Portfolio | December 2014

Portfolio Exclusive to Emirates First Class and Business Class

Singing the BlueS Japan’s Fickle Music Market german induStry Shifting Investment Overseas FaSt-Food SalarieS Big Burgers, Little Pay

Jean-Christophe

Babin Bulgari’s Passion for Luxury

Issue 108 n December 2014

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This issue DECEMBER 2014

Portfolio

Exclusive to Emirates First Class and Business Class

Cover Story 34 From Time to Timeless Jean-Christophe Babin, the former CEO of Tag Heuer, is now at the helm of luxury jeweller Bulgari. The company – which became famous in the 1950s and ’60s for dressing Sophia Loren, Jacqueline Onassis and Elizabeth Taylor with flamboyant coloured gems – now has products spanning handbags, watches, perfumery and five-star hotels.

Features 42 Japan Resists Move to Digital Music

56 Fast-food Wages

Around the world, the music business has gone digital. But

Danish fast-food workers earn $20 an hour, which is far more

in Japan, the compact disc is still king.

than most of their American compatriots.

48 Germany’s Shifting Focus

60 New Zealand’s Shrinking Wool Market

Petrochemical reliant and energy-intensive companies such

Synthetic fibres have eaten into the demand for wool, which

as BASF are increasingly investing overseas.

has resulted in lower prices and poses a challenge for New Zealand’s sheep farmers.

52 Rising Rents Challenge Barcelona Thousands of small, family-owned shops are being pushed from Spain’s historic districts as rent controls expire.

60

42

52

11

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12

Exclusive to Emirates First Class and Business Class

Essentials 67 Ghost Towns, Puffins and Unspoiled Views Newfoundland was battered by forced resettlements and the decline of the cod fishing industry. Now, tourism is slowly creating an economic lifeline on the remote Bonavista Peninsula.

74 A Toast to Dylan Thomas The Welsh poet would have turned 100 in October and

67

refocusing public attention on his work has been the main aim of the centenary.

80 South Korea’s Gaming Craze Professional video game competitions, or e-sports, have become South Korea’s national pastime.

86 Inside Rolex Rolex lives by its own rules. Cloaked in mystery, the brand has secured its position as a world leader in the watch

74

industry.

92 Directing Planes by Remote Sweden is testing a new system that will allow air traffic controllers to “virtually” guide flights at small, remote airports from a central location.

96 Other Business Portfolio takes a light-hearted look at the latest business news.

80

Departments 15 Notebook World business in a nutshell.

23 Observer Spotting and analysing business trends.

32 Column: Paul Krugman What Markets Will

Published for Emirates by

Media One Towers, Dubai Media City, PO Box 2331, Dubai, UAE. Telephone: (+971 4) 4273000 e-mail: emirates@motivate.ae

92 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 Group Sales Manager Jaya Balakrishnan Email: jaya@motivate.ae General Manager – Group Sales Anthony Milne Email: anthony@motivate. ae International Sales Manager Martin Balmer Email: martin.balmer@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

Emirates takes care to ensure that all facts published herein are correct. In the event of any inaccuracy, please contact The Editor. Any opinion expressed is the honest belief of the author based on all available facts. Comments and facts should not be relied upon by the reader in taking commercial, legal, financial or other decisions. Articles are by their nature general, and specialist advice should always be consulted before any actions are taken.

Printed by Emirates Printing Press, Dubai, UAE

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Notebook

15

getty images

BUSINESS NEWS IN BRIEF

Chocolate: An Endangered Treat The gap beTween how much

world’s cocoa – temperatures will increase

this year, the country’s appetite will nearly

cocoa the world wants to consume and

by up to 2°C by 2050, intensifying the dry

double, to 70,000.

how much it can produce will swell to one

season and causing water shortages. The

million metric tons, according to Mars Inc.

result, the report states, is that “cocoa-

varieties are being bred. Of the multiple

and Barry Callebaut AG, the world’s largest

growing areas will decrease seriously.”

newly introduced strains, the most

chocolate maker. By 2030, the predicted

However catastrophic, the threat of

There is hope, however, as new cocoa

renowned comes from Ecuador. CCN51, as

drought pales in comparison with that of

the breed is called, is resistant to witches’

disease. Frosty pod colonised Costa Rica

broom and produces nearly seven times

than was produced. This year, despite an

in just two years. Witches’ broom, another

more beans than its traditional Ecuadorian

unexpected bumper crop, supply barely

devastating fungus, hit the Brazilian state

counterpart. Unfortunately, there’s a major

kept pace with the recent upswing in

of Bahia in 1989. This cocoa-producing

trade-off: taste.

demand. From 1993 to 2007, the price

powerhouse’s yield subsequently collapsed

of cocoa averaged $1,465 a ton; during

from 300,000 tons to 130,000 tons

strains dubbed R-1, R-4 and R-6. At

the subsequent six years, the average was

annually, in a decade. Before witches’

the 2009 Cocoa Awards at the Salon du

$2,736 – an 87 per cent increase.

broom, Brazil was the world’s second-largest

Chocolat in Paris both R4 and R6 won

Disease, drought and climate change

exporter of cocoa. Today, it’s a net importer.

prizes for their rich and complex flavours.

are taking their toll on cocoa production.

While drought and disease threaten to

However, the best chocolate is often

shortfall will grow to two million tons.

Last year, more cocoa was consumed

More promising are the Costa Rican

According to a report prepared by

decimate cocoa plantations worldwide,

a blend of distinct African and South

the International Centre for Tropical

cocoa consumption is on an inexorable

American cocoa varieties. So even if South

Agriculture for the Bill & Melinda Gates

upward trajectory. In 2010, according to

American production is put back on track,

Foundation, in Ghana and Ivory Coast –

the International Cocoa Organisation, the

problems in Africa could leave a bad taste in

which together produce 53 per cent of the

Chinese ingested 40,000 tons of cocoa;

chocolate connoisseurs’ mouths. n

December 2014

Notebook Numbers Game

Russia’s Gold Buying Spree In the face of a tough economic outlook, some central banks have been

GETTY IMaGES

$2.5

bolstering their gold reserves.

Between July-September 2014

billion cash deal

central banks added 92.8 tons

has secured

of gold to their reserves – and

aT&T rights over Mexico’s

59 per cent of net purchases

third-largest wireless operator,

in this period were made by

GETTY IMaGES

Lusacell. The acquisition will help aT&T expand its business in

The Mexican government is currently implementing reforms to dilute the dominance of america Movil and Grupo

by Kazakhstan, which added 28 tons to its reserves, and

the growing cellphone market in Latin america’s No.2 economy.

Russia. Russia was followed

$1

million was offered by an unnamed arab Sheikh for an old ’87 Volkswagen Beetle owned by Uruguayan President Jose Mujica. The president is nicknamed ‘the poorest president in the world’ due to his modest lifestyle and for the fact that he donates 90 per cent of his salary to charity.

Azerbaijan bought a further seven tons.

Gold now makes up 10.6 per cent of Russia’s total reserves, up from just under 8.4 per cent a year ago. Russia has

Televisa by encouraging foreign

The World

100

In Figures

will be shut down next year in

date – roughly a 50 per cent

asia, africa and the Middle East

increase on both the previous

in an attempt to improve the

two years’ purchases. Russia

billion fund is being

UK bank’s profitability. The asia-

has now overtaken China in

planned by China to

focused bank has been facing

the amount of gold held by its

revive the centuries-old Silk Road

tough market conditions and

central bank.

over-60s, including Ford that

trading route. The fund, which will

has issued three profit warnings

is designing a driving seat that

be overseen by a new Chinese

this year.

can detect a potential heart

bank, will finance infrastructure

attack and safely bring the car

construction to link its markets to

to a stop.

three continents. Policies will be

investment in the sector.

$15

trillion by 2020 will be the value of

the Silver economy according to forecasts by Euromonitor.

Companies are vying to tap into this growing market of wealthy

$40

set in place to encourage Chinese

£2

$1.3

branches of

added about 115 tons of gold

Standard Chartered

to its reserves this year to

trillion webconnected

devices industry will get a

billion deal gave Turkish

lenders to finance infrastructure

huge boost if Barack Obama’s

food group Yildiz

in countries along the route

proposal for an open internet

connecting China to Europe.

policy is implemented. Whilst

Holdings rights over United Biscuits, the UK Company

urging the US Federal

behind McVite’s Jaffa Cakes

Communications Commission

and Penguin brands. Yildiz

to regulate broadband under

already owns Belgium’s Godiva

the strongest possible rules, he

chocolate and america’s De

also proposed an explicit ban of

Met’s Candy Company. With this

internet-service providers being

acquisition it intends to enhance

able to demand extra payment

its position in the UK where it

for speedy delivery of content

currently has minimal presence.

and data.

GETTY IMaGES

16

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Notebook

18

NigeriaN BillioNaires DomiNate rich list the business magazine Ventures Africa.

The collective wealth of Nigerians on

has about 30 million subscribers across

which champions African capitalism, stands

west Africa. The highest-ranking South

at $77.7 billion, more than double that of

African, and third overall, is Johann

South Africans and almost as much as the

Rupert, chairman and biggest shareholder

rest of the continent’s billionaires combined.

of the Swiss-based luxury goods company

boasts 23 while South Africa and Egypt

Compagnie Financière Richemont SA. Number four on the list is Folorunsho

have eight each. Their net worth totals

Alakija of Nigeria, whose $7.3 billion,

$161.7 billion, up 12.4 per cent from $143.8

generated from oil and gas, puts her ahead

billion on Ventures Africa’s first list in

of America’s Oprah Winfrey as the richest

2013. Of five new billionaires added this

black woman in the world, according to

year, four are Nigerian.

Ventures Africa.

Aliko Dangote, founder of Africa’s biggest

Africa’s second wealthiest woman is

industrial conglomerate, Dangote Group,

Isabel dos Santos, daughter of long-time

remains the continent’s richest man. His net

Angolan president Jose Eduardo dos Santos,

Nigeria has more billionaires than any other

worth has grown to $25.7 billion in 2014,

on $3.5 billion. Igho Sanomi of Nigeria

country in Africa, including the continent’s

a 21 per cent rise from his $20.2 billion

($1.3 billion) and Mohammed Dewji of

wealthiest man and the world’s richest black

valuation in 2013.

Tanzania ($2 billion), both 39, are the

woman according to a ranking published by

Second is his compatriot Mike Adenuga,

DP World to Buy Dubai’s Economic Zones

continent’s youngest billionaires.

square-kilometre industrial park adjacent to DP World’s flagship Jebel Ali port in Dubai, is EZW’s primary business unit and generated 97 per cent of its revenue and operating profit in 2013.

DP World Ltd. (DPW), which operates

cent in 2014, the fastest pace since 2007,

ports from China to Peru, agreed to

according to International Monetary

from its existing cash holdings and

buy Dubai’s industrial parks operator

Fund estimates, helped by a boom in

committed conventional and Islamic loans

Economic Zones World (EZW) for

its trade, tourism and real-estate

as well as revolving facilities, according to

$2.6 billion. The company also plans

industries. Container throughput at

the statement.

to delist its shares from the London

DP World’s more than 65

Stock Exchange.

terminals globally jumped

The purchase, which includes the acquisition of the Jebel Ali Free Zone logistics park, is expected to be completed

10 per cent in the nine months through September.

The acquisition will help

in the second quarter, Dubai-based DP

DP World “offer seamless

World said in a statement. The agreement

supply chain services to

includes the assumption of net debt of $859

shippers and shipping lines,”

million, and is at about 10 times EZW’s

DP World Chairman Sultan

earnings before interest, tax depreciation

Ahmed Bin Sulayem said in

and amortisation for 2013, it said.

the statement.

Dubai’s economy may expand five per

DP World will fund the acquisition

Jebel Ali Free Zone, a 57

getty images

getty images

telecommunications company, which

the rich list compiled by Ventures Africa,

Of 55 billionaires in Africa, Nigeria

Aliko Dangote is Africa’s richest man.

worth $8 billion, owner of the Globacom

Portfolio

chaumet.com

“Double take” by Marine Vacth

Joséphine Rings

20

Notebook DUBAI EVENT: SMART LIVING 2014 WEBSITE: DUBAIAUTUMNFAIR.COM DATE: DECEMBER 1-3 VENUE: DUBAI INTERNATIONAL CONVENTION & EXHIBITION CENTRE The 29th edition of the UAE’s only consumer goods trade fair will focus on the entire spectrum of consumer goods ranging from housewares and leather goods to carpets, cosmetics and home textiles. The show is a successful platform for international manufacturers, suppliers, producers and exporters to reach their target audience and strike onsite deals with retail businesses.

There is plenty of opportunity for visitors to get their hands on new products, attend demonstrations, compare features and snap up the best possible deals available in the MENA region.

EVENT: DUBAI INTERNATIONAL JEWELLERY WEEK WEBSITE: JEWELLERYSHOW.COM DATE: DECEMBER 3-6 VENUE: DUBAI WORLD TRADE CENTRE View the latest jewellery trends at this show, which hosts the biggest and widest jewellery collection from across the globe. The event has more than 80 different product categories spanning from antique and bridal jewellery to high-end watches, collectors’ items, and limited editions. The show will also hold a hosted buyers programme, seminars, and the 6th Jewellery Design Awards that honour the best in the industry and also promote emerging design talents in the Middle East.

DUBAI

United Arab Emirates

EVENT: GULF TRAFFIC EXHIBITION WEBSITE: GULFTRAFFIC.COM DATE: DECEMBER 8-10 VENUE: DUBAI INTERNATIONAL CONVENTION & EXHIBITION CENTRE Discover the latest in road infrastructure, traffic management systems and technologies for enhancing road safety. The show will see the launch of 850 new and innovative products, while the event itself focuses on multimodal traffic and parking systems that helps promote safer, efficient and sustainable traffic environments. There will also be conferences hosted by industry experts and free seminars on the latest technologies from leading companies.

EVENT: MEBA 2014 WEBSITE: MEBA.AERO DATE: DECEMBER 8-10 VENUE: DUBAI WORLD CENTRAL MEBA 2014 (Middle East Business Aviation) is a three-day event that presents an opportunity for professionals in the aviation sector to engage with officials from some of the top industry players such as Airbus, Boeing, Bombardier, Emirates Executive and Etihad Airways. The event is set to host over 400 exhibitors, more than 8,000 visitors and present over 50 aircraft on static display. This year’s MEBA will focus on the region’s private business jet market as industry analysts suggest this sector is on course for 13 to 15 per cent growth due to strong demand for charters and aircraft.

EVENT: DUBAI DRINK TECHNOLOGY EXPO WEBSITE: DRINKEXPO.AE DATE: DECEMBER 14-16 VENUE: DUBAI INTERNATIONAL CONVENTION & EXHIBITION CENTRE This exclusive exhibition for the MENA region’s beverage industry showcases the latest in drink processing technology and packaging systems. It is a must-attend event for those connected with the foodservice, retail and hospitality industry as it provides an opportunity for networking and exploring the latest market trends and expertise available. Best products and practices in the beverage industry will be recognised at the Middle East Beverage Awards to be held on the 15th.

