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
Portfolio
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.
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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
Portfolio
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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. Portfolio
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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
enjoy responsibly
DOM PÉRIGNON VINTAGE 2004 EACH VINTAGE IS A NEW CREATION DOMPERIGNON.COM
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
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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. Portfolio
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