches are best utilized in combination (e.g., the use of demographic data only to base strategic decisions may lead to a significant loss of opportunity and thus fall into the trap of painting consumers' behaviour with the same brush). For instance, recent research of mine that we are working on publishing is related to the drivers of banking technology usage, and while many banking professionals assume age (i.e., demographic variable) is a key driver of digital adoption and thus base decisions based on this factor, we found that other psychographic variables can paint a fuller picture in the process of digital banking adoption.

How does the dynamics of consumer behaviour impact organizations?

The dynamic of consumer behaviour impacts organizations in multiple ways including the development of products/services/ enhancement of marketing strategies, understanding competition, and driving bottom-line profits.

Development of products/services: By understanding consumer needs/wants/preferences, businesses can develop and design products/ services that match consumer needs. In recent years, businesses have relied on consumer surveys,

focus groups, and pre-market experiments to gain an understanding of the market before spending resources on product development. This is also evident in consumer experience, where the field of UX (user experience) has taken a common practice of conducting consumer research before and as businesses work on the development of websites and applications.

Enhancement of marketing strategies: Having an understanding of the complex consumer dynamics may aid businesses in developing strategic plans that tailor to their target market and develop tactical approaches based on the understanding of what motivates customers to take certain actions.

Understanding competition: Understanding how consumers perceive and interact with competitors may help organizations develop clear points of differentiation and address consumers' pain points proactively.

Driving bottom-line profits: Ultimately organizations look to drive profit and increase acquisition while reducing customer churn. Understanding consumer behaviour may help increase sales and reduce costs by examining the behavioural drivers of consumers, developing products/services efficiently, and having the right product/service to the right customer at the right place.

What factors influence behavioural changes in a customer?

As human beings are very complex, there are a wealth of variables that influence behavioural changes. While the following is by no means a comprehensive list, it is however a starting point of much of what we know.

Demographic variables: This includes age, gender, income, occupation, level of education, etc.

Psychological variables: Internal psychological factors such as perceptions, memory, learning, and motivations are all factors that may influence behavioural actions.

Social variables: The environment of an individual plays a critical role in determining how one might behave in different scenarios. For example, influence on reference groups such as family, friends, and colleagues has been shown to be a likely driver of behavioural action. On the other hand, the need to

The main issue may be around how to effectively use the data to segment consumers and therefore target and position products/services more effectively

IN CONVERSATION OMAR H. FARES LECTURER, TED ROGERS SCHOOL OF RETAIL MANAGEMENT

dissociate from certain groups may also play a key role in behavioural action.

Situational variables: Consumers may behave differently in certain situations, for instance, one's behaviour can be different if they are busier or if the weather is bad.

Marketing variables: Different variables such as promotions, advertisements, or discounts may influence consumer behavioural actions. The study of such influence is of key interest to consumer behaviour researchers as such variables can be controlled to a higher extent compared to other variables.

How can a company influence consumer behaviour through marketing strategies?

Companies may influence consumer behaviour in several ways including effective branding, strategic advertising, behavioural nudges, product/service promotions, efficient targeting and positioning, and personalization of offerings.

Effective branding: Companies with strong brands and brand image may influence consumers to interact with their product/service by enhancing trust and managing expectations. For instance, purchasing a laptop from an established brand comes with the expectations that have been developed by previous user experience, trust in the post-purchase process, and a level of comfort in knowing what the brand stands for. On the other hand, making such a purchase from an unknown brand leaves customers

with a lack of trust in the product and what it can and is expected to deliver. Therefore, building a brand image is key to helping customers make decisions and influence their behaviour.

Strategic Advertising: When done right, advertising can be a powerful tool to help customers move from one stage to another in the customer purchase journey. Some of the key considerations should be around what message is the company trying to deliver to the customer? What is the goal of the advertisement (i.e., informative, persuasive, reminder)? Who is the ideal customer? How to best reach the ideal customer? Many companies fall into the trap of pushing out advertisements before strategically aligning on some of the main areas of consideration which may result in a harmful impact on the brand and cost companies a wealth of resources.

Behavioural Nudges: These nudges can be referred to as subtle prompts designed to influence behaviour in a positive way. For instance, a product stored at eye level in a retail store may influence customers to purchase the product vs products that are harder to see at eye level. There are many examples of the usefulness of behavioural nudges to influence behaviour, however, some of the key ones include choice architecture (i.e., the process of designing the way choices are presented to customers), social proofs (i.e., the process of using social influence/norms to impact one's decisions), default (i.e., the process of setting an aspired action

Digital marketing helps businesses to reach a highly targeted wider audience compared to traditional channels. Companies can specifically reach customers based on their behavioural, psychographic, demographic, and geographic traits with more effectiveness as the default option), and feedback (i.e., the process of showcasing customer behaviour to customers to influence future actions).

Product/service promotions: The process of including discounts, free trials, and offers may entice customers to take certain behavioural actions. Such an area has been of key interest to researchers and practitioners. Promotion of a product/service that may entice an initial behavioural action works well with the familiarity principle. The familiarity principle is the tendency of individuals to prefer things the more they become familiar with them. Thus, having a promotion or free trial may enhance one's level of familiarity which may lead to enhanced positive behavioural action.

Efficient targeting and positioning: Companies that are able to segment their customers effectively may be better positioned to effectively reach their ideal customers at the right time and place. Reaching customers at the right time and place can play a significant role in behavioural action, therefore, leading to increased sales and bottom-line profits.

Personalization: The process of designing products/services that fit the customers' needs/wants, through data and analytics, may result in customers feeling a sense of relevance and connection to the brand. Thus, personalization of offerings may influence behavioural action leading to positive business outcomes and increased customer satisfaction.

Why is digital marketing important for a business to be successful?

In the modern landscape, digital presence is no longer optimal for most businesses, but rather a necessity. Customers enquire, connect, interact, and purchase from certain brands online. Digital

marketing helps businesses to reach a highly targeted wider audience compared to traditional channels. Companies can specifically reach customers based on their behavioural, psychographic, demographic, and geographic traits with more effectiveness and reduced costs compared to traditional modes of marketing. Additionally, businesses can work within their own budget to create effective campaigns that may be significantly cheaper than other channels. Most importantly, businesses can measure consumer behaviour with a high level of precision and may quickly adapt and change their approaches based on real-time feedback.

How different is 'Inbound Marketing' when compared to 'Digital Marketing'? Which one should companies prefer?

The ultimate answer depends on the company's goals and resources. However, both approaches provide value in a unique way. Inbound marketing provides customers with value through valuable content such as informative videos, blog posts, and expert research. The idea is customers will be attracted to engage with the business through helpful information presented which in turn may result in increased brand trust. On the other hand, digital marketing refers to an all-encompassing approach where a business may work to develop strong inbound strategies and also proactively reach customers wherever they are. This may include targeted advertisements and content. Companies need to examine their goals, motives, and resources before selecting an approach.

Does digital marketing yield results for all businesses? What is your take?

A clear no. While digital marketing is a necessity in the modern landscape, if done inappropriately, it may cost businesses significant losses. Some of the common reasons why digital marketing efforts may fail include: poor segmentation, targeting and positioning, lack of clarity on objectives, bad product/service, no clear value proposition, ineffective message, minimal testing and optimization, and budget constraints. Therefore, it is important to critically examine all the factors involved in building an effective digital strategy before going to market.

IN CONVERSATION OMAR H. FARES LECTURER, TED ROGERS SCHOOL OF RETAIL MANAGEMENT

What role will artificial intelligence play in the coming days in transforming the marketing sector?

Artificial Intelligence will play a critical role in reshaping the marketing field. A few key takeaways I present here are businesses with no proper marketing plan before integrating AI technologies will still be a business with a poor plan after integration and AI technologies will effectively need active human monitoring and management to avoid reputational and different sorts of risks.

Also, there will be other scenarios, where AI will help automate (and are already helping) repetitive tasks, thus leaving marketers to focus on high-impact tasks. Content creation may be enhanced by using AI, however, with a careful note on avoiding complete reliance on existing tools, this will be one of the top areas of possibility and challenges for marketers (It will be important to maintain the human element to existing processes to maintain relevancy and connection with consumers).

Customer service can be enhanced through the use of chatbots that are trained on vast amounts of data and are able to support customers 24/7 in different languages. Also, Internal marketing tasks will likely become more efficient with the integration of AI tools such as pipeline management software. Last but not the least, customer research can be enhanced by using AI through effective thematic analysis that can be done in minutes (otherwise may take weeks or more). Marketers will be able to collect, analyze, and adjust in real time creating key opportunities in the field.

You have worked for leading institutions such as Walmart, CIBC, and Fairstone Financial. According to you, what does it take to become successful in Retail Sales Management?

Some of the key skills that I believe are necessary include data analytics, technical competency in one's particular subject matter, relationship management, research competencies, ability to write and present work effectively, and work-ethic/commitment.

While there is no clear formula for success, there are certain steps one can take to further enhance and develop. In the field of Retail Management, data analytics (the ability to work with a large set of data

Customer service can be enhanced through the use of chatbots that are trained on vast amounts of data and are able to support customers 24/7 in different languages

and give meaning to it) is a key to standing out as a strategic leader and decision-maker.

Following, I suggest developing a high-level of technical competency in one's subject matter, this can be done through active studying and working towards relevant certifications in one's field.

I also urge working on the soft skills side, just like subject matter expertise can be acquired, soft skills need continuous development and work. This will lead to effective working relationships with colleagues and customers alike.

Moreover, one of the usually overlooked skills is the ability to research in a scientific manner. I suggest that future business leaders take research methods courses and familiarize themselves with the scientific research process as it will pay dividends in the form of strategic decisions in the long run.

I also recommend that individuals practice business writing and presenting at all given opportunities (valuable information that can't be communicated effectively may cost one and business significant losses).

Finally and most importantly, one can teach all of the above, however, work-ethic/commitment is very hard to teach. I argue that the main criterion for success is work-ethic/commitment where all the other areas can be reached with the right focus and strategic planning.

CONSUMER BEHAVIOUR DIGITAL MARKETING

LTC: Leading Lao’s telecommunication revolution from the front

Director General Souphol Chanthavixay and the management team of Lao Telecommunication participated in the Ministry of Technology and Communications' Lao Digital Week, an annual national event to show the latest technologies and solutions being introduced to Laos

Lao Telecommunication Public Company is the Lao PDR’s leading telecommunications provider with nationwide network coverage. The company’s telecom services include 2G, 3G, 4G and 4.5G mobile phone connectivity, fixed line and fixed wireless telephone services, fibre to the home internet, international calling, and mobile data services.

As the largest telecom operator in the Lao PDR, Lao Telecom’s network covers well over 95% of the country’s connectivity infrastructure. The venture also has established roaming contracts with all

Lao Telecom’s network covers well over of the country’s connectivity in-frastructure

95%

major markets to ensure that visitors to the Southeast Asian country can connect seamlessly.

Lao Telecom is the only company to have been ISO certified since 2013, apart from being the first to implement a ‘Network Operations Center’ that monitors its network on a 24/7 basis to ensure consistent and persistent services.

From common people to corporate and government entities, Lao Telecom covers a range of customers. From staying in touch with your dear ones to having a network that boosts your business connectivity, Lao Telecom has emerged as a one-stop solution for multiple challenges.

Corporate clients have now realized the strength, capacity, reach and stability of Lao Telecom’s network, which in turn, has assured them that they can remain competitive and in touch with their customers and business partners. Also the government entities in Lao PDR back the venture, given the security and integrity of its communication and network infrastructure.

"Technology changes constantly and new advances in technology drive the world and can empower an economy’s sustainable growth. At Lao Telecom we stay abreast of the latest technological advances, and whether it is the introduction of 4G or 5G mobile communications technologies, new innovative technologies form the basic foundation that supports Lao Telecom’s broadband speed and capacity, the very elements that make us the leading telecoms and digital solutions provider in

Laos," the company remarked.

Lao’s A-Z of digital business solutions, including e-commerce, social media and mobile payments depend on Lao Telecom’s ability to constantly deliver on the technology front.

“And that is our mission, to provide the type of solutions that will answer the needs of the consumers, and the business and government sectors,” remarks the telecom giant.

Fintech is quickly becoming an important pillar in Lao’s digital economy. Lao Telecom is also leading the transformation from the front by launching a national e-wallet that has become the largest non-bank payment system in use in the country.

