Portfolio | May 2015 by Motivate Media Group

Portfolio Exclusive to Emirates First Class and Business Class

GOOD NEWS, BAD NEWS Economics of a Strong Dollar CREDIT SQUEEZE Choking Small Suppliers VERTICAL FARMING A Green Investment

Martin Winterkorn VWâ&#x20AC;&#x2122;s Battle for Supremacy

Issue 113 n May 2015

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Petite Heure Minute PaillonnĂŠe ref. J005033257

Art of Astonishment

Hortensia Collection Ring, pink gold and diamonds A round pink sapphire Angel-skin and pink opal Marquise-cut pink tourmalines

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This issue MAY 2015

Portfolio

Exclusive to Emirates First Class and Business Class

Cover Story 30 Clash of the Titans VW CEO Martin Winterkorn, who was slated to take over from Chairman Ferdinand Piech in 2017, doubled revenue to more than $220 billion last year and tripled net income since taking the helm in 2007. Against these results, it is easy to understand why the sudden breakdown between Winterkorn and Piech caught the auto industry by surprise.

Features 36 Japan’s Savings Problem

54 Cyprus Still Scarred by Banking Crisis

The Japanese used to have the highest savings rate in

Two years ago, Cyprus’ financial system was in crisis. The

the world, but that is changing and complicating the

Eurozone implemented a rescue package that Cypriot bank

country’s recovery.

depositors were forced to help pay for, with far reaching

40 Prime Farmland Inside a Factory Growing crops indoors in a vertical environment is still a

results.

50 A Luxury Countdown

nascent industry, but it is attracting big investors.

The quicker a cruise ship is turned around between voyages, the more profitable it is. This results in an intricate logistical

44 Cost of the Strong Dollar The strengthening dollar against other currencies, especially the euro, is hurting US exports and company bottom lines.

ballet.

50 Squeezing Their Suppliers Large food companies are now demanding 90 to 120 days to pay their suppliers, a move that is squeezing small companies.

Portfolio

Exclusive to Emirates First Class and Business Class

Essentials 63 Lords of the Ring This year marks the 150th anniversary of Vienna’s fabled Ringstrasse. Ever since its opening by Emperor Franz Josef in 1865, this five kilometre boulevard has been at the epicentre of the city’s social life.

68 Art for the Knowing Nose Peter De Cupere specialises in making olfactory art that

occasionally stinks.

70 Edinburgh’s Restaurant Revolution The Scottish restaurant scene is evolving rapidly, with the country now boasting 16 Michelin stars and the capital, Edinburgh, has four of these.

76 Geysers, Mushers and Sled Dogs Vie With Growth Russia’s remote Kamchatka Peninsula is famed for its natural beauty and rich wildlife. But ambitious development plans

are now threatening the environment.

80 An Olympic Bid Where Snow Rarely Falls Beijing is bidding for the 2022 Winter Olympics although the region is officially semiarid. However, that is rapidly becoming the norm.

84 Pouring Souls Into a Fading Craft When the prestige Italian book printer Zanardi found itself in financial difficulties, the employees banded together and

bought the company.

Departments

88 Other Business

11 Notebook

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

World business in a nutshell.

18 Observer Spotting and analysing business trends.

28 Column: Phillip Inman Global Slowdown Will Harm Anti-poverty Drive.

84 Published for Emirates by

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Portfolio

F O R

S H O P P I N G

L O V E R S

CA S T E L L A N A

S TO R E

M A D R I D / D I AG O N A L

DEPARTMENT STORES SPAIN & PORTUGAL

BA R C E LO N A

Notebook B U S I N E S S

N EW S

The Clean Energy Surge

B R I E F

continues to plummet, and is now on par

with global sales of 288,500 units last year,

or cheaper than grid electricity in many

according to BNEF research. While that's

areas of the world. Solar, the newest major

just 0.5 percent of all car sales, it’s more

source of energy in the mix, makes up less

than five times the number in 2011, and

than one per cent of the electricity market

manufacturers are preparing for more. Fuel-cell cars also are moving from the

The race for renewable energy has

today but could be the world’s biggest

passed a turning point. The world is now

single source by 2050, according to the

laboratory to the showroom, starting in

adding more capacity for renewable power

International Energy Agency.

Japan with models from Toyota Motor

each year than coal, natural gas and oil

Analysts at the BNEF summit also said

Corp. and Honda Motor Co. By 2018,

combined. And there’s no going back

that an upheaval in clean energy is quietly

Japan will be the biggest market for fuel-

according to an analysis presented at the

loosening the oil industry’s grip on the

cell vehicles, with 4,200 cars on the road.

Bloomberg New Energy Finance (BNEF)

automotive industry.

annual summit in New York.

Oil consumption has flatlined for a

Costs are plunging in the electric car business as quickly as they did in the solar

decade. Through the economic boom,

industry in the last decade. The price of

world added 143 gigawatts of renewable

the financial crisis, and the recovery now

lithium-ion batteries that power most

electricity capacity, compared with 141

underway, demand peaked in 2004 and

electric cars has fallen 60 per cent from

gigawatts in new plants that burn fossil

has fallen ever since. Part of what explains

2010 and will keep declining at the same

fuels. The shift will continue to accelerate,

dwindling gasoline demand is efficiency. In

pace, BNEF estimates. That will bring the

and by 2030 more than four times as much

the past 13 years, US fuel efficiency in miles

price of no-pollution cars within striking

renewable capacity will be added.

per gallon has soared 29 per cent.

distance of ones that require gasoline

The shift occurred in 2013, when the

Photos: Getty Images

I N

The price of wind and solar power May 2015

Electric vehicles are starting to take off,

within a decade.

Notebook

N u m b e r s

G a m e

The world in figures

95%

of the fine

were to strike a free trade deal

levied on the

with its former partner it would

Moroccan soccer governing

not rake in enough to offset the

body for pulling out as host of

costs.

the African Cup of Nations has been reduced. Morocco sought to postpone the event due to

481,000

concerns over the spread of

affluent Indians with financial

Ebola. The Court of Arbitration

assets worth $100,000 to $2

for Sport reduced the fine from

million are expected to grow

$1million to just $50,000.

ten-folds to reach more than 4.9 million households by 2020,

a gallon plunge in

according to new research

gasoline prices has

by the Economic Intelligence

driven Americans to hit the road

Unit. India is followed by

at a record pace by driving three

Indonesia, Vietnam, Thailand

trillion miles for the first time in

and the Philippines in the race

seven years, according to the

to the riches.

Federal Highway Administration. Low gasoline combined with an improved job market has set off a

years after America’s most generous con artist, Mark Landis, started his career, he decided to donate his fraudulent works to more than 50 museums in 20 states. He was never prosecuted as he didn’t take payment so he hadn’t technically broken the law. He was instead treated like royalty and showered with gifts for the art works he gave away.

€4.4

national spending spree on sport utility vehicles and vacations.

$16.6

billion purchase

of Alcatel-Lucent by Nokia will see it boldly push ahead in its ambitious drive to become

£56

billion a year

one of the world’s leading

would be lost by

network equipment makers.

2030 if Britain left the European

Having sold its mobile handset

billion offered

European regional headquarter

Union and shut down its

division to Microsoft last year

by US parcel

of the combined companies

borders, according to a report

for $7.2 billion, Nokia has

delivery company FedEx for

will remain in the Netherlands,

by Open Europe. The exit would

since focused on network

acquiring Dutch rival TNT

while FedEx will maintain the

result in a permanent loss of 2.2

equipment manufacturing,

Express will help strengthen

TNT express brand for an

per cent of the country’s gross

mapping-and-location services

its position in Europe. The

appropriate period.

domestic product, and even if it

and patent licensing.

UK’s Debt Warning Britain’s reliance on households using loans and credit cards to spur economic growth has put the gradual recovery of the past five years in jeopardy, the International Monetary Fund has warned. A rise in household debt to one of the highest in the developed world puts the UK on a warning list of countries vulnerable to a credit crunch. The warning directed at the UK followed publication of figures showing household debt levels in Britain remained high while other countries had seen bigger reductions since 2008. Britain had reduced household debt relative to national income from 96 per cent to 87 per cent, leaving it ahead of Portugal on 83 per cent and France and Germany on 56 and 54 per cent respectively. Portfolio

Notebook The Rise of $200,000 SUVs Super-expensive SUVs – all of which cost more than a Ferrari – are on the rise. The Range Rover SV Autobiography costs around $200,000. It fits in with the $218,000 Mercedes-Benz G65 AMG, which has a hand-built V12 engine that puts out 621hp. The G65 AMG is the fourth AMG model to cross the $200,000 threshold. Rolls-Royce is currently testing drivetrains for its “Project Cullinan,” a prototype all-wheel-drive suspension model that will be selling by 2018. Experts say it could cost as much as $400,000. The

deliver better profit margins than sedans

SUVs allows more opportunities for upgrades

Bentley Bentayga, announced in2012, will

and coupes do. Their size and prestige

and bespoke treatments on top of their multi-

finally see showrooms in 2016. Similarly

demands a price premium. But they also

layered variant range. All these require more

priced offerings such as the Lamborghini

offer a wider range of pricing: you can buy

materials that cost more money—and for

Urus, Aston Martin DBX and Maserati

the Range Rover Evoque for $41,000 or

automakers, bring more profit.

Levante are slated for production in 2017,

the Range Rover SV Autobiography for

2018 and beyond.

$200,000. By contrast, the span between

fuel prices, increasing global wealth, and

variants of the BMW 3-Series sedan hovers

the simple fact that big vehicles signify

around $20,000.

top-tier status in most countries as a recipe

When it comes to extremely priced SUVs, there is money to be made. The simplest reason is that trucks and SUVs

Even more significant, the sheer size of

Questions Around China’s Economy But seven years later, with Eurozone policymakers resorting to quantitative easing to kickstart demand, and US

Motoring executives point to stable

for success. production and bank lending, suggests growth is running at closer to three per cent than the seven per cent suggested by official GDP data. House prices are declining at six per

interest rates still at zero, being saddled

cent a year, compared with double digit

with a growth model that relies on selling

growth a year ago – similar to the kind

cheap products to the West is no longer

of reversal that plunged the US into the

such a winning strategy.

sub-prime mortgage crisis. Furthermore,

Beijing has made clear that after initially

banks are saddled with non-performing

The worse-than-expected trade data

cushioning the slowdown with a massive

loans and industries are struggling to

from China last month was the latest

fiscal stimulus, it is now aiming to engineer

tackle overcapacity.

evidence of the struggle Beijing faces in

a shift to a more sustainable growth model,

achieving a soft landing for the world’s

from a dependence on investment and

positive picture. It believes growth will drift

second-largest economy.

exports towards consumption. On that

downwards, from 7.4 per cent in 2014 to 7.1

basis, the sharp decline in exports is to

per cent this year. It does spell out the risks of

China’s role as the world’s manufacturing

be welcomed as a sign that the rebalancing

what it calls “a disorderly unwinding of real

powerhouse, shipping cut-price goods from

is working.

and financial vulnerabilities”. But it insists

Before the Great Crash of 2008,

shoes to smartphones out across the world,

But some analysts believe it is the

However, the World Bank paints a more

that Beijing has “ample fiscal space” – namely

turned the toil of hundreds of millions of

latest sign that something is badly amiss.

around $3.9 trillion of foreign exchange

workers into gold.