Portfolio

Observer

23

A fashion show in Lagos. Nigeria is one of the African countries that has issued sovereign bonds.

reuters

BUSINESS NEWS IN BRIEF

An Untapped Continent

three to manage Kenya’s $2 billion debut in

Banks are jostling for sovereign debt deals in Africa, but experts warn there is a downside, reports Danny Hakim.

make the hard sell,” said an executive in the

the sovereign debt market. Now, it wanted to do the same for Uganda. “They’re about to room, who was watching from a distance.

Uganda could use the money for power plants, rail lines, roads or similar projects it has planned. Countries around the continent

Five men in dark business suits

But the sovereign debt market is booming,

are generally using proceeds from the bond

gathered before Maria Kiwanuka in a

with sub-Saharan African countries raising

sales to improve infrastructure, restructure

semicircle. They were international bankers

nearly $7 billion so far this year, more than

debt and finance deficits.

and they had a pitch to make. Kiwanuka,

in all of 2013, according to Dealogic, a

the finance minister of Uganda, was sitting

market research firm.

The yields on many of the new bonds

hydropower plant. Senegal is fixing roads and

in Ghana, Kenya and Nigeria have dipped

the electric grid. Kenya is expanding its ports

even as the Ebola crisis has intensified.

and railway system, as well as paying off a

sovereign debt deal in Africa, a continent

That means that the market’s outlook for

higher-cost loan.

that foreign investors have long been wary

those countries has improved, although that

of for its economic woes, rampant poverty

could change, particularly for West African

pitches had become routine. “They do

and political instability. Now that narrative is

countries, if health officials’ warnings for the

want us, and I am flattered that they are

changing, and one sub-Saharan nation after

region turn increasingly dire.

acknowledging our macroeconomic stability,

up on a small riser, her bright pink and gold dress a sharp contrast to the men’s suits.

Bankers are jockeying for the next

© 2014 New York times News service

Rwanda, for instance, is finishing a convention centre and building a new

another is jumping into the debt market.

The pitch to Kiwanuka took place at the

After the meeting, Kiwanuka said such

because no one wants to get in bed with

London office of Standard Bank, based in

a basket case,” she said. “I don’t see the

West Africa, could cost $33 billion, the

Johannesburg, during an African investment

sovereign bond as the end of the story. It’s

World Bank estimated, prompting worries

conference the lender hosted this summer.

just a tool to get things sorted.”

about the continent’s growth prospects.

Only a few days before, the bank was one of

The Ebola outbreak, which is ravaging

December 2014

African nations have been borrowing in a

24

Observer $7 billion 6

African sovereign debt

5

Jumping on the Bond Market

Internationally marketed sub-Saharan African sovereign bonds issuance

4 3

Before 2006, only South Africa had issued a sovereign bond.

Now, more than a dozen sub-Saharan countries have done so.

2 1

Sovereign debt issued since 2006 ’06

’08

’10

’12

2006-14 cumulative totals by country 2.5

1.5

1.2

1.0

0.7 0.6

go

ga

la

ne

ia

er

l

a ric

Source: Dealogic

s lle he yc da Se a n a w i R ib a am ni N za ast n o Ta y C or Iv

An

Se

ig

N

a

Af

na

bi m

1.7

a ny

ha G

h

on

ut

ab G

So

2.0

Za

2.6

Ke

$10.9 billion

’14 Year to date

THE NEW YORK TIMES

variety of ways over the years, issuing bonds

suddenly cold on regions, as happened with

For now, bond investors seem relatively

on their domestic market and taking out

emerging markets after the Federal Reserve

unfazed by the potential economic fallout

loans directly from foreign banks, as well as

started pulling back on its stimulus efforts.

from the Ebola epidemic. While the countries

relying on aid from foreign governments. But

The appeal to investors is clear enough.

N.Y. Times News Service Federal Reserve policies after the financial Date: 10/24/14 crisis pushed interest rates to record lows, their inability to repay debts because of wars, Graphic Slug: INVESTORS AFRICA DEBT making US debt less appealing and the political upheaval and economic tumult, Size: 7.6 x 2.3 higher yields offered by emerging market leading U2 singer Bono and the Live Aid With Story: (BC--INVESTORS-AFRICA-DEBT--NYT) they have also been known in the West for

hardest hit – Liberia, Guinea and Sierra Leone – have not issued sovereign bonds, Ivory Coast, which borders both Liberia and Guinea, received a warm reception when it returned to the market in mid-July. Even

founder Bob Geldof to campaign in years

debt more enticing. The yields on sub-

now, the yields on its bonds are only modestly

past for lenders to forgive African debts.

Saharan debt can be more than three times

higher than when they came to market.

Many sub-Saharan nations are still unrated

as high as those on US Treasury securities.

“Right now, market conditions are

But investors also face risks. Among other

such that lowly rated sovereigns can get

concerns, many sub-Saharan countries have a

access,” Kraemer said. For a while during

denominated in dollars, can be a far cheaper

history of fragile institutions and corruption,

the Eurozone crisis investors could earn a

way to raise money than local lending rates,

and some countries have defaulted on

higher interest rate from Spanish bonds than

though they are more expensive than direct

other forms of debt. Nigeria, Africa’s largest

from those of Zambia, he said. “From our

aid or low-rate loans from government aid

economy, restructured its debt four times

perspective, given what our ratings are, that

groups, which often come with oversight

from 1986 to 2000 but defaulted on the

makes no sense at all.”

requirements. Before 2006, only South

agreements nonetheless, according to its debt

Africa had issued a sovereign bond. Now

management office.

by the major credit ratings agencies.

Sovereign bonds, which are typically

more than a dozen sub-Saharan countries

“My belief is always that you’re a successful

Many institutions and people, including the International Monetary Fund and Joseph Stiglitz, a winner of the Nobel in economic

participant in the international capital

science, have urged caution. Mark Roland

markets not when you’ve issued your first

Thomas, an economist and Africa expert

private capital. It shows that private capital

bond, but when you’ve repaid it, and that

at the World Bank, said the trend “does

is replacing development aid as a source

time is still to come for all of those large bond

say something genuine and true about the

of capital flows to the continent, and that’s

issuances,” said Moritz Kraemer, the chief

progress Africa has made in the last couple

good,” said Kingsley Chiedu Moghalu, the

sovereign ratings officer at Standard & Poor’s,

of decades.”

deputy governor of the Central Bank of

in an interview.

have tested the market.

“It shows the opening up of Africa to

Nigeria, in an interview. He participated in Nigeria’s promotional tour before it issued its first sovereign debt in 2011. “From the point

Sometimes it is not always clear what the money will be used for.

Mozambique’s foray into the market last

But he added: “Does it create more challenges and does it mean that macroeconomic management has become more complicated? Does it mean that

of view of the young man sitting at a hedge

year was controversial. The country set up

relatively small economies are now more

fund in London, it’s a new frontier,” he said.

a tuna fishing company that raised $850

exposed to international economic conditions?

Yes, and our clients are aware of that.”

But it is not without pitfalls. Because they

million through bond offerings, but the

are borrowing in a foreign currency, countries

International Monetary Fund has raised

can quickly find that any cost advantage

questions about whether the proceeds were

least for now. “Our debt service is still below

disappears if their own currency weakens.

being used for more than tuna boats and

10 per cent of our total budget,” Kiwanuka

And investors can become jittery, going

asked for more transparency.

said. “We don’t want it to spiral.” n

Uganda is remaining on the sidelines, at

Portfolio

Observer O N E 2 W AT C H TExT: HildA d’sOuzA

Patrick Pouyanne The French multinational oil and gas company Total S.A. appointed Patrick Pouyanne as chief executive officer on October 22. Pouyanne succeeded Christophe de Margerie who was killed in a tragic plane crash. The swift appointment came in less than 48 hours.

Pouyanne, 51, is a former government official and an experienced oil executive. He joined Total in 1997 and in his previous roles headed the company operations in Qatar and Angola. He also served as president of Total’s refining and chemical division and has long been considered a potential successor by the board.

Under the late de Margerie, Total had sold its older fields and sought to cut investment in new projects as part of a pledge to its investors that it intended to cut two billion dollars in costs a year for the next three years.

On taking up office Pouyanne reaffirmed that he will stick to his predecessor’s plan. “My objective today of course is mainly continuity and stability.” Pouyanne gave an emotional tribute to de Margerie, with whom he had worked for 12 years. Pouyanne plans to cut costs, close plants and boost output. Total’s chief financial officer confirmed Pouyanne will visit contacts in the oil industry and in several resource-rich countries. He also plans to meet investors in Europe and the US before the end of the year.

“The appointment of Pouyanne to the role of CEO is a farsighted and thoughtful choice. Investors should be reassured by the depth and quality of the management team and that the direction of the company for the coming three years is already clearly defined” wrote the equities team at Barclays Capital following the announcement.

Pouyanne is a graduate of the French engineering schools Ecole Polytechnique and Ecole des Mines in Paris. In his prior positions he’s focused on Total’s refining and downstream operations and been hands on with the manufacturing and processing side of the business. As head of Total’s downstream operations Pouyanne played a key role in merging Total’s loss making “downstream” refining and petrochemical businesses. His strategies of cutting costs to counter declining gasoline demand in Europe is set to earn $650 million in extra cash per year from 2015.

Whilst Pouyanne’s experience will prove useful in seeing through Total’s priority with cutting capacity, he might need to work on forging stronger links with big oil producers and political leaders.

“He will have to maintain the extensive international network that de Margerie had developed over the years. That was mentioned by the chairman and other board members during the meeting, that’s his priority,” said a union representative who sits on the board of Total.

Thailand’s Slumping Exports Thailand is heading for a second straight year of slumping exports, something the onetime tiger economy hasn’t experienced in at least two decades.

Shipments abroad, which make up the equivalent of about 70 per cent of the economy, have shrunk in six out of nine months this year and will probably contract in 2014, according to the central bank. That’s in comparison to an annual average pace of growth of about 13 per cent in the period 2002 to 2012.

The economy is forecast to grow this year at the slowest pace since 2011, when thousands of factories were inundated by the worst floods in 70 years. The National Economic and Social Development Board (NESDB) said it expects GDP growth of one per cent for the full year.

Thailand has been losing its export competitiveness in electronics in the last three years, especially in the manufacture of hard disk drives as companies failed to adjust production to meet shifts in consumer preferences, the central bank said in a report in June. Investment in research and development has lagged that of countries such as Singapore, Malaysia and Indonesia, while local firms have invested more overseas because of tax incentives and higher wages, it said.

Thailand’s ranking for innovation in the World Economic Forum’s Global Competitiveness Index fell to 67 in 2014 from 33 in 2007, even as the Philippines, Indonesia and Malaysia rose.

The NESDB said export value this year will probably be flat, and that it expects the value to grow four per cent next year. The economy may expand 3.5 per cent to 4.5 per cent in 2015, the agency said.

GETTY IMAGES

26

Portfolio

Observer

28

South Africa’s Acid-Water Clean-Up

uranium, a by-product of gold mining, and seeps out into rivers, a process called acidmine drainage.

The government is spending money on expanding existing water-treatment facilities in Krugersdorp, west of Johannesburg, and Germiston in the east as well as a new operation in nearby Springs. The three together will treat water leaking from the three mined-out basins beneath and either side of Johannesburg.

Part of the cost of the treatment facilities will be borne by mining companies in the area including DRDGold Ltd., Central Rand Gold Ltd. and Gold One International Ltd., Marius Keet, acting chief director of the Department of Water Affairs’ Gauteng province, said in April.

reuters

Even so, the government may have to carry the bulk of the costs as most South Africa received funds for a

After intensive mining in the region for

of the damage was caused in the past,

programme that may cost $900

120 years, Africa’s richest city is littered

making it difficult to enforce historic

million to clean up toxic water leaking

with enormous underground mined-

environmental liabilities, he said. Few

from abandoned mine shafts in and

out caverns that have become flooded.

environmental regulations were in place

around Johannesburg.

Water combines with toxic metals such as

until the mid-1990s.

Big Oil Deals Return

them together will likely spur on other dealmaking as well.

General Electric Co. could go after

Halliburton’s deal for Baker Hughes may

to survive and the confidence to strike.

National Oilwell Varco Inc., a $31 billion

be just the start of big energy takeovers

Halliburton, a $47 billion provider

energy equipment company, to show it’s

as oil prices slump. Halliburton’s planned

of oilfield services and equipment,

serious about being big in the industry

$34.6 billion takeover of Baker Hughes

approached Baker Hughes about a

after last year’s purchase of pumpmaker

for cash and stock represents the biggest

combination at a time when the target

Lufkin Industries, said Royal Bank

oil-services deal on record. By buying

was trading near its cheapest price in

of Canada. The drop in crude prices

the maker of drill bits and pressure-

more than a year. The forces that drove

could even make $123 billion BP Plc an

pumping tools, Halliburton – the secondbiggest oilfield-services company after

acquisition candidate In the exploration and production

Schlumberger Ltd. – will gain more

sector, analysts highlighted Laredo

market clout to help insulate itself from a

Petroleum as an example of a company

sustained oil market downturn.

whose weak balance sheet may force it

Crude has plunged to a more than

to find a buyer. Others such as Pioneer

four-year low amid a US supply glut.

Natural Resources and Oasis Petroleum

That’s making top energy companies,

have top acreage in some of the best

from equipment makers to oil explorers,

US shale plays and are now trading at a

cheaper for buyers that have the capital

relative bargain.

Portfolio

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Observer The World

CompIled by Hilda d’souza

Top 10

Platinum for Fuel Cells

Top 10 MosT Recognisable songs in THe uK rank

band

Song title

1.

Spice Girls

Wannabe

recogniSed in SecondS 2.29

2.

lou bega

mambo No.5

2.48

3.

Survivor

eye of the Tiger

2.62

4.

lady Gaga

Just dance

2.66

5.

AbbA

SoS

2.73

6.

Roy orbison

pretty Woman

2.73

ReUTeRS

30

7.

michael Jackson

beat It

2.80

South Africa’s Anglo American Platinum Ltd. is seeking to boost

8.

Whitney Houston

I Will Always love you

2.83

9.

The Human league don’t you Want me

2.83

demand for platinum with systems that produce electricity in

10.

Aerosmith

2.84

I don’t Want to miss a Thing

SoURCe: mANCHeSTeR’S mUSeUm of SCIeNCe ANd INdUSTRy (moSI)

remote areas.

Platinum, now used mostly for jewellery and catalytic converters for vehicles, has a unique ability to react with hydrogen, making

Top-eaRning dead celebRiTies rank

name

1.

michael Jackson

earningS ($mil) 140

it an efficient catalyst for fuel cells. Anglo American and Canada’s Ballard Power Systems Inc. are now testing the process to see if it can be used to light up an isolated village.