Having an e-wallet is a major step toward Lao PDR’s goals like financial inclusion and fiscal efficiency.

Lao Telecom’s e-wallet, known as ‘M-Money’, is a mobile electronic payment system. People these days prefer making online transactions, rather than having bank/government office visits and standing in queues there to pay their bills. Online

Lao Telecom Director General and senior management donate essentials to students.

In the area of education support, it has been providing scholarships to students at the National University of Lao, over the past quarter of a century

payment platforms have emerged as the one-stop, easy solution in the 21st century.

Lao Telecom has responded to this trend with its ‘M-Money’, which also serves the Lao government’s policy of transforming the country into a cashless society, and ensuring that everyone has access to financial services.

Future challenges for Lao Telecom

It is necessary to make the right business adjustments, accommodate new technologies and then select the right solutions for future operational needs, and this whole procedure is very delicate due to the inherent risks of selecting the wrong solution at the wrong time.

The introduction of new disruptive technologies like ChatGPT and 5G internet, and the costs associated with it may impact a venture’s operations in unforeseen ways, particularly on the fronts of business automation and staff redundancy issues. Lao Telecom is well aware of it.

“We will continue to monitor new advances, and already we are looking at the recent wave of announcements about AI technology that may have a massive effect on our daily lives – how will that affect telecommunications, how can we as a telco harness the power of AI, and more; these are the questions of today for solutions for the future,” it remarked.

Lao Telecom also has the challenge to focus on its human capital to ensure that it em-ploys the correct people to drive the implementation of these new technologies. Then the venture will also have to manage its fiscal and scientific resources to encourage creative new projects in areas like AI, big data, and cloud computing, with the goal of enriching customer experiences with technological breakthroughs.

“Beyond our commitment to our customers and partners, the company also has a com-mitment to the nation and

society. The Company’s slogan reflects the duty the Company carries toward the nation; Lao Telecommunication, providing telecommunication solutions to the people of Lao,” it remarked.

Lao Telecom: A supporter of knowledge and skills

Lao Telecom has also become a leader in

Lao Telecom is the only company to have been ISO certified since 2013, apart from being the first to implement a ‘Network Operations Center’ that monitors its network on a 24/7 basis to ensure consistent and persistent services

Lao Telecom also has the challenge to focus on its human capital to ensure that it employs the correct people to drive the implementation of these new technologies

promoting education and learning, and the backing of skills and start-up businesses. In the area of education support, it has been providing scholarships to students at the National University of Lao, over the past quarter of a century. As of 2023, annually up to 25 students receive a scholarship to assist them defray their education costs.

Lao Telecom also supports and participates in events like start-up weekends and makeathons where students can present their projects for further research and development activities. The company has also agreed to support

the country’s first public community 'makerspace' to drive innovation and provide a space where idea creators and curious learners can come together to explore, experiment, ideate and create.

Lao Telecom’s mission is to provide a comprehensive range of telecommunications and digital lifestyle solutions at international standards for and to the people of the Lao PDR. It has a constant drive to introduce new technological solutions and offerings to its customers, solutions which will fulfil the latter’s daily communications needs.

Increased capacity, increased bandwidth, and improved speeds are the main advantages of 5G over 4G

5G technology: Next big thing

IF CORRESPONDENT

It is fair to say that in the past couple of years, no buzzword has had as much of an effect on marketing as the word 5G. The word signifies so much that the industry has been promoting it everywhere. The new smartphones support 5G. The rollout of new carrier networks mentions 5G services and chip vendors talk about 5G modems and SoCs. Device makers upsell 5G as the 'next big thing' that will 'change users' lives.' Depending on whom the individual talks to, there will be different hearing about 5G altogether.

There are several questions about the 5G, like whether is it mildly upgraded 4G mobile broadband, or is it the technology that will connect industries and services, power a massive number of IoT (Internet of Things) devices, and serve as the backbone support for future innovation? In this article, International Finance will try to answer these questions.

What is 5G?

The fifth-generation mobile network is known as 5G. The air interface that enables 5G, which replaces 4G LTE, is 5G NR (New Radio). The 3GPP, an organisation that develops industry standards,

created the 5G specification. Similar to 4G, 5G is a cellular mobile network that supports mobile broadband. The fundamental idea is the same: networks are divided into cells, and devices get cellular connectivity by connecting to radio waves emitting from a carrier-installed node. It just makes use of additional radio frequency (RF) waves that were not available to 4G. Increased capacity, increased bandwidth, and improved speeds are the main advantages of 5G over 4G.

The background

Mobile networks typically receive a standardrelated technological upgrade every ten years. In the 1980s, 1G networks were analogue networks. Since 2G networks were digital networks, their introduction in 1991 marked a significant turning point for GSM. For instance, SMS texting was supported by 2G networks. GSM, TDMA, and CDMA were the three forms of 2G networks. Later, the 2G GSM networks introduced GPRS and EDGE (2.5G and 2.75G, respectively), which provided basic and slow mobile data. Although browsing the web on 2G required waiting several minutes for a page to load, this was just the start of mobile Internet.

The first commercial 3G networks were rolled out in 2001. In contrast to 2G, which stood for digital voice calling, 3G stood for mobile data. Similar to 2G, 3G was available in a variety of forms, including W-CDMA (which was used in

More than half of the world still does not have widespread access to 5G, but that will change over the course of the next five years

international phones and later developed into HSPA), UMTS, and CDMA2000, to mention a few.

The spread of 3G networks takes a very long period, for instance, India did not have 3G networks until 2010. While 3G enabled mobile internet, data speeds were not very great because the initial 3G UMTS data speed target was only 144Kbps. HSPA and HSPA+ (3.5G) did improve data speeds, but for the most part, browsing the web on 3G was a slow experience with speeds ranging from 1Mbps to 10Mbps on average.

Then in the beginning of 2010, the 4G LTE network was started. The 4G standard made quick, practical mobile data a reality. It had a target data download speed of 100 Mbps, but because of congestion, many 4G networks today have lower download rates.

It unlocked new industries such as ride-sharing. It brought IP-based telephony in the form of Voice over LTE (VoLTE). The network 4G LTE was the successor to both global 3G (WCDMA/UMTS/ HSPA), and EVDO Rev A. The 4G networks were the best yet, and smartphones featuring 4G were more powerful than ever. The network has been

iterated upon by LTE-Advanced, and advancements in 4G keep happening with new modem chips being released every year. The 4G is a mature technology and one that has changed the world.

As with any other network, 4G was unable to keep up with the rising data needs. Data speeds started to decrease as 4G networks became crowded and more people started using them.

For the past four years, 5G networks and modems have been under development, but commercial 5G just started to become a reality in 2019. More 5G networks were deployed in 2020, and more 5G products were made available for purchase. More than half of the world still does not have widespread access to 5G, but that will change over the course of the next five years. The rollout of 4G networks is more or less complete, and so, carriers are turning their attention to 5G.

The applications of 5G 5G is a broad term. It has applications in three fields, which are mobile data and voice, enterprise solutions and IoT connectivity. The 5G addresses the first area for smartphone users. Experts say that with applications in fields like autonomous cars,

smart cities, uses in the medical industry, smart machinery, smart manufacturing, etc., the business sector will undoubtedly gain from the 5G rollout. With respect to the third field, IoT, the telecommunications and mobile industries have been proclaiming for years that 5G will connect IoT devices in massive numbers. Everything around us will be connected. For smartphone users, the latter two fields are academically interesting, but it is the first field—mobile data and voice—that actually matters for end users.

The 5G refers to faster data—in certain cases much quicker—for smartphone users. Additionally, the new networks guarantee extremely low latency, comparable to cable internet. For use cases that depend on extremely low latency, like multiplayer cloud gaming, this will be a major issue. While 4G networks have never been able to achieve latency levels comparable to cable broadband, 5G promises to do just that.

Additionally, the bandwidth and network data capacity of 5G will be substantially higher. According to reports, when a significant number of users start utilising the network, it won't be as overloaded as 4G. The 5G will offer better customer service, less downtime, and higher quality of service for carriers who have overloaded 4G networks. But it is all about the speeds. The maximum downlink speed of the 5G specification is 20Gbps, which is 10 times faster than the fastest 4G LTE modem chip (which tops out at 2Gbps). Of course, 20Gbps is

currently just a theoretical goal. The best modem chips released by chip vendors Qualcomm and Samsung can go as high as a theoretical maximum of 10Gbps when using millimetre wave 5G.

Customers will naturally expect that 5G networks will be orders of magnitude quicker than their current 4G LTE networks given these speeds. Low-band 5G networks from carriers like T-Mobile and AT&T are only marginally faster than 4G networks. These become sometimes slower as the radio frequency spectrum is so important, a 5G network doesn't necessarily guarantee it will be significantly quicker than a 4G network. The 5G networks with data downlink speeds of just 30–50 Mbps are possible, despite other mid-band 5G networks having data downlink rates of 500–600 Mbps.

The technology behind 5G

The Orthogonal Frequency Division Multiplexing (OFDM), which also powers 4G, drives the 5G network. Digital data is encoded using the OFDM technique, which uses multiple carrier frequencies. It is the technology of choice since it is reliable and effective. Similar to 4G (FDD-LTE and TDD-LTE), 5G uses both frequency division duplex (FDD) and time division duplex (TDD) technology.

The spectrum is the main feature that distinguishes 5G from 4G. The electromagnetic frequency spectrum utilised to transport data across the air is referred to as the spectrum. Higher speeds and more data capacity are possible with 5G because of its ability to exploit a

Number of internet users worldwide

wider range of RF waves than 4G networks. It is noted that around 10-20MHz of 5G spectrum in a low band such as 600MHz will give speeds ranging from 50Mbps100Mbps, but as you move up the frequency spectrum, the speeds will also go up rapidly.

A technique called Dynamic Spectrum Sharing (DSS) enables the reuse of the 4G spectrum. This is what US carriers like AT&T are doing. However, experts say, greater frequencies are required to provide the fastest 5G speeds.

There are two 5G operating modes, these are non-standalone mode (NSA) and standalone mode (SA). Nearly all carriers currently rely on NSA 5G. In this mode, the 5G network is reliant on a 4G core network and 4G base stations. These networks use 4G network capabilities for data link transport. Since carriers may leverage their

Source: Statista | (In Millions)

4G core networks and network infrastructure, NSA deployment is made simpler for them. The disadvantage here is that it's dependent on older technology used for 4G, so speeds won't be as high, while latency won't go as low as it can go in SA mode. However, there are still benefits to the 5G protocol itself that consumers will hopefully realize.

The real 5G fantasy that carriers are starting to promote is the SA mode. Verizon and T-Mobile in the US both provide commercial standalone 5G networks, but AT&T is now taking its time. Due to the usage of a 5G core network and separate network infrastructure, SA 5G networks are totally independent of 4G. Since this data link transfer does not rely on 4G technology, SA networks can guarantee significantly faster speeds and lower latency.

Newer smartphone releases that are powered by the most recent modems support both modes, which means they support both the existing NSA networks and future SA networks.

Network bands

The 5G network comes in two types. One is 5G at frequencies below 6 GHz, which is the real 4G LTE replacement. The other is 5G mmWave, or millimetre wave. The majority of users will only encounter sub-6GHz since carriers throughout the world have been wise enough to handle mmWave cautiously. But in some countries, including the US, carriers have launched mmWave first due to the initial shortage of sub-6GHz spectrum. While countries like South Korea, Japan, and Russia have jumped on the mmWave bandwagon, the vast majority of the

world has chosen to play it safe with sub-6GHz.

The term sub-6GHz means a network bandwidth radio frequency that is less than 6GHz. All 4G bands are sub-6GHz. On the other hand, mmWave denotes bands with radio frequencies greater than 6GHz. Although mmWave bands offer a range of 24GHz to 100GHz, in reality, carriers have only launched networks in the 26GHz to 39GHz range so far.

Experts believe that with thorough deployment, 5G can play an essential part when it comes to revolutionizing the telecom sector. For companies, those who harness it will benefit from the efficacies as well as the prospects for innovation that the 5G network provides.

editor@ifinancemag.com

IF CORRESPONDENT

The delivery of different services through the Internet is called cloud computing. These tools and programmes comprise software, servers, databases, networking, and data storage. Cloud-based storage enables users to save files to a remote database rather than a proprietary hard disc or local storage device. As long as an electronic device has access to the web, it has access to the data and the software programs to run it. Cloud computing is a popular option for both individuals and corporations for various reasons including cost savings, increased productivity, speed and efficiency, performance, and security.

