Portfolio Exclusive to Emirates First Class and Business Class
India’s Boom Return of the Tiger Short Circuit Japan’s Solar Issues Art Basel Inspiring Brands
Muhtar Kent Putting the Fizz Back Into Coke
Issue 112 n April 2015
This issue APRIL 2015
Portfolio
Exclusive to Emirates First Class and Business Class
Cover Story 24 Putting the Fizz Back Into Coke Coca-Cola, one of the world’s most iconic companies, is starting to lose its sparkle. CEO and chairman Muhtar Kent has his work cut out for him as he battles changing tastes, health conscious consumers and a steady decline in US soda sales.
Features 30 India’s Economic Surge
46 Tech Boom Under Threat?
Other developing economies have run into headwinds, but
Vietnam’s technology businesses are a bright spot in the
India’s outlook has brightened since the election of business-
country’s economy, but increased regulation may hamper
friendly Prime Minister Narendra Modi.
innovation.
34 The Invention Mob
50 Soaring Mortgages
Quirky is a startup that sources inventions from the online
Many European homebuyers who took out mortgages in
community and then refines, manufactures and markets the
Swiss francs are seeing their repayments rise as the currency
resulting products.
gains strength.
38 Making the Apple Watch Tick
54 Short-Circuiting a Solar Boom in Japan
In order for the Apple Watch to truly take off, much will
Japan lags behind many countries in renewable energy and
depend on third-party apps that will make it more functional.
now there are fears that the government is retreating from its
42 Greece’s Bureaucratic Labyrinth There is no question that Greece is suffering from austerity
clean-energy commitments.
38
cuts, but its complicated bureaucracy is also stifling the economy and innovation.
30
42
5
Portfolio
6
Exclusive to Emirates First Class and Business Class
Essentials 59 The Many Faces of Angkor From the bustle of trendy Siam Reap to isolated temples in the jungle, a visit to Angkor Wat is a multifaceted experience.
64 Life of Italian Nobility for Sale Regulations and rising taxes have forced many landowners to put their castles and historical mansions on the market.
68 Reclaiming Puerto Rico’s Food Paradise
59
Puerto Rico has produced its fair share of internationally acclaimed chefs, but now its local food scene is also gaining attention.
72 Crisis Hits Kimono Trade The Japanese island of Amami Oshima is renowned for its kimonos, but a stagnant economy and an out-dated distribution system is endangering this tradition.
68
76 The Tall Blacks The New Zealand Breakers, a basketball team from a country that worships rugby and cricket, has won three of Australia’s National Basketball League’s past four championships.
80 Taps Run Dry in Brazil’s Largest City A combination of drought, deforestation, climate change and creaky infrastructure have caused an unprecedented water crisis in São Paulo.
80
84 The Brands in Art Basel’s Orbit
Departments
Art Basel is the most well-attended art event in the world,
9 Notebook
which is why there is stiff competition among companies for
World business in a nutshell.
15 Observer
sponsorship deals.
88 Other Business
Spotting and analysing business trends.
Portfolio takes a light-hearted look at the latest business news.
22 Column: Jane Levere Smart Luggage for the Connected Age
Published for Emirates by
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Editor-in-Chief Obaid Humaid Al Tayer Managing Partner & Group Editor Ian Fairservice Editorial Director Gina Johnson Group Editor Guido Duken Deputy Editor Vishwas Kulkarni Junior Writer Mary Sophia Picture Researcher Hilda D’Souza Editorial Assistant Londresa Flores Senior Art Director Tarak Parekh Senior Designer Charlie Banalo Head of Production S Sunil Kumar Assistant Production Manager Murali Krishnan Chief Commercial Officer Anthony Milne Email: anthony@motivate.ae Group Sales Director Craig Wagstaff Email: craig.wagstaff@motivate.ae International Sales Manager Martin Balmer Email: martin.balmer@motivate.ae Group Sales Manager Jaya Balakrishnan Email: jaya@motivate.ae Senior Sales Manager Michael Underdown Email: michael@motivate.ae INTERNATIONAL MEDIA REPRESENTATIVES AUSTRALIA/NEW ZEALAND Okeeffe Media; Tel + 61 412 080 600, licia@okm.com.au BENELUX M.P.S. Benelux; Tel +322 720 9799, francesco.sutton@mps-adv. com CHINA Publicitas Advertising; Tel +86 10 5879 5885 GERMANY IMV Internationale Medien Vermarktung GmbH; Tel +49 8151 550 8959, w.jaeger@imv-media. com HONG KONG/MALAYSIA/THAILAND Sonney Media Networks; Tel +852 2151 2351, hemant@sonneymedia.com INDIA Media Star; Tel +91 22 4220 2103, ravi@ mediastar.co.in ITALY & SPAIN IMM International; Tel +331 40 1300 30, n.devos@imm-international.com JAPAN Tandem Inc.; Tel + 81 3 3541 4166, all@tandem-inc. com NETHERLANDS GIO Media; Tel +31 6 29031149, giovanni@gio-media.nl TURKEY Media Ltd.; Tel +90 212 275 51 52, mediamarketingtr@medialtd.com.tr UK Spafax Inflight Media; Tel +44 207 906 2001, nhopkins@spafax.com USA Totem Brand Stories; Tel +212 896 3846, faith.brillinger@totembrandstories.com
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Portfolio
F O R
S H O P P I N G
L O V E R S
CA S T E L L A N A
S TO R E
S TO R E
M A D R I D / D I AG O N A L
DEPARTMENT STORES SPAIN & PORTUGAL
BA R C E LO N A
9
Notebook B U S I N E S S
N EW S
Egypt’s New Capital
B R I E F
to the east of its predecessor. The scale of the plans certainly defy historical norms. If completed, the currently nameless city would span 700
several years of deep social division, political upheaval and economic crisis. There are also those who doubt this particular dream will ever reach reality.
square kilometres (a space almost as big as
“Based on historic and global track
Egypt’s capital has moved two-dozen
Singapore), house a park double the size of
records, trying to build a new city from
times in the country’s 5,000-year history,
New York’s Central Park, and a theme park
scratch is a massive gamble,” says Brent
but its current seat of power has remained
four times as big as Disneyland – all to be
Toderian, Vancouver’s former chief planner,
unchanged since AD 969. That was the year
completed within five to seven years.
and a consultant for several cities outside
when Fatimid invaders began to build a
According to the brochure, there will be
of the Middle East. Toderian cites less
grand enclosure to house their new mosques
exactly 21 residential districts, 25 “dedicated
ambitious projects in China – places like
and palaces – a private city known to its
districts”, 663 hospitals and clinics, 1,250
Caofeidian, which hoped to attract a million
residents as al-Qahera, and eventually to the
mosques and churches, and 1.1 million
residents but ended up with only a few
world as Cairo.
homes housing at least five million residents.
thousand. Dubai is an obvious counter-
But a millennium on, and nearly 20
In terms of population, that would
example of success. Writing in The Egyptian Observer, the
million inhabitants later, Cairo’s time
make it the biggest purpose-built capital
might finally be up according Egyptian
in human history – nearly as large as
academic and Cairo native Khaled Fahmy
officials. The government has announced
Islamabad (population: an estimated 1.8
argued that the money spent on the new
a $45 billion plan to pass Cairo’s baton to
million), Brasilia (2.8 million), and Canberra
capital “could solve the problems of Cairo’s
another foreign-helmed development. Just
(380,000) put together.
inner cities where 63 per cent of the city’s
as al-Qahera once was, this new capital Photos: Getty Images
I N
In certain quarters in Egypt, these
inhabitants live. We could provide them
is to be built from scratch – in this case
astonishing numbers have been hailed by
with all the basic needs that they have been
by Capital City Partners whose founder,
those who desperately hope a new capital
deprived of over the past 50 years: potable
Mohammed Alabbar, built Dubai’s iconic
can symbolise a process of national renewal
water, health care, clean air, recreational
Burj Khalifa skyscraper – on virgin sands
under President Abdel Fattah el-Sisi, after
facilities, and much more.”
April 2015
Notebook
10
N u m b e r s
G a m e
The world in figures train makers: Bombardier,
compared with the 109 million
Siemens and Alstom.
who spent $164 billion in 2014, according to an analysis by Bank
60%
jump in demand
of America Merrill Lynch. To put
for Australian
that in perspective, there were
real estate by Chinese investors
just 10 million Chinese outbound
has spurred the government to
tourists in 2000.
impose new taxes on foreign properties buyers, including a proposed application fee of A$10,000 for every A$1m spent
$2.1
trillion in profits are stashed
away overseas to avoid taxes by
on Australian property. Chinese
US companies, according to a
buyers have become the biggest
Bloomberg News review of the
single group of foreign residential
securities filing of 304 corporations.
property investors in the US,
Microsoft Corp, Apple Inc, Google
UK and Australia according to a
Inc, and five other tech firms
Knight Frank report.
account for more than a fifth of the $2.1 trillion stockpile as each
35,000
km
boosted their accumulated foreign
journey
profits by more than 20 per cent
around the world will see the
18
-karat solid gold Apple Watch Edition with sapphire crystal glass will firmly clock Apple’s entry into the world of high-end fashion. The luxury watch, set to start at $10,000, is the firm’s most expensive item since 1983. Technology and luxury good analysts are confident the product has the potential to succeed in the market.
$2.2
over the past year.
Solar Impulse 2 aeroplane make a record-breaking attempt over the next five months. The solarpowered plane will stop off at
11%
more expensive than New
York when it comes to buying
various locations around the
basic groceries has cemented
globe to carry out maintenance
Singapore’s position for a
billion deal
Finmeccanica of its loss making
and spread the campaign
second year as the world’s
has been
arm and reduces debt by 15
message of “clean technologies”.
most expensive city, according
signed by Italian aerospace and
per cent, while the acquisition
defence group Finmeccanica
will build Hitachi’s position in
to sell its rail business to
Europe, where it competes with
Hitachi Ltd. The sale relieves
the world’s top three international
a survey done by the Economist
174
million Chinese
Intelligence Unit. Following behind
tourists are tipped
Singapore are Paris, Oslo, Zurich
to spend $264 billion by 2019,
and Sydney.
126 Million Passengers by 2020 Dubai international Airport and Dubai World Central will together see around 200 million passengers by 2030 according to Paul Griffiths, the airport’s CEO. He also revised the projection for passenger numbers to 126 million by 2020. “By 2020 we expect Dubai International to have ultimate capacity of 100 million. By 2020, the traffic projections for the amount of air travel through Dubai will reach 126 million,” he said. “And this (the growth projections) is without the availability of further infrastructure development or space to build at Dubai International.” Dubai International recently overtook London’s Heathrow as the world’s busiest airport, recording nearly 70.4 million passengers in 2014. Meanwhile, Al Maktoum International Airport in DWC, which currently has a capacity of five to seven million passengers, is slowly building up pace in passenger numbers. Portfolio
Notebook companies that generate at least 15 per cent of international revenue in two or more currencies. Earnings per share of North American corporates were hurt by $0.06 on an average, nearly double the 2013-2014 average and the highest since FiREapps began measuring the impact of currency swings. A slew of US multinational companies, from DuPont to Procter & Gamble, have showed that a strong US dollar hurt their earnings, and several blue-chip exporters said the situation will get worse if the greenback holds its strength. The number of companies reporting a negative impact was 6.4 per cent higher
Currency Swings Hurt US
in the fourth quarter than in the third quarter, according to FiREapps. A strong US dollar is hurting multiple sectors, including industrial companies
The strong dollar is good news for some,
Total negative currency impact rose
but US corporations are feeling the pain.
more than four-fold in the fourth quarter
such as 3M Co, technology companies like
This is highlighted by a report from
from the previous quarter, and was the
Microsoft Corp and Apple Inc, healthcare
currency risk management consulting
biggest since the height of the euro crisis,
companies including Bristol-Myers
firm FiREapps that found foreign
according to the report.
Squibb and Pfizer, and consumer firms
FiREapps analyses currency effects on
like Procter & Gamble – which all garner
corporates $18.66 billion in revenue in the
quarterly earnings of 846 North American
a large portion of their sales from outside
fourth quarter.
companies, a subset of the Fortune 2000
the United States.
exchange swings cost North American
Pressure On US Oil Output According to OPEC, US oil output could start to take a hit by late 2015 due to low
be curbed towards the end of the year. Oil’s collapse from $115 a barrel in 2014
prices. This implies that the exporter group
gained impetus after OPEC refused to cut
will have to wait beyond its next meeting in
output at a November meeting, seeking to
June to see if its strategy to defend market
slow higher-cost production in the United
share will dent the shale oil boom.
States and elsewhere that had been eroding
The halving of oil prices since June 2014 has prompted spending cuts by oil
its market share. For now, OPEC forecast no further rise
companies and a drop in US drilling,
in demand for its crude in 2015, trimming
raising expectations of slowing output in
the forecast slightly to 29.19 million bpd,
countries outside the Organisation of the
and left unchanged its estimate of global
Petroleum Exporting Countries (OPEC).
growth in oil demand this year.
But in its March report, OPEC left its
In the previous report, OPEC had
forecast for non-OPEC supply this year
sharply increased the 2015 forecast of
unchanged and said output of US “tight”
demand for its oil due to a lower outlook
oil, also known as shale, might only start to
for non-OPEC supply.
April 2015
11
12
+++ ++ + ++++++ +++ + +++Ras + alAjman ++++++ Khaimah Sharjah +++ ++++ +++++++ +++++++++++++++++ Dubai ++++++ ++++ ++++++++++++++++++++ ++++++++ Jebel Ali ++++ ++ +++++++++++++++++++++++ ++ +++++ +++ ++ + ++++++++++++++++++++ ++++++++Fujairah + +++ ++ + + + + + + + + + + + + + + + + + + + ++++++++ +++++ +++ ++ +++++ + ++++ ++++++++ ++++++++++++ + +++++++++++++++++++++ ++ +++++++++++++++++++++++++ + + + + + + + + + + + + + + + ++++++++ ++++++++ +++++++++++++++++ +++++++ +++++++ Dhabi ++++++++ +++++Abu ++++++++++++++++++++++++++ +++++++++ + + + + + + + +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Al Ain ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++ +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++ ++ +++++ + + +++++++++++++++++++++++++++++++++ +++++++ +++++++ ++++++++ + + + + ++++++++++++++ ++ +++++ ++++++++ + + + +++++++ + + + +++++ ++ ++++++++ ++++++++++++ + 13-15 +++++++ ++++++++ ++ ++ +++++ ++++++++ + + +++++++ + OUTDOOR DESIGN & ++++++++ ++++++++++ D U B A I D I A R Y + ++ +++++ + + +++++++ + BUILD SHOW ++++ +++++++++++++ Dubai World Trade Centre ++ ++++ theoutdoorshow.ae
Notebook
UNITED ARAB EMIRATES
April 2015
forum agenda include cloud regulation and barriers, building business in the cloud, and ensuring high level of security and data protection. Attendees benefit from keynote speakers, as well as discussions with leading regional telecom operators.
The show brings the latest in products, services and techniques to design and build private and public spaces such as public parks, schools and major residential projects. New features on the agenda this year include the developer zone, where top developers will be meeting with potential suppliers for many leading projects in the UAE. Running alongside the event is Landscape 2020 that will focus on elements such as town planning, waste management and innovative urban projects.
13-14
26-28
Dubai World Trade Centre tankstorageforum.com/tankworldexpo/ This event for oil, gas and chemical storage offers attendees the opportunity to gain key insights into the latest market trends and commercial opportunities for their businesses in the Middle East. Industry professionals can gain key information on how to ensure cost effective growth, best strategies for minimising costs and increasing automation at their storage facilities. Some of the key vendors at the exhibition hail from engineering and construction companies, automation solution providers and pipeline manufacturers.
Dubai World Trade Centre gisec.ae Offering cutting-edge IT solutions, the Gulf Information Security Expo & Conference will showcase over 100 top IT brands, free sessions and workshops. New to this edition is the Safe Cities Briefing Day designed for senior officials from government, security and agencies involved with setting best practise for safe cities. It will also review the latest policy, plans and procurements designed to make cities safe. The official programme will also run sessions on a wide range of topics including cyber security, developing a security culture and the privacy dilemma.
9-10
14TH MENA FOREX The Westin Mina Seyahi Beach Resort meforexexpo.com This expo provides a platform for foreign exchange businesses to engage with institutional investors, discuss trends and establish investment opportunities. Some of the topics on the agenda include alternative styles and strategies for investing, managing risks in online trading and the future of gold trading. A gala dinner awards will honour the winners under more than 40 categories. Some of the categories include best forex bank, best forex customer services provider, and broker of the year award.
112-14
CLOUD MENA Habtoor Grand Hotel mena.cloudworldseries.com The 5th edition of the Cloud World Forum MENA is set to be bigger and better by hosting more than 60 visionary speakers, leading solution providers and more interactive sessions. The highlights of the
TANK WORLD EXPO
GISEC
Portfolio
Observer BUSINESS NEWS IN BRIEF
Korea’s F1 Dream
we ended up with a spectacular flop.” Such failures are far from unheard-of in
The Korean Grand Prix only lasted for four years, and critics say it was ill-conceived from the start. But at least it has left a legacy of motor racing, reports Choe Sang-hun.
Formula One racing. The Turkish Grand Prix lasted only from 2005 to 2011, and India’s third and last was in 2013. Low attendance in Turkey and a tax dispute in India were blamed for the early demises. But many in South Korea say the
EIGHT YEARS AGO, the South Korean
on their way to the Hyundai shipyard.
Yeongam circuit, which was funded mostly
province of South Jeolla, which includes the
But only three more Grand Prix races
with public money, was ill-conceived from
sleepy coastal county of Yeongam, cleared
followed, and today the quiet has
the start. As early as 2007, parliament’s
more than 400 hectares of rice paddies and
returned. The biggest events now seen
budget office and a government research
embarked on a $375 million experiment:
at the 5.6-kilometre Korea International
institute warned that South Jeolla’s
building a Formula One racetrack.