2.

elvis presley

55

3.

Charles Schulz

40

4.

elizabeth Taylor

25

lacked electricity for at least five years, until Anglo American and Ballard completed the system in July. The Naledi Trust

Naledi Trust, about 200 kilometres south of Johannesburg,

5.

bob marley

20

6.

marilyn monroe

17

7.

John lennon

12

8.

Albert einstein

11

9.

Theodor Geisel

9

a chemical reaction that uses platinum as a catalyst. The fuel

10.

bruce lee

9

cells use about 2.5 grams to three grams of platinum for every

system runs on methanol. Hydrogen is extracted from the fuel and fed through a membrane. That produces electricity through

kilowatt of generating capacity

SoURCe: foRbeS

The test in South Africa, the world’s biggest platinum

HigHesT gRossing HoRRoR Movies earningS ($mil)

producer, may lead to wider use of fuel cells as a source of power

rank

name

1.

World War Z

540

in developing regions. More than 1.3 billion people worldwide

2.

The Conjuring

318

3.

Annabelle

206

live without electricity, and almost half are in sub-Saharan

4.

dracula Untold

167

5.

Insidious Chapter 2

162

Africa, according to the International Energy Agency.

Platinum producers are eager to see wider use of fuel cells,

6.

mama

146

which would boost demand for the metal, which has slumped

7.

Warm bodies

117

12 per cent this year. The systems are also being used to power

8.

The purge: Anarchy

110

9.

evil dead

97

mobile phone towers in remote locations and warehouse forklifts.

10.

paranormal Activity: The marked ones

90

SoURCe: foRbeS

Demand for fuel cells may eventually lead to the creation of a new industry in South Africa, which has the world’s biggest known platinum reserves.

Portfolio

M ESUR E ET D ÉMESUR E *

TONDA 1950

White gold set with diamonds Ultra-thin automatic movement Hermès alligator strap Made in Switzerland

www.parmigiani.ch

Commentary

32

Paul Krugman

What Markets Will In my lIne of work you see a

economic outlook is so bad, and we’re

I’m not mainly talking about plunging

lot of policy crusades, and these are often

stock prices, although that’s surely

not just talking about Germany. France

justified with implicit cries of “Mercatus

telling us something (but as the late Paul

is currently in conflict with the European

vult!” – the market wills it. But do those

Samuelson famously pointed out, stocks

Commission, which says that the projected

invoking the will of the market really know

are not a reliable indicator of economic

French deficit is too big, but investors –

what markets want? Apparently not!

prospects: “Wall Street indexes predicted

who are still buying French bonds despite

nine out of the last five recessions!”).

a 10-year interest rate of only 1.26 per cent

told repeatedly that governments must

Instead, I’m talking about interest

– are evidently much more worried about

cease and desist from their efforts to

rates, which are flashing warnings,

European stagnation than French default.

mitigate economic pain, lest their excessive

not of fiscal crisis and inflation, but of

compassion be punished by the financial

depression and deflation.

To get more specific: We have been

gods, but the markets themselves have

It’s also instructive to look at interest rates on “inflation-protected” or “index” bonds, which are telling us two things.

Most obviously, interest rates on long-

never seemed to agree that these human

term US government debt – the rates

First, markets are practically begging

sacrifices are actually necessary. Investors

that the usual suspects keep telling us

governments to borrow and spend,

were supposed to be terrified by budget

will shoot up any day now unless we slash

say on infrastructure; interest rates on

deficits, fearing that the US was about

spending – have fallen sharply. This tells us

index bonds are barely above zero, so

to turn into Greece – but year after year,

that markets aren’t worried about default,

that financing for roads, bridges and

interest rates stayed low. The Federal

but that they are worried about persistent

sewers would be almost free. Second, the

Reserves’ efforts to boost the economy were

economic weakness, which will keep the

difference between interest rates on index

supposed to backfire as markets reacted

Federal Reserve from raising the short-

and ordinary bonds tells us how much

to the prospect of runaway inflation, but

term interest rates it controls.

inflation the market expects, and it turns

market measures of expected inflation similarly stayed low.

out that expected inflation has fallen

Interest rates on much of European

sharply over the past few months, so that

debt are even lower, because Europe’s

it’s now far below the Fed’s target.

How have policy crusaders responded

In effect, the market is saying that the

to the failure of their dire predictions?

Fed isn’t printing nearly enough money.

Mainly with denial, occasionally with

One question you might ask is why the

exasperation. For example, Alan Greenspan once declared the failure of interest rates

market’s pro-spending, print-more-money

and inflation to spike “regrettable, because

message has suddenly gotten louder. My

it is fostering a false sense of complacency.”

guess is that it’s mainly driven by events

But that was more than four years ago;

in Europe, where the slide into deflation

maybe the sense of complacency wasn’t all

and the growing public backlash against

that false?

austerity have reached a tipping point. And it’s very reasonable to worry that Europe’s

All in all, it’s hard to escape the

problems may spill over to the rest of us.

In any case, the next time you hear some

knew little about what the market wanted.

In fact, if you look closely, the real

talking head opining on what we must do

message from the market seems to be

to satisfy the markets, ask yourself, “How

that we should be running bigger deficits

does he know?” For the truth is that when

and printing more money. And that

people talk about what markets demand,

message has gotten a lot stronger in the past few weeks.

getty images

© 2014 New york times News service

conclusion that people like Greenspan

what they’re really doing is trying to bully us into doing what they themselves want. n Portfolio

FROM TIME TO TIMELESS

Profile

34

Jean-Christophe Babin, the former CEO of Tag Heuer, is now at the helm of luxury jeweller Bulgari. The company – which became famous in the 1950s and ‘60s for dressing Sophia Loren, Jacqueline Onassis and Elizabeth Taylor with flamboyant coloured gems – now has products spanning handbags, watches, perfumery and five-star hotels, reports Vishwas Kulkarni.

Portfolio

PHOTO: ALEX ATACK

Profile

35

December 2014

N estled in the Ballardian architectural

been any massive changes to Bulgari,

blue eyes twinkle like the seas he once

fantasy of Dubai International Financial

a firm that was largely seen as family-

traversed. The sea, in fact, has indeed

Centre (DIFC) is Quadro Gallery, a stylish

owned? “No, to be honest, we are very

played a role in Jean-Christophe Babin’s

enclave of the arts that is all aflutter with

clear that we want to keep this going like a

rise in the world of luxury retail.

harried PR agents in elegant gowns and

family-run company. We really value what

lifestyle journalists, society graces and Arab

the family has built. Otherwise we would

passion for luxury retail, there is that ‘X

sheikhs. And there is much cause for the

not have acquired the company. Nicola

factor’ that lies behind Babin’s success:

excitement: Bulgari is exhibiting a recently

Bulgari and Paolo Bulgari collaborate with

his littoral past. After management school

acquired eight-piece collection that once

us very closely. They are both sitting on

he enrolled in the navy, a stint that saw

belonged to Hollywood icon Elizabeth

the board, but beyond the board they are

him visit French overseas bases all over

Taylor. Thus complemented by Egyptian-

very actively involved in all aspects of our

the world. In a way, Babin was globalised

themed art direction and video loops from

business. We have a lot more resources

pre-globalisation, something that helps

the actress’s iconic role in Cleopatra, in

with this merger to push the brand.

him understand the nuances of local

which she played the role of Isis – as in Isis,

Synergies will be at play, both with media

idiosyncrasies in an international context.

the Queen of the Nile – are a gold-and-

buying and retailing. However, more than

“I think the navy helped me develop

turquoise encrusted mirror, the “Taylor

anything else, we wish to make jewellery

crucial business skills. Life in the army or

Burton fiancée ring”, a platinum sautoir

the heart of our focus,” he says as his grey-

navy is very structured. These institutions

Beyond the charisma and his genuine

with diamonds and sapphires.

But before any thought of a potential heist crosses my mind, I’m ushered along to meet with Jean-Christophe Babin, the CEO of Bulgari. More than Elizabeth Taylor or her dazzling collection, it is this man who is the star of the moment as he is helming Italy’s most exquisite former family-owned jewellery brand, a 130-yearold entity that was acquired by the LVMH group three years ago for a record $5.2 billion. “He’ll be with you in three minutes, I promise,” says the PR lady, gently tapping the door with her carefullymanicured fingernails.

J C Babin is full of enthusiasm and all of it, much like the diamonds Bulgari sells, is real. It has been almost a year since he joined the group. Have there

Photo: Douglas KirKlanD/CorBis

Profile

36

Taylor in a scene from the movie The V.I.P.s (1963), directed by Anthony Asquith.

Portfolio

37

work because everyone knows the objectives. That said, you are also aware that you have to get somewhere in the face of impediments. It’s all about adapting to a new situation that can unfold in unexpected ways. This is very similar to business, where strategy is very crucial, much like the navy. Take the global financial crisis of 2008, for instance.”

WE MOVE the subject to what’s staring at us from the walls. Elizabeth Taylor at her Tinseltown best, dazzling us with her strident persona and her Bulgari masterpieces. A famous quote by Richard Burton, the thespian who famously married her twice, goes: “I introduced Liz to beer; she introduced me to Bulgari.”

Nobody epitomised the “diamonds are a girl’s best friend” maxim better than the Hollywood diva. Yet, looking to the future, won’t Bulgari need to nurture newer, perhaps more larger-than-life icons?

It is at this point in the interview that you realise that Babin is not taking any prisoners, even from Hollywood. “Look, with all due respect to Elizabeth Taylor, we don’t want to be the brand of anybody.

Elizabeth Taylor, many top politicians, kings, Hollywood legends – all rich and famous people – love our brand. We are not looking to be any star’s brand. We are already aware that when famous people decide to buy high-end jewellery, Bulgari will come to mind. Our retrospective exhibitions look back at our wide December 2014

“We are not looking to be any star’s brand. We are already aware that when famous people decide to buy high-end jewellery, Bulgari will come to mind.”

spectrum; for instance, these pieces from the Elizabeth Taylor exhibit are part of a ’60s and ’70s glamour, when American actors came to Europe to shoot Hollywood pictures. With the Elizabeth Taylor exhibit, we’re harking back to the La Dolce Vita era – a time in which we were mixing diamonds with very precious stones to give jewellery a luxurious feel.”

Looking to the past, how does a brand such as Bulgari negotiate glamour in

Customers are getting increasingly drawn to faddish items thanks to social networking hype. Tastes change over time too. Does Bulgari ever get nervous about how it will re-invent itself, if the necessity were to arise?

“Diamonds are forever. Diamonds are a girl’s best friends. This was true 1,000 years ago; it will be true 1,000 years from now as well. We are in the business of using very precious material that the earth has taken thousands of years to create. As such, we’re working on a 1,000-year spectrum. So, let me re-emphasise: we were never in fashion, or ahead or behind of it. We are not into ‘bling’, Bulgari is timeless,” says the man whose last stint was as CEO of yet another eternal status symbol – Tag Heuer watches.

“Our boutiques are gorgeous, but you can’t spend a night in them,” says Babin.

“If you look at the fastest growing segment in our business today, it is a genre called ‘experimental luxury’.”

PHOTO: ALFREDO AGOMERI

the increasingly fickle epoch of bling?

Taylor photographed in front of Bulgari’s iconic store at 10 Via dei Condotti, Rome in 1967.

BUT BULGARI is, in fact, doing its own bling number: in a daring extension of its brand the firm is developing a chain of designer hotels across the globe.

What is that experience like? How does it complement a jewellery brand that today boasts of 300 exclusive outlets across the world?

“Our boutiques are gorgeous, but you can’t spend a night in them,” says Babin.

“If you look at the fastest growing segment PHOTOFEST

Profile

38

A famous quote by Richard Burton, the thespian who famously married Taylor twice, goes: “I introduced Liz to beer; she introduced me to Bulgari.”

in our business today, it is a genre called ‘experimental luxury’. This includes bespoke hotels, exclusive spas, designer resorts. Bulgari has a lot of possibilities with this genre. A boutique is a great experience, but it is limited in space and time. This is our way to spend more time with our valued customers. As I mentioned earlier, you don’t spend half an hour in a hotel room; you spend a night.”

With plans afoot to develop Bulgari hotels in Dubai and Beijing, how does Babin walk the tightrope of an international designer brand with the peculiarities of local tastes?

“Globalisation, thanks to the

Bulgari Hotels & Resorts has signed an agreement with UAE-based real estate development company Meraas Holding for a new hotel in Dubai to be opened in 2018.

information era we live in, is driving taste to convergence points – people like the Portfolio

Profile

40

“Diamonds are forever. Diamonds are a girl’s best friends. This was true 1,000 years ago; it will be true 1,000 years from now as well. So, let me re-emphasise: we were never in fashion, or ahead or behind of it. We are not into ‘bling’, Bulgari is timeless.” same art, the same books, globalisation is harmonising the world in a way. It’s easier today for Bulgari to sell evenly across countries more than at any other point in history. So, even though we will use bamboo in a very modern way for our Beijing hotel, at the end of the day, it will be a Bulgari product. In Dubai, we will employ modern Arabic architecture, but our approach to localisation is nuanced.

In that sense we are very Italian: we are all about emotionally connecting with the people we serve. It is fundamentally a very Italian way of working.”

Perhaps Italians indeed “do it better” if LVMH’s third-quarter profits in 2014 are anything to go by. Buoyed by robust trading at Bulgari, the conglomerate’s overall sales rose 5.2 per cent, to $9.37 billion in the third quarter.

FOR ALL his jet-setting, Babin is a family man with a wife and five children.

Is there ever the occupational hazard of his wife demanding more diamonds than he can afford?

“Well, she doesn’t own as much Bulgari as she might want to. But you know what? She has the chance to test a lot of prototypes. She gets to try a lot of products that don’t belong to her and for now she is very happy with this arrangement!” he says, flashing a milliondollar smile and then darting his glance to the PR agent who is gently tapping at the glass door, hinting that our time is up. ■ Portfolio

Music

42

J a pan

Resists Move to Digital Music Around the world, the music business has gone digital. But in Japan, the compact disc is still king, reports Ben Sisario.

On a drizzly Sunday afternOOn,

Universal Music Group, the world’s largest

million last year, according to the

Tower Records’ nine-level flagship store

music conglomerate. That uniqueness has

Recording Industry Association of Japan.

in Tokyo was packed with customers

the rest of the music business worried.

Turning Japan around – and finally

like Kimiaki Koinuma. A 23-year-old

Despite its robust CD market, sales in

nudging it in the digital direction – has

engineer in a Dee Dee Ramone T-shirt,

Japan – the world’s second-largest music

become a priority for the global music

Koinuma said that, unlike most men his

market, after the United States – have

business, which has struggled to regain its footing after losing about half its value

age around the world, he spends little time with digital services and prefers his music on disc.

“I buy around three CDs a month,” he said, showing off a haul of six new albums, including the Rolling Stones’ classic Exile on Main St. and an assortment of the latest Japanese pop hits.