Understanding cloud computing

Cloud computing is named as such because the information being accessed is found remotely in the cloud or another virtual environment. Users can store files and apps on faraway servers and then can access the data via the Internet thanks to companies that offer cloud services. This enables the user to access it remotely since they are not obliged to be in a specific location to do so. With the help of cloud computing, users may process data without using computers or carrying around heavy equipment. All of the work can also be transferred to enormous computer clusters

located far away in cyberspace. Users' data, work, and applications are accessible from any device, and users can connect to the Internet from anywhere in the world.

Cloud computing can be both public and private. Public cloud providers offer their services over the Internet for a price. On the other hand, limited numbers of users can access private cloud services. These services consist of a networked infrastructure that offers hosted services. A hybrid option is also available, which incorporates aspects of both public and private services.

Types of cloud services

Regardless of the kind of service, cloud computing services provide users with a series of functions including email, storage, backup, and data retrieval, creating and testing apps, analyzing data, audio and video streaming, and delivering software on demand. Although it is still a relatively new technology, cloud computing is being utilised by a wide range of industries, including large corporations, small businesses, nonprofit organisations, governmental agencies, and even individual consumers.

With the help of cloud computing, users may process data without using computers or carrying around heavy equipment

CLOUD COMPUTING

Deployment models

There are many different kinds of clouds, and each one is unique. Public clouds offer their services on internetconnected servers and storage. These are run by independent firms that manage and take care of all the infrastructure, software, and hardware. Customers use accounts that virtually anybody may use to obtain services. Private clouds are only accessible to a small number of clients, typically just one company or organisation. The cloud computing service could be hosted by the company's data centre. On a private network, many private cloud computing services are offered. As the name suggests, hybrid clouds combine both public and private services. This kind of architecture gives the user more options and improves the infrastructure and security for the user.

Types of cloud computing

Like a chip or a phone, cloud computing is not a standalone piece of technology. Software-as-a-service (SaaS), infrastructure-as-a-service (IaaS), and platform-as-a-service (PaaS) make up the majority of the system instead.

A software programme is licenced to clients as part of the software-as-a-service (SaaS) model. Usually, licences are made available on-demand or on a pay-as-yougo arrangement. Microsoft Office 365 contains this kind of mechanism.

Infrastructure-as-a-service (IaaS) is a technique for supplying anything through IP-based connectivity as part of an on-demand service, including operating systems, servers, and storage. Clients can obtain software and servers through an on-demand, outsourced service rather than having to buy them outright. Popular examples

of the IaaS system include IBM Cloud and Microsoft Azure.

The most complicated of the three cloud computing levels is platform-as-aservice (PaaS). PaaS and SaaS are quite similar, with the main distinction being that PaaS is a platform for developing software that is supplied over the Internet rather than offering software as a service. Platforms like Salesforce.com and Heroku are part of this strategy.

Advantages of cloud computing

Companies from all industries can profit from using cloud-based software, which can be accessed by browsers or native apps on any device. As a result, users can carry their files and settings over to other devices in a completely seamless manner. Using cloud computing for file access is simply the tip of the iceberg. Users may check their email on any computer and store files using services like Dropbox and Google Drive thanks to cloud computing. Users can back up their music, files, and images using cloud computing services, ensuring those files are immediately available in the event of a hard drive crash.

It also offers big companies huge cost-saving potential. Companies had to invest in pricey information management infrastructure and technology purchases, construction, and maintenance before the cloud became a practical substitute. Fast Internet connections can replace expensive server centres and IT staff in businesses, allowing workers to do jobs online by interacting with the cloud. People can conserve storage space on their computers or laptops by using the cloud infrastructure. Software businesses can now sell their wares online rather than through more conventional, tangible

ways like discs or flash drives, which allows customers to upgrade software more quickly. Customers of Adobe, for instance, can use an online subscription to access the applications included in its Creative Cloud.

Disadvantages of the cloud

There are risks, of course, with all the speed, efficiencies, and innovations that come with cloud computing. Security has always been a major concern with the cloud, particularly when it comes to private financial and medical documents. Although regulations require cloud computing firms to strengthen their compliance and security measures, it is still a problem today. Important data is encrypted for protection, but if the encryption key is lost, the data is gone as well. Cloud computing firms' servers

Source: Statista (In Billion US Dollars)

TECHNOLOGY FEATURE DATA CLOUD COMPUTING SERVERS

are susceptible to internal errors, power outages, and natural calamities. The geographical reach of cloud computing cuts both ways: A blackout in California could paralyze users in New York, and a firm in Texas could lose its data if something causes its Mainebased provider to crash. As with any technology, there is a learning curve for both employees and managers. But with many individuals accessing and manipulating information through single portal, inadvertent mistakes can transfer across an entire system.

Market value of cloud computing

The market for cloud computing is currently at an all-time high, valued at $371.4 billion, and is projected to reach $832.1 billion by 2025. It is swiftly developing, progressively

recognising its commercial significance, and drawing an increasing number of academics, practitioners, researchers, and computer scientists. Cloud computing is not a single subject but rather a collection of many technologies that make up the cloud. The top 10 research areas in the realm of cloud computing are listed below:

Big Data

Big Data is the term used to describe the enormous volumes of data that different programmes produce in a relatively short period of time. In business-run data centres, it is rather laborious to store such massive and copious volumes of data. The cloud is the best option since collecting insights from Big Data also becomes a laborious operation that takes a long time to run and produce results. All the data

can be pushed onto the cloud without the need for physical storage devices that are to be managed and secured. Also, some popular public clouds provide comprehensive Big Data platforms to turn data into actionable insights.

DevOps

DevOps is an amalgamation of two terms, Development and Operations. There are now fewer barriers between the development team and the operations team as a result of continuous delivery, integration, and deployment. Heavy applications and software need elaborate and complex tech stacks that demand extensive labor to develop and configure which can easily be eliminated by cloud computing. It offers a wide range of tools and technologies to build, test, and deploy applications

All the data can be pushed onto the cloud without the need for physical storage devices that are to be managed and secured

within a few minutes and a single click. It provides a variety of tools and technologies that may be used to quickly build, test, and distribute applications. The method is easy and cost-effective for development teams because it may be tailored to the needs of the client and eliminated when not in use.

Cloud Cryptography

It is important to safeguard and secure cloud data against outside intrusions and breaches. To do this, Cloud Cryptography is a frequently used method to secure data that is present in the cloud. Since all data is secured using either encryption methods or the idea of a private key, it enables users and customers to access shared cloud services quickly and reliably. It can limit the view of the data being conveyed and render plain text unintelligible. The best Cloud Cryptography security methods avoid slowing down data transit and offer protection without preventing the sharing of important information.

Cloud Load Balancing

Cloud Load Balancing refers to dividing and dispersing the incoming load from numerous sources to the server. Cloud Load Balancing encompasses holding the circulation of traffic and demands that exist over the Internet. This lessens the issue of unexpected outages, improves overall performance, minimises the likelihood of server failures, and also offers a high level of security. Server load balancing allows cloud-based server farms to achieve more precise scaling and accessibility. As a result, it is simple to allocate and manage workload demands.

Mobile Cloud Computing

In order to offer services like seamless

and plentiful computational resources to mobile users, network operators, and cloud computing specialists, Mobile Cloud Computing combines cloud computing, mobile computing, and wireless networks. All processing and data storage happens outside of the actual mobile device, which serves as the console. The lack of expensive hardware, longer battery life, increased data storage and processing power, improved data synchronisation, and high availability owing to "store in one place, accessible from anywhere" are some benefits of using Mobile Cloud Computing. The backend, which offers support for a variety of access ways, handles the integration and security aspects.

Green Cloud Computing

The major challenge in the cloud is the utilization of energy-efficient and hence developing economically friendly cloud computing solutions. Large data centres with numerous computers, cables, air conditioners, networks,

etc. use a lot of energy and emit a lot of carbon dioxide into the atmosphere. The goal of Green Cloud Computing is to make virtual servers and data centres more energy- and environmentally friendly. The amount of power and energy that cloud resources frequently use results in a lack of energy and has an impact on the climate worldwide. Green Cloud Computing offers ways to lower operating costs and improve the energy efficiency of such systems. Power management, virtualization of servers and data centres, extensive e-waste recycling, and environmental sustainability are the key axes on which this is based.

Edge Computing

With the premise that the data is processed closer to the source, Edge Computing is an improvement and a far more effective kind of cloud computing. According to edge computing, all processing will take place at the network's edge rather than on a

TECHNOLOGY FEATURE DATA CLOUD COMPUTING SERVERS

platform that is centrally controlled or in data warehouses. Edge computing disperses numerous procedures and data processing approaches among several locations. As a result, the data can be sent to the closest node and processed at the edge. Since the data is closer to the source and there is no longer any latency or delayed response, the security of the data is also increased without reducing productivity.

Containerization

Containerization in cloud computing is a procedure to obtain operating system virtualization. Through the use of remote resource procedures, the user can interact with a programme and its dependencies. Blocks that help produce operational effectiveness, version control, developer productivity, and environmental stability are built using the cloud computing container. The infrastructure has been improved since it offers more control over the specific operations involving the resources. The usage of containers in

online services assists storage with cloud computing data security, elasticity, and availability. Containers provide some benefits over virtual machines, including a consistent runtime environment, the flexibility to operate almost anywhere, and lower overhead.

Cloud Deployment Model

There are four main cloud deployment models namely public cloud, private cloud, hybrid cloud, and community cloud. Each deployment type is specified based on where the infrastructure is located. The general public can easily access systems and services thanks to the public cloud. Since it is accessible to all users, like email, public cloud services could also be less dependable. Systems and services can be accessed inside a company using a private cloud without external access. Because of its access limitations, it provides superior security. A hybrid cloud is a combination of private and public clouds, with the private cloud being used for vital tasks and the public cloud for non-critical tasks.

Cloud Security

The security of the cloud is a key concern as the number of businesses and organisations employing cloud computing is growing rapidly. Every physical and logical security issue that arises across all the many service models of code, platform, and infrastructure is detected and addressed by cloud computing security. Although it discusses these services as a whole, the public, private, or hybrid delivery models are how these services are actually provided. The data is safeguarded on the cloud against loss, theft, calamity, and removal. Data can be safeguarded with the aid of

firewalls, virtual private networks, and tokenization.

Cloud computing research challenges

There are two major cloud computing research challenges, i.e. Portability and Development of a new architecture. The ability to move an application and its data from one location to another is known as portability. Limiting reliance on the underlying atmosphere could help achieve it. No matter the provider, platform, operating system, location, storage, etc., a portable component (application, data) could be transported and reprocessed. For instance, if the new cloud environment is Linux and the previous cloud environment is Windows, portability would allow an application operating on the old cloud to run on the new cloud without needing to be modified.

On the other hand, nearly all cloud computing services are currently used in sizable commercial data centres and operated in an antiquated centralised manner. This kind of design has some drawbacks, such as low manageability and low economies of scale. The majority of researchers lean towards hosting cloud apps on planned resources. This cloud computing paradigm is highly rational and well-suited for applications like scientific computing since it uses volunteer resources or a combination of volunteer and dedicated resources. However, regardless of its advantages, this architecture has open research challenges as well, which are heterogeneous resources management, and incentive schemes for such architecture.

Edge computing disperses numerous procedures and data processing approaches among several locations

Microsoft and Amazon are now spending more and more on AI-based healthcare technologies

AI revolution in healthcare

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Artificial intelligence (AI) has made a significant impact on the healthcare industry, reshaping the way we diagnose, treat, and monitor patients. By enabling more individualised therapies and delivering more precise diagnoses, this technology is significantly enhancing healthcare research and outcomes. The ability of AI in healthcare to quickly analyse enormous amounts of clinical documentation aids in the identification of illness signs and trends that would otherwise go unnoticed by medical professionals. Healthcare and artificial intelligence have a wide range of possible uses, from analysing radiological images for early detection of disease to forecasting outcomes from electronic health information. Healthcare systems can become smarter, quicker, and more effective in providing treatment to millions of people worldwide by incorporating artificial intelligence in hospital and clinic settings.