Circuit, with its capacity for 120,000
revenue forecasts for the project were
spectators, are amateur races that draw
exaggerated. In January, a civic group filed
modest crowds.
suit against former provincial officials
© 2014 New York Times News Service
In 2010, Yeongam hosted the first Korean Grand Prix. New hotels went up to accommodate what local officials
“We started with a big dream of making
over the track, asking prosecutors to bring criminal charges for breach of trust.
hoped would be an unprecedented
lots of money,” said Park Bong-soon, a
wave of foreign tourists. The screams of
South Jeolla province official whose title
racing machines came to this flat, quiet
until recently was director of the Formula
nest of problems, a project that should
land, which was more accustomed to
One support centre, even though there is
never have been born,” said the group,
the trundle of gigantic ship components
no longer an F1 race to support. “Instead,
whose English name is Good Society
April 2015
“The Formula One race here was a
15
16
Observer for Humans, accusing the officials of squandering tax revenue to pursue a “political showpiece.” The officials have denied such accusations. The Korean Grand Prix’s main problem, provincial officials like Park now say, was that most South Koreans were simply unfamiliar with Formula One – and, indeed, with auto racing in general. Some took “F1” to be a variant of K-1, a mixed-martial-arts competition. In Seoul, the capital, road racing is usually mentioned in association with so-called pokjujok, literally “tribes of violent speed” – fast-food delivery drivers on souped-up motorcycles who terrorise late-night drivers. South Jeolla officials had envisioned the Grand Prix as a multimilliondollar advertising platform for Korean corporations like Samsung and Hyundai, but given the sport’s obscurity in the country, no major sponsors were interested. And ticket sales were disappointing – which perhaps should have been no surprise, given the track’s location in the remote southwest. (Both the location and the dearth of South Korean racing fans were cited by parliament in its early warnings about the project.) Organisers wound up cutting ticket prices substantially, and they were accused of exaggerating turnout and of letting people into the races at no charge. BY 2013, SOUTH Jeolla was deep in debt and unable to come up with the annual fees required by Formula One. The fees were reduced by about 40 per
Top: Cars at the Nexen Tire Speed Racing event at Korea International Circuit in Yeongam. Above: Spectators cheer at the Nexen Tire Speed Racing event.
will return soon. Still, some say that the Formula One venture should not be seen as a complete failure. It left behind a legacy, they say: the seeds of a South Korean racing scene.
cent that year, to $27 million (after which
“You see the car-racing mindset
a banner went up in Yeongam thanking Bernie Ecclestone, the F1 chief ). But no
prompting speculation that it would move
suddenly picked up in Korea in the past
more discounts were forthcoming, and
to the Seoul area. But it was dropped
two years,” said Michel Puchercos, 57, a
that year’s Grand Prix was the last. In the
from the calendar in January, with no
French businessman in Seoul who has
autumn, South Korea was mysteriously
explanation given.
been competing in local amateur races for
included on Formula One’s calendar for 2015, with no site specified for the race,
South Korean officials say there is no realistic prospect that the Grand Prix
three years. “You see the number of racing cars increasing.” Portfolio
Observer O N E
2
w a t c h
Text: Hilda D’Souza
Prior to his recent tenure as the chairman of Bayer AG’s health-care division, Brandicourt served at American pharmaceutical giant Pfizer. There Brandicourt oversaw the introduction of the cholesterol treatment Lipitor, the best-selling statin, and also the first drug to generate $10 billion in annual sales. This successful US experience should benefit Sanofi as the company plans to launch the new injectable cholesterol treatment called Praluent together with its US partner Regeneron this year. In addition to Praluent and Toujeo, which replaces Lantus, the company is projected to launch up to 18 new drugs by 2020. Others
Olivier Brandicourt, CEO, Sanofi
include the world’s first vaccine for dengue fever, which bank analysts say could become the world’s best-selling vaccine with revenues of over $1.05 billion. Brandicourt studied medicine and after attaining his degree he spent eight years with
Sanofi SA, the French pharmaceutical
the Paris Institute of Infectious and Tropical
company and one of the world’s largest
Diseases researching malaria in West and
drug and vaccine makers, has named
Central Africa and working as a doctor in
Olivier Brandicourt as its new chief
the Democratic Republic of Congo. Industry
executive, effective April 2. Brandicourt
analysts say this experience will be valuable in
replaces Christopher A. Viehbacher who
promoting the new dengue vaccine.
was abruptly dismissed on grounds of lack
Brandicourt will also have the task of
of communication with the board and his
driving through Sanofi’s on-going restructuring
questionable management style.
demands and reviving its oncology research
Brandicourt takes helm at a critical time
and development that suffered a setback after
for Sanofi as it gears up for a busy period
a few late-stage product failures. Investors
of product launches, which investors are
also want to see Brandicourt succeed where
counting on to revive growth after long
his predecessor Viehbacher failed by pushing
dearth of innovation. Sanofi’s top-selling
for greater productivity without alienating the
diabetes drug Lantus, which accounts for
company’s powerful French stakeholders.
over 30 per cent of its profits, loses patent
“Olivier Brandicourt’s strong experience
protection this year. The company also faces
combined with his international profile, deep
stiff competition from rivals that have already
knowledge of US and emerging health care
lined up cheaper versions of the product in
markets, and his capability to unite teams will
Europe. In addition, Lantus has come under
provide new dynamism to Sanofi’s strategy
pressure by insurers in the US who are
of diversification and innovation,” chairman
demanding lower prices.
Serge Weinberg said in a statement.
++++++++++++++++++ ++++++++++++++++++ Ghana Secures ++++++++++++++++++ ++++++++++++++++++ $1 Billion IMF ++++++++++++++++++ ++++++++++++++++++ Loan ++++++++++++++++++ ++++++++++++++++++ Ghana has struck a deal with the ++++++++++++++++++ International Monetary Fund aimed at ++++++++++++++++++ ++++++++++++++++++ stabilising its troubled economy. The ++++++++++++++++++ IMF will provide Ghana with loans ++++++++++++++++++ ++++++++++++++++++ worth about $940 million in instalments, ++++++++++++++++++ beginning in April. The three-year deal ++++++++++++++++++ ++++++++++++++++++ follows months of talks prompted by the ++++++++++++++++++ government’s failure to meet targets on ++++++++++++++++++ ++++++++++++++++++ inflation, the budget deficit and growth. ++++++++++++++++++ The Ghanaian economy had been ++++++++++++++++++ expanding at about eight per cent ++++++++++++++++++ ++++++++++++++++++ annually on the back of gold, cocoa and ++++++++++++++++++ oil exports. However, growth fell to 4.2 ++++++++++++++++++ ++++++++++++++++++ per cent in 2014 as commodity prices ++++++++++++++++++ fell and the currency depreciated. The ++++++++++++++++++ ++++++++++++++++++ resulting economic crisis has led to severe ++++++++++++++++++ power shortages. ++++++++++++++++++ ++++++++++++++++++ This bailout is considered necessary for ++++++++++++++++++ the restoration of investor confidence in ++++++++++++++++++ a struggling economy beset by crippling ++++++++++++++++++ electricity black-outs. ++++++++++++++++++ But President John Mahama’s ++++++++++++++++++ ++++++++++++++++++ administration has a tough job ahead ++++++++++++++++++ implementing austerity measures being ++++++++++++++++++ ++++++++++++++++++ prescribed by the IMF – a likely increase ++++++++++++++++++ in fuel prices as a 17 per cent petroleum ++++++++++++++++++ ++++++++++++++++++ tax is imposed, a freeze on hiring public ++++++++++++++++++ sector workers and an end to costly ++++++++++++++++++ energy subsidies. ++++++++++++++++++ ++++++++++++++++++ The IMF now expects inflation in ++++++++++++++++++ Ghana to fall to between 11 and 12 per ++++++++++++++++++ ++++++++++++++++++ cent by the end of the year. Growth ++++++++++++++++++ should come in at 3.5 per cent in 2015, ++++++++++++++++++ ++++++++++++++++++ it said, rising to between five and six per ++++++++++++++++++ cent by 2017. ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Reuters
18
Portfolio
Observer
19
End of the “Blue Banana” Once depicted as a “Blue Banana” stretching from Manchester to Milan, Europe’s industrial heartland has moved eastwards just as its political centre of gravity has shifted to Germany. The term was coined in 1989 to describe French geographer Roger Brunet’s work identifying a manufacturing megacity, visible from space at night as a band of light curving from England to Italy via the Netherlands, Belgium, West Germany Reuters
and Switzerland. A quarter of a century later, the continent’s industrial geography has morphed. A more fitting image might be
cars and some industrial machinery. Manufacturing employment has declined
percentage points between 2004 and 2013, the latest year for which final data
a golden soccer ball centred on southern
everywhere in Europe as a share of the
is published. The biggest gains accrued to
Germany and reaching into Poland,
workforce but most sharply in Britain,
Germany with 2.2 percentage points.
Hungary, the Czech Republic, Slovakia,
France and Belgium, with the post-2008
Austria and Romania.
economic crisis accelerating a trend driven
region encompassing Britain, France,
by the globalisation of supply chains.
Ireland, Spain and Portugal lost a
Former-communist countries that joined the European Union in 2004 and 2007 have
The golden football region – Germany,
Over the same period, the Atlantic Arc
cumulative 4.4 percentage points in
become the extended production line of
the Netherlands, the Czech Republic,
intra-EU market share, led downwards
German industry, no longer just supplying raw
Slovakia and Romania – increased its
by Spain and the UK. Italy also lost 1.7
materials and components but assembling
share of intra-EU trade by a total of 5.3
percentage points.
Indian Jewellers Jump Online growth potential convinced Ratan Tata, former chairman of the Tata Group, to invest in Bangalore-based online jewellery store BlueStone last year. Jewellers are tying up with Amazon.com, Flipkart Online Services and Ebay after the government last year eased import curbs on gold bars and coins. The total online retail market in India will be about $6 billion this year, driven by free delivery and heavy discounting, Gartner Inc. estimates. That may grow to $22 billion by 2018, CLSA Asia Pacific Markets predicts. Getty Images
The online jewellery market may be worth as much as $2.5 billion in the next five to 10 years, BlueStone estimates. Currently it accounts for less than 0.1 per cent of the $55 billion jewellery In India, where buying gold traditionally means a trip to the family jeweller, a growing e-commerce market forecast at $22 billion in three years is starting to challenge all conventional wisdom. Gitanjali Gems Ltd., India’s biggest diamond and gold jewellery
market, it says. Indians bought 662 metric tons of gold jewellery valued at $26.9 billion in 2014, the most since 1995, according to the World Gold Council. Total demand including for gold bars and coins was 842.7
retailer, expects online sales to account for as much as 20 per cent
tons, helping India surpass China as the world’s largest consumer
of its sales in two to three years from about one per cent now. The
last year, the council said.
April 2015
Observer T H E
W O R L D
ToP Text: Hilda D’Souza
1o
Safe CitieS index 2015 Rank
CITY
1.
Tokyo
2.
Singapore
3.
Osaka
4.
Barcelona
5.
Amsterdam
6.
Sydney
7.
Zurich
8.
Toronto
9.
Melbourne
10
New York
Getty Images
20
China’s Tourist Wave Already the most prolific spenders globally, the number of Chinese outbound tourists is tipped to soar further as the millennial generation spreads its wings.
Source: The Economic Intelligence Unit 2015
According to a new analysis by Bank of America Merrill Lynch,
CitieS for digital SeCurity Rank
CITY (oveRall Rank)
1.
Tokyo
SCoRe/100 87.18
2.
Singapore
83.85
3.
New York
79.42
4.
Hong Kong
78.78
5.
Osaka
77.00
6.
Los Angeles
74.99
74 million Chinese tourists are tipped to spend $264 billion by 2019, compared with the 109 million who spent $164 billion in 2014. $264 billion is about the size of Finland’s economy and bigger than Greece’s. “China-mania spread globally in the past few years, akin to when the Japanese started travelling some 30 years ago, when the
7.
Stockholm
74.82
8.
San Francisco
73.85
9.
Abu Dhabi
73.71
needs,” the analysts wrote. “In our view, this is going to be bigger
10
Chicago
72.90
and will last longer given China’s population of 1.3 billion versus
world went into frenzy then, pandering to Japanese customers’
Japan’s population of 127 million.’’
Source: The Economic Intelligence Unit 2015
Millennials, or 25- to 34-year olds, are expected to make up the
CitieS leading in infraStruCture Safety SCoRe/100
bulk of Chinese tourists at 35 per cent of the total, followed by
Rank
CITY
1.
Zurich
92.63
15- to 24-year olds accounting for around 27 per cent. Only about
2.
Melbourne
92.28
five per cent of China’s 1.3 billion populace are thought to hold
3.
Sydney
91.40
passports, meaning the potential for outbound tourism is vast.
4.
Amsterdam
91.27
5.
Tokyo
89.79
6.
Montreal
89.47
7.
Singapore
88.86
The projected boom could be good news for the global economy. The Chinese are the world’s biggest consumers of luxury goods, with half of that spending done overseas. Chinese visitors to the
8.
Toronto
87.57
US have risen more than 10 per cent since 2009, the fastest pace
9.
Madrid
87.28
for a destination outside of Asia. Australia, France and Italy are
10
Abu Dhabi
86.16
also popular.
Source: The Economic Intelligence Unit 2015
Asian markets stand to benefit, with the biggest uptick tipped for Japan, South Korea and Southeast Asia, according to the research. Portfolio
CASHMERE, SILK & CROCODILE CONCEPT
Commentary
22
Jane Levere
Smart Luggage for the Connected Age
in late summer. Trunkster’s bags will have a tracking system, a scale and a battery with two USB chargers, Potash said, as well as a roll-top entry providing quick access. The push for the connected bag solves
It wasn’t long ago that the main selling
one of the most vexing problems for
point of a piece of luggage was its durability.
travellers – lost luggage. “The last thing that
Not for Kevin Harwood. Like many travellers today, he is looking for technology
you want to have happen is an unwelcome
to go along with durability. He stumbled
surprise of a suitcase disappearing,” said
across a carry-on bag controlled by
Henry Harteveldt, travel analyst for
smartphone – with a Bluetooth-enabled lock,
Atmosphere Research Group. “This is
GPS tracking and a USB port for recharging
peace-of-mind technology.” Travellers who want to track their bags but
a device. It has a built-in scale, too.
not replace luggage they already own, or who
“I’m a little bit of a geek, always looking for products that extend from my phone,
are concerned about a suitcase’s embedded
that connect my world and me,” said
tracking system possibly malfunctioning,
Harwood, a 30-year-old software developer
have another option: free-standing devices.
from Austin, Texas.
Beside LugLoc – which uses Bluetooth and GSM technology and costs $70, plus
Why should luggage be any different? At the crowdfunding site Indiegogo he was
to airport. Rimowa, a German luggage
additional search fees – there is Trakdot,
among the first to buy into a startup called
manufacturer, is jointly developing a smart
whose GSM device texts and emails users the
Bluesmart that is developing a connected bag.
suitcase line called Bag2Go with Airbus and
location of their checked suitcase when their
Harwood has plenty of company. Bluesmart
Deutsche Telekom. The new bags, expected
plane lands and costs $50, plus an annual
raised more than $2 million from more than
to be available next year, will interact with
service fee of $20.
10,000 backers, far surpassing its goal.
sensors in the cargo holds of Airbus aircraft
Bluesmart, which expects to deliver its first bags in October, is part of what has become
to identify their location. “Adding electronic capability and
Franck Dubarry, founder of Lev Technology, said his company would introduce a Smart Unit device this summer
a stampede of businesses – both startup and
communications to baggage makes a lot
that will tell users where their bags are after
established – into the nascent connected
of sense,” said Frank Gillett, an analyst at
flights. It will cost $99, plus activation and
luggage industry.
Forrester Research. “What you’re seeing is
other fees.
Samsonite is to introduce a new line of
the first round of innovation that will take
To comply with regulations governing
GeoTrakR suitcases, containing a cellular-
time to evolve. The goal is to improve the
personal electronic devices, the tracking
enabled baggage-tracking system from
travel experience.”
systems are generally designed to
LugLoc, at the Travel Goods Association
© 2015 New York Times News Service
said it would release a carry-on and a suitcase
Hanif Perry, 32, a New York-based
automatically shut down once they are stored
trade show in Las Vegas, Nevada. Andiamo
marketing consultant who also participated
and to automatically turn back on once a
will introduce a new carry-on with a
in Bluesmart’s Indiegogo campaign, said he
plane lands.
wi-fi hotspot, battery charger and other
liked its bag’s laptop pocket. The carry-on, he
features. Delsey has been soliciting feedback
said, “is more purposefully designed for the
and better for customers quickly spread
since late last year for its Pluggage line of
younger traveller who carries all devices.”
throughout the market,” said Michele Marini
smart suitcases.
Bluesmart is not the only luggage venture
“Products that make travel easier
Pittenger, president of the Travel Goods
Even telecom companies are interested.
raising money through crowdfunding.