Analysis, based on rail freight, electricity

reserves – to spend its way out of trouble. Portfolio

+++ ++ + ++++++ +++ + +++Ras + alAjman ++++++ Khaimah Sharjah +++ ++++ +++++++ +++++++++++++++++ Dubai ++++++ ++++ ++++++++++++++++++++ ++++++++ Jebel Ali ++++ ++ +++++++++++++++++++++++ ++ +++++ +++ ++ + ++++++++++++++++++++ ++++++++Fujairah + +++ ++ + + + + + + + + + + + + + + + + + + + ++++++++ +++++ +++ ++ +++++ + ++++ ++++++++ ++++++++++++ + +++++++++++++++++++++ ++ +++++++++++++++++++++++++ + + + + + + + + + + + + + + + ++++++++ ++++++++ +++++++++++++++++ +++++++ +++++++ Dhabi ++++++++ +++++Abu ++++++++++++++++++++++++++ +++++++++ + + + + + + + +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Al Ain ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++ +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++ ++ +++++ + + +++++++++++++++++++++++++++++++++ +++++++ +++++++ ++++++++ + + + + ++++++++++++++ ++ +++++ ++++++++ + + + +++++++ + + + +++++ ++ ++++++++ ++++++++++++ + 12-13 +++++++ ++++++++ ++ ++ +++++ ++++++++ + + +++++++ + E-Commerce Show ++++++++ ++++++++++ D U B A I D I A R Y + ++ +++++ Middle East + + +++++++ + ++++ +++++++++++++ Dubai International Convention & ++ ++++ Exhibition Centre

Notebook

UNITED ARAB EMIRATES

May 2015 4-7

ARABIAN TRAVEL MARKET 2015 Dubai World Trade Centre arabiantravelmarket.com Staged annually in Dubai, the 21st edition of Arabian Travel Market will be bigger and better with more exhibition hall space and more themes. This year the themes focus on family travel, travel technology, business travel, and luxury and wellness travel. Participating travel businesses will benefit from the launch of newly introduced features. Exhibitors have the opportunity to team up with travel bloggers to further their online marketing goals, plus they can access the ATM exhibitor portal to promote their products and can address the media through the ATM PR campaign.

12-13

The Mobile Show Middle East Dubai International Convention & Exhibition Centre terrapinn.com/exhibition/mobile-showmiddle-east Advertising agencies, media houses, broadcasters, telecommunication, regulators

and healthcare operators to name just a few will benefit from attending this event as it covers the latest trends in the rapidly growing m-commerce industry. Retailers can gain first hand tips on ways to transform their businesses through mobile innovations by taking mobile contactless payments mainstream. Telecommunication companies can learn how to build networks for the next generation of digital society and enhancing their revenues from mobile advertising.

12-13

CARDS & PAYMENTS Dubai International Convention & Exhibition Centre terrapinn.com/exhibition/cards-andpayments-middle-east/index.stm Explore what a cashless society actually means and discover the advanced payment channels through digital currencies, wallet, and alternative payment opportunities. Over 300 of the worldâ&#x20AC;&#x2122;s top suppliers covering all aspects of payment, ID, authentication and access control will showcase their products at the expo. Banks, telecommunications companies and retailers will benefit by keeping abreast of how consumer transactions are changing and how the industry can keep pace with the digital consumer. There will also be free seminars, workshops and product launches.

terrapinn.com/exhibition/ecommerceshow-middle-east/index.stm The E-Commerce show is for professional and budding online entrepreneurs who want to further and optimise their online businesses. Seminars will be held by influential members of the online entrepreneurial world, as well as networking opportunities, workshops, products and services will be available. Exhibitors will have plenty of opportunity to establish new leads, create brand awareness and launch new products.

18-21

INDEX (International Design Exhibition) Dubai World Trade Centre indexexhibition.com Now in its 25th year, this interior design trade event showcases the very best in furniture, lighting, product design and home accessories. The architecture and design community will discuss, debate and source products for projects across the residential, retail and hospitality areas. Each year INDEX delivers a range of new features and this edition will witness the INDEX Artistsâ&#x20AC;&#x2122; Avenue, Majlis Design competition and INDEX Design Talks, which is a free-to-attend programme of seminar sessions.

Portfolio

Observer BUSINESS NEWS IN BRIEF

Sollywood: Apartheid South Africa’s Strange Movie Boom

Popo Gumede, turns to the camera to say:

It launched a Hollywood career and made the world’s first Zululanguage film. So does it matter that the explosion of black cinema in apartheid South Africa was funded by Pretoria – and led by an Afrikaner construction boss? asks Gavin Hayes.

at all; to how seeing so many black faces on

“All this violence could have been avoided if we just sat down and talked about it.” Others point to how seminal Van der Merwe was in setting up any kind of black film industry screen inspired a generation. All this, from a man who, at the age of 30, had seemed happy enough running a construction company in Johannesburg. It was on a construction job that Van der

Last year, tonie van der Merwe

– 20 years after apartheid – his massive yet

Merwe met Louis and Elmo de Witt, film-

accepted his Simon Sabela award as one

ambiguous role in South African film finally

making brothers who inspired him to try his

of four “heroes and legends” at the Durban

being acknowledged.

own hand. More entrepreneur than auteur,

International Film Festival. “Without being

To many, the “B-scheme” movies he’d made

he’d already spotted a business opportunity

racist, I thought a white guy won’t easily win

– escapist fantasies, boys’ own adventures,

after watching his 200 workers hoover up US

a prize, but I was wrong,” he said from the

morality plays – were the film equivalent of

blaxploitation flicks at Saturday night on-site

stage, in his tux and big owlish spectacles.

apartheid’s watered-down “native beer”, sold

screenings. Blaxploitation in the land of black

in government beer halls; a cynical National

exploitation? Well, why not?

Certainly, few white guys in the new South

“It was clear to me that this was the

Africa receive awards for films they made

party-sponsored diversion designed to

under an apartheid subsidy scheme to create

encourage the native population to stay on the

market of the future,” Van der Merwe recalls

films for black audiences. Yet here he was

reserves. At the end of one such movie, its star,

from his offices in suburban Cape Town. “So

May 2015

Observer I financed the whole thing. And we used all

after a while. It saved a lot of time, money

of my equipment as props. My diggers. My

and frustration.” So much so that in 1986, he would make

airplane. My cars.”

the film he considers his finest work, entirely

Joe Bullet was the result. Van der Merwe produced, Louis de Witt directed, and the

in Zulu: Umbango (The Feud). “Umbango was

cast was entirely black. Ken Gampu, who

a great hit,” says Hand, who produced it. “We

later found success in Hollywood, starred

built a whole cowboy town up in Mooi River.

as Bullet alongside singer Abigail Kubeka.

The cowboy suits we imported from America.” Once you’d made a film, the hard work

Modelled on something between Shaft and James Bond, Joe Bullet had Gampu doing

as “a gentleman. Very kind. He had no airs

didn’t end there. Hand had 14 flatbed trucks

karate, driving sports cars, throwing knives,

or graces. There was no apartheid when we

loaded with two projectors apiece; his crews

climbing up mineshafts and shooting guns.

were shooting.” Yet because of the laws of

touring the country to screen the latest

the time, the black actors and mainly white

B-scheme bangers to the most rural areas.

slightly less than a week. The censors

production crew would often have to dine

“Most of these places didn’t have electricity,

decided that this swish thriller portrayed

and sleep separately on location. “But we

let alone a cinema,” says Van der Merwe.

black people in far too aspirational a light.

didn’t mind that so much. Our rebellion was

“There might be a few thousand people, and

The film was banned, and for Van der

simply to be involved in the arts and to do

they’d come from miles around.”

Merwe, who’d spent 18 months making it,

our jobs to the best of our ability.”

The movie was a big hit in Soweto – for

But as swiftly as it arrived, the B-scheme

Down the years, a few more subversive

disappeared. In 1989, Pretoria abolished the

scripts did manage to nip past the censors.

subsidy. Within months, everyone had to find

opportunity, and successfully lobbied the

The most notable was David Bensusan’s My

a real job, even Van der Merwe, who bought

government to set up a subsidy for making

Country My Hat (1983) – a critique of the

two hotels. With regime change in the 90s,

black films: the so-called B-scheme. The

pass laws, which forced black South Africans

the bulldozer of history rapidly cleared traces

catch was that it meant making the sort of

to carry internal passports when travelling

of the B-scheme. Until a chance meeting

films Pretoria liked to see. In all, Van der

outside their townships or homelands.

between Van der Merwe and Benjamin

that spelled financial disaster. Undeterred, he spotted another

Merwe had a hand in around 400 such

Despite a lack of radical credentials, Van

Cowley, who runs a Cape Town production company called Gravel Road.

movies. At his peak, he was churning out

der Merwe achieved at least one historic first

one a month. The subsidy created a mini-

for black nationalism, when he made the

gold rush where, according to Darryl Els, a

world’s first Zulu-language film – Ngomopho

in financing a gospel musical,” says Cowley.

Johannesburg independent cinema owner:

(Black Spoor). Unfortunately, he couldn’t

“He started telling me that he had all of these

“It was pretty much the best investment you

understand it (his Zulu remains basic). And

old canisters of films he’d made.”

could make if you had a spare 10,000 rand

neither could the film’s editor, which created

lying around. Many of these films could gross

all sorts of problems. So he developed a

the movies. Within a year, he’d set up Retro

70,000. So the returns were excellent.”

system of on-the-spot editing, alongside the

Afrika Bioscope to do just that. By the end of

camera. “Everyone in the industry copied it

2014, Joe Bullet was having its newly restored

“But I always strove for quality,” Van der

“He came to me because he was interested

Cowley jumped at the chance to digitise

Merwe says. He wrote many of his own

digital premiere in Durban, and Van der

scripts, light, adventure-packed storylines

Merwe was a white man winning an award

that never wandered into the miseries of the

in the new South Africa.

socio-economy. He says he never supported

Since then, six films have debuted on

apartheid. “But I am not a radical and never

South African TV, and several more have

got involved with politics.”

been restored by Gravel Road. Now Van der

“The message of my films was always

Merwe has been offered the chance to make

‘crime does not pay’,” says Steve Hand, an

his first new movie in 25 years - Rhino Wars,

Afrikaans farm hand who started out as Van

a full-length feature about modern poaching.

der Merwe’s Zulu translator, before moving

“I feel very grateful to Ben, because I’ve been

on to direct his own B-schemes. On set, Abigail Kubeka remembers Van der Merwe

Tonie van der Merwe, winner of the Simon Sabela award.

given a second innings,” he enthuses. “I’ve definitely got a couple more movies in me.” Portfolio

Observer O N E

w a t c h

Text: Hilda D’Souza

be ploughed back into building carbonfree hydro and nuclear power generation. The company also intends to extend its operations beyond the Nordic and Baltic regions, as well as Poland and Russia to venture further afield as it integrates with the European Union market. The board also plans to achieve significant company growth through energy sector restructuring. Fortum will harness the expertise of Lundmark, who has a proven track record in developing international businesses and strong leadership skills as CEO and president at Konecranes. Previous to that position he

Pekka Lundmark, Chief Executive, Fortum

was at the Hackman Group. “We are impressed by his capability to clearly conceptualise and implement strategy, plus his experience in mergers and acquisitions,” Fortum’s chairman said in a statement. The board believes that Lundmark, together with Fortum’s executive management’s experience of the energy

Fortum, the Finnish energy company,

sector, will position the company as a

has appointed company outsider Pekka

strong sector leader for the future.

Lundmark as its new chief executive

Lundmark is committed to continuing

to further its growth ambitions through

the company’s policy of driving the

mergers and acquisitions. Lundmark joins

generation of carbon free energy.

Fortum after a 10-year stint at the helm

“Fortum’s exceptionally strong balance

of crane company Konecranes, where he

sheet provides good premises for future

transformed the firm into a global player

investments in growth, clean energy and

and more than tripled its stock value. The

the development of new services. I am

51-year-old Lundmark starts at Fortum

enthusiastically looking forward to start

in September, replacing Tapio Kuula who

working with Fortum’s skilled personnel

retired due to ill health.

and management team,” he said.

State-controlled Fortum is busy

Lundmark is a graduate from Helsinki

restructuring and looking to drive

University of Technology with degrees in

further growth through acquisitions. The

engineering, IT and international marketing.

company recently sold its Nordic power

He is married with three children and

grid businesses for $10 billion, the biggest

enjoys cross country skiing, badminton

divestment in the company’s history.

and the occasional James Bond movie

Flush with cash, the $6.6 billion profit will

when his busy work schedule allows it.