The future of healthcare appears to be artificial intelligence, which will change how patients obtain high-quality treatment while reducing costs

for providers and enhancing health outcomes. It all started with IBM's Watson artificial intelligence system, which was created to provide precise and speedy answers to questions. Natural language processing, the technology used to comprehend and decipher human communication, was the subject of IBM's unveiling of a healthcare-specific version of Watson in 2011. This event is mentioned in articles on artificial intelligence in healthcare. Along with IBM, other tech behemoths like Apple, Microsoft and Amazon are now spending more and more on AI-based healthcare technologies. Artificial intelligence has amazing potential in the field of healthcare. AI in healthcare is anticipated to significantly alter how we analyse healthcare data, identify diseases, create remedies, and even completely prevent them. Artificial intelligence in healthcare enables medical personnel to make more accurate decisions based on more precise information, which saves time, lowers costs, and generally improves the management of medical data. From identifying new cancer treatments to improving patient experiences, AI in healthcare promises to be a game changer - leading the way towards a future where patients receive quality care and treatment faster and more accurately than ever before.

Here are a few of the different types of artificial intelligence and healthcare industry benefits that can be derived from their use.

AI in healthcare is anticipated to significantly alter how we analyse healthcare data, identify diseases, create remedies, and even completely prevent them

Machine Learning

One of the most prevalent applications of artificial intelligence in healthcare is machine learning. There are numerous variations of this broad technique, which is at the foundation of various approaches to AI and healthcare technology. By enabling the application of artificial intelligence in medical diagnosis and treatment, machine learning has changed the way the healthcare system operates. With higher precision than ever before, machine learning algorithms can quickly analyse massive quantities of clinical paperwork, spot trends, and make predictions about medical outcomes.

The data science behind machine learning is assisting healthcare practitioners in improving their treatments and lowering costs by analysing patient records and medical imaging in addition to developing new remedies. Doctors can more correctly identify illnesses and tailor therapies to the needs of specific patients by utilising AI technology like machine learning for activities like disease diagnostics or medication research and development. Additionally, the use of artificial intelligence in healthcare, such as machine learning, enables professionals to find previously unknown correlations between diseases in

healthcare data or identify small changes in vital signs that could point to a potential issue.

The most widespread utilization of traditional machine learning is precision medicine. It is a significant advancement for the data science of many healthcare organisations to be able to anticipate which treatment procedures would be successful for their patients based on characteristics and the treatment framework. The majority of AI technology in healthcare that uses machine learning and precision medicine applications requires medical images and clinical data for training, this process is known as supervised learning.

Deep learning-based artificial intelligence in healthcare also employs speech recognition via natural language processing. Deep learning models often include few features that have significance to human observers, making it difficult to evaluate the model's output. Healthcare practitioners find it more and more important as deep learning technology develops to comprehend how it operates and how to use it efficiently in clinical situations.

Natural Language Processing

Natural Language Processing (NPL) is a type of artificial intelligence that enables computers to

comprehend and utilise human language. This form of technology has reshaped many fields, including the healthcare industry. NLP is being used in the healthcare industry for a variety of health data applications, including enhancing patient care by increasing the accuracy of diagnoses, expediting clinical procedures, and offering more individualised services.

For example, in order to accurately identify illnesses, NLP can be used to extract relevant information from medical records. Additionally, based on previous health information, it can be used to determine the best treatments and medications for each patient or even forecast potential health hazards. Additionally, NLP gives therapists effective tools for organising enormous amounts of complex data, a task that would typically take much longer to complete manually.

Medical personnel can utilise artificial intelligence to more precisely diagnose ailments and give better-individualised therapies to their patients, thanks to natural language processing, which is proving to be a vital tool in the healthcare industry. This type of healthcare AI is rapidly turning into a necessity in the contemporary healthcare business and is probably going to get much more advanced and be employed in a wider range of applications.

Rule-based Expert Systems

Expert systems based on variations of ‘if-then’ rules were the prevalent technology for AI in healthcare in the 80s and later periods. Clinical decision assistance using artificial

intelligence is still commonly used in the healthcare industry today. Currently, a lot of electronic health record systems (EHRs) include a set of regulations with their software options.

Expert systems often involve the development of a comprehensive set of rules in a particular knowledge area by engineers and human experts. They are simple to understand and follow, and they work well up to a point. But if the number of rules increases excessively, typically above several thousand, the rules may start to clash and disintegrate. Also, if the knowledge area changes in a significant way, changing the rules can be burdensome and laborious.

Machine learning in healthcare is slowly replacing rule-based systems with approaches based on interpreting data using proprietary medical algorithms.

Diagnosis & Treatment Applications

Diagnosis and treatment have been part of artificial intelligence in healthcare for the past 50 years. Even early rule-based systems had the ability to effectively identify and treat disease, even though they were not totally accepted for clinical practice. They were not noticeably more accurate at diagnosing than humans, and the interaction with physician workflows and health record systems was not great.

However, whether rules-based or algorithmic, it can frequently be challenging to integrate clinical processes and Electronic Health Record (EHR) systems with the use of artificial intelligence in health-

care for diagnostic and treatment plans. When compared to the accuracy of proposals, integration problems within healthcare organisations have been a bigger roadblock to the mainstream deployment of AI in healthcare.

The majority of AI and healthcare features offered by medical software suppliers for clinical trials, diagnosis, and treatment are stand-alone and focus on just one aspect of care. While still in the early stages, several EHR software providers are starting to include basic AI-powered healthcare analytics capabilities in their product offerings. Healthcare providers who use standalone EHR systems will either need to take on significant integration projects themselves or make use of third-party vendors who have AI capabilities and can integrate with their EHR in order to fully benefit from the use of AI in healthcare.

Administrative Applications

Artificial Intelligence in healthcare is changing many of the administrative aspects of medical care. The use of artificial intelligence in healthcare can free up time for clinicians and healthcare organisations to concentrate on patient care and revenue cycle management by automating tedious operations like data entry, claims processing, and appointment scheduling. Furthermore, by offering a quicker means to analyse medical imaging, claims processing, test findings, and health data, artificial intelligence has the potential to lessen human error. Medical personnel are now

more in control of their workflow process because of artificial intelligence, which allows them to deliver higher-quality patient care while still operating within budgetary constraints.

The ability of AI in healthcare to analyze the medical history of a patient and deliver better and faster results is reshaping the way healthcare providers deliver care, making it possible for them to devote more time and resources to their patients. With artificial intelligence in healthcare leading the charge in improving patient care, medical professionals can be confident that they can focus on delivering quality care while also saving time and money with AIpowered administrative tasks.

Also, healthcare artificial intelligence offers a refined method for healthcare providers, it gives better and quicker patient care. By automating mundane administrative tasks, artificial intelligence can give medical practitioners more autonomy over their workflow

process while also saving time and money by automating routine administrative activities.

Challenges for Artificial Intelligence in healthcare

As healthcare organizations increasingly invest in the use of artificial intelligence in healthcare for a range of tasks, the challenges facing this technology must be addressed, as there are many ethical and regulatory issues that may not apply elsewhere.

Healthcare organisations are investing more and more in the use of artificial intelligence, but there are many ethical and regulatory difficulties and challenges which must be addressed.

Some of the most significant issues are gaining physician acceptance and trust, assuring compliance with federal rules, training algorithms to recognize patterns in medical data, patient safety and accuracy, and data privacy and security. Data privacy is particularly crucial because AI

systems gather a lot of sensitive personal health data that could be abused if not managed properly. Additionally, proper security measures must be put into place in order to protect sensitive patient data from being exploited for malicious purposes.

When applying AI in healthcare, accuracy and patient safety are also crucial aspects to consider. AI systems must be trained in order to identify patterns in medical data, comprehend the connections between various diagnoses and therapies, and make precise suggestions that are catered to each patient individually. Furthermore, integrating AI with current IT systems might make things more complicated for medical professionals because it necessitates a thorough understanding of how current technology operates to ensure smooth operation.

editor@ifinancemag.com

One direct impact of metaverse in the workplace will be in form of team meetings and client presentations

Metaverse taking over professional workspaces

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While the world is steadily moving towards normalcy again, after a twoyear-long COVID-19 bout, the trend of ‘Remote Workplace’ is becoming the new normal in the white-collar sector.

While most of the tech biggies have hit the headlines due to them calling their employees back to the office, other businesses are adopting the hybrid culture now. About 50% of their staffers can work from anywhere, while the remaining will report to their team leaders at the office. The hybrid concept is getting boosted by video calling apps such as FaceTime, Skype, Zoom and Google Meet, as these video meeting apps are serving as the communication channels between employers and employees.

However, it is the metaverse, which is going to lead the technological revolution in the hybrid office culture. With the support of Augmented Reality (AR) and Virtual Reality (VR), it is working towards creating a virtual office, where those working from home, can get the feeling of working in a real-world company headquarters.

In the recently concluded ‘Meta Connect 2022’

event, Microsoft unveiled its technological solutions to aid the futuristic concept of ‘Virtual Office.' Apart from entering into a partnership with Meta, the company also cited that 50% of the millennial workforce will be working in a virtual office in near future. Keeping this in mind, Microsoft will help Meta with its HoloLens/Mixed-Reality tools to help businesses transition into the AR/VR phase. While Microsoft’s ‘Work and Productivity Tools’ will be making their debuts in both Quest 2 VR headset and the upcoming Meta Quest Pro, the two firms will partner with each other to come up with more such breakthrough techs in the coming months. Quest headsets will have Microsoft Mesh which will allow the professionals to join their team meetings in Horizon Workrooms (virtual conference rooms). Your Meta Avatars can even allow you to interact with your teammates and do routine tasks such as undertaking brainstorming sessions to decide upon business strategies. All other conventional Microsoft tools such as Word, Excel, PowerPoint, and Outlook will be integrated with the Quest devices to make the experience

holistic. The customers will be enabled to stream a Cloud PC complete with personalized settings under this mechanism.

Let’s go back to a 2019 study from the leading freelancing website ‘Upwork’ which stated that by 2028, 73% of United States businesses will have remote staffers. It also said that the companies will be offering commercial spaces in their staffers’ resident cities, which can be used as a company based in that geographical territory, with tech support connecting them with the main headquarter. The report highlighted the importance of having a mixed and merged workforce, which now has emerged as a ‘Hybrid Workforce’.

Coming back to 2022, a ‘Slack’ report has said that some 78% of professionals now want flexibility in their daily work schedule. They are giving preference to the hybrid concept. While on one hand, it is taking care of employers’ and employees’ financial health by saving costs, it is also proving compatible with the social distancing rules, with COVID still evolving.

American hospitality giant MGM Resorts have recently teamed up with VR training innovator Strivr to give job seekers a chance to try out their work roles in virtual reality before accepting the offer letters. If the candidate is unhappy, he/she can decline the opportunity, thus saving the company's training time and money.

One direct impact of metaverse in the workplace will be in the form of team meetings and client presentations. Through the 'Avatar' format, you can send your digital clone to attend a team meeting or give a client presentation, while having some quality family time or holiday trips. Even customer visits can be performed via metaverse, while

businesses can even host their trade exhibitions virtually, attracting more first-time customers via live streaming. The companies can benefit in form of cost savings in areas such as booking fair venues, hotel bookings for guests and special business delegations and food catering.

While many professionals complained about “Zoom Fatigue" in the last two years (burnouts due to back-toback, excessive online meetings), bosses came across the disturbing habit of employees putting themselves in mute mode during team meetings. Metaverse's concept of virtual office addresses this issue too, as it not only mimics the conference room environment, where the team members can see each other, the business leaders too can observe his/ her colleagues' body language during a brainstorming session, all from the comforts of the home.

Let’s go through some of the examples of professionals embracing the metaverse in their fields.

Euronews reported about Jeff Weiser, founder of a United Statesbased translation start-up, spending 25 to 35 hours weekly in his Cincinnati home. He uses Oculus VR gear and a supporting app called 'Immersed,' which syncronizes his computer and smartphone screens to his virtual world. He uses these to communicate with his colleagues' avatars from various parts of the world.

The same report also talked about Teamflow co-founder Florent Crivello, who deals with software solutions for companies investing in metaverse. His area of expertise is in introducing desktop-based VR tools, while the Teamflow virtual offices have gameboard-like appearances with meeting rooms and other basic workplace-

related infrastructures. Staffers in those places are represented by icons featuring their photos/live video facial appearances. They can discuss workrelated stuff with their colleagues by moving their 'pawn' close to the one of that designated person. Crivello's company has more than 1000 daily customers.