Association. “To use recent examples, we’ve
AT&T is researching development of a smart
Trunkster collected $1.4 million from
seen lightweight bags, expandable cases and
bag, described in a YouTube video posted
3,500 investors through Kickstarter, easily
four-wheeled luggage rapidly become the
last summer, that tracks a bag from airport
surpassing its goal. Jesse Potash, a co-founder,
new normal,” she said. Portfolio
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Profile
24
Portfolio
25
Putting the Fizz Back Into Coke Coca-Cola, one of the world’s most iconic companies, is starting to lose its sparkle. CEO and chairman Muhtar Kent has his work cut out for him as he battles changing tastes, health conscious consumers and a steady decline in US soda sales, reports Guido Duken. Muhtar Kent, Coca-Cola’s Chairman and Chief Executive Officer, is under pressure. In North America, the company is dealing with a steady decline in soda consumption and competition from smaller players. In 2014, Coca-Cola’s global unit case volume rose 1.5 per cent, which was short of its target range of three to four per cent. Its operating income and earnings per share growth also fell short of targets. As a result, shareholders are not happy. Wintergreen Advisers, a minority shareholder in Coca-Cola, went so far as to call for Kent’s head. The investment firm, in a statement accompanying an analysis of Coca-Cola’s performance, said Kent was “incapable of leading Coke’s turnaround and should be replaced.” That’s not to say that Coca-Cola is on the ropes. The company has 130,600 employees, makes 500 different beverages around the world and sells two billion servings daily. North Korea and Cuba are the only two countries in the world where Coke does not operate. There are a number of reasons why Coke’s performance is faltering. One major factor is the growth in competition. Today, there are 4,200 beverages in the market, thousands more than existed just a few years ago. But beyond competition, there is a bigger problem, namely relevance. And relevance, in turn, is tied to changing trends. Simply put, Coke isn’t cool anymore. In fact, it is even regarded as a health hazard. a fifth of all US adults were obese; today that number is 35 per cent. Obesity rates among children have tripled since the 1970s. The scientific community quickly identified fast food and sodas as a major cause. The result has been a steady sales decline in the $75 billion soda industry. Yet for decades, soda companies saw consumption rise. During April 2015
Photos: Getty Images, Corbis
By 1999, according to the Centres for Disease Control and Prevention,
Profile
26
targets in 2014, but also likely in 2015. Coke recently reported that its 2014 revenue slid two per cent to $46 billion and profit fell 17 per cent to $7.1 billion from the prior year. The solution? Kent believes it is to sell more soda, diversify, and cut costs. MUHTAR KENT, THE son of a Turkish diplomat, is a Coca-Cola man through and through. He started with the company in 1978 working on delivery trucks. “I would get up at 4am, go into supermarkets, bring in products, stock the shelves and build displays. At the time, I would sometimes ask myself what I was doing, but I now know it gave me a very fundamental understanding of our business from the ground up.” He continued to rise up through the ranks with a variety of leadership positions in Coke’s US, Europe and Asia operations. Kent put the understanding he gained from his delivery days to good use in what he cites as the most enjoyable aspect of his career. “I’m thankful that I’ve had opportunities to be involved with the 1970s, the average person doubled the amount of soda they drank; by the 1980s it had overtaken tap water. In 1998,
Above: Kent puts the understanding he gained from his delivery days to good use in expanding the brand.
markets and societies that are on the move. This was true in the 1990s, when I worked in a number of the former Soviet bloc nations as they embraced the free
Americans were downing 1.3 oil barrels’ worth of soda for every person. But in
years for Kent, and it may get worse. In
market and greater political freedom. It
2005 sales started dropping and they
February 2013, Coke confirmed it had
was amazing to experience first-hand the
haven’t stopped since. Americans now
fallen short of its three to four per cent
positive changes happening there.”
roughly drink the same amount of soda as
annual volume growth for the first time
they did in 1986, and there have also been
in nearly a decade. Kent called it a “speed
Europe that Kent had a once in a lifetime
unexpected slowdowns in key markets
bump” and promised that 2014 would be
moment after the Berlin Wall fell in 1989
such as China and Latin America. That is
the “year of execution”. By October last
and he was put in charge of the region.
a big problem for Coke, as soda makes up
year, he had to acknowledge Coke would
After sizing up the potential, Kent flew
74 per cent of its business worldwide.
not only miss its revenue and profit
to Atlanta and told his bosses, “I need
In fact, it was in Eastern and Central
And that falling trend is set to continue, as health-conscious consumers shift away from calorie-rich drinks. And as concerns have grown over “artificial” products, such as sweeteners, customers have also moved away from low calorie “diet” colas. In the US, Diet Coke consumption has plunged by two per cent in the past two years.
Kent bases his leadership strategy around being “constructively discontent”. By this, Kent means, “not fast enough, not innovative enough, not entrepreneurial enough. It’s all about an entrepreneurial mentality. I’ve worked religiously to get that into the company. People need to feel like they are chasing pennies down the hallway.”
The result has been a rough two Portfolio
27
capital, and we’ve got to go now.” He and
20 billion-dollar brands. Fourteen of them
his team built 22 factories in 28 months.
are still beverages, including Dasani water
In 1999 he joined the Turkish Efes
and Minute Maid orange juice. “Sparkling
Beverages Group but he returned to
beverages have always been a treat, and
Coca-Cola in 2005 as head of North Asia,
we have to rediscover that,” Kent said in a
Eurasia and the Middle East where he
recent interview.
worked with the bottling network to boost
In February 2014, Kent announced
sales volumes. He was then promoted to
plans for a reintroduction of Coca-Cola,
president and focused on his next target,
accompanied by a two-year, $1 billion
Coca-Cola Enterprises (CCE), which was
marketing push, with the goal of driving
Coke’s biggest bottler in the US. CCE
“sparkling” (the company’s euphemism for
had taken on too much debt and could
soda) back to where it once was. “It’s going
not adequately invest in Coke’s brands.
to take a while, this is not … an immediate
“Coke had no chance to grow in the US,”
fix, but we know it’s going to be a steady
Kent believed. The obvious answer was
improvement,” he said. Judging by last
to buy the bottler, but negotiations had
year’s results, this strategy is producing
already failed twice. But Kent managed to
some effects with sales of Coca-Cola
broker a $12.3 billion megadeal in 2010
inching up one per cent in North America.
that brought 65,000 new employees, $21 billion in revenue and various synergies that helped Coke save $350 million in annual costs.
Above: Coca-Cola has successfully turned Gold Peak, Fuze Tea and I Lohas into $1 billion brands respectively by scaling it through Coke’s global distribution system.
On the back of this success Kent
Coca-Cola has also been busy diversifying its brands. Since 2007, the company has invested in at least five smaller companies and bought three. Coca-Cola has successfully turned
became CEO in 2008 and chairman
Gold Peak, Fuze Tea and I Lohas into
in 2009. Kent bases his leadership
KENT WILL NOW have to enforce
$1 billion brands respectively by scaling
strategy around being “constructively
his leadership strategy as Coca-Cola
it through Coke’s global distribution
discontent”. By this, Kent means, “not
needs rapid change, innovation and
system supported by intense marketing.
fast enough, not innovative enough, not
entrepreneurial success. But can he do it?
Last year, Coke spent $3.5 billion
entrepreneurial enough. It’s all about
in buying minority stakes in Keurig
Kent insists that soda is still the
an entrepreneurial mentality. I’ve worked
company’s “oxygen”, as it generates roughly
Green Mountain (a machine that
religiously to get that into the company.
74 per cent of revenues. Coca-Cola, he
allows people to make single servings
People need to feel like they are chasing
believes, has “exactly the right ingredients”
of sodas and other drinks at home)
pennies down the hallway.”
to grow rapidly – including a portfolio of
and a 16.7 per cent stake in Monster
Falling flat
Coca-Cola Co.’s global beverage volume, annual change SOURCE: The company/The Wall Street Journal.
6%
4%
2%
0% 2005 April 2015
2006
2007
2008
2009
2010
2011
2012
2013
2014
Profile
28
relevant in a world of changing tastes. Market researchers have found that high school teenagers can tell them Red Bull’s ad slogan, but have no idea of Coke or Pepsi’s. Whereas drinking a Coke formerly used to be part of the “cool” factor, that role is now played by iPhones and other luxury accessories. That is why Coke needs to find new growth businesses as the market moves away from carbonated soft drinks. NOT THAT COCA-COLA is the only company in this situation. Preferences are changing so rapidly and profoundly that they’ve caused recent financial losses at companies such as Kellogg, Kraft Foods Group and McDonald’s as consumers move to items that are healthier, tastier and more unique. Kent Beverage – a successful energy drink. Kent is also intent on freeing up cash by refocusing on Coca-Cola’s core business. In other words, Coke plans to refranchise, or sell off, nearly all of its North American bottling operations.
Top L-R: Coke plans to refranchise, or sell off, nearly all of its North American bottling operations; Coke spent $3.5 billion in buying minority stakes in Keurig Green Mountain and Monster Beverage. Above: Kent insists that soda is still the company’s “oxygen”, as it generates roughly 74 per cent of revenues.
to it that our brands connect with the values that are so important to the key demographic of the millennial youth generation: authenticity, sustainability and transparency. We need to stay nimble, responsive and progressive.”
This will allow the company to focus on
In 2009, Kent believed he could double
its core competencies – marketing innovation and franchise leadership.
is aware of that shift. “We must see
as Honest Tea, Zico coconut water, and
sales by 2020. The company has since
Innocent, a British-based juice, have
distanced itself from that target, but still
costs by $3 billion a year, some of it by
infused the company with entrepreneurs
believes in its long-term growth strategy.
cutting 1,800 jobs. By reducing hierarchy
who continue to run their brands and in
“There is no tomorrow without today,”
at the corporate level, Coca-Cola is hoping
many cases operate far from corporate
says Kent. “The future of the world
to gain faster, decentralised decision
headquarters in Atlantis.
belongs to two groups: those that can
The company is also planning to slash
making. Furthermore, Coke’s aggressive
It is the acquisition of such brands that
acquisition of independent brands such
Coca-Cola hopes will allow it to maintain
grow and those that cannot grow. Those that don’t grow will go into oblivion.” Portfolio
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Economy
30
India’s Economic Surge Other developing economies have run into headwinds, but India’s outlook has brightened since the election of businessfriendly Prime Minister Narendra Modi, reports Keith Bradsher.
C
hina’s economy is slowing. Brazil
boilers. Foreign investment rules have
is struggling as commodity prices
been relaxed for insurers, military
plunge. Russia, facing Western
contractors and real estate companies.
sanctions and weak oil revenue, is headed into a recession. As other big developing markets
Renewed optimism from outside investors is spurring business expansion
to make changes. His party lost badly in recent local
stumble, India is emerging as one of
in cities around the country like
the few hopes for global growth. The
Tiruppur, a hub of India’s yarn and
elections in Delhi. The next test was in
stock market and rupee are surging.
textile industry. “Most of the factories in
February when the government presented
Multinational companies are looking to
Tiruppur are doubling or tripling their
its full-year budget to parliament and
expand their Indian operations or start
capacity, and these are huge factories,”
layed out an agenda for taming chronic
new ones. The growth in India’s economy,
said Pritam Sanghai, the director of
deficits while increasing investment,
long a laggard, just matched China’s pace
Arjay Apparel Industries.
bolstering manufacturing and building
in recent months. © 2015 New York Times News Service
A broad tax overhaul is underway.
India is riding high on the early success
Whether India’s momentum is shortlived or sustainable hinges on whether
modern highways and ports. India, in part, is benefiting from
of Prime Minister Narendra Modi and
Modi can push through deeper reforms,
favourable economic winds, the same
a raft of new business-friendly policies
including addressing the persistent
ones wreaking havoc in Russia, Venezuela
instituted in his first eight months.
poverty and corruption that plague the
and elsewhere. The country’s reliance
Small factories no longer need to
economy. Lacking the necessary political
on imported oil, for example, has been
shut down every year for government
support to overhaul legislation quickly, he
its bane for decades. By last summer, oil
inspectors to spend a day checking
has largely relied on temporary measures
was a $100 billion drag on the economy, Portfolio
31
“All the circumstances have come
roughly five per cent of the entire country’s economic output. With crude prices now halved, fuel costs for trucks and cars have plunged, pulling down transport expenses and inflation. The cost of government fuel subsidies has nosedived, helping curb the country’s chronic budget deficits. “We’ve essentially received a $50 billion gift for the economy,” said Raghuram G. Rajan, the governor of the
India, in part, is benefiting from favourable economic winds, the same ones wreaking havoc in Russia, Venezuela and elsewhere. The country’s reliance on imported oil, for example, has been its bane for decades.
together to make manufacturing and growth happen,” said Shailesh V. Haribhakti, the chairman of MentorCap Management, a boutique investment bank in Mumbai. As India’s fortunes begin to shift, Modi is trying to tackle thornier economic issues. He wants to expand the private sector’s role in coal mining, a government-dominated industry. He is looking to accelerate the construction of
Reserve Bank of India.
roads and other infrastructure. On the
India is also profiting from the troubles of other emerging markets.
India and its main rival as an alternative
tax front, Modi hopes gradually to replace
China’s investigations of multinationals,
to China, Indonesia.
state taxes on goods that cross state
persistent tensions with neighbouring
Mary T. Barra, the chief executive
borders with a national tax.
of GM, came to Pune in western India
In a January visit to New Delhi,
have prompted many companies to start
last September to oversee the start of
President Barack Obama highlighted
looking elsewhere for large labour forces.
Chevrolet exports from there to Chile.
Big companies like General Motors have
She is also scouting for opportunities to
recently moved their international or
expand in India’s auto market, which
Asia headquarters from Shanghai to
the company predicts will be one of the
Singapore as they expand further into
world’s three largest by 2020.
Illustration: Charlie Banalo. Photos: Getty Images
countries and surging blue-collar wages
April 2015
Below: Workers assemble a General Motors car in India. Multinationals, like GM, are expanding further into India at the expense of China.
Economy
32
“There are still too many barriers – hoops to jump through, bureaucratic restrictions – that make it hard to start a business, or to export, to import, to close a deal, deliver on a deal.”
chronic regulatory obstacles in India. “There are still too many barriers – hoops to jump through, bureaucratic restrictions – that make it hard to start a business, or to export, to import, to close a deal, deliver on a deal.” But Obama acknowledged the country’s progress, saying, “Prime Minister Modi has initiated reforms that will help overcome some of these barriers.” The challenges are significant. The World Bank recently ranked India as the 142nd-hardest place to do business out of 189 countries. Legal disputes, often involving land, can bog down even the most sought-after projects. A Boeing aircraft maintenance centre is only now close to opening after a two-year delay in
parliament, the deeply divided upper
on executive orders that automatically
construction of a crucial taxiway, caused
house has delayed action on bills for his
expire in late April. They can be renewed,
by villagers who lay down in front of
longer-term reforms. So Modi has relied
though not indefinitely.
bulldozers until the state government paid them more for a 183-metre strip of land.
250 million
Would-be builders of large factories also worry about India’s stringent labour laws, including essentially lifetime
India
YOUTH POPULATION
employment guarantees for unskilled or semiskilled workers with at least two years’ experience.
Both sexes 15 to 24
150
Those labour law protections are starting to erode. Many companies
100
rely increasingly on contract workers, whom they require to leave after a single year, circumventing the
50
employment guarantees. For Modi, the most immediate challenge is on the political front. While his party dominates the lower house of
Clockwise: Raghuram G. Rajan, the governor of the Reserve Bank of India; An industrial project under construction in Pune; Farmers, who have yet to give their land to the Maharashtra Industrial Development Corporation, work their land.
200
China
Divergent Paths
The supply of 15- to 24-year-olds, the prime age for factory workers in emerging markets, is rising in India. By contrast, it is plunging in China because of the “one child” policy, and a sharp increase in college attendance has made the problem more acute. PROJECTIONS
0 ’95
’00
’05
Sources: International Labor Organization; United Nations
’10
’15
’19
THE NEW YORK TIMES
Portfolio
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LAST S
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High achievement always takes place in the framework of high expectation.
Innovation
34
A
The Invention Mob
was a clever fix rather than an imaginative breakthrough:
Irritation was the mother of his invention. He found the standard power strip maddening because electric plugs would often block the adjacent sockets. So after his senior year in high school, while attending a summer programme at the Rhode Island School of Design, he © 2015 New York Times News Service
Quirky is a startup that sources inventions from the online community and then refines, manufactures and markets the resulting products, reports Steve Lohr.
s inventions go, Jake Zien’s
devised an adjustable power strip that solved that problem. But his product concept – a brief description, drawings and a crude mock-up – went nowhere until he was a senior in college. At that point, he sent digital versions of his sketches to a startup called Quirky. Portfolio
35
Quirky’s designers and engineers refined the concept. “They made it a much more elegant solution,” he said. Quirky also handled the manufacturing and marketing, secured a patent and listed Zien as the lead inventor. A year later, in 2011, the snakelike adjustable strip, Pivot Power, was on its way to store shelves. Zien, 25, now gets a few cents on the dollar for every Pivot Power sold. A software designer in New York, Zien has collected more than $700,000, and counting. This flexible power strip is the biggest hit so far for Quirky, founded in 2009. The company, based in New York, is a curious creation of the internet era, a hybrid of the digital and physical worlds. It is a social network, an online retailer and an industrial designer, manufacturer and marketer. Ben Kaufman, the company’s 28-year-
testing how far the crowd-based model
old founder and chief executive, calls
of innovation and product development
it “a modern invention machine,”
can go. Quirky’s ultimate goal, Kaufman
whose mission is to commercialise
insists, is to create an engine that
product ideas.
accelerates the process of identifying
Quirky is Exhibit A for the case
and developing new ideas for all kinds of
that a digital-age renaissance of the
products. “I’d like Quirky to be a utility
small inventor is not only possible but
like electricity,” he said.
underway. The company taps an online
Investors are betting that Quirky can
Opposite page: (Top) Nathan Firth, inventor of a smartphone-app garage door opener, at home in San Marcos, California. (Below) Jake Zien, inventor of the Pivot Power surge protector strip, at his office. Top: An evaluation session at Quirky, whose founder calls it a “modern invention machine,” at the firm’s offices in New York. Below: The flexible Pivot Power adjustable strip has been Quirky’s biggest success to date.
community of one million registered
build a sizable business. The company
users. More than 400 Quirky-generated
has raised $185 million to date. General
faster-paced models of manufacturing.
products have made it to the marketplace
Electric, the United State’s largest
The rest of the money has come mainly
so far.
manufacturer, has put in $30 million, as
from venture capital firms.
The company is also a laboratory for
Investors are betting that Quirky can build a sizable business. The company has raised $185 million to date. General Electric, the United State’s largest manufacturer, has put in $30 million, as part of a partnership to experiment with faster-paced models of manufacturing.