++++++++++++++++++ ++++++++++++++++++ US Investors ++++++++++++++++++ ++++++++++++++++++ Target European ++++++++++++++++++ ++++++++++++++++++ Property ++++++++++++++++++ ++++++++++++++++++ American investors are buying ++++++++++++++++++ European commercial property at a ++++++++++++++++++ ++++++++++++++++++ record pace as the dollar’s eight-month ++++++++++++++++++ rally and struggling economies on ++++++++++++++++++ ++++++++++++++++++ the continent make offices, shops and ++++++++++++++++++ warehouses affordable. US spending on ++++++++++++++++++ ++++++++++++++++++ European commercial real estate last ++++++++++++++++++ year was just short of the 2007 peak, ++++++++++++++++++ ++++++++++++++++++ according to Real Capital Analytics Inc., ++++++++++++++++++ and may be broken this year after a ++++++++++++++++++ strong first quarter. ++++++++++++++++++ ++++++++++++++++++ US investment in European ++++++++++++++++++ commercial property climbed 90 per ++++++++++++++++++ ++++++++++++++++++ cent last year to ¤41.2 billion, just shy of ++++++++++++++++++ the 2007 peak of ¤41.5 billion, RCA said. ++++++++++++++++++ ++++++++++++++++++ Another ¤8.9 billion has been spent this ++++++++++++++++++ year through March 25, with a further ++++++++++++++++++ ++++++++++++++++++ ¤3.3 billion under contract. ++++++++++++++++++ Europe’s recovery will probably ++++++++++++++++++ strengthen this year, leading to job ++++++++++++++++++ growth and higher domestic demand ++++++++++++++++++ for real estate, according to a report by ++++++++++++++++++ ++++++++++++++++++ Deutsche Asset & Wealth Management. ++++++++++++++++++ Overall investment in European ++++++++++++++++++ ++++++++++++++++++ property climbed 12 per cent to ¤160 ++++++++++++++++++ billion last year, according to the report. ++++++++++++++++++ ++++++++++++++++++ Record-low returns from fixed++++++++++++++++++ income investments have spurred money ++++++++++++++++++ managers to buy real estate in a search ++++++++++++++++++ ++++++++++++++++++ for higher returns. ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Corbis

Portfolio

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Observer

China Embraces Desalination water through membranes that trap salt

170 miles to Beijing. Home to 20 per cent of the world’s

and other particles – and multistage flash,

population but only seven per cent of

which involves boiling seawater multiple

its fresh water, China has embraced

times and collecting salt-free water vapour

desalination. The central government’s

at each step. The power required to push

Special Plan for Seawater Utilisation calls

water through the fine membranes or

for producing three million tons a day

repeatedly raise it to a boil accounts for

of purified seawater by 2020 – roughly

30 per cent to 50 per cent of a plant’s

quadruple the country’s current capacity.

operating cost. Although the Chinese have the most

Of China’s 668 largest cities, at least 400 already suffer from water scarcity. According to state media reports, building the Bohai Bay plant will cost

ambitious plans, other countries, including Spain, the US and Australia, have built or are building substantial facilities. World Resources Institute, a think tank

Getty Images

seven billion yuan ($1.1 billion); the

On the shores of Bohai Bay near the

pipeline connecting it to Beijing an

devoted to the environment, warns that

additional 10 billion yuan. That doesn’t

the high power demands of desalination

include the high electricity costs the plant

will encourage more coal-burning and

will incur once it’s up and running.

urban smog in China’s northern cities.

industrial city of Tangshan, construction

Developed in the 1950s, desalination

However, this isn’t the only option. Saudi

has begun on an ambitious engineering

was until recently used mostly by wealthy

Arabia’s state-owned technology company

project. Starting in 2019, the facility

desert countries such as Saudi Arabia, the

Taqnia and Spanish energy company

will remove salt from 120,000 tons of

biggest operator of desalination plants in

Abengoa recently announced construction

seawater daily. This will produce 50,000

the world. The two main ways to remove

of the world’s first solar-powered

tonnes of potable water that will be piped

salt are reverse osmosis – pushing the

desalination plant.

Cheese Boom Ahead? The European Union scrapped restrictions last month on how much milk dairy farmers can produce as the 28-nation bloc seeks to liberalise agricultural markets. The resulting increase in EU milk production – Rabobank forecasts that farmers will squeeze as much as eight per cent more from their cows by 2020 – will gradually increase competition in cheese just as the euro’s slump slices into the value of Switzerland’s Gruyère and Appenzeller exports. Switzerland exported 17 per cent less Emmental last Getty Images

year as Europeans bought cheaper alternatives. Cheese is Switzerland’s most important agricultural export. Shipments rose 0.4 per cent to 68,255 metric tons in 2014, with the bulk going to Germany, Italy and France, according to Switzerland Cheese Marketing. The side effects of the EU

can cost as much as double as in France and Germany. About 30

unbridling milk production may gradually force Swiss producers

per cent of the cheese consumed by the Swiss last year was made

to backtrack on price increases that they took to offset this year’s

by foreign producers, which can call their cheese Emmental

13 per cent slide in the euro.

but can’t print a special label on it that certifies it’s from the

Cheaper imports are spreading into Switzerland, where milk

renowned cheese region. Portfolio

CASHMERE, SILK & CROCODILE CONCEPT

Observer T H E

W O R L D

TOP Text: Hilda D’Souza

kuwait Discovers new Oilfields

LARGEST M&A DEALS OF ALL TIME Rank

DEaL

American Online acquires Time Warner

TOTaL vaLuE ($b) 186.2

Vodafone Airtouch acquires Mannesman

185.1

Verizon Communications acquires Cellco Partnership 130.0

Altria Group spins off Philip Morris International

Fortis, Banco Santander and Royal Bank of Scotland acquire ABN AMRO Holding

107.6 100.0

Pfizer acquires Warner Lambert

AT&T acquires BellSouth

87.3 87.3

Exxon acquires Mobil

80.3

Royal Dutch Shell merges with Shell Transport and Trading

80.1

Comcast acquires AT&T Broadband

76.1

Source: Bloomberg

Getty Images

Kuwait, which plans to boost oil output capacity by a third by 2020, has discovered four new oilfields in the north and west of the country.

ADVISERS TO GLOBAL M&A DEALS Rank

DEaL

TOTaL vaLuE ($b)

Goldman Sachs

876.5

Bank of America Merrill Lynch

666.4

Morgan Stanley

650.8

JP Morgan Chase

623.4

Citigroup

598.0

Hashem Hashem, the chief executive of state-run Kuwait Oil Co (KOC), did not give production rates of the new oilfields, but said exploration activities have moved ahead despite oil prices dropping nearly 50 per cent since last June. “The fields will be developed and production will start briefly,”

Barclays

533.8

he said, adding that the new discoveries had been announced

Lazard

439.3

after two years of exploration activities had proved positive.

Deutsche Bank

383.6

Credit Suisse

356.3

Centerview Partners

224.1

Source: Bloomberg

DEaL

the fields were both light and heavy oil, with preliminary results showing “huge commercial volumes”.

ADVISERS TO US M&A DEALS Rank

Two reservoirs for unconventional oil in the north of the country were also discovered, Hashem said. The grades found in

TOTaL vaLuE ($b)

Kuwait plans to boost its oil and gas drilling rigs by 50 per

Goldman Sachs

555.3

cent by early 2016 as it seeks to boost crude and gas production

Bank of America Merrill Lynch

444.4

despite low oil prices, Hashem said in February.

Citigroup

392.4

JP Morgan Chase

391.9

Barclays

378.4

Morgan Stanley

323.2

Most of Kuwait’s production is from Burgan, the world’s second largest oil field, which is in the southeast of the country. The country’s current output potential is around three million

Lazard

201.7

barrels per day, but the country wants to lift this to four million

Credit Suisse

181.8

bpd by 2020.

Centerview Partners

171.5

Deutsche Bank

124.3

Source: Bloomberg

The Gulf state expects a big boost from its northern fields, planning later this year to invite international oil firms to bid for technical service agreements in the area. Portfolio

Commentary

PhilliP Inman

Global Slowdown Will Harm Anti-poverty Drive World Bank president Jim Yong Kim has warned that a slowdown in growth across the developing world is a threat to the organisation’s project of reducing poverty. Kim said a fall in global growth to around three per cent this year will make it more difficult to raise the living standards of the one billion people who still live in extreme poverty. “We must now re-examine our strategies to lift the final billion out of poverty and into the modern world,” said the World Bank chief. The warning came during the World Photo: Reuters

Bank’s spring meeting in Washington DC, where the 188-member organisation struggled to show that its efforts in the last year have borne fruit. Earlier, the World Bank had announced

growth following China’s move to reduce

they should undertake structural reform

that between 2011 and 2014, 700 million

speculative lending and dilute a rampant

programmes to promote growth. Structural

people became account holders with

property boom. The World Bank expects

reforms raise productivity and growth over

banks or mobile money service providers,

China’s transition to a consumer demand-

time to sustain rising prosperity.”

pushing down the number of “unbanked”

driven economy to reduce annual GDP

individuals to two billion adults.

growth from 7.1 per cent this year to 6.9

International said: “We have seen a

per cent in 2016.

worrying glimpse of the old World Bank

The rise in numbers with a bank account is viewed as a significant step in

focusing only on growth, structural reform

tackling corruption, which tends to rely on

continue to be downgraded, with the

cash payments to avoid tax and facilitate

forecast for growth cut from 4.8 per cent

corrupt deals.

in January’s World Bank assessment to 4.5

has a wider plan to overcome poverty,

But with growth slowing, structural

The prospects for developing countries

Nicolas Mombrial of Oxfam

and opening the gates to the private sector. “While we recognise that Jim Yong Kim

per cent now. Kim said that for developing

he has yet again failed to profile his

reforms in many of the countries where

countries, this marks a further slowdown

commitment to tackling climate change

the World Bank is active are taking time

from 2014 and the fourth consecutive year

and inequality as central to his aim in

to have an effect.

of falling growth rates, which had averaged

eradicating poverty by 2030.

Growth has stalled in Mexico, which Kim praised for implementing reforms

over six per cent between 2000 and 2011. He added: “We see two major transitions

“We agree that the lack of growth in developing countries is bad news for

that have increased competition in key

for developing countries in the coming

pulling the almost billion people out of

sectors such as energy. Brazil is suffering

months – an adjustment to lower oil prices

poverty. But reducing these key elements

from a series of corruption scandals

and the prospect of tightening of global

to mere footnotes misses an opportunity

and a severe drought. Much of South-

financial conditions. Our main piece of

to harness the potential of this important

East Asia is experiencing a slowdown in

advice for developing world countries:

year for development.” Portfolio

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T H E

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Profile

CLASH OF THE

TITANS VW CEO Martin Winterkorn, who was slated to take over from Chairman Ferdinand Piech in 2017, doubled revenue to more than $220 billion last year and tripled net income since taking the helm in 2007. Against these results, it is easy to understand why the sudden breakdown between Winterkorn and Piech caught the industry by surprise, reports Daniel Evans.