Harvard Business Review wrote about India-based NextMeet, which is mainly an avatar-based immersive reality platform. With an aim of removing the workplace isolation, often faced by professionals working from home. Here employee digital avatars can enter the virtual meeting rooms and give a presentation from the dias, apart from enjoying the benefits of a virtual colleague networking lounge, all with the help of an avatar.

UK-based PixelMax is helping businesses to create immersive workplaces. Their virtual offices can be entered from a web-based system. The team members can see their work

TECHNOLOGY FEATURE VIRTUAL REALITY METAVERSEREED WORK SPACE

There are over 400 million metaverse monthly active users

buddies' avatars and if they bump into each other, can use the moment to indulge in a chat as well. These virtual offices even have 'wellness centres’ in the form of forests and aquariums.

Metaverse reaches 400 million monthly active users

In 2022, the metaverse reportedly reached a record high of 400 million monthly users. Its current Monthly Active Users count (MAU Count) is giving competition to Reddit and Pinterest, The total population of the United States and the United Kingdom combined alone is close to 400 million.

Metaverse’s user base is mostly from the young age bracket and keeping in mind this factor alone, we can conclude that the world of AR and VR will keep on growing in the coming years as well. What lies ahead for the metaverse, when it comes to revolutionising office culture?

A Lenovo survey has shown that 44% of its participating professionals

•The market size of the metaverse is over $38.5 billion

• The majority of people are willing to spend up to $1,000 on advanced VR gear

• Over $500 million worth of real estate was purchased in the metaverse so far

• 53% of companies investing in the metaverse invest in cryptocurrencies

• There are over 400 million metaverse monthly active users

• Roblox is the biggest virtual world in the metaverse

• 51% of the metaverse userbase is 13 or younger

• 74% of American adults are joining or considering joining the metaverse

expressed willingness to work in office set-ups based on metaverse.

Another PwC study has stated that in less than a decade, virtual reality will be used in 23 million jobs worldwide.

A Microsoft report, which covered some 31,000 professionals from 31 countries, said that some 52% of these individuals may change to a remote working model by 2023. Around 54% of company leaders (as covered by the survey) told that by next year, they will be having redesigned meeting rooms catering to the hybrid working model. They will focus their efforts on redesigning meeting rooms to be easier to use in hybrid models.

While the virtual offices will be costsaving for both employees and business leaders, a mimicked office setup will give professional vibes to those working away from their company headquarters.

Bloomberg Intelligence has predicted that the Metaverse market will reach around $800 billion in 2024. PricewaterHouseCoopers has even

backed VR/AR sectors pumping some $1.5 trillion into the global economy by 2030. Most importantly, the whole ecosystem will create a new digital economy. For example, Californiabased IMVU, an avatar-based social network with a monthly user base of over 7 million, has thousands of creators selling their virtual products for the metaverse and generating around $7 million in form of monthly revenues. The organisation also has a team of developers, known as "meshers", who are designing 3D templates, which can be customised as virtual products. These products are ensuring steady income for the developers.

So far, metaverse has got a good start, in terms of introducing the concept of virtual offices and avatars, as the bosses can get the best out of their team members, in terms of providing a mimicked professional work environment.

Leading Saudi’s Economic Transformation

The Kingdom of Saudi Arabia has been witnessing robust economic growth in recent years, due to its abundant natural resources, and the able guidance of the country's leadership, along with key economic and structural reforms implemented to boost the economic diversification under ‘Saudi Vision 2030’.

The reforms were introduced in 2016 with the aim of transforming the nonoil sectors, improving living standards, and creating a sustainable and diverse economy. The ‘Financial Sector Development Program’ sits at the core of ‘Vision 2030’, thus focusing on the financial sector, advancement of the capital market, and attracting foreign investors.

The Kingdom has the world’s largest Islamic banking and insurance sector, which has helped it to become the global leader in Islamic finance. Saudi also has the largest jurisdiction for Islamic finance

SRC plays a vital role in contributing to the ‘Financial Sector Development Program’ and ‘Vision 2030’

Fabrice Susini, CEO, Saudi Real Estate Refinance Company (SRC)

based on assets. The Kingdom’s Sukuk market has been a major source of financing for the country's growth journey over the past decade.

The growth of the Saudi Sukuk market is a testament to the Kingdom's efforts to create a diversified and sustainable economy. By using Islamic finance to fund infrastructure projects, the government has been able to attract a wide range of investors. As the Sukuk market continues to expand, it will play an increasingly important role in realizing the ‘Vision 2030’ program.

There are several factors that have contributed to the success of the Sukuk market in Saudi Arabia. Apart from the investors’ strong demand for Islamic finance, the Kingdom’s regulatory environment has also been supportive towards the Sukuk market with a clear set of rules established by the CMA.

While the UAE led the Sukuk market in the Gulf Cooperation Council (GCC) region in 2007 and 2008, by 2014 Saudi Arabia had emerged as the second largest issuer of Sukuk in the world, followed by Malaysia. Saudi’s rise was driven by a total of 15 issuances with a combined value of $12.1 billion, thus cementing the country's position as a major player in the global Sukuk market.

The growth of the Saudi Sukuk market has maintained an upward trajectory, with four issuances totalling $3 billion in 2023 alone. The Islamic bond has become a crucial element for many businesses in the Kingdom, including Saudi Real Estate Refinance Company (SRC). The Saudi Sukuk market will keep on expanding as more companies recognize the benefits of this innovative financial instrument.

SRC plays a vital role in contributing to the ‘Financial Sector Development Program’ and ‘Vision 2030’. It is offering alternative financial solutions to primary mortgage originators, apart from attracting investment to the real estate sector, thus helping to diversify financing sources and drive economic growth. Through its refinancing activities for lenders, SRC also helps to develop a vibrant secondary home financing market in the Kingdom, thereby supporting the efficiency and stability of the primary housing market. The funding raised through these efforts allows SRC to strengthen its relationships with home financiers, who, in turn, will benefit from working with the company in managing their risk, capital, and liquidity, thus advancing towards the target of achieving 70% home ownership among Saudi nationals by 2030.

Focusing its business model on Saudi’s secondary mortgage market, SRC ensures that the refinancing provided by it is enabling originators to offer home buyers an extensive range of affordable financing solutions, fixed and variable with tenors of up to 30 years. SRC raises capital by constantly issuing Sukuk both locally and internationally.

In a significant milestone for Islamic banking, SRC has spearheaded with reputable scholars to launch a Shariahcompliant potential Residential Mortgage-Backed Securitisation (RMBS) tool called ‘Murabaha’, which will enter the testing phase soon.

SRC announced in October 2022 about doubling its Saudi-Riyaldenominated Sukuk program from SAR 10 billion (launched in 2018) to SAR 20 billion. This move follows the highly successful completion of the company's SAR 10 billion issuances since 2021, which were oversubscribed and offered in a fixed profit rate format across a tenor of up to 10 years.

SRC also completed a further tranche of SAR 3 billion Sukuk issuance, which was issued in September 2022 at a competitive fixed profit rate of 4.02% to Saudi institutional investors. The positive market response to this recent issuance tranche demonstrates the company’s ongoing momentum with its first domestic Sukuk program, completed in a record timeframe.

Positive investor confidence in the Saudi housing market has been reflected in the success of SRC's Sukuk issuances. In 2020, SRC received ‘A’ (stable) rating from Fitch and ‘A2’ (stable) from Moody’s owing to its robust business model and key role in the Kingdom’s property market.

The success stories of SRC and Saudi’s Sukuk market are further evidence of the Kingdom’s commitment to the Shariah principles, apart from its strong leadership in the Islamic finance sector. With its strong demand, supportive regulatory environment, and further growth potential, the Sukuk market is poised to play a key role in Saudi's economy.

Sukuk market has been a major source of financing for the country's growth journey over the past decade

The crude petroleum and natural gas activities contributed 32.7% to the Saudi economy

Saudi’s 2030 PUSH

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In March 2023, came the good news for Saudi policymakers. The Kingdom witnessed a GDP growth of 8.7% in 2022, which was the highest among G20 countries that year. The growth exceeded the analysts' expectations of 8.3%, and as per the Xinhua news agency, the latest GDP growth rate is the highest one for the country since 2012.

Crude petroleum and natural gas activities achieved the highest annual growth rates of 16.1 per cent, followed by transport, storage and communication

As per the current exchange rate, the GDP growth has pumped over $1 trillion in 2022 alone, again another first in the Kingdom.

Further breakdown of these growth figures only boosts Saudi's efforts of diversifying and strengthening its economy (along with cutting down its dependence on oil trade) under the 'Vision 2030' plan. While the energy sector contributed some 32.7% in the latest GDP upswing, it was followed by government services (15.2%), manufacturing activities except oil refining (8.6%), and wholesale and retail trade, restaurants and hotels (8.2%).

Breaking down the stats

Saudi Arabia's economy grew by 5.5% in the 2022 fourth quarter. Non-oil activities for the Octo-

ber-December period jumped 6.2%, whereas energy activities grew by 6.1%

Saudi government also expanded its services by 2.9%. Transport, storage and communication activities recorded the highest yearly growth rates of 13.1%, followed by community, social and personal services (10.5%), other mining and quarrying activities (8.4%), and crude petroleum and natural gas (7.2%).

The Kingdom’s GDP at current prices stood at over 1.02 trillion riyals ($272.75 billion) in the 2022 fourth quarter.

The 2022 fourth-quarter GDP growth was Saudi’s seventh consecutive three-month expansion after its slowdown due to COVID. And most importantly, all activities within the Kingdom's economic framework have achieved positive growth rates.

Crude petroleum and natural gas activities achieved the highest annual growth rates of 16.1%, followed by transport, storage and communication (9.1%), and petroleum refining (8.3%).

The Kingdom’s GDP at current prices amounted to more than 4.15 trillion riyals last year.

The crude petroleum and natural gas activities contributed 32.7% to the Saudi economy. The Kingdom's preliminary estimates for 2023 indicate a GDP growth of 3.1%, whereas the International Monetary Fund (IMF) expects it to grow by 2.6% this year and by 3.4% in 2024.

Activities in Saudi's non-oil economy hit an eight-year high in February 2023. Riyad Bank's

Purchasing Managers' Index for the Saudi economy rose to 59.8% in February 2023 from 58.2% in January, thus recognizing the Kingdom's fastest growth in the arena of non-oil private sector businesses since March 2015.

The country's inflation rate for 2022 was estimated at 2.6% and, according to the latest preliminary forecasts, is expected to hit 2.1% in 2023, suggesting that the Kingdom is performing sufficiently on this front as well, when developed economies like the United Kingdom and the United States saw neck breaking inflation last year.

The success story

In March 2023, Saudi Downtown signed a pact with the country's Small and Medium Enterprises General Authority, also known as Monshaat, to develop projects in 12 cities around the Kingdom.

The agreement will create business opportunities for the Kingdom's SME sector in line with the goals of 'Vision 2030', the Saudi Press Agency reported.

Saudi Downtown, a wholly-owned subsidiary

of the Saudi Public Investment Fund (PIF), will establish urban centres of sustainable economic and social impact in 12 cities across the country.

Another focus area for the Saudi government has been the tourism sector. In the recently concluded ITB Berlin (world's largest trade fair for the global tourism industry), Ahmed Al-Khateeb, Saudi minister of tourism, not only opened the Saudi pavilion, which received a number of presidents, ministers, leaders, and other key officials, but also interacted with major commercial bodies such as TUI Group and FTI Consulting, apart from the UN World Tourism Organization and the World Travel and Tourism Council. Saudi had the largest space in the trade forum, and its line-up of interactive content not only impressed industry stakeholders, but also helped the Kingdom to seal strategic agreements with UNWTO, Expedia Group, FTI Consulting, DER Touristik, Hotelbeds, and Lufthansa City Center.

The Kingdom recorded 93.5 million visitors in 2022 and is now eyeing to receive 100 million tourists annually by 2030. Saudi Arabia, which is the largest investor globally in the tourism sector, has already allocated

$550 billion to realize the above goal, as per reports.

And in a further boost to the economic diversification efforts of the Kingdom, the non-oil foreign trade between the UAE and Saudi Arabia jumped 70% over the last ten years, hitting 136 billion dirhams ($37 billion) by 2022 end, as per the statistics from the UAE Federal Competitiveness and Statistics Center.

Property & aviation sectors leading diversification efforts

From March 7 to March 10 2023, the Kingdom hosted its Restatex Riyadh Real Estate Exhibition, which witnessed the launch of real estate funds with a total value of more than SAR 4 billion ($1 billion), aimed at providing over 4,000 housing units in Riyadh and Madinah on an area of over one million square meters, thus keeping pace with the property sector's growth targets for 'Saudi Vision 2030'.