Japan may be one of the world’s perennial early adopters of new technologies, but its continuing attachment to the CD puts it sharply at odds with the rest of the global music

Japan may be one of the world’s perennial early adopters of new technologies, but its continuing attachment to the CD puts it sharply at odds with the rest of the global music industry.

began to disrupt the album-based business model.

But accomplishing change has been difficult, according to analysts and music executives in Japan and the West, in part because of a protectionist business climate in Japan that still views the digital business with suspicion. Streaming music services like Spotify and Rdio, widely seen as the industry’s best new hope for new revenue, have stalled in efforts to enter Japan. Spotify, the biggest such player,

industry. While CD sales are falling © 2014 New York Times News service

since 2000, when digital technology

has been stuck for two years in licensing

worldwide, including in Japan, they still account for about 85 per cent of sales

been sliding for a decade, and last year they

negotiations with music companies in

here, compared with as little as 20 per

dropped 17 per cent, dragging worldwide

Japan, where home-grown pop idols by

cent in some countries, like Sweden,

results down 3.9 per cent. Digital sales

far outsell Western acts.

where online streaming is dominant.

– rising in every other top market – are

“Japan is utterly, totally unique,” said Lucian Grainge, the chairman of the

Ken Parks, Spotify’s chief content

quickly eroding in Japan, going from

officer, said he was optimistic about his

almost $1 billion in 2009 to just $400

company’s prospects, and noted that the Portfolio

43

getty images

Tower Records is still thriving in Japan with 85 outlets.

December 2014

Music

44

negotiating process was slow wherever it went. Spotify, which has more than 10 million customers in 57 markets around the world, negotiated with labels for almost two years before it arrived in the United States in 2011, for example.

“When the decision-makers finally feel that the heat is intense enough that they have to do something different, they will,” Parks said. “I think we are approaching that moment in Japan.”

Others have doubts, pointing to the Japanese market’s devotion to the CD,

Tower Records closed its 89 US outlets in 2006, but the Japanese branch of the chain – controlled by NTT DoCoMo, Japan’s largest phone carrier – still has 85 outlets, doing $500 million in business a year.

have shaped its attachment to the CD and contributed to the scarcity of digital

an album.

Tower Records closed its 89 US outlets in 2006, but the Japanese branch of the chain – controlled by NTT DoCoMo, Japan’s largest phone carrier – still has 85 outlets, doing $500 million in business a year.

At Tower’s flagship store, in the heart of the skyscraper-lined shopping district of Shibuya, a group of preteen girls called Kokepiyo performed for fans August, while their mother-managers

revenue for record labels in the country, Peculiarities of Japan’s business climate

the biggest fans to buy multiple copies of

and autographed CDs one afternoon in

which remains a primary source of and an indispensable promotional tool.

propping up CD sales, because it can lead

for example, do particularly well in Japan,

watched protectively. Outside, an 18-year-

perhaps because of the elaborate, artist-

old student who gave her name as Yuria

focused packaging.

had come to Tower to see her favourite

The hugely popular girl group AKB48

band, the Lotus. She carried a bag full of

pioneered the sale of CDs containing

merchandise she had bought at the store,

at play, like Japanese consumers’ love for

tickets that can be redeemed for access

and said that she frequently buys multiple

collectible goods. Greatest hits albums,

to live events – a strategy credited with

collectible copies of CDs. “Each store has

getty images

music, but cultural factors may also be

J-POP, Japanese pop music, is still a huge seller in the CD format.

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Music

46

The Japanese record companies’ hope is to maintain the current size of the physical market, and to try to make the digital market grow again by licensing new digital services.

its own freebies to give away to sell more

at more than $20. In the mid-2000s a

CDs,” Yuria said. “So it all depends on how

nascent download service, Recochoku, was

good they are.”

tethered to Japan’s expansive cellphone market, but that system collapsed once

In the United States, digital sales have

the country moved on to smartphones like

long since overtaken physical ones. But

the iPhone.

CDs still account for 41 per cent of the $15

Part of the problem, executives say,

billion recorded music market worldwide,

is the complex array of companies that

and, in addition to Japan, some big

control rights to the most popular music

markets like Germany remain reliant

in Japan, which have been very slow

on CD sales. That attachment worries

to license new services. Sony’s Music

some analysts, who contend that if those

Unlimited, for example, is the largest

countries do not embrace digital music, an

available streaming service in Japan, but

inevitable decline in CD sales will further

it lacks the most popular hits there. (Sony

damage the industry.

declines to say how many subscribers

management is worried about what

Kimiaki Koinuma shows some of his new purchases, including the Rolling Stones’ Exile on Main St.

recover from its losses last year.

“A substantial amount of senior

it has to Music Unlimited, in Japan or

happens on their watch, but not

a cold, that’s it – we’re done,” said Alice

elsewhere.) Apple’s iTunes store arrived

necessarily worried about what happens

Enders, a media analyst with Enders

in Japan in 2005, but only in 2012 did it

after that,” Shigeo Maruyama, the former

Analysis in London.

begin to sell the Japanese music titles of

president of Sony Music Entertainment

its hardware rival Sony.

Japan, said in an interview.

“If Japan sneezes and Germany catches

A distinctive business ecosystem in Japan has kept CD sales lucrative for

Executives in Japan and the West

This year, things in Japan are looking

music companies, while thwarting digital

blame an overly cautious Japanese music

slightly better. In 2013, there were no

advancement. Pricing restrictions on

industry for not adapting, and serious

million-selling albums, but this year

retailers keep the cost of most new CDs

worries remain about Japan’s ability to

there have been two: a Japanese version of Disney’s Frozen soundtrack and the latest release by AKB48. Yet in the first half of the year sales were still down an additional three per cent compared with a year earlier.

“The Japanese record companies’ hope is to maintain the current size of the physical market, and to try to make the digital market grow again by licensing new digital services,” said Yoichiro Hata, a director of the Recording Industry Association of Japan.

For the rest of the struggling global recording industry, that growth cannot

Kokepiyo, a girl group, at an in-store event at a Tower Records in Tokyo.

come soon enough. “It’s inevitable that this market comes back to growth,” said Grainge, of Universal. “What I’m not going to predict is when.” n Portfolio

Industry

48

T

A BASF researcher checks the durability of waterproof bricks.

he industrial complex of the chemical giant Badische Anilin & Soda Fabrik, or BASF, is spread over 10 square

kilometres along the Rhine River in Ludwigshafen. It resembles a small city, with 33,000 employees working in 2,000 buildings, crisscrossed by roads and railways.

It is a fitting home for the world’s largest maker of chemicals, and a physical reminder of the integral place BASF occupies in the industrial base that has helped Germany grow into Europe’s biggest economy.

Lately, though, BASF has been investing more of its money and management energy outside Germany, especially in the United States. And the company’s reasons help illustrate why the German industrial economy has been losing momentum – and why Germany risks tipping back into recession.

BASF executives say that German and European Union policies toward industry, particularly when it comes to energy, are forcing big companies to look elsewhere as they seek to expand. Energy is perhaps BASF’s biggest cost. Tremendous amounts of electricity are required to produce chemical raw materials like ethylene, propylene and butadiene for a range of

getty images

products like plastics, pharmaceuticals and rubber. And oil or natural gas are the basic materials from which these chemicals are produced.

Especially in Germany, prices have

Germany’s

jumped as a result of the government’s big push for renewable energy sources – a policy that the government of

Shifting focuS

the Energiewende, or energy transition.

At the same time, surging production © 2014 New york times News service

Petrochemical reliant and energy-intensive companies such as BASF are increasingly investing overseas, report Stanley Reed and Melissa Eddy.

Chancellor Angela Merkel has labelled

of natural gas from shale rock in the United States is creating cheap and ever more abundant energy, giving American chemical plants and manufacturing sites a new competitive edge over facilities in Europe.

Already, BASF has doubled its annual Portfolio

49

BASF’s overseas expansion comes even as Merkel’s government pushes corporate Germany to invest more within the country to help revive the flagging economy – even though her administration has not committed to any government stimulus investments.

The industrial complex of the chemical giant Badische Anilin & Soda Fabrik, or BASF, which is spread over four square miles along the Rhine River.

investment in the United States to about

In October, the company reported a

Germany, according to a survey by the

$1 billion. With its French partner Total,

nearly five per cent decline in profits for

German Chambers of Commerce. “In

it recently completed an estimated $400

the third quarter, compared with a year

a highly competitive world, German

million expansion and upgrade of their

earlier, and reduced its earnings forecast

industry is at an increasing disadvantage

petrochemical plant in Port Arthur, Texas,

for 2015. The company cited the weak

owing to the growing energy price

which employs about 250 people. As a

European economy as well as slower

disadvantage that it faces,” the market

result of the modifications, the plant’s

growth in emerging markets. But while

research firm IHS wrote in a study

main production engine can now make its

BASF said sales in its core chemicals

published this year.

chemicals from shale gases, allowing for

business had declined by four per cent in

potentially huge savings.

Europe, it added, without citing specific

eChem, an industry adviser, estimates that

Paul Hodges, chairman of International

“We shift investment money from

numbers, that its North American

costs for petrochemical companies are

Europe into the US as a consequence

chemicals business had seen strong

now 20 per cent to 25 per cent lower in

of the less competitive environment

growth, as a result of demand for products

the United States than in Europe.

in Europe,” Harald Schwager, a senior

from the Port Arthur plant.

member of BASF’s executive board, said in an interview.

BASF’s overseas expansion comes

Electricity in Germany already costs about 1.2 euro cents more than the

even as Merkel’s government pushes

average price across the European Union.

corporate Germany to invest more

Although industries deemed energy-

had ¤74 billion, or about $94 billion, in

within the country to help revive the

intensive are exempt from many of the

revenue last year, plans to pump a quarter

flagging economy – even though her

surcharges that go toward financing the

of its planned ¤20 billion in investments

administration has not committed to any

planned transformation of Germany’s

into North America. For the first time,

government stimulus investments.

energy sector into one largely dependent

During the next five years, BASF, which

on renewable resources by 2050, that

the company plans to trim its spending

Since 2011, the chemical industry –

in Germany from its traditional level of

Germany’s third-largest industrial sector

exemption is not secure. The European

at least a third of investment to only a

after automobiles and machinery – has

Union threatened to overturn the

quarter. And slightly fewer than half of

not increased production or investment

exemption this year on grounds of unfair

the company’s approximately 113,000

in the country, according to VCI, an

competition but decided instead to allow

employees are now in Germany. About

industry association. And nearly a quarter

it to continue until 2017. That extension,

17,000 are in North America, and roughly

of all companies in heavy industry are

though, added to the uncertainty for big

the same number work in Asia.

considering reducing production in

German industrial companies trying to

December 2014

carpets and diapers, from natural gas.

plan for the longer term.

“We are seeing a shift in investment,”

The company is still scouting for a site

said Hubertus Bardt, head of energy at the

for the plant, which would be its largest

Cologne Institute for Economic Research.

investment in the region, costing more

“When we ask big companies what

than one billion euros.

“The whole shale gas revolution

they are doing, about a third say they are holding back on making long-term

really has created a renaissance in the

decisions. They only have security for the

petrochemical industry,” said Heidi

next three years.”

Alderman, BASF’s senior vice president for North America, who is based in

Industry leaders criticise Berlin for not adopting policies that might bring down

Houston. “Investments that previously

fuel costs, including allowing exploration

might not be considered in North America

for shale gas. A big impediment to encouraging shale development is that extracting the gas often involves

are now coming to North America.”

Harald Schwager, a senior member of BASF’s board, says that the company is investing heavily in the US.

Wacker Chemie, based in Munich, is building a $2 billion plant in Tennessee

hydraulic fracturing, or fracking, which

to make polysilicon, a material that is

environmentalists oppose.

used to make solar panels. Wacker’s manufacturing process will rely heavily on

BASF hAS a unit, Wintershall, that is the

chlorine, a chemical whose manufacture

largest oil and gas producer in Germany.

requires huge amounts of energy.

In September, the German industrial

The company has significant exploration tracts for shale gas in the German state of

giant Siemens agreed to buy Dresser-Rand,

North Rhine-Westphalia. Schwager, the

a Houston-based maker of equipment for getty images

BASF executive, estimates that fracking could produce enough shale gas to either

the energy industry, for $7.6 billion. Two Austrian steel makers, Voestalpine and Benteler, are building mills on the Gulf

for a couple of centuries. But the company

Kurt Bock, the CEO of BASF, says Germany’s high energy costs are affecting competitiveness.

has been prevented from drilling for the

conventional gas reserves, after a two-

perspective – not from a company

fuel because of concerns about water

year moratorium.

perspective but for the region Europe – is

satisfy Germany’s own needs for 10 years or maintain current gas production levels

pollution and other hazards.

Schwager outlined other big

Coast in Texas and Louisiana.

“The bad thing from a European

it’s not only BASF,” Schwager said. “It is

investment plans for the Gulf Coast of

many European companies which are

Germany’s largest, have been hobbled

the United States, including a plant that

energy-intensive. They are finding out

by a moratorium on fracking, Schwager

will make propylene, which is used in a

that the benefits of shifting investment

said. Pending legislation would set the

wide range of products including paints,

from Europe to the US are significant.” n

Even its conventional gas operations,

bar for environmental standards so high that it would essentially rule out widespread exploration for shale gas. It would, however, allow the resumption of fracking for the extraction of more

Wintershall, a subsidiary of BASF, is Germany’s largest oil and gas producer.

“The bad thing from a European perspective – not from a company perspective but for the region Europe – is it’s not only BASF.”

getty images

Industry

50

Portfolio

Real Estate

52

geTTY images

Rising Rents Challenge

barcelona Thousands of small, family-owned shops are being pushed from Spain’s historic districts as rent controls expire, reports Raphael Minder.

In the centre of Barcelona’s

small, often family-run shops face the end

character in the face of the homogenisation

scenic old city, a once-historic bookshop is

of decades of rent controls this year.

that accompanies the arrival of multi-

© 2014 New York Times News service

being turned into a store for Mango, the

It is not that the establishments did not

national chain stores.

The removal of traditional stores from

giant clothing retailer. A maker of combs,

know the changes were coming – they

founded in 1922, is now a big-name bag

had 20 years’ warning. But slowly, now

the old city centre, known as the Gothic

store. And a toy store, owned by the same

suddenly, that time has arrived, provoking

Quarter, is “a criminal loss of patrimony

family since the Spanish Civil War, has

eleventh-hour resistance as small shops

in a city that is getting drowned by big

been converted into an outlet for Geox, the

are pushed from historic districts by an

money and international brands and is

Italian footwear company.

inundation of international brands, which

losing all sense of history, order and proper

are virtually the only ones that can afford

urban planning,” said Josep Maria Roig,

the staggering spike in rents.

the owner of La Colmena, a pastry shop

The changes are more than the result of the kind of creeping gentrification that has reshaped so many cities worldwide. Here,

The rapid turnover has spurred soul-

and across Spain, historic districts are

searching and debate about just how far

being transformed as tens of thousands of

the city should go to protect its distinctive

founded in 1872.