Portfolio

Photos: Getty Images, Corbis

May 2015

Profile

Last month’s clash between Volkswagen AG’s chairman Ferdinand Piech and CEO Martin Winterkorn had all the drama of an episode of Game of Thrones. It all started when Piech, in an interview with Der Spiegel, said that he had “distanced” himself from Winterkorn, suggesting that Germany’s highest-paid CEO had lost a critical degree of support from his board. Until that interview, Winterkorn was seen as Piech’s close ally and heir apparent. The idea of a poisonous rift between the two ignited fears about the future running of Europe’s biggest carmaker, whose empire spans 12 brands, employs 600,000 people in 118 factories around the globe, and sold more than 10 million vehicles last year. In the past, a throwaway comment from Piech, the grandson of the VW Beetle creator Ferdinand Porsche, has been enough to bury the fortunes of many a senior VW executive. A similar interview he gave in 2006 had effectively ended the VW career of Bernd Pischetsrieder, whom he had plucked from BMW to be his intended successor. So there were widespread predictions that the demise of Winterkorn, who has led VW since 2007, was virtually guaranteed. As it turned out, Piech suffered a rare defeat following a rapidly convened crisis

Above: Ferdinand Piech, Chairman of the Supervisory Board of Volkwagen Group, speak to Martin Winterkorn (R), CEO of German carmaker Volkswagen AG

meeting in Salzburg where he found himself

profitability in line with the company’s peers. Now, as US car sales soar and emerging markets such as Brazil, Russia and China slow down, Winterkorn’s US failure could turn into an expensive one.

lacking sufficient votes after the VW works

and Winterkorn had such a deep mutual

VW has the self-proclaimed ambition to

council and the local state government of

understanding, according to Piech, that

become the world’s largest auto group, but

Lower Saxony, both of them key stakeholders,

they did not need to speak to each other.

with Toyota firmly entrenched in the US

distanced themselves from Piech to back

And both of them have had remarkable

(boasting a market share of 14.1 per cent

Winterkorn. Also in the chief executive’s

careers at VW. Piech has dominated the

compared to VW’s 3.2 per cent), this is

camp was Piech’s cousin, Wolfgang Porsche

company for 22 years, first as CEO and

looking increasingly unlikely. Winterkorn

– whose Porsche SE holding company holds

then chairman, transforming it into the

had been confident that this goal could be

a 50.7 per cent stake. The following day, the

world’s second-largest auto group after

reached by 2018.

supervisory board released a statement that

Toyota. Winterkorn, in turn, has nearly

Winterkorn was the “best possible chairman

doubled revenue to more than $220

success comes mainly from the strength

of the Volkswagen board of management”

billion last year and tripled net income

of the Porsche and Audi brands, both of

and that “the executive committee will now

since taking the helm in 2007. The

which come under the VW marque as well

propose to the supervisory board to extend

company made ¤11 billion in profit last

as VW’s strong position in China, which

Mr Winterkorn’s current contract in the

year and its share price trebled in the past

covers up many flaws at VW, including

supervisory board meeting of February 2016.”

five years, valuing VW at ¤117.8 billion.

low productivity compared to competitors

The question is, what caused the

Winterkorn’s detractors say VW’s

and a failure to produce models that the

breakdown between the CEO and the

HOWEVER, WINTERKORN HAS

78-year-old chairman? At one time Piech

failed to crack the US market and keep

US market wants. It is also behind on car industry Portfolio

new VW model coming off the assembly line and he loves cars. “People, who like me, grew up in the 1950s and 1960s after WWII, grew up with cars,” Winterkorn said. “Notions such as mobility and cars were anything but alien to us.” He added that he developed an interest in cars simply by watching beautiful Porsches whizz by in his home state of Swabia. “That’s why it was a pleasure for me to become an auto engineer. It makes me particularly happy remembering how fascinated I used to be as a boy watching Porsche staging test drives.” As for technology, Winterkorn is the proud owner of a VW XL1, that consumes under one litre of petrol per 100 kilometres. This hybrid two-seater sports Above: Coca-Cola has successfully turned Gold Peak, Fuze Tea and I Lohas into $1 billion brands respectively by scaling it through Coke’s global distribution system.

both an electric and a combustion engine. On the electric car front, Winterkorn can point to the launch of the E-Golf. “The car of the future will be one with minimal emissions,” is Winterkorn’s standpoint. “It will be a car that can run on diesel and petrol, but also on electric power, and it will raise the bar with regard to the use of information technology as there will be a

developments such as electric cars, where

and the result is a company with 12 brands

it has been superceded by companies such

that has become so big and complex that it

as Tesla in California and, closer to home,

is almost ungovernable.”

its Munich competitor BMW. While Google and Apple are experimenting with

THERE IS NO doubting Winterkorn’s

driverless cars, VW has so far shown little

commitment to VW. The CEO tests every

initiative in that direction. Still, industry observers have been flummoxed by the timing of the leadership battle. “Since Piech brought Winterkorn into the top tier of the company eight years ago, the two engineers have worked on realising their big dream – of turning VW into the largest carmaker in the world,” said Caspar Busse in the Süddeutsche Zeitung. “And at the very moment when they’re on the verge of realising their goal, we get this unprecedented power battle.” The true cause, he said, was “megalomania”. Both have set their sights on making the Wolfsburg-based company the biggest in the world “to the expense of everything else May 2015

lot more interaction between vehicles.”

Below: Winterkorn is the proud owner of a VW XL1 that consumes under one litre of petrol per 100 kilometres.

Profile

Left: Winterkorn currently has the support of the Porsche family.

as chief executive of VW in 2006 shortly after Piech said his continued tenure was an “open issue”. The chief executive’s contract was initially extended but months later Pitschetsrieder was gone. Wolfgang Furweger, a journalist and the writer of Piech’s biography, believes that Winterkorn will now be seen as a “lame duck.” And, according to Furweger, the reason for Piech losing confidence in Winterkorn was due to the latter spending too much time on succession planning. “Piech doesn’t like that. He cares about managers doing what they are paid for, namely to earn money and not polishing their image.” The view that the Piech-Winterkorn feud is far from settled is echoed by car industry insiders who said that the supervisory board’s decision was merely intended to calm the waters in the run firmly on the US market and admits

up to May’s shareholder meeting, and

to push innovations. But Winterkorn

mistakes were made. “We did not do

that the power struggle would continue

doesn’t believe that there will come a

enough to look after the Passats that were

behind closed doors. Many also question

time when software will become more

built in the US,” Winterkorn says. “The

whether Winterkorn and Piech can

important than hardware. “It’s a question

responsible managers should have been

continue to work together in such a

of physics to say that movement needs

jumping up and down on my desk and

poisoned atmosphere at a time when VW

something mechanical, a car for instance,”

made it clear that the US-Passat needs

is undertaking huge structural changes

he said. “And Google, Apple and others

to be upgraded.” They didn’t, and as a

and battling to increase profitability and

have realised that cooperating with us has

result there is now a new leadership team

reverse falling car sales in the US, Brazil

the advantage of working together with

in place. “My personal focus is now very

and elsewhere.

people who understand the hardware,

much aimed at the US,” says Winterkorn.

VW has been cooperating with Google

hence our cooperation with Google.”

Last year VW embarked on an ¤5 billion

Even if they solve their battles, the question as to who will take over the

cost-cutting plan as the profit margin of

reins from Piech when he retires in 2017

building cars, that doesn’t worry

its core passenger car brand is too low.

remains open. Industry observers say he

Winterkorn. “For lower speeds and electric

“When it comes to the productivity of our

would like his successor to be Ursula,

cars, I can imagine Google and Apple

core competitors, we definitely have some

his wife who famously takes pride in

getting that right. But when you are talking

catching up to do,” admitted Winterkorn.

test driving the new models herself.

of speeds in the region of 100km/h, the laws

He is consequently reducing the number

But it is said the Porsche family favours

of physics rule, and not software.” However,

of models VW produces and getting rid of

Winterkorn. “For them he is the desired

Winterkorn fully supports the concept of

options that are used in less than five per

candidate to take over from Piech as

autonomous cars and has told the German

cent of VW models.

chairman,” said Dietmar Hawranek of Der

As for the threat of Apple and Google

Spiegel magazine. “But the Porsches can’t

government that it needs to put the right regulations in place, otherwise “all the

STILL, THE QUESTION remains

shoehorn Winterkorn in against the will of

research will emigrate to California”.

whether Winterkorn has really won

the Piechs, and Piech can’t install his wife

the battle against Piech. Winterkorn’s

without the approval of the Porsches.” The

predecessor Bernd Pischetsrieder resigned

next VW battle might well be looming.

Before the blow up with Piech, Winterkorn had already put his focus

Portfolio

Economy

Japan’s Savings Problem The Japanese used to have the highest savings rate in the world, but that is changing and complicating the country’s recovery, reports Jonathan Soble.

akazumi Fukuoka should be

country’s economy. The country’s savings

stagnant wages mean many cannot do

exactly what Japan needs to

rate, long one of the highest in the world,

so without short-changing their futures.

get its economy moving again.

is now below zero. In short, Japan’s

Japan’s large aging population is already

Fukuoka, an art director at a small online

citizens are spending more than they earn.

drawing down nest eggs, and younger

media company, has an active and free-

By comparison, the rate in the United

people aren’t filling the void.

spending social life. A part-time DJ, he

States, where consumers have a reputation

often buys records in the music shops of

for living beyond their means, is on the

sharp increase in so-called zero savers

Tokyo’s trendy Shibuya district. He eats

rise, hitting 5.5 per cent in January.

– those with little or no financial assets,

and drinks out regularly, too. But his

The reversal is stark. For decades,

A particularly pressing concern is the

like Fukuoka. About 40 per cent of

salary has barely budged in recent years.

many Japanese hoarded cash, a habit

unmarried adults are zero savers, and 30

So he is spending every yen he earns.

that took hold in the years after World

per cent of families are, according to the

“I’m not saving,” said Fukuoka, 30.

War II, when government protections

Central Council for Financial Services

“There are people my age who are married

like unemployment insurance and public

Information, a research group affiliated

with kids and have their own houses, but I

pensions were scarce. Today, Japan is in

with Japan’s central bank. A decade ago,

don’t have any of that.”

a bind.

the ratio for both groups was about 10

It is an increasingly common refrain

Prime Minister Shinzo Abe is trying to

in Japan – and one that complicates the

inject life into the lacklustre economy, in

government’s efforts to revitalise the

part by getting people to spend more. Yet

percentage points lower. Like the Japanese population as a whole, Kyoko Inadome is a former saver. Portfolio

about 40 per cent of unmarried adults are zero savers, and 30 per cent of families are, according to the Central Council for Financial services information, a research group affiliated with Japan’s central bank. During college, she put away enough money from part-time jobs that she was able to move to England, pay for a second diploma, then return home to Japan with a nest egg worth two million yen (or about $17,000). “My money went further than I thought,” she recalled. “I worked a lot and set aside everything I could.” A decade later, Inadome, 40, a music therapist,

unionised, full-time employees at blue-

books promise to help readers with low

says her bank balance has hardly changed.

chip corporations. Many who don’t belong

incomes stabilise their finances. In the

She moved out of her parents’ house only

to that privileged group aren’t spending

past, his core audience was people in

last year.

more; they just have less to set aside.

their 50s and 60s who were planning for

Now, there are growing fears about

retirement. “Now there are more young

Japan’s drop in savings has

the ability of an overburdened pension

people,” he said. “Their salaries aren’t

coincided with an erosion in pay and

system to support them when they reach

going up and they don’t know what to do.”

job security for many workers, especially

retirement age.

younger ones. On March 18, a group of

“A lot of people have vague worries about the future,” said Mitsuaki

and Panasonic, announced their biggest

Yokoyama, a financial planner and author

pay increases in years. But they apply

of a series of best-selling books on how

to an increasingly rare kind of worker:

to save money. Yokoyama’s most popular

Illustration: Charlie Banalo. Photos: Getty Images

prominent companies, including Toyota

May 2015

Top: Prime Minister Shinzo Abe of Japan. Below: (L-R) Mitsuaki Yokoyama, a financial planner and author of personal savings guides; Takazumi Fukuoka, an art director at a small online media company in Tokyo.

Economy

Personal savings were a main ingredient in Japan’s post war economic miracle. Through the 1970s and 1980s, the government encouraged people to save with tax breaks and other incentives. The goal was to secure plentiful domestic funding for the country’s expanding industries. “There were a lot of policies that promoted savings,” said Arthur Alexander, a professor at Georgetown University who follows Japan’s economy closely. “They’re all gone.” Japanese households saved nearly a quarter of their incomes in the mid-1970s. While the savings rate declined after that, it remained persistently higher than in other countries even through the 1990s. The decline has accelerated recently, as baby boomers have retired and begun to

a contractor who manages the online

pay issue, brokering meetings between

live off money they set aside during their

shopping site of an apparel company. “But

executives and union leaders and dangling

working lives. It’s a vast demographic

our savings isn’t increasing, so I don’t feel

the prospect of corporate tax cuts as a

group – a quarter of the population is now

satisfied or secure.”

reward for wage hikes.

older than 65. Wages for those who are

The national household savings rate

Most experts say it would be a good

still working have been stuck at the levels

slipped to minus 1.3 per cent in the last

thing if businesses hoarded less and

of two decades ago. And more workers are

fiscal year, according to a government

spent more. But Abe’s aim is a delicate

on temporary contracts that don’t entitle

report issued in December. The situation

one, because the same pile of savings is

them to traditional bonuses – paid twice

adds an extra layer of complexity to the

supporting Japan’s huge government debt.

a year and at retirement, a system that

task facing Abe.

helped past generations to save.