As per PricewaterhouseCoopers (PwC), Saudi Arabia’s housing demand, which was at 99,600 homes in 2021, will increase by over 50% to reach 153,000 houses by 2030. The Kingdom has swiftly acted as per the challenge, by signing up agreements worth over 10 billion Saudi riyals ($2.66 billion) to set up four investment funds to fast-track the country's property projects. Global ratings agency S&P predicted in 2022 that the Kingdom will see sustained growth in its property market, fuelled by 'Vision 2030' and the Iskan programme, with $1 trillion slated for real estate and infrastructure projects.

The market will witness a massive boom by 2033, as the government

draws up more and more high-ticket projects and gets attention from global property market players.

“Investors who want to buy real estate understand that if someone committed to invest [that much] in the country it's going to be growing. Saudi has a lot of potential for the next ten years … and the next ten years is going to be the greatest time for [the] Saudi property market,” Alex Galtsev, CEO of Dubai-based property technology company Realiste told Al Arabiya English, while giving his insights on the Saudi's property sector boom.

Investcorp Holdings, one of the largest asset managers in the Middle East, will invest $1 billion in the Saudi property market over the next five years.

Also not to forget about the creation of a futuristic city called NEOM. This occupies the centre stage of the Saudi real estate sector’s roadmap for ‘Vision 2030’. The city's main attraction point will be the luxury island called 'Sindalah', which will reportedly rival tourist destinations like Monaco and Athens, with vibrant and world-class marina and yacht clubs.

Dubai Marina and Jumeirah Village Circle have already established themselves as real estate investment destinations within the Kingdom. And the first two months of 2023 have been bumper ones for the sector as property demand in Dubai hit a record high. In February alone, Dubai’s residential market saw 8,515 transactions, a whopping 43.9% increase from 2022. January and February of 2023 together clocked a total of 17,741 residential transactions, a new record.

Shifting the focus from the property sector, let’s explore the Kingdom's aviation sector. Crown Prince Mohammed bin Salman announced the creation of a new national airline called 'Riyadh Air', with industry veteran Tony Douglas being its chief executive, in march 2023. The airline, owned by Saudi Arabia's Public Investment Fund (PIF), is expected to contribute significantly to the Kingdom's economic diversification, by adding $20 billion to the GDP, apart from creating over 200,000 jobs, while reportedly serving over 100 global destinations by 2030.

The country's aviation sector has been working aggressively towards localizing jobs. In 2021, General Authority of Civil Aviation (GACA) launched an initiative of localizing around 10,000 jobs. Saudi Arabian

Airlines has recently ensured that the majority of its pilots are from the Kingdom, while several other carriers are poised to follow similar moves, which will generate more employment for qualified Saudi professionals in the field of aviation.

King Abdulaziz International Airport's infrastructures have been expanded to $7.2 billion, while the Kingdom's Minister of Transport and Logistics Saleh Al Jasser revealed his government's plans of investing approximately $133 billons by 2033 in the aviation sector, keeping in mind the country's goal of hosting 330 million tourists by 2030.

NEOM Bay Airport received its first flight in 2019 and has already been classified as a commercial hub by the International Air Transport Association (IATA). King Salman

International Airport is another upcoming big-ticket project, which will be operational by 2030 in Riyadh. The facility will have six runways, apart from possessing the capacity for hosting 120 million travellers yearly.

The world taking note

World Bank’s Vice-President for the Middle East and North Africa Ferid Belhaj recently urged the countries within his jurisdiction to emulate Saudi Arabia's economic diversification model. He, while noting the impressive growth trajectory of Saudi's non-oil sector, emphasized that the model has showcased a "new economic and development approach, breaking free from patterns that no longer hold good."

Moody's too noted that Saudi's non-oil sector has become the main

driver behind the Kingdom's economic growth.

"This is (the growth of the nonoil sector) largely due to the Saudi government's efforts to diversify the economy by carrying out structural reforms, including the introduction of taxation, modernisation of regulatory systems, as well as infrastructure improvements. These reforms have led to increased foreign investment, which has stimulated economic growth and contributed to job creation. The report also highlights that accelerated private sector growth in recent years has helped improve fiscal revenues," the ratings agency said.

The growth of the Middle East’s non-oil economy will continue to progress into 2023 as the GCC economies continue to diversify, Riyadh Al Najjar, PwC Middle East Chairman of the Board & KSA Country Senior Partner, informed Zawya, a statement which further solidifies the fact that Saudi's economic diversification efforts, which have proven to be game-changing ones, have steadily been emulated by its Gulf neighbours as well.

When the world was undergoing an economic slowdown in 2022, Saudi defied the trend and continued its bold march towards realising the goals of 'Vision 2030'. The GCC is undergoing a transition phase, where they are focussing more on economic diversification and sustainable development. The Saudi model gives them a roadmap for how to achieve a sustainable economy.

To help double family-owned businesses’ contribution to the nation's GDP to $320 billion in 2032, UAE introduced legal reforms in January 2023

Family companies: New fillip for UAE

IF CORRESPONDENT

American billionaire investor and hedge fund manager Ray Dalio, Indian business conglomerates Gautam Adani and Mukesh

Ambani are some of the prominent names looking to expand their operational footprints in the UAE by setting up business headquarters in the Gulf country.

Ultra-high-net-worth individuals are now giving a new fillip to the Emirate's real estate dreams. More and more family offices are now being set up in the UAE, and the market size is expected to reach the Dh3.67 trillion mark by 2028. As per reports, these family offices are becoming the new wealth parking mechanism for the ultra-rich. As per stats, an estimated 17,000 family offices worldwide have combined assets of $10 trillion and around 25% of these assets have been placed in the real estate sector.

All eyes on Dubai

Hedge funds, crypto companies and

venture

capital firms are now increasing their presence in the UAE, due to new reforms and legislations, seen as conducive for family offices and wealth management firms.

As per reports, in 2021 alone, UAE's financial wealth grew by 20%, a ratio which was double that of its global counterpart of 11% This tally is more than enough to cement the Emirati’s status as a haven for family wealth.

In the same year, ultra-high-net-worth individuals and family offices poured some 41% wealth into the UAE GDP. By 2026, the share will likely increase to 46% by 2026.

Analysts project that the Gulf country's financial wealth will continue to expand at a compounded annual growth rate of 6.7% and reach $1 trillion by 2026, up from $700 billion (Dh2.57 trillion) in 2021.

Family businesses in the UAE play a key role in the emirate's economy, as they contribute to nearly 60% of the country’s GDP growth, apart from employing 80% of the country's do-

mestic workforce in their operations.

Recently, Edmond de Rothschild, EnTrust Global, Nomura Singapore Limited and The Family Office Company set up their premises in the Dubai International Financial Centre (DIFC).

The Centre (DIFC) has attracted several notable names recently, currently hosting over 300 wealth and asset management companies. These ventures represent an industry size of $450 billion (Dh1.65 trillion). More than 150 funds were domiciled in the DFIC by 2022 end.

With $517 billion of wealth in Dubai, the Emirati city has emerged as the Middle East's golden bird, as DFIC continues to attract global and regional asset management firms to set up an office.

“With the enactment of the new regulations, Dubai will likely witness a significant transfer of wealth from other popular hubs like the US, Luxembourg, Singapore, and Hong Kong. Owing to Dubai’s geo-strategic location and investor-friendly laws, Asian family offices could especially look to establish and expand their base from here,” said Vijay Valecha, Chief Investment Officer, Century Financial, while interacting with the Khaleej Times.

Around 30 of the Asian family offices have more than $1 billion in assets under management, something which will have a positive impact on DFIC's growth in the coming days.

As per Valecha, the UAE has chartered a growth strategy to see itself as a global investment destination and evidently, its business-friendly policies tend to attract talent, paving the way for global family offices to set up their operations in the country.

“In the past decade, the UAE has undertaken a series of legislative reforms to promote the smooth transfer of

wealth and ownership of family-owned assets and businesses. This includes the issuance of trust and foundation legislation, and was followed by the enacting of a wills system for non-Muslims, in both DIFC and Abu Dhabi Global Markets,” he remarked further.

Tracking the government initiatives

To help double family-owned businesses’ contribution to the nation's GDP to $320 billion in 2032, UAE introduced legal reforms in January 2023. Experts see the move in line with the country's economic diversification goals by attracting investment in key sectors, investments which will strengthen UAE's corporate sector further, so that the latter can contribute to the GDP more in coming years.

The new law enables family businesses to overcome challenges when

planning succession under the existing regulatory framework of the UAE Companies Law.

The law applies to all family-owned companies that exist in the UAE, and the venture owners who own the majority of the shares in these businesses as family companies in accordance with the existing UAE legal provisions.

“This law would assist family businesses in diversifying their operations, establishing pioneering ventures in modern economic areas, and strengthening their partnerships and opportunities both inside and outside the country. The program seeks to turn 200 family business projects into big corporations with a market value of more than Dh150 billion ($40.84 billion) and yearly revenue of Dh18 billion by 2030 which would go a long way in transforming UAE's growth story,” Valecha said.

The law under discussion here, Fed-

ECONOMY FEATURE UAE GDP GROWTH UAE FAMILY BUSINESSES

eral Decree Law No. 37 of 2022 on family businesses, had been introduced by the UAE government in November 2022 to enhance and raise the family business environment in the country to globally competitive levels.

Essam Al Tamimi, founder and Chairman of Al Tamimi & Company in 2022 said that the law would define a family company as a venture incorporated under the Companies Law whose majority of shares have been owned by persons belonging to the same family and were registered in a special register of family companies at the Emirate's Ministry of Economy.

“Under the law, a company loses its family company status if the partners from among family members cease to be majority shareholders, and with that, the company loses its benefits under the law,” he explained further.

“The law applies to all existing fami-

ly companies or thereafter incorporated in the UAE, with the exception of public joint stock companies and general partnerships. In this regard the law does not create a new form for the family company as family companies will still take the same forms already in place in the UAE under the Commercial Companies Law or in the free zones as per their own legislations,” the expert commented further.

“Where a special provision exists, such provision shall apply and not the provisions of the Companies Law. As long as a company comes under the definition of a family company, then it enjoys the unique benefits, incentives, and exclusions available under the Law or such decisions as the Cabinet or the competent authority may issue in the implementation of its provisions,” Al Tamimi concluded.

Flexibility in selecting partners & resolving disputes

The latest legal reform now gives family companies the right to adopt a charter that will regulate their business governance, apart from providing freedom to these business charters to include conditions, standards, and qualifications to be met for family members to be considered for employment with the concerned companies.

The law also provides for other mechanisms to regulate family governance and the former’s relationship in relation to the company through entities such as family assemblies, family councils and family offices.

The reform is also different from the Commercial Companies Law, as it doesn't set a maximum limit on the number of partners a family company can have and gives these ventures the right to agree, in the memorandum of association and charter, on equal/differ-

ent rights for the partners with respect to dividends, management, and other rights and benefits. The law also permits these ventures to operate different classes of shares, dividends and voting rights, as per the partners' wishes. However, the new law also gives strict controls and procedures on the disposal of shares to non-family members, whereas the business partners will get a pre-emption right in addition to a right of redemption.

Also, the family company can purchase its own shares, a right which was previously restricted to joint stock companies only. The legal reform has now ensured that these families will now have additional means to protect their companies and preserve ownership continuity, while exercising the flexibility to exit the ventures at their convenience.

Talking about the dispute-resolving mechanism, the reform has set out various flexible options for the family members and partners, including a conciliation process to be agreed upon in the memorandum of association/charter, through a board constituting individuals, partners or third parties. If these options fail, the matter then will be decided by the dispute resolution committee, which will be established by a decision of the Minister of Justice or the head of the local judicial authority.

Understanding UAE’s family business ecosystem

Family businesses have a long and strong presence in the Gulf region, contributing positively to the economies in this part of the world, especially when it comes to the non-oil sectors. Dubai has been home to these ventures, and their operational holdings cover multiple sectors from retail and leisure to financial services.

As per reports, family-owned businesses contribute 60% of the country’s GDP and 80% of the nation’s workforce. A tally by Forbes Middle East suggests that the Gulf Cooperation Council (GCC) has emerged as the safe haven for family businesses. The Forbes list has been topped by Saudi Arabia (36), followed by the UAE (21), Kuwait (10), Oman (6), Bahrain (5), Qatar (5), Jordan (4), Morocco (4), Algeria (3), Egypt (3) and Lebanon (3).