April 2015
part of a partnership to experiment with
To realise its ambitious goals, however,
Innovation
36
college. He attended Champlain College
Quirky has to go beyond making smallbore products, like the Pivot Power. Other popular Quirky products include a gadget for separating egg yolks, a plastic stem that inserts into a lemon or a lime and becomes a push-button spritzer, and a corkscrew that cuts the foil off a wine bottle and doubles as a pour spout. Smart, perhaps, but not essential for a networked future. That is starting to change. Quirky is pursuing the much-promoted vision of
Big companies want to pick up innovation tips from Quirky, but they will be encountering a corporate culture whose essence Kaufman defines as “a complete disregard for the way things are supposed to be done.”
out in his freshman year. He worked on his startup, called Mophie. It made products like a plastic sled to hold the iPod Nano that could split the audio stream so two people could listen at once. It won a Best of Show award at the Macworld convention in 2006. Rather than simply trying to repeat that accomplishment the following year, Kaufman decided to do something totally different. He and his team showed up
the smart home, or the consumer Internet of Things. The strategy and the timing are
in Burlington, Vermont, but he dropped
The corporate-partner strategy is
at Macworld in San Francisco, set up a
guided in part by its inventor community.
intended to allow Quirky to focus on its
booth and asked the attendees to invent
Big companies – not just lone inventors
design talents while it benefits from the
the company’s 2007 product line. At their
– will increasingly be part of Quirky’s
marketing and manufacturing muscle
booth, they passed out small notebooks
future. It says a handful of companies
of the large enterprises. But it creates
and pens and encouraged the Macworld
have lined up for its new corporate
the potential for a culture clash. Big
crowd – die-hard Apple fanatics – to draw
partnership programme, which builds
companies want to pick up innovation
up their ideas and submit the sketches.
on Quirky’s experience with GE.
tips from Quirky, but they will be
Winning entries were selected, and by the
Although it is not identifying them
encountering a corporate culture whose
end of the four-day show, they used a 3-D
yet, the new partners will include
essence Kaufman defines as “a complete
printer to make prototypes.
large companies that make toys, audio
disregard for the way things are supposed
equipment and kitchenware. The
to be done.”
products created will carry the tagline
While still in high school, Kaufman
That experience, Kaufman recalled, was “absolutely life changing.” He was struck, he said, by the power of seeing
“Powered by Quirky,” but will be sold
coaxed his parents into taking out a
“a community of passionate people work
under the big companies’ brands.
second mortgage of $185,000 on their
together to create and invent the future.”
house to fund an early entrepreneurial
Two years later, he founded Quirky.
Below: Ben Kaufman, the founder of Quirky, tests a product at the firm’s offices in New York.
venture, which made accessories for the Apple iPod. The loan from his parents
“Ladies and gentLeman, 7 pm
had one condition: that Kaufman go to
Thursday night and you’re watching Quirky product evaluation,” Kaufman said, standing behind a lectern, stage-lit and wearing a mike. “Give it up.” Hearty applause issued from the 100 or so people assembled at the company’s headquarters. Many more Quirky followers in the United States and abroad were watching the event streamed over the web. This happened to be in December, but these evaluation sessions happen every Thursday. The first step in that process is automated. Software algorithms search inventors’ online submissions for product ideas that are off limits for Quirky, like guns, bombs, medicine and food. Next, the company’s inventor community gets Portfolio
37
Right: The offices of Quirky, whose founder calls it a “modern invention machine.” Below: New ideas adorn the noticeboards of Quirky’s office. About one in five ideas makes it into the marketplace.
engaged in a virtual plebiscite, voting up or down on the ideas. Quirky’s screeners and product managers then study the popular ideas. They look for, among other criteria, whether the product category is a trending subject, Twitter-style, on its inventor social network. Each week, fewer than 10 ideas are presented at the Thursday events, and about half typically get the go-ahead. When a product idea gets the nod, Kaufman intones, “Congratulations, you’re a Quirky inventor.” In truth, there’s still a way to go at that point. About one
What Quirky has done for many inventors is to make placing a product on store shelves an attainable aspiration. There are a few Quirky inventors, like Zien, who have made very good money. But for most, the main satisfaction is being a part of ideas that make their way into the world as products. And there is recognition: The inventor’s name appears on the packaging for each product.
in five of the ideas approved at weekly evaluation events make it into the marketplace, where Quirky products are sold through major retail chains. What Quirky has done for many inventors is to make placing a product on store shelves an attainable aspiration. There are a few Quirky inventors, like Zien, who have made very good money. But for most, the main satisfaction is being a part of ideas that make their way into the world as products. And there is recognition: The inventor’s name appears on the packaging for each product. Quirky, with nearly 300 employees, is growing fast. The company is private and does not make public its financial reports, but Kaufman says Quirky’s revenue more than doubled in 2014, to $100 million. How far Quirky can go from here depends on the pace at which the smarthome market develops. Someday, homes will be more intelligent, safer and more energy-efficient as devices including light bulbs, doors, window shades, water heaters and lawn sprinklers become able to communicate and respond to and learn from users’ digital commands. It’s beginning to happen, but slowly.
April 2015
Design
38
Making the Apple Watch Tick
T
In order for the Apple Watch to truly take off, much will depend on third-party apps that will make it more functional, reports Brian Chen.
how much it costs. Just as important, it
he value of a wrist watch is
without the help of a whole lot of app
typically defined by its materials,
developers.
design, features and brand. For
with third-party apps, and it’ll be the
apply, but so will something else: apps.
same with the watch,” said Jan Dawson,
Apple recently explained how its long-awaited Apple Watch works and © 2015 New York Times News Service
“All of Apple’s devices really come alive
the new Apple Watch, all those factors will
an independent technology analyst for Jackdaw Research. When Apple released the iPhone in
also demonstrated what the watch was
2007, it was essentially a blank slate.
capable of doing with apps made by other
When the App Store opened a year later,
companies. If the watch is going to be a
the device became much more than a
success, those other companies will have a
fancy phone. Just by downloading an
lot to do with it because few devices – not
app, the iPhone could become a musical
even those made by Apple – will sell well
instrument, a medical device, a TV remote Portfolio
39
Opposite page: Tim Cook, Apple’s chief, announces the Apple Watch in San Francisco. Left: An attendee of Apple’s media event tries on the Apple Watch. Below: Journalists, bloggers and Apple fans prepare for the presentation by Tim Cook, about the features in the Apple Watch.
and gaming device. It became the ultimate Swiss army knife of gadgets. For the Apple Watch to be remotely as successful, Apple will have to find a way to take that world of apps to the wrist. But a watch presents unique challenges with its tiny screen. And the way app developers make money from it will be different than with other Apple products. Unlike the iPhone or iPad, the Apple Watch is not a stand-alone product. It relies on an iPhone to fully operate, partly because the brains of watch apps will live on the iPhone. So users will have to install watch apps on the iPhones as well. The economics of that combination are tricky. Developers working on watch apps have to make an iPhone app first and expand it to include support for the watch. And it remains unclear whether they can double dip. Apple has not said whether developers can charge for the iPhone app, then charge again for the watch extension of the app. Still, companies are trying, even though some are worried the watch’s tiny screen can limit features or – even worse – ads. Christian Gaiser, chief executive of Retale, said his company found a path to using a watch app to complement its smartphone app. Retale’s iPhone app displays weekly deals for retailers like Wal-Mart and Target. Retale users who April 2015
see something they want to buy in the
if the watch is going to be a success, those other companies will have a lot to do with it because few devices – not even those made by Apple – will sell well without the help of a whole lot of app developers.
iPhone app can push the nearest location of the retailer to the watch app, which will map out turn-by-turn directions on the watch screen. Retale collects fees from retailers whenever customers engage with their ads, so the watch app is meant to increase usage of the smartphone app, Gaiser said. At its media event, Apple also demonstrated an app from Uber, the ridesharing service, to summon a car. The watch app shows where the driver is on a
Design
40
“the end goal is to build loyalty with our most valuable guests,” said Chris Holdren, who led development of the starwood watch app. “it continues to deepen the relationship we have with them.”
The cheapest model is the Apple Watch Sport, the one tailored to athletes, which starts at $350. The larger Apple Watch Sport costs $400. The next step up is the map, and from there, the user can place a
Apple will offer three models, each with
Apple Watch, with a more fashionable
a casing made of a different material:
stainless steel case. The smaller version
Watch Sport, a version with an aluminium
of this watch costs $550 to $1,040, and
by Starwood Hotels. Starwood’s iPhone
case; Watch, which has a stainless steel
the larger one costs $600 to $1,100. The
app can be used to book a hotel room.
case; and Watch Edition, which has a case
price range for both depends on the band.
The watch app sends a notification to the
made of 18-karat gold.
The golden Apple Watch Edition is a sure
phone call to the driver. Apple also rolled out an app developed
watch wearer when he or she is near the
Each model comes in two case sizes –
sign that Apple has entered the luxury
hotel. When the guest arrives at the hotel,
3.81 centimetres and 4.19 centimetres.
market. Pricing for this high-end version
the watch app shows the room number,
And for each watch, customers will
starts at $10,000.
and after that the watch can unlock the
be able to choose from a variety of
user’s room door just with a hand wave
interchangeable bands in different colours
go on sale April 24. It will first be
over the lock.
and materials.
available in a select number of countries,
Preorders start April 10, and it will
“The end goal is to build loyalty with our most valuable guests,” said Chris Holdren, who led development of the Starwood watch app. “It continues to deepen the relationship we have with them.” Unlike past apple products, the Apple Watch has a complex pricing structure. Because a smart watch is both device and fashion accessory, Apple designed the watch to be highly customisable to suit the tastes of various users, from fitness buffs to collectors of luxury watches.
Above: Tim Cook shows Christy Turlington Burns a model of the Apple Watch. Right: Attendees of Apple’s media event try on models. Portfolio
41
including the United States, Australia, China and Japan. At the event, Apple also stressed some of the signature features of the device. The company has highlighted the crown as its latest signature innovation for controlling a device, similar to the mouse for the personal computer, the click wheel on the iPod and the touch screen for the iPhone. On the Apple Watch, the crown can be twisted to zoom in or out of the screen or to scroll through a web page. You can take and even make phone calls, as long as your iPhone is nearby. “I have been wanting to do this since I was five years old,” said Tim Cook, Apple’s chief executive. The watch includes a heart rate sensor and a sensor for tracking movement to
Above: Journalists, bloggers and Apple fans view models. Right: The smart watch is both gadget and fashion accessory, Apple designed its device to be highly customisable to suit the tastes of various consumers, from fitness buffs to collectors of luxury watches. Below: Kevin Lynch, an Apple executive, demonstrates how Instagram functions on the new Apple Watch.
complement fitness applications. It has a chip that helps it make wireless payments. The watch also includes Digital Touch, an application that enables a new method of communication between watch users. Watch wearers can scribble sketches on the watch screen and send them to one another, or even send their heartbeats. Apple also added to the watch a so-called taptic engine, which taps users on the wrist with a tactile sensation when they receive alerts, messages or notifications. Apple said the watch’s battery would last 18 hours. April 2015
Greece
42
Greece’s Bureaucratic Labyrinth There is no question that Greece is suffering from austerity cuts, but its complicated bureaucracy is also stifling the economy and innovation, reports Liz Alderman.
Portfolio
43
Y
annis Stamatiou is one of
couldn’t give me a piece of paper,”
Greece’s many business owners
said Stamatiou, the chief executive of
who say Greece’s economic
Stamatiou Plastics, as he described the
problems are not only about austerity.
anxiety that he says keeps him awake
Just ask him about the bureaucracy,
night after night. “Greece is never
alone stoke growth and create the new
which the new government has vowed
going to move forward unless this new
jobs that Greece desperately needs.
to streamline but is a snarl of rules,
government tackles the dysfunction,
There is no question that Greece is
decades in the making, that could prove
bureaucracy and uncertainty that we
struggling to recover from the austerity
hard to untangle.
have failed to address since the crisis.”
cuts that its international creditors have
Stamatiou recalls with disgust his trip
© 2014 New York Times News Service
Above: Filippos Stamatiou owns Stamatiou Plastics with his father in Athens.
As Prime Minister Alexis Tsipras
demanded. To improve the national
last summer to a tax office in southwest
recently staged a showdown with
balance sheet, previous governments
Athens. The large plastics factory his
European creditors over a debt deal,
slashed state spending 20 per cent in five
family has run for 40 years, which
he has insisted that a first step must be
years, mostly by cutting wages, pensions,
employs 150 workers and is one of the
removing many of the austerity measures
health care and social services, which
few in the industry to survive Greece’s
that previous governments agreed to
impoverished many Greeks and depressed
wrenching economic crisis, was poised
starting in 2010 as conditions for bailout
consumption. The economy has shrunk
to get a rare bank loan. But because of
loans totalling $274 billion.
by a quarter in the last five years, and
a welter of changes to Greece’s tax rules
But without many of the other
unemployment is above 25 per cent. But just as harmful as austerity cutbacks
in recent years, the tax official could not
economic changes that Tsipras and his
produce a critical document the bank
finance minister, Yannis Varoufakis,
have been the structural problems
needed to seal the deal.
say they intend but need time to make,
inhibiting economic efficiency, many
removing austerity may not be nearly
of which have barely budged, despite
enough to restore economic stability – let
creditors’ demands. Businesses are still
“We came this close to closing the whole company because the government April 2015
44
stymied by labour rules and tax policies
reforms in the public and private sector
– say are desperately needed. His Syriza-
that under the previous government often
creating conditions for growth.”
led government says it can succeed where
changed week to week – 2,200 new tax regulations in the last two years alone.
Tsipras, even as his campaign and debt-
others failed because the left-leaning party,
negotiating rhetoric has vilified austerity,
having never before been in power, will not
has acknowledged the need to pursue
be constrained by inertia or vested interests.
FIRMS LIKE STAMATIOU’S, as
the overhauls that Greece’s European
well as investors and startups, face high
partners – and many Greeks themselves
He does not have the luxury of time. A modest economic recovery that began
administrative costs and bureaucratic
last summer has been at least temporarily
inefficiency that Greek business associations
derailed by the political upheaval in
say jeopardise jobs and leach nearly $16
Greece. Investors and bank depositors
billion a year from the economy. Corruption
have pulled tens of billions of dollars
remains widespread, and vested interests
from the country over the uncertainty
have fought against opening swaths of the
of whether the austerity pushback will
economy to competition.
succeed or will instead result in Greece
“The removal of austerity is all fine and well,” said Constantine Mihalos, president
potentially being the first member to leave the euro currency union.
of the Athens Chamber of Commerce.
Many elements of Syriza’s growth
“But it will only be the right solution if
blueprint would take time to bear fruit,
it is followed by the necessary structural
meaning Greece could remain dependent on external European aid for a long time. Stamatiou, who runs the plastics business with his son, Filippos, 26, is sympathetic to the bid to end austerity. When the crisis hit, they did not cut employee wages, finding other ways to reduce costs. “When you lower their salary for years, they have no ambition to do new things,” Filippos Stamatiou said of the
Clockwise: Tina Kyriakis, who created a small business in 2012 giving cultural tours of Athens, says she struggles with bureaucracy; Greek Prime Minister Alexis Tsipras; A man feeds pigeons in central Athens; An employee works on a boat at the Stamatiou Plastics factory.
Portfolio
company’s workers. “It’s not productive for them or for the economy.”
Economists say Tsipras’ plans to stoke
computer one afternoon at Impact Hub,
consumption by eventually rolling back
an airy wooden loft for Greek startups
austerity could help. But businesses
in central Athens. A former corporate
break most of those barriers. Greece’s new
say growth would come much faster if
communications director for a French
budget minister, Dimitri Mardas, said
the government focused on enhancing
company that withdrew from Greece
in an interview that the priority was to
Greece’s productive capacity, in part
after the crisis hit, she created a small
“reconstruct the state and the economy
by following through immediately on
business in 2012 giving cultural tours
from zero, and rebuild it again.” But to the
basic changes like cutting red tape and
of Athens to tap the one lively sector of
chagrin of creditors in debt negotiations
enhancing competition.
the economy, tourism.
Tsipras has said his government will
recently, Tsipras is resisting changes like
“We’ve endured almost everything,”
“I knew domestic consumption would
making labour laws more flexible, which
Filippos Stamatiou said. “In order for us not
be dead for at least 10 years, so I decided
he argues would perpetuate hardship.
to disappear, stability needs to return. When
to focus on income that doesn’t have to
that happens, we’ll see about growth.”
do with the local economy,” said Kyriakis,
Below: Tourists visit the Parthenon on the Acropolis. Bottom: A stall owner arranges fish at the main fish market in Athens.
surrounded by a roomful of onceSUCH PROBLEMS ARE hardly limited
unemployed young people striking out
to the old economy, as Tina Kyriakis
on their own. Yet the energy from the
well knows. Kyriakis, 30, hovered over a
startup scene has been no match for the Greek bureaucracy. Because government licensing rules limit competition in the tour guide sector – a problem highlighted by Greece’s creditors – Kyriakis’ five freelance employees cannot give tours at the Acropolis. When someone does work, she must go to the social security office in person to register their hours. If the schedule changes, she must go again to report it. “The administrative burden is killing us,” she said. “You spend hours and hours in public offices, not being efficient.” Meanwhile, the tax code changes so frequently that it is almost impossible to keep up, Kyriakis said. And with a 23 per cent value-added tax on all tours, plus a 26 per cent tax on profit, she has little left over to reinvest. “If you are doing something innovative in Greece, you face a chaos of uncertainty, instability and risk,” she said. While Tsipras has pledged to help startups become the source of thousands of new jobs, Kyriakis is not optimistic. “They need to realise that change is only going to come through private initiatives,” she said. “We need the economic and political environment to change in a way that will allow this to flourish.” Her message to Tsipras, she added, is this: “Just don’t stand in the way.”