Japan isn’t about to run out of spare

Naohiko Baba, the chief Japan economist at Goldman Sachs, worries

cash soon. Thanks to the high savings

what will happen if both households and

incomes, so I feel like we should be able

rates of the past, about 1,400 trillion

to save more,” said Kozo Shimoda, 37,

yen of household financial assets remain

companies turn their backs on saving. At the equivalent of 2 ∏ years of economic

tucked away, or more than $11.5 trillion.

output, Japan’s debt load is the heaviest

And Japanese businesses have replaced

in the world. Yet about 90 per cent of the

households as avid hoarders of cash.

debt is held locally, meaning that Japan

In an era of slow growth, they see few

is, in effect, lending to itself. That is one

investment opportunities, so profits

reason, economists say, that Japan has

simply pile up in the bank. Corporate cash

avoided the kind of bond market pressure

reserves now amount to about 40 per cent

that has sent less indebted countries like

of the Japanese stock market’s value, twice

Greece into crisis.

“Between my wife and I, we have two

Top: ‘Abenomics’ has injected some life into Japan’s economy, but problems remain. Below: Takeshi Kaneko (right) sold his family business to a Chinese investor after failing to find a Japanese buyer.

the ratio in the United States. One goal of Abe’s economic programme,

Baba calculates that Japan could run short of the savings it needs to fund the

known as Abenomics, is to get this idle

debt locally by about 2020. After that, it

cash back into the hands of individuals

would need to turn to foreign investors – a

– and ultimately coursing through the

potentially destabilising shift. “Once we

economy – in the form of wage increases

have to rely on foreign investors to finance

or higher returns to investors. The

the debt,” he said, “that could be the

prime minister has lobbied hard on the

beginning of a disaster for Japan.” Portfolio

Industry

Prime Farmland Inside a Factory Growing crops indoors in a vertical environment is still a nascent industry, but it is attracting big investors, reports C.J. Hughes.

chools, sports arenas and

AeroFarms, a company producing herbs

Goldman Sachs is picking up the bulk

apartment buildings have sprouted

and vegetables in an indoor, vertical

of the $39 million cost for development

in recent years in the troubled city

environment. Instrumental in reviving

of the AeroFarms Ironbound complex,

of Newark, New Jersey, as part of an effort

parts of Newark, the RBH Group sees the

using equity, debt and bridge financing.

to revitalise it. Now, it’s kale’s turn to take

venture as a way to create jobs, clear a

Prudential Financial, whose headquarters

root in a most unusual spot.

shabby block and supply a healthy, locally

are now in Newark, is also an investor. The

grown food source.

project has been awarded $9 million in city

A former Grammer, Dempsey and Hudson steel plant in the Ironbound

The complex, a group of metal-block,

and state money, in tax credits and grants.

section of Newark is being razed by the

low-slung buildings, some connected,

The new 6,410-square-metre complex

RBH Group to make way for a giant

some not, also has prominent backers.

will also contain labs, offices and a café and

custom-built complex for its sole tenant,

Through its Urban Investment Group,

is expected to be finished next year. Portfolio

food is cultivated without soil or sun,

wants, when it wants it, how it wants it and

past that took advantage of empty lots or

while proponents say vertical farms are

where it wants it,â&#x20AC;? said David Rosenberg,

evolved in rooftop greenhouses, AeroFarms

extremely efficient and have a small

chief executive of AeroFarms. The

employs so-called aeroponics and stacks

environmental impact. They take up

company has housed a smaller, temporary

its produce vertically, meaning plants

minimal space, grow round the clock and

operation in an apparel store downtown.

are arrayed not in long rows but upward.

are near the markets that sell their crops,

Scheduled to open this autumn inside

Because the farming is completely indoors,

reducing the need for long truck trips.

it relies on LED bulbs, with crops growing

Vertical farms are also far less susceptible

in cloth and fed with a nutrient mist.

to the vagaries of unpredictable weather

Unlike urban vegetable gardens of the

Critics of vertical farming have complained that taste can suffer when May 2015

like droughts or floods. â&#x20AC;&#x153;We can deliver anything the plant

Opposite page: Employees monitor a tray of lettuce at the temporary offices of AeroFarms in Newark. Above: Employees chat near vertical growing trays at AeroFarms.

Industry

thomann said he welcomed company in a small but growing sector. “We all need to collaborate, since we really are competing with traditional farms,” which still control 95 per cent of the market, he said. “We all need to work together to make this a viable category.” the new Ironbound site, AeroFarms projects it will reap up to 30 harvests a year, or over 900,000 kilograms of greens, including kale, arugula and romaine lettuce, Rosenberg said. At that output, AeroFarms would be among the most productive vertical farms in the country, analysts say. But in an industry where profitability is elusive, success is hardly guaranteed. Indeed, AeroFarms is still lining up

lofty nine-metre ceilings. In contrast, FarmedHere, an Illinois

nearly 50 Whole Foods markets, plus other grocery stores, said Mark Thomann, the

customers, which ideally will include

company, grows plants in about 4,366

grocery chains, schools and restaurants,

square metres of a low-slung 8,640-square-

company officials said. Not yet profitable,

metre former box factory near Chicago

in a small but growing sector. “We all

the company, which plans to expand to 70

Midway International Airport. Founded

need to collaborate, since we really are

employees, from 20, is also seeking venture

in 2011, FarmedHere sells its produce to

competing with traditional farms,” which

chief executive. Thomann said he welcomed company

capital funding. Comparing vertiCal farms can be tricky. Unlike AeroFarms, some sell whole plants, or by-products like juice and salad dressing. Also, because the height of rooms in vertical farms is often more important than their width, floor measurements can be misleading, some farmers say. Still, in real estate terms, the Ironbound operation would be Photo: Reuters

among the country’s largest. About twothirds of the complex, or 4,274 square metres, will be dedicated to crops, according to the company, in rooms with

Above: Different varieties of lettuce grow in vertical trays. Right: New methods of growing vegetables are tested at Panasonic Corp. in Japan. Portfolio

still control 95 per cent of the market,

especially the Ironbound section, may

he said. “We all need to work together to

be so affordable is its legacy of pollution.

make this a viable category.”

Crisscrossed by truck routes and flight

But in a sign of the risks inherent to

paths, the Ironbound also was the

Above: Ron Beit, a founding member of RBH Group, in a former steel plant that will be razed by the company to make way for AeroFarms.

the industry, other fledgling companies

home of a federal Superfund site where

trying to grow crops in small spaces have

Agent Orange, the toxic defoliant, was

have been discovered on the long block

sputtered and failed. For example, Alterrus

manufactured in the mid-20th century; the

containing AeroFarms’ new farm. In fact,

Systems, maker of the shelf-like VertiCrop

site has since been cleaned up.

the swimming pool in an athletic centre

system, with a greenhouse-like farm on

Similarly, over the years, toxins like lead

there had to be constructed on an upper

a sun-dappled roof of a parking garage

floor, over fears that harmful chemicals

in Vancouver, British Columbia, declared

could seep into the water, said Drew Curtis,

bankruptcy this year. If the industry is nascent, it can still attract big backers. Previously, both Goldman and Prudential teamed with RBH on Teachers Village in Newark, a $160 million project that is creating a mix of schools, apartments and stores from a patchwork of warehouses and parking lots. But brokers say that Newark, about 16 kilometres west of New York, also appeals to startups because of its dirtcheap rents. “Companies are starting to realise that doing business in Newark is significantly cheaper,” said Ron Beit, RBH’s founding member. One reason that Newark, and May 2015

One reason that Newark, and especially the Ironbound section, may be so affordable is its legacy of pollution. Crisscrossed by truck routes and flight paths, the Ironbound also was the home of a federal Superfund site where Agent Orange, the toxic defoliant, was manufactured in the mid-20th century; the site has since been cleaned up.

a director of the Ironbound Community Corp., a local non-profit that has worked to remediate the area. But while one parcel may still be a brownfield, most of the contaminated soil has been carted away, Curtis said. Besides, AeroFarms sits on land that has never been polluted, according to Beit, who added that its water supply would come from pipes, and not wells, anyway. And because only four trucks will service the farm daily, AeroFarms is expected to have a light environmental footprint: “Every use at that site would have probably added truck traffic, but this will be far less than other uses,” Curtis said.

Currency

Cost of the Strong Dollar

he dollar’s sharp rise in recent months has left Robert Stevenson and Eastman Machine, his

family’s 127-year-old Buffalo, New York, company, feeling the heat on both sides of

The strengthening dollar against other currencies, especially the euro, is hurting US exports and company bottom lines, reports Nelson Schwartz.

the Atlantic. Confronted with a steep drop in the value of the euro against the dollar, customers in Europe warn that they can no longer afford to buy Eastman’s US-made cutting equipment without deep discounts. Buyers in America, meanwhile, are demanding lower prices from Stevenson, too, as European-based rivals take advantage of the suddenly stronger dollar, which allows them to reduce prices on the machines they export to the United States without squeezing profits. In both cases, Stevenson has been forced to compromise, cutting prices and sacrificing profit margins to avoid losing business. “We are hardly making money, but we need to keep these customers and keep our factory going,” he said. “This wouldn’t have happened a couple of years ago.” Indeed, the sharp rise of the dollar threatens to undercut one of the principal drivers of the recovery in recent years: strong export growth for US companies. At the same time, it is also raising concerns among policymakers at the © 2015 New York Times News Service

US Federal Reserve. Recently, Janet L. Yellen, the Fed chairperson, warned that the stronger dollar was likely to weigh on exports, producing “a notable drag this year on the outlook.” In March, McCormick & Co., the spice producer, said the robust dollar would hurt results in the months ahead; other

Portfolio

Right: Robert Stevenson, centre, chief executive of Eastman Machine. Below: The strong dollar has affected the profitability of US companies such as Tiffany & Co.

well-known US companies like Tiffany and Oracle made similar pronouncements recently. More warnings are expected as companies report earnings for the first quarter of 2015. Although the euro has recently rebounded slightly, with one euro now worth just less than $1.10, the shared currency used by 19 countries in Europe is down sharply from $1.25 in December. Other currencies from different parts of the world, including the British pound, the Australian dollar, the Japanese yen

Photos: Getty Images, Reuters

and the Brazilian real, have followed a similar trajectory. Globally, the dollar’s strength means US-made products – unless their manufacturers adjust prices – effectively cost about 15 to 20 per cent more to foreign consumers than they did a year

“Every company out there will blame the dollar in some way, shape or form, but there is a reason for that,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman. “Currencies are the hardest thing in the world to figure out because there are so many moving parts.”

ago. Few economists expect the dollar to

the dollar in some way, shape or form,

reverse course anytime soon; many expect

but there is a reason for that,” said Scott

the euro and the dollar to reach parity

Clemons, chief investment strategist at

in the coming months for the first time

Brown Brothers Harriman. “Currencies

since 2003.

are the hardest thing in the world to

Currency swings, though, can serve as a get-out-of-jail-free excuse for executives when their company’s numbers fall short of Wall Street’s expectations. “Every company out there will blame

May 2015

figure out because there are so many moving parts.” The exact causes vary from country to country, but in most cases the dollar is surging because the United States

Currency

Above: Janet L. Yellen, chairperson of the Federal Reserve, has warned the strong dollar is hurting US exports. Right: The strong dollar has made travel more affordable for Americans going abroad. Below: Mohamed Hassan assembles a round knife cutter at Eastman Machine.

remains an island of relative strength in the global economy. Another important contributing factor is the expectation that the Fed will increase interest rates later this year, even as the European Central Bank is keeping them low in a bid to stimulate the long-dormant economy there. That anticipated gap in future yields, along with a desire among global investors for a safe harbour as tumult continues in Russia and the Middle East, is drawing cash from overseas into dollardenominated investments, pushing the value of the dollar higher. There are economic benefits, as well as costs, from this shift. Imported goods are cheaper for US consumers, limiting the threat of inflation and potentially giving the Fed more time before a rate rise kicks in. Similarly, travel abroad is becoming more affordable for US tourists. Still, for businesses that depend on sales overseas, and executives like Stevenson, the dollarâ&#x20AC;&#x2122;s surge has meant a combination of resignation and adaptation. In Eastman Machineâ&#x20AC;&#x2122;s case, it has meant cutting costs wherever possible, importing more of the components that go into the products that Eastmanâ&#x20AC;&#x2122;s 125 workers in Buffalo assemble instead of Portfolio

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Currency

Left: Spice producer McCormick & Co said the robust dollar will weigh on its exports. Below: An inspector looks at a blade prior to shipping at Eastman Machine, a cutting machine manufacturer in Buffalo.

added. “We’re very competitive in terms of productivity. But the Indian market is taking off and we are being forced to manufacture outside of the US to stay competitive there.” With more volatility expected in the currency markets in the months ahead, many executives admit they have little control over such global economic shifts. “It’s not that easy in the short term to move production one way or another, even though we have factories all over the sourcing them domestically, and moving

sells in the United States and Europe

world,” said John Selldorff, who runs the

some production to the company’s other

will continue to be made in Buffalo,

North American operations of Legrand, a

factory, near Shanghai.