Roig, who is also the secretary of an association of traditional stores, estimates Portfolio

53

Josep Maria Roig holds a 100-year-old picture of his pastry shop.

that 100 more stores will shut their

War started. He handed it over to Geox,

doors in Barcelona this year because

which is paying about ¤35,000 a month

their owners cannot afford the higher

for his former shop, according to Banchs.

rents. Across Spain, about 200,000 store

Geox also paid him some extra cash to

owners may be affected, according to

move out and cover the cost of laying off

UPTA, the professional and autonomous

three employees who had sold his toys for

workers’ union that represents independent

decades but were no longer needed in his

store owners.

smaller shop, a former storage room that

Xavier Banchs, the toy store owner here, used to pay ¤1,000 (about $1,275) a

costs ¤800 a month in rent.

“This has been a long countdown, so I’ve

month in rent for his shop, the Palacio del

had time to get over the sorrow of moving

Juguete (the Toy Palace), which his family

out and getting rid of my staff,” Banchs said.

has owned since 1936, when Spain’s Civil

While many store owners have cut

The rapid turnover has spurred soulsearching and debate about just how far the city should go to protect its distinctive character in the face of the homogenisation that accompanies the arrival of multinational chain stores.

Roig, owner of La Colmena, takes a cake from the window of his pastry shop in Barcelona.

December 2014

Real Estate

54

Summer Olympics.

similar deals, a significant proportion have

at the Esade law school in Barcelona,

chosen to fight the changes, demanding

said, “We’re facing a situation of absolute

that Barcelona’s City Hall grant them

legal chaos.” It could, she added, set off

a seaside district, held street protests to

special protection as owners of stores that

legal complaints before the European

complain about rowdy tourists staying

have emblematic value for the city.

Commission, on the grounds that any

in overcrowded and unlicensed rental

In July, residents of La Barceloneta,

Barcelona has set up a commission

publicly funded compensation amounts to

apartments. With Barcelona and other

that is reviewing 380 store buildings to

unfair subsidies and a breach of European

Spanish cities set to hold municipal

decide whether they should be granted

competition rules.

elections in May, such issues have also

special protection.

In fact, legal action has started in

moved up the political agenda.

Barcelona. Roig recently took the city to

Ada Colau, who is expected to run

in 1964, in the midst of the Franco

court for not fully protecting a building

for mayor as the candidate of a recently

dictatorship, when the regime decided to

that housed Monge, a stamp shop that

formed, left-wing civic platform, said she

protect shopkeepers. In 1994, the law was

closed in August. The new owner plans

and her family had in fact stopped going

revised under the Socialist government to

to convert Monge into a shopping gallery

to the Gothic Quarter because it was

ensure that rents would eventually adjust

and move the building’s historic wooden

overwhelmed by foreign tourists and global

to the market, giving property and store

facade to the other side of the building and

brands. “The main attraction of Barcelona

owners 20 years to agree on new terms.

replace it with a larger entrance.

is a certain way of living, but we’re allowing

Spain’s rent controls were adopted

Raimond Blasi, Barcelona’s city

“Do we really want tourists to go home

this to get replaced by what I would

councillor for commerce, admitted the

only with souvenirs from a shopping

call a fast-food model,” Colau said. “The

fate of such historic stores should have

gallery that are made in China and have

traditional stores are getting evicted and

been reviewed well ahead of the end of

zero to do with Barcelona?” Roig asked.

the big multinationals are winning.”

were 20 years to solve the problem, but

The renT deadline comes amid a wider

proposed a draft law that would extend

last-minute improvisation is a trait of the

debate in Barcelona about what kind of

the century-old protection to the business

Latin character,” Blasi said. If stores get

tourism the city can sustain. Barcelona

activity rather than only the facade and

protected, Blasi said, some compensation

has become Spain’s tourism hub, drawing

furniture of a store.

would most likely have to be paid for loss

a record 7.5 million visitors last year,

of rental income to the property owners,

compared with about 1.5 million visitors

a new, 15-year rental contract with the

“but who has to pay for it, I don’t know.”

before 1992, when its port area and other

building’s owner that will raise his rent to

infrastructure were overhauled for the

¤7,500 from ¤1,000 a month. Roig said the

The opposition Socialist Party has also

the lengthy transition period. “There

Mar Escutia, a professor of civil law

Roig saved his pastry shop by signing

owner had better offers, but was convinced to allow La Colmena to survive. La Colmena contains wood panelling made by Cèsar Martinell i Brunet, an assistant to Antoni Gaudí, Barcelona’s most celebrated architect.

To offset the higher rent, however, Roig is set to lay off two of his six employees, as well as increase the price of his bread and pastries by five to 10 per cent.

Blasi, the councillor, said that though shopkeepers may now seek to challenge the rent law, what politicians could not do was to dictate where tourists shop. He admitted that he had walked past the recently closed bookstore Canuda, opened in 1931, several times, but never bought anything there.

“However much we don’t like to admit it, people prefer to go to Fnac,” he said, Xavier Banchs, the owner of Palacio del Juguete, has moved to a smaller space due to the increase in the rental price of his former location.

referring to the French media retailer, which has outlets in several countries. n Portfolio

Salaries

56

Hampus Elofsson, who earns the equivalent of $20 an hour working at Burger King, at his job in Copenhagen, Denmark.

Fast-Food wages Danish fast-food workers earn $20 an hour, which is far more than most of their American compatriots, reports Liz Alderman and Steven Greenhouse.

O

n a recent afternoon,

hour, why can’t those in the United States

Hampus Elofsson ended his

pay the $15 an hour that many fast-food

40-hour workweek at a Burger

workers have been clamouring for?

King in Copenhagen and prepared for a

“Trying to compare the business and labour practices in Denmark and the US is like comparing apples to autos,”

movie and drinks with friends. He had paid

to run a profitable fast-food business while

said Steve Caldeira, president of the

his rent and all his bills, stashed away some

paying workers these kinds of wages,” said

International Franchise Association, a

savings, yet still had money for nights out.

John Schmitt, an economist at the Centre

group based in Washington that promotes

for Economic Policy Research, a liberal

franchising and has many fast-food

think tank in Washington.

companies as members. “Denmark is a

That is because he earns the equivalent of $20 an hour – the base wage for fastfood workers throughout Denmark and

© 2014 New York Times News service

“We see from Denmark that it’s possible

profitable than their US counterparts.

Many US economists and business

small country” with a far higher cost of

2½ times what many fast-food workers

groups say the comparison is deeply flawed

living, Caldeira said. “Unions dominate,

earn in the United States. “You can make

because of fundamental differences between

and the employment system revolves

a decent living here working in fast food,”

Denmark and the United States, including

around that fact.”

said Elofsson, 24. “You don’t have to

Denmark’s high living costs and taxes, a

struggle to get by.”

generous social safety net that includes

have managed to adapt in countries that

universal health care and a collective

demand a living wage, and economists

some US labour activists and liberal

bargaining system in which employer

like Schmitt see it as a possible model.

scholars are posing a provocative

associations and unions work together.

question: If Danish chains can pay $20 an

The fast-food restaurants here are also less

With an eye to workers like Elofsson,

But as Denmark illustrates, companies

Denmark has no minimum-wage law.

But Elofsson’s $20 an hour is the lowest Portfolio

57

the fast-food industry can pay under an

it’s going to take us some time to build up

employees and unions pledge in exchange

agreement between Denmark’s 3F union,

the speed to get onto the high road.”

not to engage in strikes, demonstrations

the nation’s largest, and the Danish

In Denmark, fast-food workers are

or boycotts.

employers group Horesta, which includes

guaranteed benefits their US counterparts

“What employers get is peace,” said

Burger King, McDonald’s, Starbucks and

could only dream of. Under the industry’s

Peter Lykke Nielsen, the 3F union’s chief

other restaurant and hotel companies.

collective agreement, there are five

negotiator with McDonald’s.

weeks’ paid vacation, paid maternity

McDonald’s learned this the hard

By contrast, fast-food wages in the

and paternity leave and a pension plan.

way. When it came to Denmark in the

United States are so low that half of the

Workers must be paid overtime for

1980s, it refused to join the employers

nation’s fast-food workers rely on some

working after 6 pm and on Sundays.

association or adopt any collectively

form of public assistance, a study from the

Danish law does not require fast-food

bargained agreements. Only after nearly

University of California, Berkeley, found.

companies or their franchisees to adhere

a year of raucous, union-led protests did

American fast-food workers earn an

to the wages required by the agreement

McDonald’s relent.

average of $8.90 an hour.

with the 3F union. But they do, because

In interviews, Danish employees of

As a shift manager at a Burger King in Tampa, Florida, Anthony Moore earns $9 an hour, typically working 35 hours a week and taking home around $300 weekly. “It’s very inadequate,” said Moore, 26, who supervises 10 workers. His rent is $600 a month, and he often falls behind on his lighting and water bills. A single father, he receives $164 a month in food stamps for his daughters, five and two.

“Sometimes I ask, ‘Do I buy food or do I buy them clothes?’” Moore said. “If I made $20 an hour, I could actually live, instead of dreaming about living.”

Moore’s daughters receive health care through Medicaid, while he is uninsured because he cannot afford Burger King’s coverage, he said. “I skip the doctor,” he

Anthony Moore earns $9 an hour as a shift manager at Burger King, which means he takes home around $300 a week.

said, adding that he sometimes goes to work sick because “I can’t miss the money.”

Burger King declined to discuss wages or benefits, saying those decisions were made by its franchise operators. The company said that its “restaurants have provided an entry point into the work force for millions of Americans,” and that the Burger King McLamore Foundation gave some employees emergency financial assistance and college scholarships.

Schmitt, the economist, acknowledged that it would take some time for the US fast-food industry to adjust to higher wages. “We would need to phase this in,” said Schmitt, who is co-editor of the book Low-Wage Work in the Wealthy World.

“We’ve created a low-road economy, and December 2014

Moore on his way to work at Burger King in Tampa, Florida.

Salaries

58

competitive frameworks.” The company added that it and its franchise operators “support paying valued employees fair wages aligned with a competitive marketplace.”

Martin Drescher, the general manager of HMSHost Denmark, the Copenhagen Airport restaurants operator, chats with a Starbucks employee.

“It must be that US McDonald’s are far more profitable.” The higher wages and the higher menu prices help explain why there are 16 McDonald’s per million inhabitants in Denmark, but 45 McDonald’s per million in the United States.

America’s restaurant industry predicts a wave of woe if pay were to jump toward Denmark’s levels. An increase to $15 would “limit employment opportunities” by making fast-food restaurants reluctant to hire, said Scott DeFife, an executive vice president at the National Restaurant Association. “More than doubling the starting wage will dramatically increase

A cashier, Albin, takes a customer’s order at Burger King in Copenhagen.

costs in an industry that exists on very narrow margins.”

Denmark’s high wages make it hard,

McDonald’s, Burger King and Starbucks

by Orley Ashenfelter, a Princeton economics

said that even though Denmark had one of

professor, and Stepan Jurajda, an economics

though not impossible, to maintain

the world’s highest costs of living – about 30

professor at Charles University in Prague.

profitability at his restaurants, said

per cent higher than in the United States –

And the Danish restaurants are less

Martin Drescher, the general manager

profitable. With fast-food wages in the

of HMSHost Denmark, the Copenhagen

United States so much lower than in

Airport restaurants operator. “We have to

$5.60, compared with $4.80 in the United

Denmark, and the price of Big Macs in the

acknowledge it’s more expensive to operate,”

States. But that is a price Danes are

two countries similar, Ashenfelter said, “It

Drescher said. “But we can still make

willing to pay. “We Danes accept that a

must be that US McDonald’s are far more

money out of it – and McDonald’s does, too.

burger is expensive, but we also know that

profitable.” The higher wages and the

Otherwise, it wouldn’t be in Denmark.”

working conditions and wages are decent

higher menu prices help explain why there

He noted proudly that a full-time

when we eat that burger,” said Soren Kaj

are 16 McDonald’s per million inhabitants

Burger King employee made enough

Andersen, a University of Copenhagen

in Denmark, but 45 McDonald’s per

to live on. “We don’t want there to be a

professor who specialises in labour issues.

million in the United States, Jurajda said.

big difference between the richest and

Measured in Big Macs, McDonald’s

financial data for its restaurants. But it said

get really poor,” Drescher added. “We

workers in Denmark earn the equivalent

in a statement that the countries where it

don’t want people living on the streets.

of 3.4 Big Macs an hour, while their US

operates “have significantly different cost

If that happens, we consider that we as a

counterparts earn 1.8, according to a study

structures, economic environments and

society have failed.” n

their $20 wage made life affordable.

True, a Big Mac here costs more –

McDonald’s declined requests for detailed

poorest, because poor people would just

Portfolio

Agriculture

60

New ZealaNd’s

Shrinking Wool Market Synthetic fibres have eaten into the demand for wool, which has resulted in lower prices and poses a challenge for New Zealand’s sheep farmers, reports Mike Ives.

a

bout three decades

uses. The roughly 17,000 sheep farmers

ago, when Andrew Fraser

now,” Fraser said recently while driving

who remain still earn money from selling

began raising sheep, wool

a four-wheeler through sheep pastures

the fleece from their animals. But on

was among the star exports

that he manages on New Zealand’s

many sheep farms, meat has replaced

of this sparsely populated nation. Its other

South Island. By a nearby fence, fuzzy

wool as the primary profit-maker.

sheep products – lamb and mutton – were

newborn lambs the size of lap dogs were

supporting actors.

congregating shyly at their mothers’ heels.

Zealand’s annual exports of raw wool

Since 1990, the value of New

“Wool has traditionally been – and still

and manufactured wool products has

Zealand’s sheep meat exports are up,

is – a very good product,” he said. “The

declined to about $700 million from $1.2

while wool, whose export earnings have

trouble is that now, a similar product can

billion, according to government data. By

been sliding for decades, faces intensifying

be manufactured out of used Coke bottles

contrast, lamb and mutton exports have

competition from synthetic fibres. Although

and all sorts of stuff.”

increased almost threefold to $2.3 billion.

Today, the situation is reversed. New

© 2014 New York Times News service

“The boot is sort of on the other foot

sheep farming is still enmeshed in the fabric

From 1982 to 2011, New Zealand’s

And dairy exports, worth $1.9 billion in 1992, have soared to $14.1 billion.

of New Zealand’s cultural identity, it is

sheep population declined to 31.1

another economic activity that this remote

million from 70.2 million, according to

South Pacific nation is retooling for an

government data, as many sheep pastures

is the world’s third-largest wool producer

increasingly globalised world.

were converted to dairy farms or other

behind Australia and China, according to

New Zealand, with 4.4 million people,

Merino sheep, which produce a finer-grained wool typically made into clothing rather than carpet, await shearing at Galloway Station, a farm in Alexandra, New Zealand.