April 2015
Greece
45
Technology
46
ambiguous – when you run into them. But as Vietnam’s government overhauls its information technology policies, the
Tech Boom Under Threat? Vietnam’s technology businesses are a bright spot in the country’s economy, but increased regulation may hamper innovation, reports Mike Ives.
race is getting riskier. A growing list of regulations dictates how these businesses must be run, including what they can do with their content and even what their owners’ academic credentials must be. Some worry that innovation and investment in the booming sector may be smothered under the weight of new rules. Vietnam’s tech businesses are a bright spot in the country’s economy compared with its other industries, many of which are dominated by state-run companies.
© 2015 New York Times News Service
W
In one measure of growth, online sales
andering through Glass Egg
and Electronic Arts. “You just run, run,
by businesses to consumers in Vietnam
Digital Media’s open-plan
run until you hit something,” said Tran,
totalled an estimated $2.2 billion in 2013,
office in Ho Chi Minh City,
who founded Glass Egg in 1999 after a
and the number is expected to reach
Phil Tran paused beside a game designer’s
short stint at a computer game startup in
up to $4 billion in 2015, according to a
cubicle and pointed at his computer screen.
San Francisco.
2013 report by the Ministry of Industry
A character sprinted across a digital
Tran and other technology
and Trade. The technology boom is built on strong
landscape in one of the latest offerings
entrepreneurs in Vietnam are taking
from Tran’s company, which localises
the same approach to building their
internet infrastructure, brisk smartphone
international video games for online
businesses: grow at breakneck speed
sales, an explosion in online shopping and
publication in Vietnam and designs
and comply with regulations – which
legions of skilled coders and designers
3-D art for games by Sony, Microsoft
are often, in their view, maddeningly
who are willing to work for lower wages
Portfolio
47
Opposite page: Vietnam had 36 per cent smartphone penetration in 2014. Left: Ho Chi Minh City is home to nine million people. Below: A woman rides past an Apple store in Hanoi.
based voice and text services by requiring some providers to have contracts with Vietnamese telecommunications companies. And an approved rule will require some online game providers to have payment systems in Vietnam and obey other requirements, according to an analysis by Tilleke & Gibbins, a law firm based in Bangkok. Another draft rule would require overseas technology companies that
Vietnam is now among Southeast Asia’s most promising markets for high-tech growth, said Dung Nguyen, the director for Vietnam and Thailand at CyberAgent Ventures, a Tokyo-based venture capital firm that has invested in 15 Vietnamese startups since 2009. than others in the region. The expansion began about a decade ago, and Intel, Samsung and Microsoft later built factories in the country. International outsourcing firms were enticed by tax breaks and other government incentives. Vietnam is now among Southeast Asia’s most promising markets for high-tech growth, said Dung Nguyen, the director for Vietnam and Thailand at CyberAgent Ventures, a Tokyo-based venture capital firm that Photos: Getty Images
has invested in 15 Vietnamese startups since 2009. He said e-commerce, musicstreaming services and smartphone games were the hot growth areas right now. But some of the country’s internet April 2015
entrepreneurs and multinational
supply cross-border services in Vietnam
technology corporations say the new
to have representatives in the country,
and pending regulations signal that
industry professionals said. That would
Vietnam’s regulatory approach to the
apply to companies like Google that do
internet is increasingly out of step with its
business in the Vietnamese market but
blossoming technology scene.
have no formal local offices. The Asia
Last summer, content administrators of
Internet Coalition – which represents
social networks and news websites were
Google, Apple, Facebook, Yahoo, eBay,
told they must have university degrees,
LinkedIn and Salesforce.com on policy
obtain licenses and archive posts for
issues in the Asia-Pacific region – said last
at least two years. Another order, still
spring it was “very concerned” about the
in draft form, would regulate internet-
rule’s potential effects.
Technology
48
Left: A view of Ho Chi Minh City from the offices of Glass Egg Digital Media, a game developer and art production facility with clients such as EA and Microsoft. Below: Customers play video games at a cyber café.
of new threats to control, rather than a source of new opportunities to realise.” In 2013, the government issued a rule, Decree 72, that appeared to place unprecedented restrictions on speech online. That angered human-rights groups and the US Embassy, which warned that the restrictions would violate Vietnam’s international human rights commitments and stifle innovation and investment. Controversy around the rule has quieted, and in January, the stateand some industry professionals say officials
controlled newspaper Thanh Nien
of the country’s young social networks.
are closing down social media websites
quoted Prime Minister Nguyen Tan
In October, the popular Vietnamese
because they have operated, at least to some
Dung as saying that it was “impossible”
social media site Haivl.com was abruptly
degree, outside the state’s control.
for the Vietnamese government to
The chill has already been felt on some
shut down after publishing content
Hans Vriens, managing partner at
block Facebook and other social media
that the Ministry of Information and
Vriens & Partners, a consulting firm based
sites. Facebook has been sporadically
Communications deemed offensive. More
in Singapore whose clients include several
unavailable in Vietnam for years, but
than a dozen social media sites have since
major technology companies, said, “When
the government has never claimed
been fined or taken offline for similar
they look at policy developments in the
responsibility for the blockages.
reasons, according to several Vietnamese
last two years, some companies worry
businessmen in the technology sector.
that the government views social media
the Ministry of Industry and Trade on
and internet-based businesses as a source
e-commerce matters in Ho Chi Minh
Vietnamese law bans private news media,
Nguyen Thi Hanh, who represents
Portfolio
49
Clockwise: A technician in a server room at Glass Egg Digital Media; A man checks a news site on his smartphone; Mike Tran, chief executive of Ticketbox. vn; A tangle of electrical and internet lines at an intersection; Nguyen Thi Hanh, who represents Vietnam’s Ministry of Industry and Trade on e-commerce matters, near her office in Ho Chi Minh City.
City, said that the government’s internet
technology companies’ access to its
Vietnam Internet Association, a business
policies had long aimed to both regulate
domestic information technology sector as
consortium whose members include state-
and support tech businesses. She added
a way to protect Baidu, a popular search
owned telecommunications providers,
that her ministry was highly supportive of
engine, and other local heavyweights,
said that the legal environment for
e-commerce and noted that the Ministry
said Khoa Pham, director of legal and
internet businesses had been good so far,
of Information and Communications had
corporate affairs at Microsoft Vietnam.
and that the Communist Party had given
jurisdiction over social websites.
But it is unclear whether Vietnam can
“priority support” to the information
follow that model, he added, because its
technology sector.
The goVerNMeNT, MaNy tech
domestic technology industry is not as
executives say, is also trying to protect
robust as China’s.
the entrenched economic interests of the
Vu Hoang Lien, chairman of the
sector, whose billions of dollars’ worth of business has been threatened by the rise of disruptive internet technologies. The state-controlled Vietnam News reported in November that about 26 million Vietnamese, or nearly a third of the country’s population, were using internet-based smartphone applications like Viber, Line and a Vietnamese competitor, Zalo, to make calls and send messages while avoiding the traditional carriers’ higher fees. Neighbouring China can restrict foreign April 2015
the heels of the closure of Haivl.com last autumn, are considering registering their companies in Singapore, where they see
state- and military-owned companies that dominate Vietnam’s telecommunications
A few Vietnamese entrepreneurs, on
Neighbouring China can restrict foreign technology companies’ access to its domestic information technology sector as a way to protect Baidu, a popular search engine, and other local heavyweights, said Khoa Pham, director of legal and corporate affairs at Microsoft Vietnam.
more regulatory stability, said Hung Dinh, a veteran of Vietnam’s startup scene and the chief executive of JoomlArt.com, an international company that creates content-management systems for websites. Tran of Glass Egg said there appeared to be a “heightened sense of security” around internet content in recent months. “I don’t think it’s going to be a gamestopper,” he said, looking out from his 17th-floor office over Ho Chi Minh City’s skyline. But for young Vietnamese entrepreneurs, he said, “it does have a deterring effect.”
Currency
50
currencies. But the monetary magic is unleashing unintended consequences on the global economy, financial markets and ordinary people. The action by the Swiss central bank, which came in mid-January, was one of the biggest surprises. The Swiss National
Soaring Mortgages Many European homebuyers who took out mortgages in Swiss francs are seeing their repayments rise as the currency gains strength, reports Danny Hakim.
Bank decided it would be hard-pressed to keep the franc tied to the euro when the European Central Bank began a major round of stimulus. The move set off shock waves in financial markets and a oneday 23 per cent spike in the franc’s value against the euro. The fallout has been far-reaching. Some hedge funds, like one run by the Fortress
© 2015 New York Times News Service
P
Investment Group, took steep losses;
iotr Szczepaniak, an apartment
Eastern Europeans, Szczepaniak, 46,
the IG Group, a publicly traded British
manager in Warsaw, had just
is paying off a mortgage he took out in
brokerage firm and financial trading
finished work, checking faucets
francs, instead of his local currency, the
company, issued a profit warning. Swiss
and making sure rents were paid. After
zloty. In an instant, his monthly payment
exporters howled, and the chief executive
making himself a coffee, he logged on to
rose by more than 20 per cent when
of the watchmaker Swatch Group called it
a Polish social network and noticed that
Switzerland’s central bank unexpectedly
a “tsunami.”
someone had posted the current exchange
removed a cap on its currency.
rate of the Swiss franc. “I was frozen,”
Central bankers are increasingly viewed
Many of the worst hit are average Europeans who took out loans in Swiss
he said, seeing that the franc’s value had
as wizards capable of rescuing countries
francs, often from foreign-owned banks,
soared that day.
from the doldrums by printing money
to take advantage of the far lower interest
to manage interest rates and control
rates being offered.
Like hundreds of thousands of other
Portfolio
51
Poland has nearly $40 billion in loans denominated in francs, according to European Central Bank data. The borrowing, which accounts for nearly eight per cent of the country’s gross domestic product, has left Poland weighing its options. In late January, the Left: Rafal Jackowski, 39, a marketing executive who took out a loan in francs for an apartment in Krakow in 2004.
Polish government urged banks to convert franc loans to zloty at market rates. Poland is hardly the only country in this predicament. Austria has about $41 billion worth of such loans, close to 10 per cent of its economic output. Other ordinary borrowers, from France to Croatia, have also felt the sting. “With hindsight, it’s easy to say the foreign banks are guilty of pushing these
available at interest rates a third as high
39, a marketing executive who took out
mortgages and not informing customers
as for loans in Polish zlotys, or even lower.
a loan in francs for an apartment in
of the risks,” said Nicholas Spiro,
In Poland, there were 562,487 home
Krakow in 2004. “They said, ‘Wow, you
managing director of Spiro Sovereign
loans in francs in 2013, representing
can pay that much?’” he said, adding, “We
Strategy in London, who also blamed
almost a third of the total number of
were not used to spending money that we
“insufficient regulation.” Poland’s troubles,
mortgages, according to the Polish
don’t have.”
which come during an election year, are
Financial Supervision Authority.
“political dynamite,” he added.
Poland is a country that is still getting used to the idea of mortgages. Many
But borrowers unknowingly became amateur currency traders in a fast-moving game that has affected many professionals.
Poles who took out loans were the first in
gripped Europe, banks heavily marketed
their family to do so. “It was quite a shock
of a 13-year-old boy, recently joined a
loans in Swiss francs, which were
for my parents,” said Rafal Jackowski,
Facebook support group whose name
Illustration: Charlie Banalo
Before the financial crisis
April 2015
Szczepaniak, married and the father
Currency
52
happened. She immediately began calling her bank and kept calling all day, but could not get through. Over the past five years, her payments have doubled to about $2,000 a month. A few months ago, her boyfriend – the father of her 20-year-old daughter – went abroad to help cover the added costs by getting a job in a factory. When she first took out her loan, the United States was already in the grip of a financial crisis, but its impact on Europe was still not clear. “Everybody kept saying that the crisis in the States was very local – nobody knew why – but it was the US that had problems,” Szczerbowska said. “People had to be idiots to think the crisis wouldn’t spread. Unfortunately, I was the idiot.” Because Poland also had a housing bubble that collapsed during the
translates to “Tricked Into Francs,” where he exchanges stories with other Poles. “They are terrified, they are scared, and they pray that the government does something,” he said. On a recent morning, his son, Krzysztof, was watching the Disney Channel dubbed into Polish while Szczepaniak showed a chart of the movement of the franc against the zloty since he took out his loan in 2003. “It didn’t seem scary at the time,” he said. “Both the Polish and Swiss economy were very stable, and the foreign exchange rates were predictable.”
“With hindsight, it’s easy to say the foreign banks are guilty of pushing these mortgages and not informing customers of the risks,” said nicholas spiro, managing director of spiro sovereign strategy in London, who also blamed “insufficient regulation.”
crisis, many who borrowed in francs are now underwater. Leszek Wolany bought a small house in Warsaw in 2006. He took out his loan in francs because of the favourable interest rates, and for years, it seemed as if he got a better deal. But things turned around, and his monthly payments have increased more than $100 in the recent run-up. “I can’t sell the house now,” said Wolany, a 30-year-old father of one who works in advertising. “The loan is bigger than the house is worth.” Last year, Hungary, facing a similar
Since then, the franc’s relative value has
problem, forced banks to convert home
increased more than 40 per cent. writer, said she was advised by a financial
loans denominated in francs to Hungarian
took out his mortgage relatively early in
consultant when she bought a two-storey
forints at below-market rates. The country
the cycle. He said he got a 4.65 per cent
apartment in 2008. “The adviser said
was criticised for the policy, which chilled
loan in francs, versus the 10 to 12 per
Swiss francs were the best option because
the banking sector.
cent he would have paid in zlotys at the
the interest rates were lower and the
time. He can afford the increase, which
currency rates were stable,” she said.
In many ways, Szczepaniak is lucky. He
amounts to $70 a month.
“Everybody around me advised me
Poland, regarded as the model for Eastern European economic stewardship, had considered a similar path. The
to take a mortgage in Swiss francs,” she
country’s prime minister, Ewa Kopacz,
Others are in far deeper trouble.
added. “Everybody else was doing the
said January 26 that she would side with
Katarzyna Szczerbowska, a 43-year-old
same thing.” She says she is now so far
the people over the banks.
behind on her payments, and feels so Above: Piotr Szczepaniak, 46, saw his monthly payment rise by more than 20 per cent when Switzerland’s central bank unexpectedly removed a cap on its currency.
By January 28, Polish officials rejected
trapped by her accumulating debts, that
the Hungarian approach. Mateusz
she has contemplated suicide.
Szczurek, the finance minister, said, “It
She learned on Facebook of the Swiss central bank’s action the morning it
isn’t the role of the government to be removing all possible risks people face.” Portfolio
Japan
54
R
ice fields, golf courses and even a disused airport runway. All over the
southern Japanese region of Kyushu, unexpected places gleam with electricity-producing solar panels. Solar use in Japan has exploded in the past two years as part of
Short-Circuiting a Solar Boom in Japan Japan lags behind many countries in renewable energy and now there are fears that the government is retreating from its clean-energy commitments, reports Jonathan Noble.
an ambitious national effort to promote renewable energy. But the technology’s future role is now in doubt. Utilities say their infrastructure cannot handle the swelling army of solar entrepreneurs intent on selling their power. And their willingness to invest more money depends heavily on whether the government remains committed to clean energy. “It’s upsetting,” said Junji Akagi, a real estate developer on Ukushima, a tiny island near Nagasaki. Akagi said he hoped to turn a quarter of the island into a “mega-solar” generating station, and has already lined up investors and secured the necessary land. Then last September, Kyushu Electric Power Co., the region’s dominant utility, abruptly announced that it would stop contracting to buy electricity from new solar installations. Other power companies elsewhere in Japan soon followed suit. “It was a shock,” Akagi said. “Now we don’t know if Kyushu Electric will buy our power.” The faltering solar boom is threatening an important goal for Japan as a whole: finding clean sources of power to replace the nuclear output lost after the Fukushima disaster four years ago. So far, the country has been relying
Portfolio
55
mostly on fossil fuels like coal and natural
“The homework wasn’t done,” said
More challenging for electric-company
gas to fill the gap, leading to sharply
Nobuo Tanaka, former executive
planners is what is in the pipeline. An
higher emissions of greenhouse gases.
director of the International Energy
additional 8.4 gigawatts’ worth of projects,
Agency. Utilities, he said, need to
including Akagi’s on Ukushima, have
government is retreating from its clean-
install more hardware – transmission
received government approval but are in
energy commitments. Prime Minister
cables, substations and the like – and
limbo after Kyushu Electric’s edict. That is
Shinzo Abe is pushing to bring back
develop new kinds of expertise to avoid
more power than the region consumes on
into service some of Japan’s 50 nuclear
disruptions. “To make renewables work
some low-demand days – and far too much
reactors, all of which are now closed as
in reality, they have to be properly
for Kyushu Electric’s grid to handle without
public concern lingers over their safety. If
connected to the power system.”
the risk of failures, the utility argues.
Some solar advocates fear the
they reopen, it could reduce the need for
The problem is especially acute in
“If we accept everybody’s electricity, the
alternatives like solar power, which many
Kyushu, where relatively plentiful
system will become unmanageable,” said
in Abe’s circle, including the powerful
sunshine and low land prices have
Shinichi Futami, an official at the utility. It is
industry ministry, see as expensive and
attracted a disproportionate share
laying new transmission cables as fast as it
unreliable. Abe has initiated a review of
of solar development. Installed solar
can, he added, but has been stymied by the
the renewable-energy policies introduced
capacity roughly doubled in the two years
slow, expensive task of securing land rights.
after Fukushima by a previous, more left-
from mid-2012, when a law took effect
leaning administration. Environmentalists
requiring utilities to buy renewable energy
the landscape and economy in Kyushu.
worry he will gut them.
from outside producers at rates far above
They have taken over reservoirs, bankrupt
market prices. By last summer it stood at
golf courses and idle industrial parks,
amount of clean power that utilities are
3.4 gigawatts, about equal to the output of
as well as the more familiar locations of
required to buy from outside producers,
three modern nuclear reactors – at least
residential rooftops. The largest ones,
and additional measures to curb supply
during those hours when the sun was
like the Nanatsushima Mega-Solar Power
are expected this spring, including cuts to
shining at full strength.