Stevenson said he is shifting production

global manufacturer of electrical and data

aimed at the fast-growing Indian market

products based in France.

“We are shopping more overseas,” Stevenson said. “We’re a microcosm of what’s happening at a lot of US

to China to gain an edge in pricing. “I’m not losing so much business,” he

Some companies employ complex hedging strategies using futures and

companies. It costs the US jobs, but we’d

said, “but it is hurting American jobs and

other financial instruments. But that has

be foolish not to.”

profit margins.”

costs of its own, Selldorff cautions, adding

For example, Stevenson is planning to

Were it not for the price pressure from

that he would rather make bets on what

buy a new control system for his factory

European customers and the need to

he knows – electrical equipment – than

that is made in Germany rather than the

produce more of his products in China to

on the dollar’s next move.

United States. With a price of several

sell to India, he figured, Eastman would

hundred thousand dollars, the currency

employ 10 to 20 more workers in Buffalo

here, this stuff ebbs and flows,” he said.

savings are substantial.

than it currently does. “This has nothing

“These are trends that you just have to

to do with the wage scale,” Stevenson

work around.”

And while the machines Eastman

“In the dozen-plus years I’ve worked

There are economic benefits, as well as costs, from this shift. Imported goods are cheaper for US consumers, limiting the threat of inflation and potentially giving the Fed more time before a rate rise kicks in. Similarly, travel abroad is becoming more affordable for US tourists.

Portfolio

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Owners Edition 2015 Issue 3

Supply Chain

Squeezing Their Suppliers Large food companies are now demanding 90 to 120 days to pay their suppliers, a move that is squeezing small companies, reports Stephanie Strom.

ow would you like to have 120

now asks for 90 days to pay its bills.

often were a signal that a company was

Mondelez, Mars and Kellogg seek 120

Adopting a tactic widely

experiencing worrisome cash flow problems,

days. The list of companies doing the

used by 3G Capital, the Brazilian private

but these days big, robust companies are

same reads like a grocery store version of

investment group behind the recent merger

imposing new schedules on suppliers as a

Who’s Who – Church & Dwight, Procter

of Heinz and Kraft Foods, a growing

business strategy, analysts say.

& Gamble and Heinz are among those

In the past, extended payment terms

days to pay your creditors?

Bea Chiem, a credit analyst who follows

wanting more generous payment terms, suppliers said.

packaged goods companies are asking their

food companies at Standard & Poor’s,

suppliers to give them as much as four

offered several reasons that companies

months to pay their bills – even though

might use the tactic: “Their recent

their capital, bankers who work with

they typically require payment from their

performance has been soft, many are in

supply chain finance say. By pushing out

own customers in 30 days. The tactic has

the middle of restructuring and all are

payments to suppliers to three and four

gained in popularity ever since an affiliate

trying to balance the need for cash for

months, companies have more cash for

of 3G Capital put it to use after it bought

their business and shareholder returns.”

any number of projects. Mondelez, for

Anheuser-Busch in 2008.

Diageo, the European spirits company,

Most are trying to maximise use of

one, is buying back stock. Kellogg is in Portfolio

the middle of a restructuring. Procter

Marketing Agencies Association called on

interest conditions,” he told Advertising

& Gamble’s move to extend its payment

its member advertising agencies to “strike”

Age in an interview shortly after Diageo

terms to 75 days in 2013 has probably

in April against Anheuser-Busch InBev,

moved to extend its payments to 90 days.

added $1 billion so far to its cash flow,

the beer behemoth created by an affiliate

Stephen Brock is surprised that a

according to one estimate.

of 3G, after the company began seeking

revolt against Anheuser-Busch InBev

new terms. Those included acceptance of

did not happen sooner. Brock, the

“EVENTUALLY,” SAID V.G. Narayanan,

a payment period longer than 120 days

owner of Supplied Industrial Solutions

chief of the accounting practice unit at

and a request for pro bono work.

in Granite City, Illinois, had provided

Harvard Business School, “the additional

Martin Sorrell, the chief executive of

valves, processing instrumentation and

financing costs that suppliers incur because

WPP Group, the advertising titan, has

mechanical systems to Anheuser-Busch,

they aren’t being paid promptly work their

warned that such practices could turn

maker of Budweiser and other beers.

way back into higher prices for consumers.”

suppliers into lenders. “I don’t think our

Anheuser-Busch was bought by an

The practice is often crippling for

purpose is about banking – we’re not a

entity controlled by Jorge Paulo Lemann,

suppliers, especially smaller businesses

bank – or extended payment terms or

Marcel Telles and Carlos Alberto Sicupira,

that have little cushion. In Britain, the

agreeing to supply payment terms in low-

also the principals behind 3G, and merged

May 2015

into InBev in 2008. A year later, Brock was told that he would no longer be paid for his goods in 30 days; rather, AnheuserBusch InBev imposed a 120-day period. The beer giant represented about five per cent of Brock’s sales. He ultimately concluded he could better afford to lose the business than wait four months to be paid. “This really had a dreadful effect on our bottom line,” he said. “And because it hit right in the middle of the recession, it took us about a year and a half to recoup those lost revenues.” He still does a small amount of business with Anheuser-Busch InBev. The company pays him using a credit card. “Banks have tightened up lending, especially to small businesses like mine, so it becomes even harder to manage,” Brock said. “You still have a payroll to make, your own suppliers to pay, electric and other utility bills – they can’t wait four months for payment.” So far, most of the pressure seems to fall on so-called ancillary suppliers, those providing companies with packaging,

Photos: Getty Images, Reuters

advertising, equipment and so forth.

Left: Stephen Brock, the owner of Supplied Industrial Solutions, who concluded he could better afford to lose business from Anheuser-Busch InBev than wait four months to be paid. Top: A shopper at a grocery store. Above: Women from a local cocoa farmers association called BLAYEYA work at a cocoa farm in Djangobo.

Diageo, for example, has asked for more extended terms from European suppliers of components for its manufacturing plants, but not from suppliers of sugar, an ingredient it cannot easily do without or readily find alternative providers for. That may be changing, though. Two major commodities houses, which supply raw materials like coffee, flour, sugar and Portfolio

Supply Chain

Bottom left: Heinz Chairman, President and CEO William R. Johnson (L) and Alex Behring, Managing Partner at 3G Capital, announce that Heinz has agreed to be bought by Berkshire Hathaway and 3G Capital during a press conference in Pittsburgh. Top: Sir Martin Sorrell, Chief Executive Officer of WPP.

inordinate amount of risk in their lives,” Tamir said. Diane Shand, senior director of S&P’s consumer products group, said companies asking for longer payment terms today often worked to help their suppliers shoulder the burden. Banks have developed “supply chain finance” practices that will arrange loans to a supplier on the same terms they offer that supplier’s big customer, say, or buy a receivable at a slight discount so the supplier does not have to carry the receivable on its books. “It’s more of a trade-off these big companies are offering,” Shand said. “They may tell suppliers, OK, now we’ll pay you in 120 days instead of 60 or 90 but give you more business, or offer to pay in cash cocoa to food companies, confirmed that

she was concerned that such businesses,

in five or seven days if the supplier will

many of their customers were demanding

like Cargill, Bunge, the Noble Group and

give them a small discount.”

longer payment cycles.

Archer Daniels Midland, were coming under pressure.

But outside the financial industry, few observers approve of the trend. “I think

IRIT TAMIR, A senior adviser in the

“These things tend to make their way

the whole idea is very bad,” Narayanan of

Oxfam America programme aimed at

down the supply chain, and we know that

Harvard said. “They essentially are going

ensuring that big global companies do

the small farmers who produce palm oil,

to their suppliers for credit, rather than

not take advantage of small farmers and

coffee, cocoa and the other commodities

their banks – and for big, creditworthy

suppliers in the developing world, said

those companies need already have an

companies like these, that’s ridiculous.”

May 2015

Finance

Cyprus Still Scarred by Banking Crisis

Nicosia, the formerly booming capital,

Two years ago, Cyprus’ financial system was in crisis. The Eurozone implemented a rescue package that Cypriot bank depositors were forced to help pay for, with far reaching results, reports Jack Ewing.

one defunct auto dealership, a Renault

does not have the luxury of forgetting. Daily reminders include the rows of downtown shops that once sold luxury clothing brands but now stand empty. At Laguna sedan, under a thick layer of dust, is still on display behind dirty windows. Savvides lost hundreds of thousands of euros that he had deposited in Cyprus banks – money seized in the rescue programme to cover bank losses. Two

years later, his experience, and that of

tens of thousands of other Cypriots caught he financial world has pretty

contentious, internationally brokered

up in the crisis, offers lessons that could

much moved on since Cyprus

“bail-in,” in which for the first time

soon apply to Greece if it cannot reach

was briefly the epicentre of

many bank depositors were forced to

agreement with its creditors.

market anxiety. Two years ago, the country’s banks failed en masse, ATMs were rationing cash, and the integrity of the Eurozone hung in the balance. But after a

help pay for a Eurozone rescue, Europe’s

In retrospect, it is clear that European

policymakers soon turned their attention

leaders, international creditors and bank

to other issues.

regulators could have done more to limit

Yet Christos Savvides, managing director of an advertising agency in

the economic upheaval caused by seizing part of depositors’ money above the level

Portfolio

Among Cypriots, the feeling is widespread that as a country of fewer than one million people, geographically closer to the Middle East than to Europe and with a reputation as a haven for Russian cash, they were used as lab rats to test new and poorly conceived policies. of 100,000 euros covered by deposit insurance, a threshold equivalent to about $105,000 at the current exchange rate. In fact, a new European Union law written after the crisis would probably have

before many of the biggest and most

is widespread that as a country of fewer

exempted Savvides, because the deposits

sophisticated investors had fled. More

than one million people, geographically

in his case actually belonged to his clients.

recently, foreign money has been trickling

closer to the Middle East than to Europe

But that law came too late for him and

back into Cyprus, including a big bet by

and with a reputation as a haven for

other Cypriots.

Wilbur L. Ross Jr., the American investor

One surprising lesson may be that

known for his appetite for tough cases.

Photo: Getty Images

capital controls â&#x20AC;&#x201C; restrictions on withdrawals and on money transfers out

CypRus Also REpREsEnts what

of the country â&#x20AC;&#x201C; were not as disruptive as

many Europeans see as insensitivity in

feared, but did help to prevent even more

Brussels, Frankfurt, Germany, and Berlin

money from leaving Cyprus. If anything,

toward people like Savvides who must

some economists say, the restrictions

suffer the consequences of Eurozone crisis

should have been applied sooner,

management. Among Cypriots, the feeling

May 2015

Opposite page: People begin to arrive for an anti-austerity demonstration outside a European Central Bank Governing Council meeting in Nicosia, Cyprus. Above: (Clockwise) John Hourican, chief executive officer of the Bank of Cyprus; During the crisis customers lined up outside banks to withdraw their money; A closed shop in downtown Nicosia.