Portfolio

61

Beef and Lamb New Zealand, a farmer-

Having a single voice, the argument

There is also disagreement among

owned industry group. It supplies 45

goes, could help New Zealand’s wool

both growers and industry leaders about

per cent of all carpet wool globally, the

growers and manufacturers reach

reinstating a nationwide tax on sheep

Australia and New Zealand Banking

beyond China, their primary export

farmers that until 2009 had supported

Group said in a report last year.

market by far, into relatively untapped

an industry group called Meat and Wool

markets like the United States. It could

New Zealand. Many in the wool industry

Zealand’s wool is exported in raw form,

also advance the New Zealand wool

considered that group ineffective when the

rather than in finished products like

agenda in talks for the Trans-Pacific

tax was voted out in 2009. The group then

carpets or upholstery, leaving it vulnerable

Partnership, a US-led trade accord

changed its name to Beef and Lamb New

to swings in commodity markets. And the

among a dozen nations that is likely to

Zealand and focused on meat products.

global popularity of synthetic-fibre carpets

affect several agricultural commodities.

Yet more than 90 per cent of New

is viewed by many New Zealand wool growers as an existential threat.

But New Zealand’s wool industry,

Sandra Faulkner, leader of a campaign for the tax, said it would cost farmers

unlike its dairy industry, is viewed as

about a penny a half-kilogram of

highly fragmented. Even with a recent

wool sold. That would translate

are increasingly turning to crossbred

wave of consolidation, there were

to about $3.3 million a

varieties that produce more meat. Still,

35 wool exporters operating across

year, she added, and

farmers said, the wool industry would

the country last year, “a huge level of

the money would

benefit from having a unified voice to

decentralisation” given the industry’s

be invested in

promote New Zealand wool abroad

relatively modest export earnings, the

as a high-end fibre that, in their view,

Australia and New Zealand Banking

beats synthetic alternatives in several

Group reported.

To increase their profits, sheep farmers

categories, including overall quality and environmental sustainability.

“It’s the difference between the Model T Ford and the Ferrari,” said William Rolleston, president of Federated Farmers of New Zealand, a lobbying group based in Wellington.

December 2014

“Everyone’s sort of undercutting each other,” said Ross Andrews, a South Island farmer who earns around $1.40 per halfkilogram for his carpet-grade wool.

Agriculture

62

Wool handler Kohai Martin tosses merino fleece onto a sorting table at Galloway Station.

Wool growers long assumed that their industry would somehow look after itself, but there is now a clear need to promote wool over synthetic fibres.

Campaign for Wool, a British international marketing initiative led by Prince Charles that collects voluntary donations from New Zealand growers.

But Mark Shadbolt, chairman of Wools

A worker oils sheep shearing blades.

of New Zealand, a sales and marketing

“communication, education and

global fibre production and synthetics 61.4

company that represents around 1,000 wool

innovation,” including teaching

per cent. “It’s about identifying ourselves

growers, said an existing consortium of New

fellowships and complementing the work

in the luxury marketplace, which is where

Zealand wool businesses, Wool Industry

of independent marketing initiatives.

we’ve always belonged,” she said.

Research Limited, should receive a broader

Wool growers long assumed that their

The pro-tax campaign has support from

mandate to be the industry’s voice.

“Look, I’m a farmer at the end of

industry would somehow look after itself,

Brent Wollaston, the chief executive of

but there is now a clear need to promote

Cavalier Carpets, a carpet giant based in

the day, and I don’t like complicated

wool over synthetic fibres, Faulkner

Auckland. He said that the tax was a logical

structures,” Shadbolt said in a telephone

said. According to Beef and Lamb New

vehicle for promoting New Zealand wool

interview from northern England, where

Zealand, wool accounts for 1.3 per cent of

overseas and that it could complement the

Wools of New Zealand has a satellite Portfolio

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Agriculture

64

William Rolleston, president of the lobbying group Federated Farmers of New Zealand, who supports an industry tax to create promotion, marketing and innovation initiatives for wool.

office. “So why establish another structure when you’ve got one there that’s well recognised and operating successfully?”

However tHe industry changes,

Merino sheep are released back to pasture after an annual shearing and vaccination at Galloway Station.

New Zealand’s sheep will still grow their fuzzy winter coats and require the occasional haircut.

On a recent weekday morning, dozens of merino sheep, a fine-haired variety whose fleece is typically used for clothing, shuffled reluctantly – like young children entering a doctor’s office – into a drafty South Island shearing barn, called a wool shed. A team of young shearers, each holding a jumbo razor, buzzed the animals one by one before releasing them, fully shorn, into a nearby pasture that overlooked some rugged hills. The wool was then gathered off the floor, sorted at metal tables and packed into bags for export to Britain.

Lyon said farmers’ views on how the wool industry should evolve typically depend on factors like whether they have reliable export contractors, the quality of wool they produce and their level of debt.

Wool at a processing factory owned by Radford Felted Yarns, which sells felted wool to rug and carpet manufacturers, in Christchurch, New Zealand.

Peter Lyon, the supervisor of the

costs coupled with diminished earnings

shearing team, stood nearby, chatting over

certainly make many sheep farmers

the drone of razors with the farm’s owner,

nervous about their financial security.

Andrew Preston. Lyon said farmers’ views

In the mid-20th century, wool growers

on how the wool industry should evolve

were often “asset-rich and cash-poor,”

typically depend on factors like whether

Lyon said. “But you can’t afford to be

they have reliable export contractors,

cash-poor today or you’ll get thrown out.

the quality of wool they produce and

They’ve got to make a profit and stack it

their level of debt. But, he said, rising

up for the banks.” n Portfolio

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Essentials

67

The besT of leisure and lifesTyle

Ghost towns, Puffins and unsPoiled Views

getty images

Newfoundland was battered by forced resettlements and the decline of the cod fishing industry. Now, tourism is slowly creating an economic lifeline on the remote Bonavista Peninsula, reports Elaine Glusac.

December 2014

68

Essentials

Travel

The town of Trinity on the Bonavista Peninsula in Newfoundland.

ruce Miller

Back then, the timber stacks were clearly

closer to the infrastructure,” Miller said, his

throttled back the engines

houses, schooners rested at anchor, and

voice modulating between resignation and

of his 8.2-metre boat

on the farthest hill stood a white church.

anger, “but you can’t take a man who’s lived

and entered the pinched

Now, in the church’s place, a steeple lay in

all his life on the fishing grounds and put

harbour at Ireland’s Eye,

the tall grass. Worshippers last attended a

him in a city.” The 55-year-old former cod

an uninhabited, rock-rimmed island that

service here in 1965, before a government

fisherman, born in the similarly abandoned

lies nearly 13 kilometres off another, much

resettlement policy forcibly moved the 157

town of Kerley’s Harbour, began guiding

larger island: Newfoundland.

residents of the remote fishing village, or

outport ghost-town tours three years ago. “It

“outport,” to larger communities in order to

was often said, ‘They moved, but they never

centralise the population.

arrived,’” he said.

Scattered piles of weathered, grey boards dotted the steep, grassy banks like forgotten kindling. The captain held up a black-andwhite photo that echoed the view circa 1940.

“It was all about economics to take people from small communities and put them

I arrived three hours north of Saint John’s, the capital of Canada’s easternmost Portfolio

69

getty images

A humpback breaches near a whale watching boat.

getty images

Icebergs from Greenland run aground in Newfoundland bays.

getty images

Brightly-coloured puffins are one of the major tourist attractions.

province of Newfoundland and Labrador,

Newfoundland, where coastal trees often

to explore the craggy Bonavista Peninsula

grow sideways in the wind. For nearly

stayed began to exploit Newfoundland’s

and its surrounding waters. The peninsula

500 years, the more than 111,369-square-

chief natural asset: its good looks. “That’s

is one of Newfoundland’s most dramatic

kilometre island thrived on cod fishing.

why I call my tours Rugged Beauty,” said

appendages, a place where I’d heard that

But overfishing prompted a moratorium

Miller. “That’s what we got left.”

entrepreneurs like Miller were building

in 1992, resulting in the unemployment

a new tourism economy to supplant

of an estimated 30,000 people and the

towering sea cliffs, surf-strafed beaches

fishing. Over four days, I found the area’s

steady depopulation of coastal fishing

and mossy forests – are a visual feast,

lonely beauty a compelling backdrop to its

villages. Now about half of Newfoundland’s

occasionally attracting Hollywood. The

history of frontier survival, collapse and

500,000 residents live near the capital of Saint John’s, with about six people per 2 ½

2001 movie The Shipping News was filmed

square kilometres beyond.

Grand Seduction. Twenty-two years into the

21st-century renewal.

Resettlement was just the first blow to December 2014

Left with virtually no industry, those who

The leftovers – a coastal wilderness of

here, as was the more recently released The

70

Essentials

Travel

post-fishing era, the nearly 113-kilometrelong peninsula seems to have reached a tipping point with just enough going on – good food, distinctive accommodations and interesting tours – to keep a traveller

The Bonavista Peninsula is known for its rugged coastline.

engaged, but not enough to spoil the view.

“Suddenly there’s an understanding that people like art on the walls and a decent cup of coffee,” said John Fisher, an Ontario émigré who came to those conclusions in 1997 when he opened Fishers’ Loft, a four-room B&B in tiny Port Rexton. Today the inn’s 33 rooms are spread among six buildings – brightly painted, woodshingled saltbox cottages and sea captain’s homes that are distinctive architectural styles of Newfoundland.

Tineke Gow, an innkeeper who has owned property on the peninsula since 1975,

Bonavista Peninsula. On a wincingly bright

the most of local ingredients, serving

pioneered the diffused hotel concept here

afternoon, I drove to its north shore to

lobster pasta, fresh crab and seafood soup,

in 1992 when she opened Artisan Inn with

meet Katie Hayes, a 27-year-old chef who

in addition to the popular moose burger

two rooms in a 19th-century home in nearby

worked in high-end restaurants in Saint

with partridgeberry ketchup.

Trinity. Today, 15 rooms are dispersed among

John’s and elsewhere before returning to

six mostly 19th-century houses in the former

tiny Upper Amherst Cove in 2012 to open

Newfoundlanders have done all their

shipbuilding town that is the peninsula’s

Bonavista Social Club, a bakery and cafe

lives,” said Hayes, offering me a glass of

small but seasonally swelling centre for

with a wood-fired oven that is the culinary

homemade rhubarb lemonade. “You go

tourism, fluctuating between 200 residents

talk of the cape. Facing a cobalt bay, the

away and come back with an appreciation

in summer and about 140 in winter.

wood-beamed single-storey building tops

for what we have here.”

“The idea is to fit in to the landscape,”

“It’s nice to showcase what

a grassy bank where a goat and several

Gow said. “One building with 20 rooms

lambs grazed. The self-sufficient chef and

The nexT morning I joined another

would stand out.”

her husband, Shane Hayes, raise much of

itinerant local, 39-year-old Kris Prince

their own food and do their own butchery,

of Sea of Whales Adventures, aboard

Newfoundlanders who left for work

including wild game. Beyond the bread –

his 38-metre Zodiac. The grandson of a

elsewhere are gradually returning to the

four or five varieties daily – the chef makes

fisherman, Price spends winters working

Following these pioneers, younger

Diners at Fishers’ Loft, an inn that opened as a four-room B&B in 1997, and has since expanded to 33 rooms, in Port Rexton.

Bread loaves are lined up on a rack at the Bonavista Social Club.

Portfolio

72

Essentials

Travel

as an oil field welder in Alberta but returns home each spring to guide whale-watching tours. The wind chill on this rainy June morning felt like February as we bundled into thermal jumpsuits provided by the

The 3.3-mile Skerwink Trail, a 10-minute walk from Fishers’ Loft.

captain and skipped over the dark water, at times as deep as 549 metres. Soon we spied the descending fluke of a diving sperm whale. As we waited for it to resurface, a herd of 300 harp seals churned across the bay, curiously slowing as they passed, bobbing their heads higher to get a good look at the boat and its six gaping passengers, suited like snowmobilers.

Whales, icebergs loosed from Greenland and puffins are the principal tourist bait in Newfoundland. To see the latter, I drove to tiny Elliston on the tip of the peninsula, which greeted me with an irony-free sign

Trinity Harbour, providing access to pine

labyrinth is a way to better connect guests

declaring itself the “Root Cellar Capital

forests draped in a webby green epiphyte

to local people.”

of the World.” More compelling than the

known as Old Man’s Beard, stunted fir

cellar-doored hillsides where vegetables are

trees clinging to salt-sprayed cliffs, views of

Beauty, I joined a couple from Toronto and

traditionally stored were a pair of isolated

wave-bashed sea stacks, and bogs covered

listened to the stories about fishermen and

islands just metres from the shorefront

in azalea blooms.

their hard-working families that Miller

Later that day, aboard the Rugged

cliffs. Here a colony of colourful Atlantic

The trail is 10 minutes’ walk from

puffins roosted in the ledges, coming and

Fishers’ Loft, where last summer John

present, to life. He ended the four-hour

going in acrobatic foraging trips to sea.

Fisher oversaw the construction of a

cruise at his own cabin built in the resettled

double-entry labyrinth, in which two

outport of English Harbour, a creekside

the peninsula, I found few hiking trails,

walkers can race to the centre on circuitous

clearing of fallen sheds fronting a white-

though the best of them, the dramatic

but parallel paths.

capped bay ringed in silent forests.

Relative to the amount of wild land on

Skerwink Trail outside Port Rexton, more

“We’re still an emerging destination,”

tells to bring Newfoundlanders, past and

Offering me a hand back into the boat,

than filled the void. The 5.3-kilometre

Fisher said over coffee in the inn’s art-filled

Miller remained incredulous at his own

footpath traces the edge of a towering

living room. “People are not hardened to

story. “Can you imagine leaving here

sandstone headland at the entrance of

tourism. They’re curious, if anything. The

willingly?” he asked. n

Guests outside of the Bonavista Social Club in Upper Amherst Cove.

Chairs with a view at the Artisan Inn.

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74

Essentials

Culture

Portfolio

Essentials Culture A ToAsT To

Dylan Thomas

The Welsh poet would have turned 100 in October and refocusing public attention on his work has been the main aim of the centenary, reports Katrin Bennhold.

Down the footpath from his writing sheD in Laugharne, Wales, along the curve of the water and up the hill, you see what the poet Dylan Thomas once saw: tall birds on the “heron priested shore,” a “sea wet church the size of a snail” atop the ridge, the castle ruin to your left still “brown as owls.”

Poem in October, in which Thomas reflects on his 30th birthday, unfolds verse after verse as you walk through the landscape that made him, and that he remade in turn, culminating with a final clifftop exclaim: “O may my heart’s truth still be sung on this high hill in a year’s turning.”