Plant in Kagoshima, which opened in
The government recently reduced the
Solar projects have already changed
price subsidies. “It would put a brake on the spread of solar power,” Yuji Kuroiwa, the ecologically minded governor of Kanagawa prefecture, next to Tokyo, said at a news conference in December, referring to the new restrictions. LIKE OTHER COUNTRIES that have promoted the technology with generous state support, Japan is also struggling with the financial and technical © 2014 New York Times News Service
consequences of its rapid solar growth. Solar power here is costly for consumers because of high state-mandated prices, and handling the fluctuating output of thousands of mostly small solar producers is tricky for utilities. Necessary improvements in the infrastructure have not kept pace, experts say. Above: An employee works in the town management office at the Fujisawa Sustainable Smart Town.
April 2015
56
Above: The Nanatsushima Mega-Solar Power Plant, which opened in 2013, in Kagoshima. Right: Workers check solar panels at the Nanatsushima Mega-Solar Power Plant. Bottom: Houses equipped with solar panels.
2013, cover areas bigger than 100 football fields. Its vast lot was set aside for a shipyard more than 30 years ago, but sat empty until the recent solar boom. IN MAKURAZAKI, a remote city in Kagoshima, the local airport went unused for a decade, a victim of economic and population decline. Now its runway is covered end to end with solar panels, a project under the co-ownership of a leasing company and a subsidiary of Kyushu Electric. For all the frantic building, however, Japan still produces less solar power than many other countries. Nationwide, just 2.2 per cent of its electricity came from any renewable source in the last fiscal year, excluding hydropower from dams. The small percentage is the legacy of a narrow focus on nuclear power before Fukushima. The figure was less than half the level of the United States or France, Portfolio
and a fraction of the roughly 20 per cent
economy to life, through his stimulus
for inaction, said Tomas Kaberger, a
achieved by Germany and Spain.
programme known as Abenomics.
Swedish energy expert who heads the
Rather than curtail the expansion of
Catching up would be expensive, even
Japan Renewable Energy Foundation.
if all the necessary infrastructure existed.
solar power, advocates for the technology
Japan’s financial incentives for solar power
say a broader shake-up of Japan’s
economic interests,” he said, “not their
and other renewables are the highest in the
electricity market is needed. Utilities
technological interests or the interests
world – about twice the level of Germany,
like Kyushu Electric, they argue, have
of their customers.”
depending on the type of installation.
little incentive to accommodate outside
According to the government, if every
competitors to their own coal, gas
intended to promote competition. It
solar plant now on the drawing board were
and nuclear plants. Instead of seeking
would force Japan’s 10 regional utilities
actually to be built, it would cost users 2.7
innovative solutions to the oversupply
to split their generation and transmission
trillion yen a year in special charges, four
problem, utilities are using it as an excuse
operations into legally separate
times the premium they are paying now. Solar supporters note that the money economy, instead of disappearing into the pockets of foreign oil and gas producers. But cost concerns remain. Higher energy bills related to the nuclear shutdown are already being blamed for squeezing household budgets. That is hurting consumer spending
According to the government, if every solar plant now on the drawing board were actually to be built, it would cost users 2.7 trillion yen a year in special charges, four times the premium they are paying now.
and undercutting Abe’s efforts to jolt the 1
3/16/15
A reform bill now in parliament is
businesses. The two sides would remain
would at least remain in the Japanese
elite - port.pdf
“I presume that it’s to protect their
closely connected, however, and some say the plan does not go far enough to even the playing field for new entrants, including those in green energy. “These 10 monopolies will still own the grid,” said Tom O’Sullivan, a Tokyo-based energy consultant. “It will still be very difficult for independent power companies to get their electricity into the grid.”
12:03 PM
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Japan
57
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59
Essentials
THE BEST OF LEISURE AND LIFESTYLE
The Many Faces of Angkor
Images: Getty Images/Brian Johnston
From the bustle of trendy Siam Reap to isolated temples in the jungle, a visit to Angkor Wat is a multifaceted experience, reports Robin McKelvie.
60
Essentials
Travel
“I
t frustrates me that people think there’s just one Angkor temple, when there are over
600 spread across an ancient metropolis that it took London’s population until the 19th century to overtake,” Roland Fletcher explains, his passion brimming over his university professor calm. I have to confess to Fletcher that I’m one of those arriving in the ancient city of Angkor with a hazy idea of what to expect. Soon, though, I’m lost in the most remarkable temple complex on earth, which I discover is backed up by Siem Reap, an emerging chic jet set destination. Almost everyone who visits the Angkor temples stays at the adjacent city of Siem Reap. In the Swinging Sixties it was a favourite of international A-List
1970s, putting Angkor virtually off limits
from a massive jungle-shrouded moat, its
celebrities. Jackie Kennedy and Charlie
for the best part of two decades.
trio of elegant giant corncob-like spires
Chaplin breezed through its glamorous
Stumbling through the darkness I feel
vaulting high into the heavens. It’s easy to
bars and restaurants, sipping a cocktail on
like a real life tomb raider, as I approach
see why the inhabitants of Angkor felt so
the terrace of the Foreign Correspondent’s
Angkor Wat for the first time. I haul
close to the gods here.
Club. Then the horrors of the Khmer
myself up yet another step and I’m finally
Rouge clouded over Cambodia in the
here, deep inside the world’s largest
TODAY ANGKOR WAT is firmly back
temple. I am just in time. The first of the
on the tourist map, as its reputation as
sun’s rays are bursting through the ancient
one of the wonders of the world grows.
stone, putting on a spectacular light show.
The temple teems with tourists, but there
You just don’t forget your first sight of
has also been a flowering of interest in
Angkor Wat. How could you? It soars
the rest of the UNESCO World Heritage-
Top: Monks in front of Angkor Wat Temple. Above: The first of the sun’s rays bursting through the ancient stone put on a spectacular light show.
Portfolio
61
Clockwise: A Buddhist statue at the Bayon temple; Ta Keo Temple was built around 975; Angkor Wat is probably the bestpreserved of the Angkorean temples; Filming Jungle Atlantis.
listed 1,000-square-kilometre Angkor.
the life that goes on around them – forests
Most of what remains of the ancient
and small villages, as well as the ancient
metropolis of Angkor is its crumbling
ruins. As a photographer it is the periphery
temples. All of its wooden houses have
of these places that I find most interesting.”
been forever lost to the jungle. Many people just visit Angkor Wat. I
John points me in the direction of the Bayon. I hike up scores of steep stone
have a hunger, though, to discover more of
steps into a world where I’m vastly
what was the world’s largest pre-industrial
outnumbered by giant Buddha heads.
city. Handily I’m staying at the Amansara,
There are more than 200 in total, each
a former royal residence where the room
with their own unique expression staring
rate includes your own remork (similar to
out over the lush jungle as they have done
a Thai tuk-tuk) and a local guide.
since the 12th century, when the Bayon
I seek the advice of renowned local photographer and gallery owner John McDermott, who fires my enthusiasm: “Angkor encompasses the temples and all April 2015
was built as the state temple of Mahayana Buddhist King Jayacarman VII. I continue on the Tomb Raider trail, following in the footsteps of Hollywood’s
62
Essentials
Travel
version, Lara Croft (Angelina Jolie).
on the BBC’s acclaimed Jungle Atlantis
Scenes from the movie were shot at Ta
documentary. This project utilised
Prohm and it’s easy to see why at this
pioneering laser technology to create a
most dramatic of temples. My guide wakes
remarkable picture of what the medieval
me at 4am, as I’m determined to catch
world’s greatest metropolis would have
the sunrise. We arrive as the nocturnal
looked liked.
inhabitants of the jungle retreat and the
“The LiDAR Project allowed us to see
Above: Ta Prohm has been left in the same dramatic condition in which it was found, with trees invading and growing out of the ruins.
tackle the rugged jungle trails. Delving deeper now, the crowds are left far behind.
first chink of light breaks through the
the sheer scale of Angkor for the first
In place of chattering phones and selfie
dense canopy. The ruins here look like
time. For me the colossal Western Barai
sticks are the myriad sounds of the jungle,
they are losing a spectacular battle with
irrigation scheme – which anyone can visit
the chirp of exotic birds, the crackle of an
the jungle. A web of thick vegetation,
– is even more impressive than Angkor
animal I cannot even see moving just on
tangled tree trunks and gnarled roots
Wat, which is a medium-sized piece of
the edge of the ruins. The jungle wraps
weaves in and around the wealth of
engineering compared to what was the
its velvety cloak around the ruins, wilder
statues, towers and sculptures.
pre-modern world’s largest single object,
ruins, so I have to ramble over rocks and
eclipsing the Great Wall.”
slip over boulders to explore them. I’m
BACK AT THE Amansara, where
Buoyed by Fletcher’s enthusiasm I set
immersed in the world that Fletcher and
Roland Fletcher gives lectures, I catch
out with my guide to visit some of the
up over lunch. He reveals I’ve still only
more remote temples of Ta Keo, Ta Nai
scratched the surface. He should know
and Preah Khan. We switch from the
tourists forever. I see signs flagging up
as he is an Angkor specialist who worked
remork to a sturdier old-style Jeep to
restoration projects backed by China,
McDermott have become so beguiled by. These remote sites won’t stay free of
Portfolio
63
India and America as I head back to Siem Reap. There are plans for new roads too
Clockwise from top left: Preah Khan; Foreign Correspondent’s Club; Amansara; A spicy Cambodian amok at Sugar Palm.
feast on a delicious stir-fried beef salad and a spicy Cambodian amok (a rich fish soup). The hottest ticket in town is Cuisine Wat Damnak. Here in the shadow
and Siem Reap airport is expanding. Siem Reap River. Over a dinner of Khmer
of Angkor Wat long lost Khmer dishes are
IN SIEM REAP MAN already seems to
specialities I chat to Douglas Moe, who
being brought back to life by mercurial
have won his battle against the jungle.
has worked here for over a decade. In
French head chef Johannes Riviere.
Sam Clark, founder and director of
recent years he has witnessed the boom
Experience Travel Group, has witnessed
times return for Siem Reap. “The town
gather for sunset at Angkor Wat and the
the city transforming itself over the post
is buzzing again with people flocking
restaurants in Siem Reap bustle into life I
last few years: “The majestic temples
here from all over the world,” he beams.
dream of the other Angkor that lies deeper
have attracted plenty of tourist attention
“Business is good and once again the
in the black of the jungle where the tourist
in the past few years, and Siem Reap,
glamour is back in Siem Reap”.
buses don’t venture. It is an intoxicating
the gateway town to these temples, has
It certainly is. Outside the cosseted
On my last night as I watch the crowds
otherworldly place where you feel more
upped its game to cater to the increased
world of the Amansara, with its slick
like a tomb raider than just another
demand,” he explains.
service and superb spa, the local cafes,
tourist. Take a little time, make the effort
bars, restaurants and shops are booming.
and follow the advice of Angkor experts
of Jackie Kennedy and Charlie Chaplin
Chic boutiques and international
like Fletcher and McDermott and you too
and sip a cocktail on the terrace at the
brands are joining the existing array of
can gaze through this tantalising window
Foreign Correspondent’s Club. The club
independent art galleries and craft shops
into another time, a time when Angkor
still stands proudly on the banks of the
that sprinkle the city. At Sugar Palm I
was the largest city in the world.
I take a stroll with the jet set ghosts
April 2015
Essentials
64
Real Estate
Life of Italian Nobility for Sale Regulations and rising taxes have forced many landowners to put their castles and historical mansions on the market, reports Gaia Pianigiani.
N
estled on a gentle Tuscan hill
Afterwards, we have seen some owners once
near the town of Pontassieve just
or twice a year.”
west of Florence, and caressed by
generation,” said Dimitri Corti, chief
the morning fog, sits a medieval castle that
for sale, castle, church and all. While that
executive officer at Lionard, an exclusive
was once home to the few prominent noble
might seem an exceptional circumstance,
real estate company based in Florence
families who plotted against the Medicis’
increasingly for Italy, it is not. Although
whose portfolio boasts about 70 castles
rule during the Renaissance, some of whom
castles and historical mansions in Italy have
located in central and northern Italy. “It
are believed to have taken refuge here.
long been family inheritances, today dozens
is not necessarily true that the owner is a
of them are for sale, even in one of the most
millionaire like one can assume in countries
conservative real estate markets in Europe.
like the United States or England,” he
For centuries after, the descendants of the nobles and the peasants who served them
© 2015 New York Times News Service
Today the entire estate is deserted and up
“The Italian market is mostly historical – mansions pass from generation to
lived sheltered by the fortress’s crennelled
In recent years, Italy’s well-rooted
walls or in the nearby country houses, and
inherited wealth has withered from a
went to Mass in a rose stone church.
potent combination of factors. They
are frequently not Italians, a worrisome
include the increasing costs of living and
circumstance to some here who bemoan the
farmers’ families to the Sunday’s Mass
services, the shaky finances of owners
loss of historical and family patrimony to a
here up until the late 1960s,” said Franco
in a time of lingering economic trouble,
newly moneyed global elite.
Viliani, 80,a former manager of the estate.
cuts in government subsidies to maintain
“It might sound strange for a pseudo-feudal
historical properties and, not least,
Corti said, while the majority of buyers are
system, but that was a form of inclusion.
mushrooming property taxes.
foreigners. They predominantly seek villas
“I remember a procession of over 25
added. “Some do need liquidity.” Moreover, those with the money to buy
The bulk of Lionard’s sellers are Italians,
Portfolio
65
or mansions in Tuscany, and are ready to
a more diverse clientele, ranging from the
or to invest in more real estate. In 2011,
spend an average of six or seven million
Arab countries to China, plus Russia and
as the financial crisis deepened and the
euros (about $6.75 million to $7.85 million).
North America.
government came under pressure to
“It is no longer reasonable to think that
“No historical owners would like to get
the owner of a neighbouring castle would
rid of their properties, but they might be
minister, Mario Monti, raised property
buy yours,” Corti added. “It’s most likely to
in the condition to do it,” Moroello Diaz
taxes and started a review of the land
be a Russian, or a Chinese.”
della Vittoria Pallavicini, president of the
register’s assessment of home values.
Indeed, more than 50 per cent of
Italian Historic Houses Association, said
balance its books, the technocratic prime
On historical buildings, where owners
Lionard’s clients come from Russia and
in his vaulted office located in a
used to pay little as compensation for the
the former Soviet Union, while the rest
17th-century complex on the Quirinal
elevated costs of maintaining centuries-old
mostly live in North America. Other luxury
hill in central Rome. “And we fear that
structures, the taxes increased by 20 or 30
realtors, like Sotheby’s Italian branch, have
foreigners will be less attached and caring
times, depending on the property’s location.
of their property,” he added. “They didn’t
On some buildings, taxes spiked from
grow up there; that mansion doesn’t belong
¤3,000 (about $3,400) in 2011 to ¤75,000
to their family’s history.”
(about $84,000) by 2013. That might be a
Opposite page: The Castle of Torre a Decima, once home to noble families at least as far back as the Renaissance, is now deserted and for sale, in Pontassieve, Italy. Above: The Chianti hills and the courtyard of the Castle of Torre a Decima. April 2015
Despite relatively low incomes, Italians
small figure for castle dwellers in the United
have historically inherited properties
Kingdom, but a burden for Italian pockets,
and benefited from low property taxes,
especially in regions where the property’s
helping them to afford their housing,
market value or tourism interest is low.
Essentials
Real Estate
“We no longer live like in 1800,” he added. “But 99 per cent of changes are either impossible or extremely bureaucratic and complicated in an Italian historic building.” The trends, to many here, are indicative of Italy’s place as a country caught between its past glory and its modern difficulty in
Photo: Reuters
66
producing an innovative climate capable of ensuring its future. Landowners’ attempts to navigate the the noble Uberti family, mentioned in
in some cases, its use to the public. Many
Dante’s Divine Comedy, and then the
buyers give up on properties of great
Some ItalIan oWnerS who bought
Canigiani family, whose daughter Elena
historical value, but in bad condition, for
properties as an investment transformed
gave birth to the illustrious Renaissance
this reason, brokers said.
them into luxury hotels, hoping to offset
poet Francesco Petrarch.
changes have often fallen short.
the steep costs of maintaining ancient
The 14th-century castle was turned into
“This is a problem for possible investors, who want to have modern comforts like
frescoed walls and immense Italian gardens,
a lavish bed and breakfast and wedding
a spa, air-conditioning, or a lift,” said
often including hectares of olives groves
venue. But today the fruits of the estate’s
Pallavicini, of the Italian Historic Houses
and vineyards. Yet demand for luxurious
5,000 olive trees have not been picked for
Association. “We no longer live like in
holidays has not boomed in recent years,
years, and the newlyweds’ bed from last
1800,” he added. “But 99 per cent of those
and some resorts have registered few guests.
summer remains unmade. Buyers can
changes are either impossible or extremely
make it theirs for ¤18 million (just over
bureaucratic and complicated in an Italian
floors of the Tavolese castle, about 31
$20 million). But buyer beware: living a
historic building.”
kilometres south of Florence, housed
nobleman’s life in Italy comes at a cost,
Once, the 427 square metres on five
Above: Marquess Lamberto Frescobaldi poses in his cellar at the Nipozzano castle northeast of Florence. His family’s wine business makes their estates profitable. Below: Lionard Luxury Real Estate reports an increase in Italian sellers and foreign buyers of historical properties.