Decoding the figure further suggests that around 87% of the region's family businesses are diversified while the rest have specialised their operations into sectors like real estate, jewellery, FMCG (fast-moving consumer goods), industrial, food and beverages and retail. The top 10 business families in the GCC region have employed some 600,000 people with a net worth of more than $31 billion (Dh114 billion).

Talking about the UAE, Forbes’ list called ‘Top 100 Arab Family Businesses In The Middle East 2020’ has mentioned family businesses like Al Futtaim Group and Majid Al Futtaim, Al Ghurair and Al Ghurair Group, SS Lootah Group, Juma Al Majid Holding Group, AW Rostamani Group and Easa Al Gurg Group, Al Habtoor Group, Al Naboodah Holding, Khalifa Juma Al Naboodah Group, Ali & Sons Holding, Albwardy Investment, Ghassan Aboud Group, Abu Ghazaleh Investments, Al Nowais Investments, Al Shirawi Group's holding company - Oasis Investment Company, Al Fahim Group, Chalhoub Group, Al Tayer Group and Gulf Marketing Group.

UAE's tryst with family businesses started in 1838, when the family of JP Morgan founded the House of Morgan, which managed the family’s assets. Rockefeller family followed suit after

four decades by establishing its family office in the Gulf country. A recent study from international trust and corporate management company Intertrust Group has found that family offices are the fastest-growing structuring vehicle in the Middle East.

Industrial zones like Abu Dhabi Global Market (ADGM), Dubai International Financial Centre (DIFC) and Dubai Multi Commodities Centre (DMCC) have their own piece of regulations on setting up family offices in those free zones. Legal terms like the definition of family members, minimum paid-up capital requirements, and compliance and reporting requirements, vary in these three free zones. These zones also do not tax any corporate income/capital gains of these family offices.

Also, a family office is allowed to

provide asset and wealth management services, day-to-day accounting and management of legal affairs, and administrative services to the various ventures working under its umbrella.

Good days ahead for UAE

As per Betterhomes’ latest figures, British, Indian and Russian nationals have emerged as the top investors in Dubai's real estate market in the first quarter of 2023, followed by investors from Italy, Lebanon, Egypt, Turkey, France, China and the UAE.

The factors contributing to this phenomenon are the escalating costs in Europe after the Ukraine war, Dubai's efficient handling of the COVID outbreaks, a stable economy, 100% foreign ownership, and the availability of 10-year Golden Visas.

ECONOMY FEATURE UAE GDP GROWTH ECONOMIC SLOWDOWN

The Dubai-based Samana Developers too confirmed the development, by stating that Europeans were top investors in its latest real estate project. Najmeh Jafari, general manager of Samana Developers, told that the Europeans who invest in Dubai properties are from France, Germany, the UK, the Netherlands, Sweden, Switzerland, Austria, Belgium, and Norway.

Ayman Youssef, vice-president, Coldwell Banker UAE, also said that property buyers in the Emirati city are primarily coming from Germany, France and Switzerland.

“The UAE property market has managed to maintain attractive prices with higher yield/return per unit as compared to most countries in Europe. Today one can get up to 8% returns which is quite high compared to what

any European country can offer. Also, the Golden Visa, 100% ownership right, better business opportunities and other factors are encouraging people to invest more in the emirate,” the official stated.

“Dubai’s real estate sector continues to see strong international demand from across the globe, as people seek a safe haven, tax efficiency and positive investment returns. Buyers from the UK accounted for the most real estate transactions at Betterhomes in the first quarter, with growth of 60% year-onyear. This was closely followed by buyers from India,” Coldwell said in its first quarterly report.

new DIFC 'Family Wealth Centre', in terms of offering an operational framework and hub for family-owned businesses. The regulation, named the 'Family Arrangements Regulations', will provide comprehensive guidelines for family businesses holding assets, especially when it comes to these ventures' succession procedures and planning for how the future generations will take the businesses ahead.

The new set of rules will replace the legacy 'Single-Family Office Regulations' and 'DIFC Single Family Office' regimes with a new one that will eliminate the requirement for a family office to register itself as a designated non-financial business or profession (DNFBP) with the Dubai Financial Services Authority (DFSA), the independent regulator of financial services conducted in or from DIFC. Multi-family offices will, however, require authorisation and licensing by the DFSA.

Family businesses have been a part and parcel of the UAE economy. These ventures are now pumping the growth story of the country's non-oil sector. The government too has understood the importance of having the offices of these companies within its territory and they have responded to it by reforming its family business rules. With Dubai being the new investment destination for ultra-high-net-worth individuals from around the globe, one can safely bait for good days ahead for the UAE.

The Dubai International Financial Centre (DIFC) in February 2023 announced the enactment of its new Family Arrangements Regulations, which would provide a firm foundation for the editor@ifinancemag.com

By 1948, the German people had endured nine years of rationing and price restrictions

The German economic miracle

IF CORRESPONDENT

World War II, apart from crushing Adolf Hitler’s dream of establishing Nordic German Aryan supremacy all over the world, destroyed the European country’s economy as well.

The

reform

the abolition of price controls, which took place over a few weeks in 1948, highlighted the miracle

The official food ration issued by the occupying powers (as Germany got divided into four zones between Britain, France, the United States and the erstwhile Soviet Union) ranged between 1,040 and 1,550 calories per day, and food output per capita was barely 51% of its level in 1938. Moreover, industrial production in 1947 was only a third of what it was in 1938, and a sizable portion of working-age German men were deceased during the war.

However, 20 years later, most of the world was envious of West Germany's prosperity. At the time, analysts believed that West Germany would have to be the largest beneficiary of the American welfare state. The German economic miracle, or Wirtschaftswunder, became a topic of discussion.

The currency reform and the abolition of price controls, which took place over a few weeks in 1948, highlighted the miracle. In addition, the lower marginal tax rates in 1949 and 1948 also bolstered growth.

Before

By 1948, the German people had endured nine years of rationing and price restrictions. For his government to purchase war supplies at artificially low rates, Adolf Hitler placed domestic price controls in 1936. Later, in 1939, Hermann Goering, one of Hitler's most important Nazi appointees, enacted rationing.

United States, France, Britain, and the USSR joined to form the Allied Control Authority, which decided to maintain the price controls and rationing instituted by Hitler and Goering. Additionally, they kept up the recruitment of labour and other resources by the Nazis.

A "zone" of German land was under the jurisdiction of each Allied administration. The cost of living index in the American zone in May 1948, calculated at controlled prices, was only 31% higher than in 1938. The total amount of money in the German economy in 1947, including currency and demand deposits, was five times higher than in 1936. There had to be shortages because prices had only slightly increased while money had multiplied.

Food shortages became so severe due to price limitations that some people began producing their food while others made weekend trips to the countryside to barter for food.

Swaps in business-to-business transactions were so common that many companies engaged "compensators," who were experts in exchanging

currency

and

ANALYSIS WORLD WAR II GERMAN ECONOMY ECONOMY

their company's output for necessary inputs by engaging in numerous transactions. According to estimates made by American military analysts in September 1947, between one-third and 50% of all commercial transactions in the bilateral area (the US and British zones) took the form of "compensationtrade," also known as barter.

Bartering could have been more efficient than a pure cash purchase of goods and services. But, according to German economist Walter Eucken, the economic model had been "reduced to a primitive condition." The statistics support him. Bizonal production in March 1948 was just 51% of what it had been in 1936.

The argument

Eucken founded the Soziale Marktwirtschaft, also known as the "social free market," a school of economic theory with its headquarters at the Univer-

sity of Freiburg in Germany. Members of this school detested authoritarianism and voiced their opinions under Hitler's rule, sometimes at significant personal risk. The school "represented an intellectual resistance during the Nazi period, requiring great personal courage and the independence of the mind," according to Henry Wallich.

School members supported free markets, minimal advancement in the income tax system, and antitrust laws to restrain monopolies. Before the war, cartels were explicitly legal in Germany. The Chicago school's young members, Milton Friedman and George Stigler, shared that it was similar to the Soziale Marktwirtschaft. It supported strong free markets, a small amount of government redistribution through the tax system, and antitrust laws to avoid monopolies.

Wilhelm Ropke and Ludwig Erhard were students at the German school. Ropke promoted price restrictions' elimination in addition to currency reform to

bring the amount of money in circulation in line with the number of products. He reasoned that both were required to put a halt to controlled inflation. The currency reform would put a stop to inflation, and price decontrol would put an end to repression.

Ropke and Ludwig Erhard concurred. During the conflict, Erhard had penned a letter outlining his idea of a market economy. He made it plain in his memo that he wished to stop the Nazis.

On the other hand, the Social Democratic Party (SPD) favoured maintaining governmental dominance. Dr. Kreyssig, the principal proponent of central government control over economic policy for the SPD, stated in June 1948 that decontrolling prices and implementing currency reform would be futile. Labour union leaders, British authorities, most West German manufacturing interests, and some American authorities supported the SPD.

The shift

Ultimately, Ludwig Erhard prevailed. Erhard, whose anti-Nazi sentiments were evident, was chosen as Bavarian minister of finance in 1945 because the Allies wanted non-Nazis in the new German government. In addition, he was a military advisor to US General Lucius D. Clay while serving as the bizonal Office of Economic Opportunity director starting in 1947.

On Sunday, June 20, 1948, Clay and his French and British counterparts implemented a currency reform following the Soviets' withdrawal from the Allied Control Authority. The basic plan was to

replace reichsmarks with a significantly smaller quantity of Deutsche Mark (D.M.), the new legal tender. This would dramatically reduce the money supply, leading to fewer shortages even at the controlled prices—now stated in Deutsche marks.

The currency reform was highly complicated, and many people saw a significant decline in their net worth. In addition, the money supply decreased by around 93% due to the whole situation.

The German Bizonal Economic Council passed a price decontrol ordinance that same Sunday, at Ludwig Erhard's urging and against the wishes of its Social Democratic members, allowing and encouraging Erhard to do away with price limits.

De-Nazifying the West German economy was Erhard's summer project. According to the Federal Reserve Bank of New York economist Fred Klopstock, "It followed the directive removing price, allocation, and rationing regulations" from June through August 1948.

Nearly all manufactured items, including fruits, vegetables, and eggs, were exempt from regulations. As a result, many remaining limitations were removed, and ceiling prices on many other things were raised significantly.

Naturally, Erhard was correct in his prognosis. Without a rationing system standing in the way, price decontrol permitted consumers to communicate their wants to sellers, and higher prices encouraged sellers to provide more.

The administration also lowered tax rates, reformed the currency, and released price controls. In a 1949 paper, a young economist named Wal-

ter Heller, who was then working for the American Office of Military Government in Germany and subsequently became chairman of President John F. Kennedy's Council of Economic Advisers, outlined the improvements. According to Heller, Military Government Law No. 64 "cut a wide swath across the German tax system at the time of the currency reform to remove the repressive effect of extremely high rates."

The corporate income tax rate was decreased from its previous range of 35% to 65% to a flat 50%. The top income tax rate for individuals remained at 95%. However, it only applied to income over DM250,000 per year.

In contrast, the Allies had imposed a 95% tax on all income over 60,000 Reichsmarks (about DM6,000) in 1946. With an annual income of just about DM2,400, the marginal tax rate for the average German in 1950 was 18%. If that same person had made the identical amount in Reichsmarks in 1948, he would have paid taxes at an 85% rate.

economic impact on West Ger-

During the conflict, Erhard had penned a letter outlining his idea of a market economy. He made it plain in his memo that he wished to stop the Nazis

many was tremendous. "The spirit of the nation changed overnight," wrote Wallich. The drab, starving, lifeless figures pacing the streets in an endless search for sustenance came to life.

On June 21, 1948, stores were brimming with merchandise as individuals understood the money they sold their items for will be worth far more than the previous currency.

Additionally, absenteeism fell, workers missed an average of 9.5 hours each week in May 1948, partly because their wages were meagre and partly because they were out foraging or haggling for food.

Average weekly absences decreased to 4.2 hours by October. As a result, the bizonal index of industrial production was barely 51% of its 1936 level in June 1948, by December, it had grown to 78%. In other words, there had been a greater than 50% growth in industrial production.