Thomas died young, at 39, after boasting that he had downed 18 straight whiskeys (“I believe that’s the record”) in New York in 1953. In October, he would have turned 100. His small country, long ill at ease with its hard-living, hard-loving son who wrote in English, not in Welsh, and caricatured his roots as much as he claimed them, is celebrating perhaps its greatest poet.

Thomas has been called the James Joyce of Wales and compared to his own hero, John Keats. He wrote some of the most recognisable verse of the 20th century: “Do not go gentle into that good night/Rage, rage against the dying of the light.”

Gillian Clarke, the national poet of Wales who grew up in this part of west Wales, traces her own poetic awakening to the day she first heard Thomas read on the BBC, his voice summoning her 15-year-old self to “the sloeblack, slow, black, crowblack fishboat-bobbing sea” that she too knew so well. “He takes from and gives back to the landscape and the language, until the place speaks the poetry as much as the poetry voices the landscape,” Clarke said.

Many in Wales say Thomas’ poetry has been denied the recognition it

December 2014

© 2014 New York Times News service

GeTTY imAGes

deserves on teaching plans and in academic circles.

The colourful stories of his drinking and womanising – some true, some invented (often by himself ) – might have contributed to a James Dean-like notoriety

75

76

A view overlooking the town of Swansea and its bay from a spot close to the childhood home of Dylan Thomas in Wales.

in the United States, where he counts two former presidents, Bill Clinton and Jimmy Carter, among his fans. (Carter was instrumental in winning Thomas a memorial stone, belatedly, in Poets’ Corner in Westminster Abbey, in 1982.)

But that reputation appalled many in Wales, as did Thomas’ flawless English accent. Denied the Welsh language and sent to elocution lessons by his father as a boy, Thomas was long considered too English for the Welsh and too Welsh for the English. (“He belongs to the English,” the Welsh nationalist Saunders Lewis scoffed.)

The Swansea bedroom of Dylan Thomas, who died at 39 in New York.

Refocusing public attention on

who shares the poet’s short build and

his work has been one of the aims of the

unruly locks. The daughter of Thomas’

centenary, said Hannah Ellis, president

daughter Aeronwy, she discovered her

of the Dylan Thomas Society of Great

grandfather’s work only five years ago

Britain and a patron of this year’s events.

when she lost a baby and her mother,

(The other being, no doubt, to make him

and then had a son. She found comfort in

the tourist attraction

Thomas’ “timeless wisdom” about life and

that Joyce has long

death and birth and God, she said. Ellis, a

been in Ireland.

schoolteacher, wants his work to be taught

Thomas’ melancholy

more widely and creatively.

portrait now appears

A statue of Dylan Thomas in Laugharne, Wales, where the poet lived when he wrote much of his verse.

A duplicate of his writing shed – complete

on everything from

with a half-smoked pack of Woodbine

bottles to aprons.)

cigarettes and paper balls of discarded verse

It is a personal

strewn across the desk – has been set up at

quest for Ellis, 36,

schools, housing projects, literary festivals Portfolio

78

Essentials

Culture

and even September’s NATO summit in the Welsh capital, Cardiff.

Thomas’ birthplace, Swansea, that “ugly, lovely town,” where he wrote twothirds of his work in a teenage outpouring, is erecting another statue. Thomas quotations zip around the city centre on public maintenance vehicles and the No. 5 bus: “Swansea is still the best place,” reads one, an extract from a letter he wrote to a friend in 1938.

There are guided tours of nearly every aspect of Thomas’ life: His childhood home; Cwmdonkin Park, whose dense vegetation gave him nightmares of “terrifying half-people,” but also became the

Gillian Clarke, the National Poet of Wales, at her home in Ceredigion.

inspiration for a story about a love triangle; the near beaches of the Gower Peninsula,

insist is based on their town, chronicles

where he rehearsed for the Swansea Little

a day in an imaginary seaside village

Theatre and debated politics with his

called Llareggub. (Read it backward for

friend Bert Trick, a socialist grocer; and a

a sense of his mischievous humour).

seemingly interminable list of the poet’s

“If Dylan Thomas walked into

favourite haunts: the Uplands Hotel, the

Laugharne today, he could write Under

Bay View, the No Sign Bar, the Antelope,

Milk Wood all over again,” Carl Thornton,

the Mermaid and more.

a 48-year-old architect, said over a pint

But nothing is as it was in Swansea,

one recent evening. “In this town, if you

badly bombed during the war. A

say good morning to the wrong person,

more timeless glimpse can be found

within 10 hours you are having an affair.”

65 kilometres west in Laugharne

Bob Stevens, the mayor of Laugharne,

(pronounced Larn), in Thomas’ words, “The strangest town in the world.”

Thomas’ parents grew up across the

feels a special relationship with Thomas: The garage where Dylan Thomas used to write, in Laugharne.

His birthday is in October, too. When his

estuary, and he spent his childhood

up Sir John’s Hill and read them Thomas’

summers in Fern Hill, his aunt’s farm and

Poem in October, telling them of the poet

the title of one of his most famous poems.

who lived across the water from their

He lived in the area on and off for 15 years,

family farm. For the centenary, Stevens,

including the last four, and is buried in the

67, created the Dylan Thomas Birthday

village cemetery with his wife, Caitlin.

Walk, which guides literary pilgrims

“The soul of his poetry is here,” Clarke said.

children were young, he would take them

through the poem and its landmarks on a series of placards. The walk is free, and those who come on their own birthday get

The BoaThouse, where Thomas lived (“a seashaken house on a breakneck of

The No Sign Bar, said to be one of Dylan Thomas’ favorite haunts, in Swansea.

a free drink at Browns.

“I’m just a farmer, but in the end, I

rocks”), is still there, as is Browns Hotel,

think Dylan was like all of us,” Stevens

his local haunt and now a boutique hotel

said, quoting the Reverend Eli Jenkins

that calls itself “a bar with rooms.” At

from Under Milk Wood: “Not wholly good

the corner table facing the door, Thomas

or bad.” On Thomas’ hundredth birthday,

would “molder,” collecting stories and

Stevens said, he just wanted to make sure

picking up colloquialisms. Under Milk

that the poet’s “heart’s truth” is still sung

Wood, his best-known play, which locals

on this high hill and beyond. n Portfolio

80

t

op video game players in South Korea are household names. Millions of people tune in to watch game competitions

on television. The country’s largest internet portal, Naver, has its own section covering the results. Competitive video gaming is now taking off in places like the United States, attracting thousands of people to major events. But in South Korea, more than anywhere else, it has already oozed into mainstream culture.

Couples going to game clubs is about as common as couples going to the movies.

Time and again, South Korea has provided glimpses of technology-related transformations before they expand globally, including widespread broadband availability and smartphone adoption. The country has also led in professional video game competitions, often called e-sports, creating organised leagues, training wellfinanced professional teams and filling giant stadiums with frenzied fans to cheer on their favourite players.

Such excitement was on display in Seoul in October, when more than 40,000 fans filled the outdoor soccer stadium used for the 2002 World Cup semi-final to watch the world championship for League of Legends, one of the world’s most popular games.

On stage, two teams of five players sat in front of computers wielding mouse and keyboard to control fantastical characters in a campaign to destroy the opposing team’s base. Three huge screens displayed the action to the crowd.

The clear favourite of the raucous crowd was Samsung White, a team of Koreans that tore through the playoffs. The throng of fans erupted early on, when a Samsung White player wielded a spear to successfully

© 2014 New York Times News service

kill an opposing player from the Star Horn Royal Club, a team of three Chinese and two Koreans. Samsung White would continue to find success, winning the championship and the $1 million in prize money.

South Korea’S

GaminG Craze

Professional video game competitions, or e-sports, have become South Korea’s national pastime, reports Paul Mozur.

“Pro gaming exists in its current form and size in large part thanks to the people who made it possible in South Korea,” Portfolio

Essentials Entertainment said Manuel Schenkhuizen, a Dutch pro gamer. “Other countries took years to catch up and are to this date trying to mimic some of their successes.”

The prowess of the country’s e-sports players is a point of national pride. Recently there has even been handwringing about Samsung White’s not winning dominantly enough in an earlier round of the championship tournament, when it lost one of four games to a foreign competitor.

In October, people at one of the many internet cafes in Seoul, known as a PC bang, debated how the League of Legends tournament would conclude. One ninthFans gather under team banners, for Samsung White and Star Horn Royal Club, at the world championship for League of Legends in Seoul, South Korea

grader, Han Song-wook, said he had followed the rise of Samsung White for two years, in part because of the team’s aggressive game play and creative, bold moves. “Even back then I saw they had potential,” he said. “Their moves were great.”

Though gamers and industry insiders have different theories about how e-sports became so popular in South Korea, nearly all versions start in the late 1990s. At the time, in response to the Asian financial crisis, the South Korean government focused on telecommunications and internet infrastructure. By 2000, a vibrant community of gamers emerged, largely

The image of the Summoner’s Cup is shown on the monitor at the world championship for League of Legends.

December 2014

81

82

professional tournaments quickly outgrew the cramped PC bangs, first moving to hotel ballrooms and eventually stadiums. In 2004, the final of the StarCraft pro league brought out 100,000 fans to Gwangalli Beach in the southern city of Busan.

“That was the big dog – that really was when we knew, ‘Oh, my goodness, this has gone to an entirely different level,’” said Paul Sams, Blizzard’s chief operating officer.

Customers play video games at an internet cafe, known as a PC bang.

The government also became involved, creating the Korean E-Sports Association to manage e-sports. Cheap television stations took off as well, a result of the new infrastructure, and it was only natural that one, then more, would focus on e-sports.

The game clubs remain an important arena for gamers, though. On a recent Thursday night in the residential area of Kangdong in south-eastern Seoul, a PC bang was filled with high-school students.

They sat in plush chairs in front of largescreen PCs, barking strategies or crying Team members of Samsung White hold the Summoner’s Cup after winning the world championship for League of Legends.

out in joy or frustration.

After gunning down a friend with an assault rifle in the game Sudden Attack,

thanks to PC bangs that used the new

government that gave a thumbs-up to

Kang Mi-kyung, 15, said she was at the

connections. The clubs acted as a sort of

e-sports – it was professionally organised,

PC bang about five times a week.

neighbourhood basketball court or soccer

and it was on television, so it became a

pitch where gamers could test their skills.

mainstream thing,” said Jonathan Beales,

too violent,” she said, adding that she

an e-sports commentator. “The way soccer

comes mostly to see friends, including

is around the world.”

some male friends she does not see at

The government also became involved, creating the Korean E-Sports Association

“I love this game, though I think it’s

her new high school.

to manage e-sports. Cheap television stations took off as well, a result of the

StarCraft, a game released by Blizzard

new infrastructure, and it was only

Entertainment in 1998, quickly became

computer bank watching his friends

natural that one, then more, would focus

a mainstay of South Korea’s professional

play out a match of League of Legends,

on e-sports.

gaming leagues. With investment and

struggled to say why he played games.

“Fourteen years ago, you had a

organisational help from Blizzard itself,

Bae Ye-seong, 18, who stood at a

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Essentials

Entertainment

necessarily important for friendship,” he

here has also led to concerns about

said, “but it’s just a big part of our world.”

addiction and the potential harm caused

moderation in the drive to regulate gaming.

“In Korea, games are the barometer

by spending too much time playing

of the generation gap,” he said in an

began to see the promise in sponsoring

games. Occasionally, news articles report

interview. Parents view games as

e-sports stars. Before long the companies,

on a gamer’s dying of exhaustion in a PC

distractions from studying, he said, while

like Samsung, the giant technology

bang after playing for days without rest.

children see them as an important part of

company, and CJ Games, one of Korea’s

A law requires the clubs to force children

their social existence.

most successful game developers, were

under 18 to leave after 10 pm.

About a decade ago, companies

Jun is promoting new educational

Jun Byung-hun, a South Korean

guidelines that encourage schools

houses and trained 12 hours a day. That

National Assembly member and the

to warn students about addiction,

professionalism has spread outside Korea,

head of the country’s e-sports governance

while also helping parents get a better

with sponsors putting together training

body, KeSPA, said there was still a lot

understanding of gaming. “The best way

houses for gamers in recent years in the

of ignorance from older generations

to avoid addiction is for families to play

West. Still, few players take the games as

about video gaming. He had pushed for

games together,” he said. n

sponsoring teams that lived in communal

seriously as those in South Korea.

In part that may be because of the perks of stardom that surround top

The life of an e-sports star is not all glamour.

Players must practice relentlessly, spending their days sitting in front of a screen.

players here. One of the players on CJ Entus, a team sponsored by CJ Games

A South Korean man uses a smartphone to play a mobile game on subway in Seoul.

that came in second in the League of Legends world championship in 2012, recalled how a female fan followed him to competitions for two years taking photos.

She ultimately sent him an album of all the shots she had taken.

“That was nice,” said the blushing player, who goes by the on-screen handle Shy. Still, the life of an e-sports star is not all glamour. Players must practice relentlessly, spending their days sitting in front of a screen. While the coach of CJ Entus, Kang Hyun-jong, said he tried to encourage players to enjoy themselves, the real goal was clear. “The best way for players to enjoy themselves is to know how to win,” he said.

But the monomaniacal focus of gamers

The extent to which video games have become part of mainstream culture in South Korea may be a sign of things to come in the West.

Portfolio

InsIde Rolex PHOTOS: Š Jean-Daniel Meyer

Rolex lives by its own rules. Cloaked in mystery, the brand has secured its position as a world leader in the watch industry, reports Nick Rice.

Portfolio

Essentials Luxury

T

hink Rolex, think RewaRd.

work can now be done in just two phases and a

Think making it. A Rolex is a global

matter of hours.

symbol of status and success and there is no better or more portable

emblem of the luxury lifestyle. Why? “First and foremost, it’s the genius of

To vouchsafe the complete independence of the Manufacture, Rolex purchased most of the companies that supplied their essential components. In a prescient move, which leaves

our founder, Hans Wilsdorf,” says Bertrand

them unaffected by any industry-wide changes

Gros, Chairman of the Board of Directors at

in the supply chain, Rolex became a true

Rolex, “He notably invented the self-winding,

proprietary watchmaker. The vertical integration

waterproof wristwatch”. That was certainly a

means that the company is beholden to no

good start, but Rolex’s real mastery has lain in

one. Rolex is free to operate in ways that other

its virtuosity for navigating the future.

companies, watchmakers or otherwise, cannot.

“In the 1970s, virtually the entire

Rolex only permits 10 guests from the press

watchmaking industry turned towards

to enter their hallowed realm each year. When

electronics – quartz watches,” Gros continues.

the invitation arrived to form part of the first

“Our managing director at the time, André

delegation (two visits of five guests are hosted

Heiniger, remained firmly opposed to the

annually) it was a chance to understand the

idea. He considered the mechanical watch to

integrity of the product, to venture beyond the

be the true embodiment of the expertise and

marketing magic.

craftsmanship of our watchmakers.”