At the same time, many of the
even for many tycoons. New owners face
association’s 5,500 members would prefer
the same onerous bureaucracy as Italians
never to sell their property, he said. “They
to make even minimal changes to many
have an umbilical cord to that building,” he
older properties.
said. “They were maybe raised there. Selling
Under Italian law, the owner of a historical building is its custodian, bound to maintain it and grant its security and,
is not an option, as long as they can resist.” But while selling may be hard to swallow, too often the only other option is abandonment, especially for castles and monuments not located in tourist regions. “If a Tuscan owner who sells his mansion can rope in a Russian, British or American buyer to restore his family’s finances, we can’t,” said Francesco Scardaccione, the owner of a historical palazzo and two country estates, who is also president of the Italian Historic Houses Association branch in the southern region of Basilicata. “What is going to happen,” he asked, “the day we will no longer be able to afford it?” Portfolio
68
Essentials
Cuisine
Portfolio
69
Reclaiming Puerto Rico’s Food Paradise
fried bread, a dip spun from eggplants that had been smoked over the wood of wild mesquite trees, and a chop brushed with sugar-cane juice. Toward the end would come a sweet, coral-hued sphere of
Puerto Rico has produced its fair share of internationally acclaimed chefs, but now its local food scene is also gaining attention, reports Jeff Gordinier.
guava ice.
T
of loosely affiliated Puerto Rican cooks,
Where did the guavas come from? Enrique motioned toward the window. The fruit tree stood right outside.
© 2015 New York Times News Service
Enrique, 37, is a leader in a movement he sun was starting to recline
“We’ll see. I kind of like it that way. I think
farmers and activists who have arrived
on the horizon, but as chef Jose
it makes me more creative.”
at the same realisation over the last
Enrique slid a beaten-up Ford
Enrique and Katie Savage, his chef
Explorer into a parking space in Vieques
de cuisine at the hotel, tend to wing it
at an easy-going beachside hotel called El
based on whatever baskets of fruit, bags
Blok, he admitted that his menu for an
of vegetables and buckets of seafood
upcoming Saturday evening was still up in
come their way. Dinner that night would
the air. What would he be cooking?
overflow with lobster ceviche, a conch
“I have no clue,” he said, and laughed. April 2015
salad spooned into steaming pockets of
Opposite page: Tara Rodriguez Beosa (L-R) Chef Pax Caraballo and Carlos Reyes of El Departamento de la Comida, a non-profit organisation that helps distribute locally grown produce. Above: Lobster ceviche, with fried plantains and avocado.
70
Essentials
Cuisine
few years: There is a juicy gastronomic
makings of a gastronome’s fantasy island,
as a way to bring local organic products
paradise at their fingertips, and all they
a place where all sorts of natural delights
from private pinprick gardens and farms
have to do is reach out and grab it.
sprout from the land, sometimes without
to the teeming, street-art-emblazoned
much need for human coaxing.
districts of San Juan.
San Juan restaurants like Parcela Gastropub, La Jaquita Baya, Santaella,
Despite that, decades of economic
“We just kept having the same
Marmalade and Jose Enrique (the
policy, kicking into overdrive with
conversation over the dinner table,”
chef ’s namesake spot in the humming
Operation Bootstrap starting in the
Rodríguez Besosa said. “We were like,
Santurce neighbourhood); a pioneering
late 1940s, led to an emphasis on
‘Wow, there really is no access to good
farm-to-tote-bag enterprise called El
industrialisation and a shift away from
food here – to good ingredients.’”
Departamento de la Comida; and the
Puerto Rico’s agrarian roots. This helped
Hacienda San Pedro coffee company are
create a middle class, but a reliance
up a bare-bones CSA, or community-
all promulgating a new way of thinking
on growing things was replaced by the
supported agriculture project. “It was
that reintroduces Puerto Rican diners and
canned-and-shrink-wrapped gospel of
just a website, a van, the two of us and
shoppers to the buried treasures of their
postwar America.
a driver,” Rodríguez Besosa said. But
home island.
Their solution, early on, was to cook
demand exploded, so the two gradually It was thIs vexing disconnect
commandeered a warehouse space that
it is. From a food standpoint, Puerto Rico
that prompted Tara Rodríguez Besosa
includes a restaurant offering dishes made
represents a twisted paradox. Thanks to
and Olga Casellas Badillo to create El
with their bounty. “I used to market my
its balmy climate and rich soil, it has the
Departamento de la Comida 4∏ years ago
produce by cooking it at home and taking
That should not be revolutionary, but
Clockwise: Roberto Atienza, the owner of the coffee plantation Hacienda San Pedro, who is committed to the coffee industry and providing a one of a kind product; Fresh caught fish in Puerto Rico; The original restaurant of chef Jose Enrique, one of the most prestigious young cooks on the island; Cristina Lugo, left, helps customers as a volunteer at El Departamento de la Comida.
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71
pictures of it,” she said. “And then people started asking, ‘Where can I get that?’” Over the years, Puerto Rico has produced plenty of celebrated chefs (Wilo
Left: The Coabey Valley of Jayuya, considered one of the most important coffee regions. Below: (L-R) Chef Jose Enrique runs three restaurants; The Puerto Rican Scotch egg.
Benet, Alfredo Ayala, Roberto Treviño, Mario Pagán, José Santaella), many of whom have sought to raise the profile of what they call cocina criolla around the world and burnish its reputation at home. But the budding locavore movement is a godsend to next-generation figures like Ariel Rodríguez, Xavier Pacheco, Sebastián Ramírez and the sausage maestro Pedro Álvarez, who yearn to move even further beyond sawdust-dry tostones and leaden mounds of mofongo. “In the last couple of years, it has
contagious enough to become trendy. “Puerto Ricans – we’re pretty passionate
Enrique’s spots several times. In his travels around the Caribbean, Jennings
about our island and what we have here,”
has encountered his share of “very
he said.
bland, fried, uninteresting food,” but he still remembers being struck by a
become a lot easier to find higher-quality products,” said Ramírez, 29, who runs
PASSionAtE, too, ABout what
dish of butterflied baby snapper at
the kitchen at a tapas-oriented gastro
they can have, thanks to the island’s oft-
Enrique’s unmarked, always-a-party San
pub called Parcela. There is a new
untapped fecundity.
Juan flagship.
wave of young farmers, he said, and the burgeoning “buy local” fever seems
“You will fly over land that’s green, verdant, beautiful – and nobody’s growing anything,” said Simon Baeyertz, an owner of and the driving force behind El Blok. “And the younger generation has started to say, ‘Wait, that’s crazy!’”
April 2015
“You will fly over land that’s green,
As Jennings swooned over the snapper,
verdant, beautiful – and nobody’s growing
he was told that “literally the guy over at the
anything,” said Simon Baeyertz, an owner
next table, next to me, was the fisherman,”
of and the driving force behind El Blok.
he recalled. “That experience embodies what
“And the younger generation has started
Jose’s restaurants are about.”
to say, ‘Wait, that’s crazy!’” Enrique, whom Food & Wine magazine
Like more and more chefs in Puerto Rico, Enrique’s impulse is to find a way
picked as one of its best new chefs in
to use it. “The ingredients are what drive
2013, is seen as leading that charge.
me,” he said. “It’s not about what you can
“It’s incredibly fresh, his food, which is
do with an ingredient. It’s what you don’t
what I love about it,” said Matt Jennings,
do to it. So to make that happen, you need
a New England chef who has visited
to find what’s best.”
Essentials
72
Culture
K
azuhiko Kanai uses the traditional method to dye the elegant kimonos for which
the small, semitropical island of Amami Oshima is renowned: he carries a bundle of pure white silk to a nearby rice paddy and hurls it into the mud. Kanai is one of the last practitioners of a method known as “dorozome,” or “mud-dyeing,” which uses the island’s iron-rich soil to turn silk the colour of the darkest chocolate. This is just one step in an elaborate production process that can take a year to produce a kimono with the glossiest silk and most intricately woven designs in all Japan. In a nation that esteems its traditional form of dress as high art, Amami Oshima’s kimonos became some of the most prized of them all, once capable of fetching more than $10,000 apiece. But those heady days are over, as a shift to Western fashions and Japan’s long economic squeeze have led to
© 2015 New York Times News Service
plummeting demand, especially for high-
Crisis Hits Kimono Trade The Japanese island of Amami Oshima is renowned for its kimonos, but a stagnant economy and an out-dated distribution system is endangering this tradition, reports Martin Fackler.
end kimonos. On Amami Oshima, production has fallen so far in the past two decades
down from 20,000 people a generation
of kimono silk has similarly plunged, from
that only 500 people on an island with
ago, according to the Authentic Amami
enough to make 284,278 kimonos during
73,000 residents remain employed full-
Oshima Tsumugi Association, the island’s
the height of the postwar boom in 1972, to
time in kimono production, and many
union of kimono producers.
enough for just 5,340 kimonos last year.
of them are in their 70s or 80s. That’s
The union says the island’s production
Amami Oshima has fallen harder Portfolio
73
than most of Japan’s famous kimono production centres, dragged down by a complex web of wholesalers, dealers and specialised retailers who distribute and sell the island’s kimonos. While this antiquated system once benefited the
Opposite page: (Clockwise) A weaver adjusts silk threads at a workshop in Amami Oshima; Yukihito Kanai shows silk after it was washed in a river, part of a traditional method of dyeing for kimonos. Above: Kimono cloth from Amami Oshima on display at Ginza Motoji, a traditional kimono store in Tokyo. Left: Mifuko Iwasaki, who has been teaching how to weave silk on hand looms for 35 years, weaves in her class. April 2015
74
Essentials
Culture
Kanai is one of the last practitioners of a method known as “dorozome,” or “mud-dyeing,” which uses the island’s iron-rich soil to turn silk the colour of the darkest chocolate. This is just one step in an elaborate production process that can take a year to produce a kimono with the glossiest silk and most intricately woven designs in all Japan.
remote southern island near Okinawa by spreading its kimonos to the rest of Japan, islanders say it has now become a burden, keeping the kimonos prohibitively expensive while driving down wages. Yet, the old ways have proved hard to
silk is dyed in bubbling iron caldrons and
requires repeating the cycle of staining
discard, despite a growing sense of crisis.
then hung from the ceiling to dry. “If we
and drying the silk 30 times, he said. Only
Many fret that there will soon be too few
cannot make kimonos any more, what will
then is the silk ready to be immersed in
islanders left with the skills to sustain
be left here?”
the black mud, whose iron reacts with
each of the 30 separate steps needed to
Kanai says the mud-dyeing process
tannins in the tree dye to create the
produce one of the kimonos. “If we lose
alone takes more than a month, as the
one link in the chain, we lose our ability to
silk is first coloured a burgundy hue with
That is not the most elaborate step.
make kimonos,” said Kanai, 56, who owns
natural dye made from the pulp of a local
Even before the silk arrives at Kanai’s
a dirt-floored wooden workshop where
plum tree. Getting the right shade of red
workshop, it is first woven into a
coveted dark brown colour.
temporary fabric as part of a unique method that the islanders have devised for creating minutely detailed patterns. After this temporary fabric has been mud-dyed, it is unravelled back into its original silk threads. Each coloured thread now has thousands of tiny white stripes where it overlapped with another thread, blocking the mud from touching it at that point. As the threads are rewoven into new
Above: (L-R) Koumei Motoji, the owner of the Ginza Motoji kimono store; A staff member of Ginza Motoji kimono store models one made in Amami Oshima. Left: Yukihito Kanai dyes silk in the mud, a traditional method of dyeing for kimonos, near his craft house. Portfolio
75
fabric by nimble-fingered island women, they slowly reveal perfectly formed patterns, ranging from starkly minimalist shapes to elaborate scenes of bamboo groves and flying storks. “The weaver has a tremendous responsibility,” said Mifuko Iwasaki, 70, who has been teaching young islanders how to weave these perfectly aligned patterns on hand looms for 35 years. “If we make a mistake, we undo all the hard work of those who spent so much timing preparing this thread.” IwasakI says that when she began teaching her yearlong classes, she typically had 40 students, who were drawn by the fact that weaving offered higher wages than fishing, farming and logging, the island’s other industries at the time. These days, she says she is lucky to get more than two or three students, because weaving no longer pays as well. The myriad middlemen in the cumbersome distribution system each take a cut, making it hard to reduce prices at the same rate as other items in deflationary Japan. Worse, the brunt of what price
in the production process get even less.
cuts have been made inevitably falls on
Nonetheless, islanders say they are
Above: Iwasaki says that when she began teaching her year-long classes, she typically had 40 students; now she gets barely three.
the island’s dyers and weavers. As a result,
reluctant to bypass the antiquated
while a new Oshima kimono can still cost
distribution system, saying they feel bound
$3,000 to $6,000 in Tokyo, weavers say
by generations-old obligations and a fear
they are lucky to get more than $400 for
of change. This makes them a microcosm
a month’s exacting work. Other craftsmen
of Japan as a whole, which has been slow
islanders buried kimonos in the ground
to give up its out-dated postwar economic
to hide them, only to discover on digging
model despite years of stagnation.
them up again that the fabrics had turned
the myriad middlemen in the cumbersome distribution system each take a cut, making it hard to reduce prices at the same rate as other items in deflationary Japan. worse, the brunt of what price cuts have been made inevitably falls on the island’s dyers and weavers.
April 2015
“It is ironic that we can no longer make ends meet producing something so expensive,” said Shigehiko Furuta, 67, who
Mud-dyeing started when disobedient
a beautiful dark colour, said Kanai, who owns the mud-dyeing workshop. His son, Yukihito, now uses those same
uses coloured pens and graph paper to
centuries-old dyeing techniques to colour
design the minutely detailed patterns.
new types of items, including T-shirts, jeans
Shinichiro Yamada, 83, the head of the
and even guitar bodies. He is experimenting
producers’ union, said the island’s ornately
with selling these over the internet, to avoid
woven patterns have their roots in the
the onerous distribution system.
colourful culture of the Kingdom of the
“We need to become more like artisans
Ryukyus, centred in current-day Okinawa.
in Europe or artists in New York,” said
They ruled Amami Oshima until the
the younger Kanai, 35, who said he is
early 17th century, when the island was
one of the few “young successors” in the
conquered by Japanese samurai, who
island’s kimono industry. “Even traditions
claimed the island’s kimonos as tribute.
have to evolve.”
Essentials
76
Sport
The Tall Blacks
The New Zealand Breakers, a basketball team from a country that worships rugby and cricket, has won three of Australia’s National Basketball League’s past four championships, reports Scott Cacciola.
T
he New Zealand Breakers are the most unconventional team in Australia’s National Basketball
League. For starters, they are the only team in the league that is not from Australia. It is also worth noting that they practice in a converted power tools warehouse, where they have two full-length courts, a film room, offices for staff and several wellappointed vending machines. The owners are not particularly interested in making money off the team, and its chief executive officer – who was promoted after a successful stint as general manager – says that he knows almost nothing about basketball. But the Breakers, with their homegrown roster and homespun charm, know how to win. “Try to be disruptive,” Dean Vickerman, the team’s second-year coach, told his players at a recent practice, ahead of a road game against the Townsville Crocodiles.
© 2015 New York Times News Service
“They’re trying to drive the lane, and you’re trying to put doubt in their minds and buy some time for the next guy to get back.” Vickerman, 43, a convivial Australian whom everyone calls Deano, was harping on one of his favourite subjects – teamwork – and paused just long enough to blow his whistle. “Go!”
The Breakers have won three of the
“Australians are tough people,” said Dillon Boucher, a former forward for the Breakers who heads the team’s sponsorship department. “They don’t like losing.”
league’s past four championships, a stretch of dominance that was unthinkable when they were founded in 2003. Mika Vukona, a 32-year-old forward who has been with the Breakers since their inception, recalled how players were tasked with handing out wads of tickets to random Aucklanders. “And they’d be like, ‘No, we don’t want any! Go away!’” he said. The Breakers, who are sponsored by a Portfolio
77
casino, lean on the fundamentals: passing
In the old days, the offending
to the open man, running the floor, taking
player would simply pay a fine and
good shots. Cedric Jackson, 28, one of three
everyone would move on.
Americans on the roster and the league’s
Abercrombie mixed things up
most valuable player in 2013, returned from
by introducing a roll of the dice to
Europe this season to cement his celebrity
the equation, and he even provided
status. “I’m on a billboard,” he said, no
teammates with a spreadsheet
small feat given the country’s all-consuming
that details the various punitive
passion for rugby and cricket.
measures. Roll a two for a minor
The team averages 5,342 fans for home
offense? Hit the rowing machine
games at Vector Arena, and while most
for 500 metres. Roll a three for a
appreciate basketball, some are still lured by
moderate offense? Make phone
the prospect of watching a team from New
calls to five season-ticket holders.
Zealand wallop opponents from across the Tasman Sea. For Kiwis, there are few things more enjoyable than beating Australians at sports, even if that sport is basketball.
“The season-ticket holders love it,” said Vukona, the forward.
At 6:15 in the morning, the Breakers left for their game against Townsville.
Abercrombie wanted to emphasise accountability – one penalty involves
BasketBall remains a second-
wearing practice gear on public
tier sport in this part of the world, and
Dillon Boucher, a former forward for the
transportation – even if some of the players
especially in New Zealand, where boys
Breakers who heads the team’s sponsorship
now find themselves openly rooting for
grow up dreaming of playing for the All
department. “They don’t like losing.”
teammates to show up late. In any case, the
Blacks, the country’s legendary rugby
Breakers seem to share an understanding
team. Boucher, 39, the player turned team
that they are in this together.
executive, recalled favouring basketball
“Australians are tough people,” said
Six of the team’s 10 players grew up in New Zealand, which means that the Breakers ply their trade with national pride.
only because the rugby team in his
Opposing mascots have been known to
hometown was terrible.
taunt them by strangling toy sheep. Yes, New Zealand has a lot of sheep. Still, the Breakers guard against complacency. Tom Abercrombie, a forward from Auckland, recently unveiled a revised system for team-imposed fines that features three levels of infractions: the minor (arriving less than 10 minutes late for practice), the moderate (drawing a technical foul) and the severe (missing a team flight).
April 2015
Opposite page: New Zealand Breakers point guard Cedric Jackson goes for a layup against the Townsville Crocodiles. Above: A cutout of Alex Pledger, a center on the New Zealand Breakers, on the wall of their practice facility in Auckland. Below: (L-R) New Zealand Breakers players gather for a pre-game ritual before a road game; New Zealand Breakers center Ekene Ibekwe throws down a dunk during a road game against the Townsville Crocodiles.