Finance

Bank of Scotland and was hired by the Bank of Cyprus board in October 2013, said he empathised with Cypriots who believe they were treated poorly by European Union institutions. Account holders at the Bank of Cyprus lost almost half their money above the ¤100,000 level, receiving stock in the bank as compensation. Those shares have since plummeted in value. Uninsured depositors in Laiki Bank, also known as Cyprus Popular Bank, the nation’s secondlargest lender, lost everything because the bank failed. European officials argue that if depositors in Cyprus had not been forced to pay, taxpayers would have had to pay instead. “Burden-sharing with private Russian cash, they were used as lab rats to

shrank 0.7 per cent in the fourth quarter

investors was not only inevitable, but it

test new and poorly conceived policies.

of 2014, compared with the previous

also significantly reduced the financial

quarter, the worst performance in the

impact on Cypriot taxpayers and

Paschalides, a Cyprus lawyer and former

European Union. And more than half of

protected the vast majority of depositors,”

government minister who is suing the

the outstanding bank loans in Cyprus are

Benoît Coeuré, a member of the Executive

European Commission and the European

classified as nonperforming – a legacy of

Board of the European Central Bank,

Central Bank on behalf of Savvides

the crisis and a huge obstacle to growth.

said in a recent interview with Politis, a

John Hourican, chief executive of the

Cypriot newspaper. The same thing will

“It was an experiment,” said Antonis

and others who say their deposits were seized illegally. “We make an example,”

Bank of Cyprus, the country’s largest

not happen again because of new banking

Paschalides said, describing what he

commercial bank and one of the few

regulations that require lenders to build

contends was the attitude of European

left after the 2013 crisis, conceded that

up greater financial buffers, Coeuré said.

leaders. “If worst comes to worst, Cyprus

the level of damaged loans was “eye-

will collapse.”

wateringly high.”

Cyprus has survived, and by some measures is doing better than expected.

Hourican, an Irishman who previously ran the investment bank at the Royal

The news from Nicosia is not all bad. At Bank of Cyprus, deposits rose in the fourth quarter, reversing an outflow

But the economic situation remains dire. Unemployment, though falling from a peak of 16.6 per cent in December, is still above 16 per cent. The economy

Above: Shoppers at a central market in downtown Nicosia. Left: A woman cleans a closed shop. European leaders, international creditors and bank regulators could have done more to limit the economic upheaval in Cyprus.

Portfolio

Clockwise: Christos Savvides, managing director of an advertising agency, lost hundreds of thousands of euros in bank deposits; Antonis Paschalides, a lawyer representing several people suing the European Central Bank and European Commission; A man reads a paper at the front door of his shop in downtown Nicosia.

that began before the 2013 crisis. And the last restrictions on transfers of money

together own an 18 per cent stake. The bet on the bank is a bet on the

Based on what they consider Europe’s ham-handed handling of the rescue efforts

outside Cyprus, imposed two years ago,

country, Ross said. Speaking by phone

two years ago, few people expect anyone

were lifted in April, said Chrystalla

from Florida, he argued recently that

outside Cyprus to care.

Georghadji, governor of the country’s

the Cypriot economy had fundamental

central bank.

strengths, including an underexploited

a former bank worker who took a

One person who is bullish on Cyprus

tourist industry and potential natural gas

severance package during a downsizing

is Ross, the American investor, who has

deposits offshore. Still, despite assurances

drive and is now is trying to establish

also put money into battered Irish and

from bankers that they have no interest in

a mediation business to help debtors

Greek banks. Ross, who was elected

evicting people from their homes or forcing

negotiate with creditors.

vice chairman of the Bank of Cyprus in

small businesses to close, among Cypriots

Referring to the behaviour of the

November, heads a group of investors who

there is profound unease about what will

European Union in 2013, Phokas said,

happen when new legislation gives banks

“Instead of helping us, they acted like they

more power to go after debtors.

didn’t know us.”

“It was an experiment,” said Antonis Paschalides, a Cyprus lawyer and former government minister who is suing the European Commission and the European Central Bank on behalf of Savvides and others who say their deposits were seized illegally. “We make an example,” Paschalides said, describing what he contends was the attitude of European leaders. “If worst comes to worst, Cyprus will collapse.”

May 2015

“We feel bitter,” said Christos Phokas,

Logistics

Portfolio

A Luxury Countdown The quicker a cruise ship is turned around between voyages, the more profitable it is. This results in an intricate logistical ballet, reports Jad Mouawad.

nce a week, after touring the Caribbean, the cruise ship Oasis of the Seas calls into its

performance in the past two years.

what is called “turnaround day.”

Bookings fell after the grounding of Carnival’s Costa Concordia in 2012, a

when it is flying, keeping a cruise ship

tragedy that killed 32 people. That was

out at sea is essential for its profitability.

followed the next year by the Carnival

But instead of turning over a few hundred

Triumph’s loss of power at sea.

airline passengers, this ship offloads

The Oasis, which is owned by Royal

6,000 people, takes on new supplies and

Caribbean, caters to middle-class

welcomes 6,000 more travellers – all in

vacationers – there is a casino, an aqua-

less than 12 hours.

theatre for highflying diving acts, and a

Logistics are essential on turnaround

Broadway-style production of Cats – and

day, at once the first and last day of a

on a recent turnaround day during the

cruise, and the busiest time for the ship’s

winter high season, The Oasis was packed

2,140 crew members. Oasis docks at about

with families, retirees and young couples

6 am and leaves by 4:30 pm. In that time,

looking for a break from the cold.

more than 12,000 bags need to get off the

Before heading for a seven-day cruise

ship, food must be stocked, beds made

to the Bahamas, The Oasis needs to stock

and bathrooms cleaned.

everything a small city might need. The

“Embarkation day is frantic,” said Rodolfo

The trade group expects the industry to grow again this year after a lukewarm

home port in Fort Lauderdale, Florida, for Just as an airplane makes money only

May 2015

Lines International Association.

Oasis rarely picks up any provisions

Corrales, the ship’s provision master, whose

during the cruise, only topping up its fuel

job is to keep the vessel fully stocked for its

tanks while visiting ports.

journey. “It’s not just busy, it’s crazy busy.”

Bread is baked onboard, and 2,000

Born in the 1970s, the modern cruise

tons of fresh water a day are produced

industry now counts more than 400 ships

through a reverse-osmosis desalination

offering cruises tailored to many budgets

system. A treatment system handles

and whims – from luxury ships sailing

all the wastewater generated by the

the Mediterranean Sea to mass-market

passengers and crew. That system, which

holidays in the Caribbean Sea, still the

processes 1,200 tons of wastewater a

most popular voyage for cruisers. Last

day, uses bacteria to break down waste,

year, more than 17 million passengers took

then mechanical and chemical systems to

a North American cruise, up from seven

remove solids, and finally ultraviolet light

million in 2000, according to the Cruise

to disinfectant. The water at the end is

Logistics

clean enough to drink, but is discarded in

legion of workers hustled along the main

service for more than 1,800 days, or five

the sea. Any remaining solids are held in

artery, a service corridor known as I-95

straight years.) Royal Caribbean, which

special tanks to dry and be incinerated.

that runs nearly the length of the ship and

has the world’s three largest cruise ships,

allows fast access to any section.

doubled its revenue in the past decade

Almost all trash is recycled aboard or repurposed. Bottles, cans and compost are

Royal Caribbean has built the largest

to $8 billion last year. And profit per

crushed and frozen in cold-temperature

cruise ship terminal at Port Everglades,

passenger has risen, as well, to $148 last

rooms to prevent the spread of bacteria.

in Fort Lauderdale, to handle the flow

year from $136 10 years ago. The company

Engine heat is used to heat laundry-room

of passengers from Oasis and its twin,

is also moving away from traditional, all-

water and showers; air-conditioning

The Allure. To prevent long immigration-

inclusive formulas to offering services and

condensation is also used as a source for

control lines from forming, departures are

amenities for an extra cost.

laundry water.

staggered over a few hours. Passengers begin to leave their cabins

A few years ago, Royal Caribbean brought in experts in industrial

STANDING NEAR ONE of the cargo

about 7 am and must be off the ship by

productivity, including DHL and the

doors on the dock, Lincoln Brooks, the

10:30 am. The main bottleneck is juggling

German carmaker Porsche, to help

ship’s inventory manager, keeps an eye

the flow of bags. Passengers are handed

manage complex flows on the ship.

on the clock. Around him is a jumble of

colour-coded tags for their luggage, which

trucks, forklifts and carts all moving at a

is collected the night before the ship

art,” said Martin Rissley, the ship’s hotel

steady clip. Every step is timed to avoid

reaches the port. About 15 to 30 minutes

director. “The minute efficiencies you

bottlenecks inside the narrow galleys as

after the last passenger leaves, newcomers

can create in the process make a big

two-dozen cold storage rooms slowly fill

start trickling in through one of two

difference in the end.”

up with fresh vegetables.

gangways linked to the terminal ashore.

“I need to keep things moving,” he said. “I can’t afford for the captain to call me.” The countdown before sailing started deep inside the ship, as well. A small

Packing in passengers has been a

“We have everything down to a fine

Crew members, who come from all over the world (many are from the

winning formula for the business. (Until

Philippines), work long shifts. Some will

Oasis went into dry dock for a two-week

stay onboard for four months at a time

maintenance last year, it had been in

and work seven days a week, taking short breaks during the day, then head home for a two-month rest period. The obsession with detail and planning has become necessary as cruise ships get ever bigger. But risks also come with size. An engine fire on the Carnival Triumph two years ago crippled the ship at sea for several days. Toilets clogged, food Clockwise: Supplies are loaded for The Oasis of the Seas; Garbage waiting to be sorted into recyclables aboard a Royal Caribbean Cruise Lines ship in Fort Lauderdale; Attendants collect laundry from the more than 2,000 rooms. Opposite page: An open-air atrium runs down the middle of the ship with balconies for some of the inside cabins.

Portfolio

Logistics

perished, and passengers slept on decks to avoid the stench in their cabins. Carnival has since fitted its ships with emergency generators to avoid another similar mishap. But the ship’s plight turned off many would-be cruisers, and bookings dropped industrywide. The hazards were also apparent in January 2012 when the Costa Concordia, also owned by Carnival, ran aground off the coast of Italy after its captain steered it off course, and then delayed evacuating the ship when it hit rocks by the island of Giglio. Thirty-two people died. “These accidents were definitely a wake-up

night cruise in March vary from $1,109

a “war room” of staff members onshore

call for the industry,” said Henry Harteveldt,

per person for an interior room (without

to rebook flights for delayed passengers

founder of the Atmosphere Research Group,

windows) to $2,999 per person for a suite.

and find accommodations for more than

a travel industry research firm.

3,000 people who were waiting for their SOON, THE OASIS will depart. Weather

One of Oasis’ most distinctive features

ship to show up.

is an open-air atrium that runs down the

is the main cause of delays and can

middle of the ship. It allows sunlight to

have ripple effects on future cruises. For

visitors leave, including the piano tuner

come inside the vessel, enabling some inside

instance, when fog recently delayed a ship

who boards every two weeks to work on

cabins to have balconies. Those cabins can

from docking in Tampa, Florida, for more

the ship’s five grand pianos. At 4:30 pm,

1 4/19/15 4:27 be sold at aElite.pdf premium. Prices for a seven-

than a day, Royal Caribbean mobilised

the odyssey begins again.

The last passengers trickle in and

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Essentials

THE BEST OF LEISURE AND LIFESTYLE

Lords of the Ring

Images: Vienna Tourism, Hotel Imperial Vienna, Austrian National Tourist Office, Brian Johnston, Christian Stemper, Kunsthistorisches Museum

This year marks the 150th anniversary of Viennaâ&#x20AC;&#x2122;s fabled Ringstrasse. Brian Johnston enjoys a stroll around Europeâ&#x20AC;&#x2122;s most princely boulevard.