The future proved him right, as Gros adds,

Amongst our small group of watch experts is an excited sense of being granted access into

“It gave us a head start of many years over

Willy Wonka’s chocolate factory… we each

certain competitors. Later, most of them

have a golden ticket. We are not greeted by a

returned to mechanical watches. Market shares

jolly, unhinged proprietor, but rather a calm

in this segment were consequently reduced, but

and collected unison of senior Rolex staff, who

ours were already established.”

over the course of the next two days guide us

In recent years, the company’s vertical

around the four Rolex sites that comprise the

manufacturing integration, completed in the

Manufacture and explain to us the marriage

90s has also established their world-leading

of high-tech engineering and refined human

position with emblematic confidence. Rolex has

artisanal craft that creates a Rolex watch.

made huge improvements in the manufacturing

The Rolex World Headquarters & Final

process. In some stages of production, tasks that

Assembly is located in Acacias, Geneva. The

would have taken 30 steps and months of costly

building is impressively domineering with a

The Rolex World Headquarters in Acacias, Geneva has a clean and bold aesthetic.

December 2014

87

88

highly corrosion-resistant alloy that also polishes extremely well. Most other brands won’t use 904L because it’s expensive and difficult to machine. As Rolex is committed to excellence, and has the means to insist upon it, the company invested in new steel working machines and tools specifically for 904L steel. Metal forming is vital to the final feel of the watch and compromise is not an option.

Rolex is fanatical about quality control and most of the tools and machines we see in action are also designed and built in-house. In the case-machining sector we see the array of tooling required for the 150 operations to make a case. Here is evidence of the benefits of vertical integration, processes that used to take Rolex only uses 904L steel – a highly corrosion-resistant alloy that also polishes extremely well.

months are now completed in a few hours.

Rolex makes three different gold alloys – yellow gold, white gold and their own exclusive Everose gold – so named because the rose-pink colour will never fade.

dramatically compressed. The assembly

Not all production stages can be so of the bracelet is streamlined but still a relatively painstaking process. Each bracelet has more than 110 parts and requires more than 900 operations. The final assembly of the bracelet components is done by hand, then the finished item is sent for satin finishing and polishing.

It would be easy to assume that the polishing is entirely automated, but here the supremacy of the human eye and touch is valued and a team of highly trained polishers finishes every surface.

The mounting of the hour markers

clean and bold aesthetic. Established

is another surprisingly non-automated

in 1965, the HQ underwent extensive

process. With a minimum of 12 markers

renovation at the commencement of the

per dial and estimates of more than

integration process. The other three sites

800,000 watches produced per year, one

are at Plan-les-Ouates in Geneva for watch

could be forgiven for thinking this process

cases and bracelets, Chêne-Bourg, Geneva, for dials & gem-setting, and finally the movement manufacture, located in Bienne,

Most of the tools and machines are designed and built in-house.

must be conducted by machines. Yet every hour marker, all 18-karat gold, is set individually by hand. Machines couldn’t

resistant to the inevitable yellowing of gold.

accurately assess when a marker was just

Rolex’s approach to production is all

Steel is bought from external suppliers but

slightly off, and so it’s another human task

encompassing… they even produce their

it is still worked and processed in Plan-les-

for a small army of highly trained staff.

own metals. Rolex makes three different

Ouates.

gold alloys – yellow gold, white gold and

extra mile, Rolex does not use standard

visit there is a constant need for supplies.

their own exclusive Everose gold – so

316L stainless steel, as does the rest of the

The entire manufacturing process runs

named because the rose-pink colour is more

industry. Rolex only uses 904L steel – a

like a smoothly oiled machine and the

at the foot of the Jura Mountains.

In another example of going the

In each section of the four sites we

Portfolio

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90

Essentials

Luxury

our production sites. Now they are among the most efficient and productive, and probably the best, in the industry.

This gives us unrivalled autonomy, independence and flexibility, essential for our expansion,” says Gros.

So if Rolex is so accomplished… why so secretive?

“In my view, Rolex communicates a great deal,” Gros says. “But we concentrate essentially on the product and what surrounds it. Beyond traditional advertising, we communicate considerably on the events with which we are associated, whether in sports or culture – as well as on our philanthropic programmes.”

Every hour marker, all 18-karat gold, is set individually by hand.

But, he adds with a conspiratorial grin, “I will let you into a secret: at the company’s Annual General Meeting our Chief

Launching only last year, the brand has three million fans on Facebook, and counting.

Rolex is also the mostsearched-for watch brand worldwide.

Executive Officer, Gian Riccardo Marini, announced that 2013 was another record financial year for Rolex. It is historic… but in any case, at Rolex we are not in the habit of shouting our triumphs from the rooftops.”

Yet the company recognises that a position of non-communication in this omni-connected world is untenable.

“You have to communicate in the modern world,” says Virginie Chevailler, Manager of Press and Public Relations.

And when Rolex does communicate –

replenishment of raw materials and

they leave everyone else behind. Other

components needs to allow the continuous

brands must wince at the overnight

flow. This is where the Automated Stock

success of Rolex’s social media campaigns.

Delivery System comes into play. Each

Launching only last year, the brand has

Rolex site has a Stock and Distribution

three million fans on Facebook, and

centre at the heart of the building.

Automated stocking system.

counting. Rolex is also the most-searchedfor watch brand worldwide.

Venturing underground we pass through

In the coming months Rolex will

an enormous vault door worthy of Fort

kilometres of rails deliver trays of stock

Knox. Next we face biometric security

from here to the workshops in a matter of

welcome the sixth leader of the company

before the doors slide open. We are

minutes. The time taken from a component

in the form of a new CEO, Jean-Frédéric

greeted by what seems to be a scene from

request to the delivery is around six

Dufour. Formerly of Zenith, Dufour has a

a science fiction movie. A vast network of

minutes, compared to 40 minutes if the

daunting position to fill and a worldwide

mobile cranes whizz around while robotic

employee had to collect it manually. The

army of devoted Rolex lovers will be

arms collect and deposit components in

system performs up to 2,800 transports

watching closely. No great changes are

a staggering logistical construction. The

per hour, giving an idea of the sheer scale

expected, that is not the Rolex way. Expect

computerised system covers two 12,000

of operations. This is the future, and Rolex

more of what Rolex does best… the most

cubic metre vaults, each containing 30,000

is already there.

uncompromisingly excellent watches it is

storage compartments. One and a half

“We have modernised and expanded

possible to make. n Portfolio

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92

Technology

O

n a clear day, Per Granquist cannot see forever. But from his perch inside the airport

Directing

control tower in Ornskoldsvik, he does

have an unobstructed view of the future.

The big picture is provided from a 10-metre mast where a grey turret holds an array of digital video cameras, communications antennas, sensors and microphones – a setup that resembles a cross between a space-age dovecote and a prison guard tower. The system

Sweden is testing a new system that will allow air traffic controllers to “virtually” guide flights at small, remote airports from a central location, reports Nicola Clark.

is meant to integrate information of the sort that Granquist, 40, has been providing with his own eyes and ears as an air traffic controller for the last 17 years at this small airport in northern Sweden.

The information from this array, though, is being sent elsewhere – to a windowless room of another airport, 160 kilometres south, in the slightly larger town of Sundsvall.

The system is still in test mode, but the rest of the commercial aviation industry is watching closely. Early next year, Granquist and a handful of his colleagues expect to move to Sundsvall. And from there, they will begin “virtually” guiding the half-dozen or so daily flights in and out of Ornskoldsvik, which is about to become the world’s first remotely controlled airport.

“At first it seemed a bit weird,” Granquist said of his training on the new system. In Sundsvall, instead of surveying the airport through plate-glass windows, he will sit before a semi-circular wall of 140-centimetre liquidcrystal displays. “But after two weeks,” Granquist added, “it really feels no different from sitting here.”

Carved from an Arctic pine forest along Sweden’s fjord-studded eastern coast, Ornskoldsvik might seem an unlikely setting for a potential aviation

© 2014 New York Times News service

revolution. But over the last several years, officials from dozens of countries have made their way down the airport’s rutted gravel road to get a first-hand look.

It is a concept that experts say has uses not only for out-of-the way places but could also enhance efficiency and safety at sprawling urban airports. “I have little doubt that this is the next big thing for our industry,” said Paul Jones, operations manager at NATS, which provides air navigation services at Heathrow and other British airports.

It is no accident that the idea for a remote-controlled airport emerged from Sweden, Portfolio

93

Planes by remote

Per Granquist, an air traffic controller, at the airport in Ornskoldsvik.

December 2014

94

Essentials

Technology

exploring the idea of pooling controllers at a single location, to guide flights remotely. In 2006, the agency invited the Swedish aeronautics and technology group Saab to develop a prototype. The system Saab developed was installed at both Ornskoldsvik and Sundsvall airports in 2012, and it received certification from Swedish regulators at the end of October.

To guard against a remote-control airport being hijacked by hackers, the data transmitted between the camera tower and the remote control centre is scrambled using dedicated hardware and encryption software, said Anders Carp, a Saab vice Mikael Henriksson, left, and Erik Backman, director of operations at LFV, Sweden’s state-owned air navigation service provider, demonstrate remote cameras that offer a 360-degree panorama of the Ornskoldsvik runway in Sundsvall.

whose northern regions are thinly populated and poorly served by rail or

and a control tower.

“It doesn’t really make economic or even

president in charge of traffic management systems. As an added layer of security, he said, Saab also uses an algorithm to verify that images have not been tampered with en route.

other transportation alternatives. Much

social sense to station a fully-qualified

like Alaska and vast swaths of northern

air traffic controller in some of these

Mikael Henriksson has been at the

Canada, Scandinavia is dotted with dozens

places,” said Erik Backman, director of

fore of LFV’s push into the future. An air

of small airports. While many of the

operations at LFV, Sweden’s state-owned

traffic controller for 40 years, Henriksson,

world’s remote communities are so tiny as

air navigation service provider.

59, has worked at dozens of civilian and military airports in Sweden and abroad,

to rely on small private planes whose pilots

Full-time controllers in Sweden average

coordinate their own takeoffs and landings

about $77,000 a year in pay, he said, a cost

including a few harrowing stints in the

by radio, towns like Ornskoldsvik –

that rises to more than $140,000 once

war zones of Iraq. His job now is helping

population 55,000 – are just big enough to

social security and other employee charges

controllers like Granquist make the leap

justify minimal scheduled airline services

are included. That is why LFV began

to remote tower technology, which unlike

The remote tower installed at SundsvallTimra Airport in Sundsvall.

Portfolio

95

transitioning from being an airplane pilot to a drone operator, largely relies on an identical set of skills.

“Controllers are already spending most of their time looking at a screen instead of out a window,” Henriksson said.

On a recent day at the remote control centre in Sundsvall, Henriksson put the cameras in Ornskoldsvik through their paces. With the tap of a stylus on a sleek glass panel, the arc of display panels flickered to life, presenting a crisp 360-degree panorama of the runway.

As passengers boarded a Stockholmbound turboprop on the tarmac, a flock of blackbirds flitted over the projected airfield, then disappeared into the trees,

A view of Ornskoldsvik, which will have the first remote tower controlled airport in the world.

which swayed in the gentle breeze. A

remote camera technology to complement

truck rolling slowly past a hangar was

traditional control towers – either to give

of the plan to operate Ornskoldsvik’s

automatically highlighted by a red

a clearer view of parts of the airport that

tower remotely, Granquist was upset at

rectangle that followed its movement

might be obstructed by other buildings,

the prospect of having to move his family

across the screens. Henriksson clicked to

or to serve as a contingency in the event

to Sundsvall. But his reluctance has since

activate one of two robotic zoom cameras,

of extreme weather, a disaster or even a

turned to impatience – and excitement

opening a new window that functioned as

terrorist attack.

at the career possibilities that remote

Three years ago, when he first learned

virtual binoculars. When the plane took off,

Granquist most days now works his

a few minutes later, the hum of its engines

nine-hour shift in solitude, with only an

passed from right to left through the room’s

occasional visit from Robert Gyllroth, the

“It will also be nice,” Granquist said

speakers, in perfect surround sound.

airport manager, who sometimes asks him

as he padded in stocking feet to adjust a

to pitch in with other airport tasks, like

window blind against the setting sun, “to

manning the tiny duty-free shop.

have some colleagues.” n

Officials at larger airports are also intrigued by the possibility of using

A detail from the remote tower service screen where air traffic controllers can zoom in on the Ornskoldsvik runway.

December 2014

technology might open for him at other, larger airports.

Essentials

Other Business

Spacefaring Camera Sets Record Astronaut Wally Schirra’s Hasselblad

was piloting. Since then, his images

500c camera that accompanied him

have reached iconic status. Schirra’s

into orbit in October 1962 recently

colleague and fellow astronaut Gordon

sold for an eye watering $275,000 at

Cooper borrowed the camera for the

auction. Schirra, an avid photographer,

MA-9 Mercury mission in May of

decided to take the camera up with

1963 that orbited the Earth 22 times.

him on the Mercury-Atlas 8 mission to

Some 52 years later, Schirra’s

see if he could snap a few pictures of

camera had been anticipated to sell

the Earth.

for around $100,000. However, an

Schirra orbited the planet six times gettyimages

unnamed online British bidder blew

during the nine-hour spaceflight,

away all expectations for the final

snapping several pictures of the Earth

auction price by slapping down a

from inside the Sigma 7 capsule he

massive $275,00 for the camera.

Russia’s ‘Alternative’ Wikipedia Russia plans to create its own ‘Wikipedia’ to ensure its citizens have access to more “detailed and reliable” information about their country, the presidential library announced.

Wikipedia, the online encyclopedia assembled and written by internet users around the world, has pages dedicated to nearly every region or major city within Russia’s 11 time zones, but the Kremlin library said this was not good enough.

“Analysis of this resource showed that getty images

it is not capable of providing information about the region and life of the country in a detailed or sufficient way,” the state news agency RIA quoted a statement from the

Venezuela’s Culinary Record

presidential library as saying.

“The creation of an alternative Wikipedia has begun.” It was not known

Venezuela praised its ‘socialist revolution’ for a

Food minister yvan Bello said in a flurry of

whether the project might affect Russians’

culinary conquest in November: guinness

celebratory tweets. “the people are

access to the existing Wikipedia in any way.

World Records for the country’s beloved

celebrating, Venezuela is a country of records,

Christmas dinner staples.

of achievements, thanks to the revolution!,” he

a cook-a-thon in capital Caracas landed Venezuela records for the biggest ham-filled bread, sugar cane juice infused with lemon, getty images

96

added, feting the 20-metre bread, 12,000-litre drink and 120-metre ‘hallaca’. the initiative comes as Venezuelans

and ‘hallaca,’ a cornmeal dish wrapped in

struggle ahead of the holiday season due to

plantain leaves.

shortages of basic goods and sky-high

“made in socialism, made in revolution,”

inflation that crimps purchasing power.

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