After 1948, the output grew exponentially more each year. By 1958, industrial production had increased more than four times from the six months in 1948, just before currency reform. As a result, industrial output per person tripled. Contrarily, the communist economy of East Germany remained stagnant.

Erhard became Germany's first minister of economic affairs after Konrad Adenauer, the new Federal Republic of Germany's first Chancellor, recognized the success of his ideas. He kept that position up until 1963, at which point he became chancellor, which he held until 1966.

Marshall Plan

Through October 1954, overall aid from the Marshall Plan and other aid initiatives was barely $2 billion. Even in 1948 and 1949, when it was at its highest, Marshall Plan funding represented less than 5% of Germany's GDP. Germany outgrew other nations that received significant Marshall Plan help in growth.

Furthermore, while West Germany was getting aid, it paid far more than $1 billion in reparations and restitution. Last but not least, and most significantly, the Allies levied DM7.2 billion ($2.4 billion) in annual occupation costs against the Germans. Thanks to these occupation expenditures, Germany did not have to pay for its defence. In addition, Belgium recovered from the war the quickest and relied more on free markets than the other war-torn European nations.

Conclusion

What many observers mistakenly believed to be a miracle was not one at all. Erhard and other members of the Freiburg school were aware of the harm that can result from inflation when it is combined with price controls and high tax rates, as well as the significant productivity gains unlocked by stopping inflation.

Erhard, whose anti-Nazi sentiments were evident, was chosen as Bavarian minister of finance in 1945 | Photo by: Gerhard Heisler/ commons.wikimedia.org

Economists say, investors and statisticians will get better at understanding the world economy during periods of volatility and inflation

The mystery box called world economy

What is Mona Lisa doing right now? The most renowned painting in the world initially gives the impression that it is smiling. Upon second glance, her smile disappears. The smile that returns the following time is a different one. Leonardo da Vinci created this ambiguous effect by blending the contours around Mona Lisa's face with sfumato. No matter how often you look, you are never exactly sure what is going on.

The economy following the COVID-19 pandemic is like the Mona Lisa. You always notice something new when you look. Many economists are now persuaded that the global economy is going into a "hard-landing" recession as a result of the upheaval in the banking sector. Few economists seem to anticipate a "no-landing" scenario, in which the economy is unaffected by rising interest rates. This new term was derived a few months ago, and it replaced the widely held belief that a mild recession was inevitable at the end of last year.

In short, forecasting has never been more difficult. The analysts' range of forecasts for American quarterly GDP growth was twice as wide in 2018 as it was in 2019. In the International Monetary Fund's most recent global economic outlook, the word "uncertainty" is mentioned more than 60 times, which is roughly twice as many times as in April and October 2022. No one had any idea what the Federal Reserve would do with interest rates in March when the financial crisis hit, investors predicted a rate rise, a rate freeze, or a rate cut, and the following few sessions look equally unexpected.

At the European Central Bank’s most recent monetary-policy meeting, Christine Lagarde, its president, was blunt about her institution’s role. She stated that currently, it's not possible to determine what the path will be going forward.

Official statisticians are having trouble making sense of the situation. As new statistics become available, they routinely revise their estimates of anything from the gross domestic product to employment. But a significant change has occurred. The euro area's GDP revisions are four times larger than usual. The British statistics agency published some significant modifications in March. The report revealed that real business investment was not 8% lower than previously thought, but rather in line with its pre-pandemic level. Australian statisticians cut their projection for productivity growth in the third quarter of 2022 by more than half in April. The same year America’s Bureau of Labour Statistics (BLS) issued revisions to its estimate of nonfarm payrolls (not adjusting for seasonality) of 59,000 a month between the first and third estimates, compared with 40,000 in 2019.

What is happening? Maybe

everything is just more unstable. Europe had its largest war in seven decades, supply-chain bottlenecks, an energy crisis, and banking panic in the previous year. Only somewhat more stable has been the remainder of the rich world.

Yet there are also deeper changes at play. The first is about disruptions in COVID-19. As lockdowns came and went, the world lurched from plummeting to soaring growth. The "seasonal adjustments" that are often made to GDP data have been severely impacted by this. The BLS modified the parameters it uses to calculate inflation in February, which makes it considerably more challenging to evaluate monthly figures. In the fourth quarter of 2022, annualised core inflation increased from 3.1% to 4.3%. It is also more challenging than usual to comprehend inflation in the eurozone. Kamil Kovar, a consultant at Moody’s Analytics stated that depending on how seasonal adjustment is done, core monthon-month inflation in March was as low as 0.2% or as high as 0.4%

The second change concerns sample sizes. The pandemic hastened a pattern in which an increasing percentage of people refuse to participate in official polls. In America, the survey response rate that was used to estimate the number of openings dropped from a little over 60% before the pandemic to about 30%. After COVID, the response rate to Britain's labour-force survey decreased by around half. There were some business closures during lockdowns. People stopped filling out questionnaires on a regular basis. People no longer want to assist statisticians because of a rise in public distrust of the government.

Blanked

Falling response rates certainly increase data volatility. They may also lead to

prejudice. The people who stopped doing surveys appear to be less wealthy than those who still do, boosting income in error. According to Jonathan Rothbaum of the Census Bureau, after adequate corrections for non-response, the actual median household income growth in America from 2019 to 2020 was 4.1%, not the 6.8% that was initially reported. Non-response has continued to increase income statistics by roughly 2% after 2020. According to a report from the consultancy Inflation Insights, Omair Sharif, adjusting for "non-response bias" may also have played a role in the recent significant changes to American earnings statistics.

The difference between "hard" and "soft" data—objective measures like the unemployment rate and subjective indicators like people's future expectations—is the third source of confusion. The two types typically move in unison. They are currently far apart. "Soft" actions appear to be recessionary. "Hard"

Source: Statista

ECONOMY FEATURE WORLD ECONOMY GROSS DOMESTIC PRODUCT INFLATION

metrics indicate a respectable expansion. The disparity could be a result of consumers being frustrated with inflation. Prices in the developed world continue to increase by 9% annually.

Economists say that investors and statisticians will get better at understanding the world economy during periods of volatility and inflation. As the effects of the pandemic fade, so will distortions to seasonal adjustments. Incorporating alternate data into estimates has already helped economists overcome the issue of dwindling response rates. However, this offers little solace to organisations that need to make choices straight away, as well as to those who are only attempting to stay up to date on the news. Do not be surprised if the global economy remains sfumato for some time, experts suggested.

Weak economic growth in MENA

Meanwhile, experts also divided on their economic predictions for the

MENA region. Around 45% of those surveyed said it is likely and the same proportion said it is unlikely, according to the latest Chief Economists Outlook report by the World Economic Forum.

Saadia Zahidi, the forum’s managing director said that the latest edition of the Outlook highlights the uncertainty of current economic developments. Although there were some encouraging indicators in the quarterly report's May 2023 edition, the upheaval in the banking sector this year has negatively impacted worldwide prospects. Nearly 80% of chief economists think that managing inflation and preserving financial stability are trade-offs that central banks must make, and a comparable percentage predicts that central banks will have difficulty achieving their inflation targets.

Even while the majority, around 69% think that the recent financial sector disruption was an isolated incident rather than a systemic problem, they neverthe-

less expect more bank failures this year. The outlook for growth has become more stable since the January release of the last Outlook report, but regional variations remain significant. The strongest resurgence is projected for Asia, with China playing a significant role in its recovery. In actuality, the vast majority of leading economists anticipate a sizable recovery in China this year. Furthermore, in East Asia and the Pacific as well as South Asia, more than 90% anticipate at least moderate growth.

The outlook for other parts of the world is less optimistic, with more than half of top economists anticipating weak growth in Latin America, the Caribbean, and sub-Saharan Africa, and 75% of them predicting weak or very weak growth in Europe. There are a variety of forecasts for the Middle East and North Africa region, with 36% of respondents anticipating weak growth, 32% anticipating robust growth, and 32% expecting moderate growth. The research claims that the agreement by OPEC+ to reduce oil output has had an impact on regional prospects. This is partly because the Saudi Arabian gross domestic product predictions from the International Monetary Fund have been revised downward from 8.7% growth in 2022 to 3.1% growth in 2023.

Despite the improving views on US growth, not all economists are on the same page. Around 76% of them are expecting the cost of living to stay high. This problem, along with high inflation has been a huge concern. For instance, food costs soared by 46% across the Middle East and Central Asia recently. In this case, experts think that raising interest rates is the only solution.

DR. RASHMI SALUJA EXECUTIVE CHAIRPERSON, MD, RELIGARE ENTERPRISES LIMITED

Lifestyle inflation during the recession

In the recent past, thousands of people have been laid off due to economic uncertainty and a loss of business. The scenario challenges individuals on a personal level. In this context, lifestyle inflation caused by a recession can disrupt the balance between income and expenses for individuals.

There are chances of a recession across markets. Recession may lead to things spiralling out of control. A period of economic decline or recession characterises a decrease in the gross domestic product (GDP), rising unemployment rates, and declining consumer spending. It means that people may have less disposable income to spend on non-essential items.

The correlation between lifestyle inflation and recession

Income and expenditure are positively correlated. Lifestyle inflation refers to the phenomenon of spending more as one's income increases. One must have noticed with every income raise, personal expenditure also increases immediately in proportion depending on the life stages, etc.

If not managed properly, the tendency can make it difficult to get out of debt, save for retirement, or meet other big financial goals. When things go out of hand, it forces people into a cycle of living from payday to payday. In such a scenario, the affected person has

just enough money, or even less, to pay his monthly bills.

Hence, inflation can make matters worse! It can lead to a further reduction in purchasing power. As prices of goods and services increase, you may have to cut back on spending even further to make ends meet.

If, over the years, one has upgraded his lifestyle proportionate to a rise in income, chances are that he may struggle to keep up with it during recessionary times. Apart from financial troubles, the situation may trigger social and emotional repercussions too.

A forced downgrade in lifestyle may often lead to anxiety about the future. The inability to service the loans may also dent personal credit records. However, the good news is that, unlike inflation, one can control lifestyle inflation.

Strategies to temper lifestyle inflation

While lifestyle inflation is inevitable, managing the personal expense-income equation will help deal with it during the recession. Here are some solutions:

Track expenditure and savings: It is essential that the person tracks expenses and savings. It will help him identify areas where one can cut back on spending and save money. By tracking expenses, individuals can create a budget and prioritise their spending to ensure that they have enough money to

A forced downgrade in lifestyle may often lead to anxiety about the future and the inability to service the loans also dent personal credit records

cover their essential expenses. Additionally, tracking savings helps individuals stay on top of their finances and ensure that they are saving enough to weather a potential economic downturn.

Set priorities: To recession-proof your lifestyle, prioritise essential expenses such as housing, food, and healthcare, and create a flexible framework for non-essential expenses such as entertainment and travel. One way to control non-essential expenditure is to limit it to a certain percentage of your income. In some cases, one may have to make sacrifices and temporarily suspend spending on luxuries and entertainment to make ends meet. If a large proportion of the income goes into servicing debt incurred for maintaining a lifestyle, one may also consider going on a ‘lifestyle diet’ to restore parity.

Create a contingency fund: Another strategy is to build an emergency fund with a savings account designated for unexpected expenses such as job loss or medical emergencies. Ideally, an emergency fund should contain enough money to cover three to six months of essential expenses.

Invest in yourself: Investing in yourself is another way to prepare for a potential economic downturn. Invest in education, skills development, and networking. By improving skills and knowledge,

one can make himself more valuable in the job market. Skills upgrade increases your chances of employment or advancement. Also, when the going is good, one must invest in insurance products to secure oneself and his family against financial repercussions due to an untoward incident.

Lifestyle inflation is a reality, and it can be challenging to drastically ‘deflate’ one’s living standards when a recession strikes. Staying prepared, having a financial goal, and following a strategy to manage the expense-income equation will hold the person in good stead. These steps can help manage lifestyle inflation and face unimaginable challenges during a recession. Long-term planning should begin with a simple step: Asking yourself if you are recession-proof.

Dr. Rashmi Saluja is an Executive Chairperson of Religare Enterprises Limited, a Core Investment Company (CIC), that caters to customers across a wide spectrum of financial services through its various subsidiary companies, namely Religare Finvest Limited, Religare Housing Development Finance Corporation Limited, Religare Broking Limited and Care Health Insurance Limited. She has been leading the organisation from the front, through challenging times, to build a strong and integrated financial services Group.

editor@ifinancemag.com