Boucher got his start at age 17 with the team in Auckland and supplemented his income by working as a travel agent. The Breakers did not yet exist, but that was all about to change thanks to a surprising result at the 2002 FIBA World Championship in Indianapolis in the United States, where
78
Essentials
Sport
New Zealand – a team known as the Tall
35, a former guard who is now Vickerman’s
Blacks – placed fourth and momentarily
top assistant.
distracted the country from rugby. The Tall
Undercut by a false sense of security, the
Blacks did not have the most talented roster
Breakers promptly lost nine of their next
in the tournament, but they were cohesive.
10 games. They went 30-67 in their first
They fell to Yugoslavia, the eventual
three seasons.
champion, in the semi-finals, an outcome that still bothers Boucher.
The slow build toward respectability took shape in 2005, when Paul and Liz
“We had Yugoslavia on the ropes,” he
Blackwell, the owners of a supermarket
said. “It still cuts me deeply when I think
chain, bought the team. The Blackwells
about it.”
did not get involved to accumulate oodles
developmental programme that draws on
of cash. Instead, the Blackwells viewed
young players from New Zealand. Six of the
enough of a splash that a group of
basketball as a form of community outreach,
team’s 10 current players are products of the
businessmen was able to establish the
as a way to connect with children –
system. The Breakers also run an academy
Breakers in 2003 after persuading the
especially those from single-parent homes,
for promising players between the ages of
doyens of the Australian league to
an important social issue in New Zealand.
14 and 19.
Regardless, the Tall Blacks had made
expand to New Zealand. The Breakers
The Breakers staged post-practice
The eight teams in the NBL are subject
played their first game that October and
clinics for schoolchildren. They organised
to a salary cap of one million Australian
scored 44 points in the first quarter en
summer camps, weekend leagues and
dollars, spread among 10 players. The
route to a victory against the Adelaide
group outings to games. On the court, the
Breakers try to maximise every penny, and
36ers. “It was about the worst thing that
team stabilised under Andrej Lemanis,
they seldom give up on prospects.
could have happened,” said Paul Henare,
who coached the Breakers to their first winning season in 2007-08. Today, the Breakers have a robust
Game day in Townsville was filled with the hum of expectation. At 9:30 am, the players convened in the lobby of their hotel and headed outside for what was described
Above: Townsville Crocodiles fans cheer on their team during a win over the New Zealand Breakers. Left: The New Zealand Breakers practice before departing on a road trip, in Auckland. Below: New Zealand Breakers players visit a popular spot overlooking Townsville, Australia.
in their itinerary as 30 minutes of fresh air. The Breakers were heavily favoured, and Vickerman had no reason to doubt their preparation – until they took the court. The game was a disaster for the Breakers, who shot 39 per cent from the field and lost, 79-71. Vickerman was morose during his news conference. “The harder we tried,” he said, “the more we turned the ball over.” The Breakers wound up carrying a twogame losing streak into their game recently against Perth, and they were down by one point in double overtime with time about to expire when Jackson launched a shot from midcourt. It banked in. His teammates mobbed him. Days later, the players were still buzzing. “That game was a cracker,” Abercrombie said. It was the sort of shot that can save a season, and as players accustomed to doing things their own way, they knew exactly how to create something from nothing. Portfolio
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Essentials
80
Photo: Getty Images
Environment
E
ndowed with the Amazon and other mighty rivers, an array of huge dams and one-eighth of the
world’s fresh water, Brazil is sometimes called the “Saudi Arabia of water,” so rich in the coveted resource that some liken it to
© 2015 New York Times News Service
living above a sea of oil. But in Brazil’s largest and wealthiest city, a more dystopian situation is unfolding: The taps are starting to run dry. Worst of all, none of this is a surprise. In fact, the Brazilian government released a warning six years ago predicting this exact scenario in this exact timeframe.
Taps Run Dry in Brazil’s Largest City A combination of drought, deforestation, climate change and creaky infrastructure have caused an unprecedented water crisis in São Paulo, reports Simon Romero.
As southeast Brazil grapples with its worst drought in nearly a century, a problem worsened by polluted rivers, deforestation and population growth, the largest reservoir system serving São Paulo is near depletion. Many residents are already enduring sporadic water cut offs, some going days without it. Officials say that drastic rationing may be needed, with water service provided only two days a week. According to current estimates, South America’s largest city will likely run out of water in June. Behind closed doors, the views are grimmer. In a meeting recorded secretly Portfolio
81
For some in this traffic-choked megacity of futuristic skyscrapers, gated communities and sprawling slums, the slow-burning crisis has already meant no running water for days on end. “ImagIne goIng three days without any water and trying to run a business in a
“Because of environmental degradation and political cowardice, millions of people in São Paulo are now wondering when the water will run out.”
basic sanitary way,” said Maria da Fátima Ribeiro, 51, who owns a bar in Parque Alexandra, a gritty neighbourhood on the
disaster monitoring service that São Paulo’s
edge of São Paulo’s metropolitan area.
main reservoir system could run dry in 2015.
Some residents have begun drilling their
and leaked to the local news media, Paulo Massato, a senior official at São Paulo’s
Experts say the origins of the crisis go
own wells around homes and apartment
beyond the recent drought to include an
buildings, or hoarding water in buckets to
array of interconnected factors: the city’s
wash clothes or flush toilets. Public schools
surging population growth in the 20th
are prohibiting students from using water to
century; a chronically leaky system that
brush their teeth, and changing their lunch
spills vast amounts of water before it can
menus to serve sandwiches instead of meals
reach homes; notorious pollution in the
on plates that need to be washed.
Tietê and Pinheiros rivers traversing the
Officials are promising ambitious
city; and the destruction of surrounding
water utility, said that residents might have
solutions, like new reservoirs. But they are
forests and wetlands that have historically
to be warned to flee because “there’s not
a long way off, and many people in this
soaked up rain and released it into
enough water, there won’t be water to bathe,
vast metropolitan region of 20 million are
reservoirs. Eighty per cent of São Paulo’s
to clean” homes.
frightened by forecasts at Brazil’s natural
main watershed is deforested, as is 20 per cent of the Amazon.
“We’re witnessing an unprecedented water crisis in one of the world’s great industrial cities,” said Marússia Whately, a water specialist at Instituto Socioambiental, a Brazilian environmental group. “Because of environmental degradation and political cowardice, millions of people in São Paulo are now wondering when the water will run out.” April 2015
Opposite page: Aerial view of the Atibainha river dam, in Nazare Paulista, during a drought affecting São Paulo state. Above: The stump of a tree and its once water-covered roots at Atibainha reservoir, part of the Cantareira system, which is a major water source for the São Paulo metropolitan area.
The low water levels have also impacted electricity outputs, as hydroelectric dams simply cannot produce as much energy with reduced water flows Deforestation in the Amazon River basin, hundreds of kilometres away, may also be adding to São Paulo’s water crisis. Cutting the
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Essentials
Environment
forest reduces its capacity to release humidity into the air, diminishing rainfall in southeast Brazil, according to a recent study by one of the country’s leading climate scientists. Officials also point to global warming. “Climate change has arrived to stay,” Geraldo Alckmin, the governor of São Paulo state, said in February. “When it rains, it rains too much, and when there’s drought, it’s way too dry.” Shrinking water supplies are afflicting Rio de Janeiro and Minas Gerais, two other powerful states, while some smaller cities in the region cancelled Carnival festivities over worries about the lack of water to clean trash-strewn streets after celebrations. But São Paulo’S crisis is particularly
The water utility says it is pursuing a
utility said it was seeking to reduce leaks.
acute. Officials at Sabesp, the water
grandiose project to draw water from a
It has been offering discounts to reduce
utility controlled by São Paulo state, have
nearby river basin and the construction of
consumption while starting to impose steep
acknowledged lowering the water pressure
new reservoirs though some efforts are not
fines recently on high water use.
in the distribution network. While that
expected to be completed until well into
effectively reduced the amount of water
next year.
flowing through the system, the authorities
“It’s a water system which clearly
Outright rationing – in which service would be cut entirely for certain periods, not just reduced – is “still under discussion
have frequently insisted it is not the same
hasn’t been managed well,” said Newsha
and study,” said Sabesp, the water utility,
as rationing, sowing confusion and anger
Ajami, director of urban water policy
after rains in recent weeks slightly raised
among those unable to get water.
at the Stanford Woods Institute for the
reservoir levels. But for people already
Environment, who recently met with water
experiencing what they describe as de facto
authorities here. “They’re going for these
rationing, the position of the authorities has
megaprojects, which should be the last
been perplexing, at best.
Above: Artist and activist Mundano works on a graffiti mural along a busy highway titled Cantareira Desert, after the name of a nearly depleted water reservoir system that supplies São Paulo. Below: (L-R) Piping, used to transfer water from one reservoir to another, stretches across dry ground left by a receded water line; People collect water from a public source in Itu, an area about 60 miles northwest of São Paulo.
solution,” when aggressive measures should
“I feel hatred, hatred of the governor and
have been taken months ago “to reduce
of Sabesp,” said Márcia Oliani, 54, the finance
consumption and leakage.”
manager of an art gallery who endured six
More than 30 per cent of the city’s
days without water in her apartment. “They
treated water is estimated to be lost to leaks
completely failed to warn us and have just
and pilfering. In a statement, the water
continued to lie about this throughout.”
Portfolio
MOH No. OD51557
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Essentials
Art
Portfolio
Essentials Art
The Brands in Art Basel’s Orbit
Art Basel is the most wellattended art event in the world, which is why there is stiff competition among companies for sponsorship deals, reports Hannah Seligson.
W
hen visitors arrived at Art Basel Hong Kong last month, they were able to
explore artwork by Richard Serra, Keith Haring and Ai Weiwei – along with a plethora of luxury brands decked out to show their artistic side. Davidoff, the cigar company, was on hand selling humidor boxes designed by the French artist Lison de Caunes, at 19,500 euros apiece. There was also a hand-painted BMW art car and a lounge space sponsored by Executive Jet Management China, a part of the private © 2014 New York Times News Service
aviation company NetJets.
April 2015
Ruinart, the LVMH-owned Champagne company, operated a bar, along with carts that weaved through the 233 galleries represented, selling glasses of bubbly for about $22. Other brands were showcased in the Collectors Lounge, a space set aside for companies to market their products.
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If you include all three fairs – held annually in Miami Beach, Florida, and Basel, Switzerland, in addition to Hong Kong – Art Basel is the most wellattended art event in the world. The Miami fair attracted 73,000 visitors in December; 65,000 people were expected
Above: Artist Jeff Koons at the North American premiere of his BMW Art Car. Right: Mixed media installation titled Invisible Presence: Bling Memories by Ebony G. Patterson in Monique Meloche Gallery at Untitled Art Fair during Art Basel Miami Beach. Below: Cartier Dome during the Art Basel Miami Beach art fair.
brand,” said Johan Jervoe, global group
to show up in Hong Kong for the fair, held
chief marketing officer at UBS. He added,
from March 15 to 17.
however, that there was a concrete return on investment for sponsoring the fairs.
When you consider that someone
The real estate firm Douglas Elliman has
in Miami paid $1.2 million for a work by Richard Prince, you can see why
also seen tangible benefits. In 2013, “around
companies want to be part of the Basel
a third of people who came to Douglas
action. The wealthy people who buy art at
Elliman’s first showcase of high-end
the fair often have plenty more to spend.
properties at Art Basel Miami made followup appointments to view them in person,”
Competition is stiff for brands seeking sponsorship deals at the fair. “We get
said Adriana PintoTorres, director of luxury
approached by companies every week
sales for Douglas Elliman in Miami. “It was
who want to partner with us, and every
extremely successful,” she said.
year that number increases,” said Marc Artists, of course, also benefit.
Spiegler, director of Art Basel.
Without certain brand sponsors and
There is a sponsorship fee for brands,
competitions, some artists say it would be
although he would not disclose specific
more difficult to break into the extremely
numbers. “Brands pay more to take part in the fair than galleries,” he said. The bar is high for those seeking sponsorship deals, Spiegler said, because
Photo: Getty Images
Art Basel is only looking for companies with
spends in the low-two-digit millions a year
competitive art world. Traditionally,
on collaborations involving the arts, a small
galleries – and the coterie of high-end art
fraction of its overall marketing budget.
consultants who buy from them – have
UBS, the lead sponsor of all three fairs,
been the arbiters of artistic talent and one
“day-to-day engagements with the arts.” So
had a curated selection of its artwork
of the few gateways to critical acclaim and
the companies do their best to display their
displayed in its dedicated lounge space
commercial success in the art world. To
artistry. BMW, the lead automotive sponsor
in Hong Kong. In addition, the bank has
some extent, corporations have become an
for the fairs, is underwriting Art Journey, an
two full-time curators who buy art from
added gateway – a reality that has led to
award for emerging artists.
the Basel fairs (among other places) for
certain amount of concern in art circles.
“Our customers are into the arts,” said
its worldwide collection, which includes
The fear is that corporate interests could
Ludwig Willisch, chief executive of BMW
thousands of pieces of contemporary art.
compromise artistic integrity.
North America. The company says it
“Art creates a certain glow around our
When Ruinart, the official Champagne Portfolio
Essentials Art of corporations and artists. “This is not a new chapter in the debasement of art. It’s a potential reservoir of funding that when done respectfully and thoughtfully is simultaneously good for the brand and good for the artist,” Szanto said. STILL, WITH THE growing crosspollination of brands and art, there are increasingly more judgment calls to be made about the balance between artists and brands. At the Scope fair in Miami, intermingled among the 131 gallery spaces were five sponsored galleries by brands such as paper company Moo, Red Bull and Bombay Sapphire. They all displayed work by emerging artists, some selected from online competitions. Outside on the beach was Heineken House, a pyramid with 12 walls being painted live over the course of six days by a rotating group of a dozen artists, all of whom were paid for their time. Fiat, the official automotive sponsor of Scope, had a brand-new car in the middle of the fair. Visitors willing to fill out a short survey were entered for the chance to win it. Four years ago, companies couldn’t Top: A beachfront pyramid from Heineken, which was a sponsor of the Scope Art Show. Above: The BMW and Ruinart booth, which commissioned the artist Georgia Russell to make packaging for a limited edition of Champagne bottles, at Art Basel Miami Beach.
be tempted to sponsor the fair, said Daria Brit Greene, vice president of the Scope Art Show, who also oversees brand partnerships; now she says she
sponsor of Art Basel, approached the
Art Basel Miami; she hopes the exposure
has to turn away many. The companies
artist Georgia Russell about designing
will be good for her career. Russell’s work
pay the same rate as the galleries
Champagne packaging for a limited
was represented at Art Basel Miami by
do for their space, she added.
edition of 2,325 bottles, she was initially
Galerie Karsten Greve at Art B, which
ambivalent. “I’m a fine artist and this
has three locations across Europe. Even
gallery showing their art, so we try to keep
was a little bit out of what I normally do.
so, she said it would have been hard to
to a minimum, how much space we give to
I don’t want to become like Jeff Koons,”
turn down Ruinart because, among other
brands,” Greene said.
said Russell, referring to that artist’s
reasons, it has such a wide marketing
collaborations with companies such as
reach and budget.
H&M, Dom Pérignon and BMW, on
Since artists have historically had
“It does take away from a traditional
At the Art Basel fairs, the only branded items allowed on the floor are the Ruinart Champagne carts and Audemars Piguet
everything from leather handbags to the
patrons, from wealthy citizens to
clocks. “I would not allow a BMW in the
body of a car.
monarchs to religious institutions, some
middle of the fair,” Spiegler said.
But Russell agreed to the project, which
contend that it’s fairly benign for brands
The Ruinart carts, he says, pass the test
Ruinart, a division of the luxury goods
to take on a similar role. That’s how
because, unlike a car, they are small and
conglomerate LVMH, commissions every
Andras Szanto, an adviser to Art Basel
don’t block any sight lines. He said, “You
year from a different artist. Her sculpture
sponsors including Davidoff Cigars and
can’t buy your way onto the floor; it’s for
was displayed in the Collectors Lounge at
Audemars Piguet, views the convergence
galleries who have earned it.”
April 2015
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Essentials
88
Other Business
German Employers Get Creative German employers are coming up with
low-wage jobs over the past decade. Some
creative ways to avoid paying a new
3.7 million people were expected to benefit.
minimum wage, angering unions. Chancellor Angela Merkel’s government
But in the months since it went into effect it has become clear that not everyone
introduced Germany’s first nationwide
is taking home more pay. Butchers have
wage floor of ¤8.50 per hour early this
complained that they must pay a fee of up
year. The law was the brainchild of the
to ¤100 per month to use knives they need
Social Democrats (SPD), who made it
to cut meat. Bakers say they are being paid
a condition of joining Merkel’s coalition
in buns and bread instead of cash. Other
in 2013.
workers have had their holiday entitlement
The centre-left party argued that it was a necessary response to the sharp rise in
Vandals Take Selfie
reduced or premiums for working nights, holidays and Sundays slashed.
Thief Returns Oscar Gown
thief, who tipped off celebrity news site TMZ. com after learning the pearls on the dress were fake. The Kenyan actress had worn the dress adorned with 6,000 pearls to the Academy Awards in one of the most commented looks of the night. The media source said the thief removed two pearls from the dress and took them to the Garment District in downtown Los Angeles where he was told they were not
The $150,000 Oscar gown worn by actress
real. The thief then took the dress back to
Lupita Nyong’o reappeared days after being
the London West Hollywood hotel and left it
stolen. Apparently it was returned by the
inside a trash bag in a bathroom.
Two female tourists from California have been cited by police in Rome for carving their initials into a wall at the city’s ancient Colosseum and then taking a selfie to record the vandalism. Italian state news agency ANSA reported that the two women, ages 21 and 25, used a coin to damage a secondfloor brick wall on the western side of the amphitheater, which dates to the first century AD. A tour guide spotted the vandalism Photos: Reuters
and called police, who questioned the pair before citing them for “aggravated damage to a building of historic or artistic interest.” Portfolio
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