May 2015

Essentials

Travel

here’s a lot to like about the Ringstrasse. You can keep your Champs-Elysées with its tourist

hordes and increasingly tatty food outlets, your snooty Fifth Avenue and The Mall in London, more ceremonial carpet than

round of palaces and museums, apartment

actual avenue. The Ringstrasse is all things

blocks and parks. It provides imperial

to all people: grand and intimate, ornately

glamour yet suits the modest capital of a

urban and leafy green, laden with culture

little nation. Ride around it on the tram,

but surprisingly relaxed, too. Unlike many

pedal its cycle paths, walk its promenades,

grand boulevards, it doesn’t culminate in

sit on public benches and crane your neck

a single mighty building. It’s a merry-go-

at ever more startling architecture. The Ringstrasse never disappoints.

Above: View over the Ringstrasse and Parliament. Left: Café in the hall of the Kunsthistorisches Museum.

Any year is a good year to visit Vienna, but the Ringstrasse is in the spotlight this year, with special exhibits charting the emergence of one of the continent’s greatest Portfolio

Above: Figure on the roof of the Post Office Savings Bank. Left: Emperor Franz Josef, the man behind the Ringstrasse.

the start, the Ringstrasse was a huge success. It became the thing to stroll along the boulevard, especially between Kärntner Strasse and Schwarzenbergplatz, the corner of which became the place to meet. Along it carriages clopped and trams rattled. Eventually motor vehicles necessitated Vienna’s first traffic lights in 1926. The Ringstrasse is now one of the city’s busiest roads, thought this isn’t always apparent as you stroll, thanks to flanking parks, promenades and overhanging trees. You can walk the Ringstrasse in an hour. You can also take the tourist Vienna Ring Tram and plug into headphones for information about sights along the

Any year is a good year to visit Vienna, but the Ringstrasse is in the spotlight this year, with special exhibits charting the emergence of one of the continent’s greatest urban renewal projects.

25-minute loop. With stops at museums urban renewal projects. In 1857, Emperor

and cafés, however, it can easily take all

Franz-Josef decided the city’s fortifications

day. And don’t forget to just look up: the

should be demolished to make way for a

Ringstrasse is an open-air museum of

more open, modern city with a swelling

architectural styles, from the ancient Greek

population. Former military parade

(Parliament), Renaissance (State Opera,

grounds beyond the walls would be turned

Natural History Museum) and Gothic

into a boulevard 57 metres wide and five

(City Hall) to the baroque (Burgtheatre).

kilometres around.

Statues wave from rooftops, gargoyles leer,

In 1865 the emperor presided over the Ringstrasse’s opening ceremony. From

May 2015

curlicues flow. A good place to start is the Hofburg

Essentials

Travel

palace. Skip the elaborate state apartments, whose endless gilt and red silk isn’t really to modern tastes. To appreciate the energy of baroque it’s better to take in its living remnants. The palace features the white horses of the Spanish Riding School, while the Hofburg Chapel offers the Mozart music that embodies the zest and wit of the era. Come back in the evening, because the palace exterior is wonderful under illuminations, when imperial bling glimmers and horse-drawn carriages clip-clop. Across the road, though set back a little from the Ringstrasse, is one of the world’s foremost cultural precincts, the Museums Quartier, where nineteenth-century palaces and contemporary glass-and-concrete extrusions clash. In the courtyard free-form

year, and providing a great outlook over the

museums and galleries across the city this

benches in jaunty yellow and red are the

Ringstrasse from a pigeon’s point of view.

year, but perhaps the most entertaining

place to hang out on summer evenings:

way to learn about the Ringstrasse is on

a sort of open-air salon where students

Further clockwise round

tours offered by Sigmund Freud Museum

murmur and giggle. If you only have

the Ringstrasse is the white Parliament,

(1 May to 30 September), which take

limited time, head to the Kunstkammer

opposite which is the Volksgarten, heady

you to the university, Freud’s favourite

(chamber of curiosities) at the Museum

with roses in summer, and graced with

coffeehouses, and patients’ houses.

of Art History. It’s a treasure-trove of

a statue of Empress Elizabeth, ill-fated

Hapsburg collectibles that range from

wife of Franz-Josef. Walk through it

the Ringstrasse has a facade dotted with

peculiar drinking goblets to mechanical

towards the madly neo-Gothic City Hall,

important literary figures. Across the

dancing bears, gorgeously bejewelled

whose library is currently exhibiting

road is Café Landtmann, one of the great

objects d’art, clocks and scientific tools.

the plans submitted for the Ringstrasse

historic cafés of the Ring and favoured by

Alternatively, take advantage of rooftop

design competition, and documents

politicians and theatre types. It’s perhaps

guided tours at the Museum of Natural

relating to its implementation. It’s one of

best known as Freud’s favourite hangout,

History, an occasional treat revived this

many Ringstrasse-related exhibitions in

and has a sumptuous wood-panelled

The University of Vienna building on

interior, brass chandeliers and fantastic outdoor terrace. There were once 30-odd cafés on the Ringstrasse that provided a turn-of-the-century meeting places for artists, revolutionaries and chess players, and which formed part of the social hub created by the Ring. Hop on a tram here and rattle towards the Danube Canal and along it past Schwedenplatz, alighting on the Stubenring. The Ministry of War building represents the last desperate pretention of a failing empire: it’s overblown statuary

Top: The Ringstrasse from the rooftops. Left: Parliament, City Hall and the Volksgarten under night illuminations.

and unrestrained decor contrast with a

delightful Stadtpark. It’s Vienna’s oldest

building across the square, the Post Office

park, opened in 1862, with duck ponds,

Savings Bank, an outstanding example of

meandering paths and statue of composers

Modernist architecture by influential local

bursting out of the shrubbery, most

architect Otto Wagner. Wander inside

notably a gilded statue of Johann Strauss

and admire the main banking hall, an Art

the Younger playing his fiddle. A nearby

Nouveau wonder in steel and glass that’s a

bust of Lehár grimaces in disapproval as

world away from the indulgent interiors of

Schubert lurks under a tree.

imperial palaces. The next stop is MAK, the Museum

Opened in 1869 in flamboyant neoRenaissance style, the State Opera further

of Applied Arts, in which you can

around the Ringstrasse was reconstructed

inspect furniture, porcelain and textiles

after bombing in 1945 and draws the

from the same era as the Ringstrasse’s

crowds; scruffy tourists in badly-ironed

founding. Afterwards you can tuck

shirts mingle with Viennese society in

into contemporary reinterpretations

Givenchy and diamonds. In the foyer a

of traditional Viennese cuisine (potato

bust of Mahler (once the musical director)

goulash with smoked sausage, beef

glares across at Strauss, surrounded by

broth with liver dumplings) at in-house

scenes from operas. Red carpets flow up

Österreicher im MAK, whose bar is also

sumptuous staircases and the walls erupt

a youthful hangout at night. Across the

in cornices and curlicues.

street you’ll find Café Prückel, another of

By now, you’re almost back where

the Ring’s venerable coffeehouses. It has

you started. Last stop is the Burgarten,

abandoned ornate interiors for a 1950s

which has returned you to the rear of

look and is known for its strudels.

the Hofburg, since these were once

Get some fresh air at the utterly

the imperial gardens. It has, perhaps surprisingly, Vienna’s only outdoor statue of Franz-Josef, the man who

Clockwise: The famous gilded statue of Johann Strauss the Younger in the Stadtpark; The State Opera; The Kursalon in the Stadtpark; A shell-shaped vessel in stone and chalcedony featuring Bacchus (Prague, 1605) from the Chamber of Curiosities collection at the Kunsthistorisches Museum.

May 2015

created the Ringstrasse and became something of a monument himself thanks to a lengthy reign. It’s a modest and rather uninteresting statue, but there’s no denying the glory of the emperor’s architectural legacy.

Essentials

Art

Art for the Knowing Nose Peter De Cupere specialises in making olfactory art that occasionally stinks, reports Douglas Quenqua.

eter De Cupere’s “Tree Virus”

artist who has been using odours to

sculpture wasn’t much to look

trigger visceral reactions for nearly 20

at: a dead, black tree rooted in a

years. “When you look at something, you

craggy white ball suspended over a dirt

start to think about it. I want people to

pit, all of it covered by a plastic igloo. Built

also feel how work can impact you.”

on a college campus in the Netherlands

Sewage, sweat, rotten fish, cigarettes,

leftover scenery from a Tim Burton film if

urinal cakes. But also grass, toothpaste,

it weren’t for the outrageous smell.

candy, flowers and soap. All have

Inside the igloo, a heady mix of

Yes, De Cupere makes art that stinks.

in 2008, the whole thing might have been

figured prominently in the installations,

peppermint and black pepper saturated

paintings, perfumes, performances and

the air. It flooded the nose and stung

even an iPad app of this provocateur. He

the eyes. Most visitors cried; many ran

is just one of several contemporary artists

away. Others seemed to enjoy it, laughing

using odour to create art that delivers

through the tears.

an intensely personal, emotional and

Such is the strange power of olfactory art. “When you walk into an installation

sometimes physical experience. Smell has an unfair advantage over the

distinguishes olfaction comes from.” Just as Proust’s madeleines opened a

with scent, you cannot hide. Your body

other senses when it comes to eliciting

floodgate to childhood memories, scents

starts to react,” said De Cupere, a Belgian

a response, researchers say. “There is a

can recall different feelings depending

unique and directly intimate connection

on how a person first encountered them.

between where smell is processed in the

“The classic example is wintergreen mint,”

brain and where memory is stored,”

considered a very pleasant odour in the

said Rachel Herz, a psychologist at Brown

United States but unpleasant in Britain,

University and the author of The Scent

Herz said. “In the UK, wintergreen is the

of Desire: Discovering Our Enigmatic

scent of bathroom cleaning products or

Sense of Smell. The olfactory bulb –

medicine. In the US, it’s candy.”

the bundle of neurons that transmits

Herz added that she had always enjoyed

information from the nose to the brain

the smell of skunk, because before she

– is part of the limbic system, which

learned its source, she recognised it as the

supports emotion, long-term memory

smell of the woods.

and adrenaline flow. “This is where that special characteristic that really

De Cupere, 44, is well aware of the physiology he exploits. By using smells that Portfolio

Left: Artist Peter De Cupere in his research laboratory in Mortsel, Belgium. Opposite page: “Warflower” is a grotesque plant that smells of gunpowder, growing out of a soldier’s helmet.

tried using perfume and a fan to stage a “scent concert” in New York, but was foiled by clouds of tobacco smoke and was eventually booed offstage. Smell-oVision, a method developed decades later for pumping odours into a movie theatre, failed in part because the smells took too long to reach the balcony. Even today, De Cupere needs galleries showing his work to take it easy on the air conditioning. De Cupere discovered the power of scent at a young age. At nine, he distilled grass from his backyard to make a perfume, and saw it brighten the mood of people on the bus. “It’s 7 o’clock in the morning, everyone is tired, but you enter the bus and there’s this smell of fresh-cut grass, and people start to smile,” he said. More often, he uses smells to provoke. “Warflower,” on display at the Courtauld Institute of Art in London, is a grotesque plant that smells of gunpowder, growing out of a soldier’s helmet. De Cupere has a high profile in his home country, and there is evidence his appeal is spreading. He is having his first exhibition in Cuba, and will have others are both familiar and out of place – like a

are hard to control and susceptible to

in Switzerland, Italy, the Netherlands and

cityscape carved out of soap or a gas station

environmental conditions. In 1902, a poet

Germany this year.

with pumps that smell like grass – he not

and art critic named Sadakichi Hartmann

and climate (three of his favourite topics), but interacts with people’s memories. “With odour, I can make work that’s universal, that everyone can understand, but still there will be a personal aspect to it,” he said in a telephone interview. “It’s more intimate than seeing, and it’s very subjective. It adds another dimension to the work.” Art that incorporates scent has always been an outlier, and not without reason. Smells, which start with microscopic chemicals floating through the air, May 2015

He’s never exhibited in the United States – a tough market, given Americans’

only comments on environment, beauty

“The classic example is wintergreen mint,” considered a very pleasant odour in the United States but unpleasant in Britain, Herz said. “In the UK, wintergreen is the scent of bathroom cleaning products or medicine. In the US, it’s candy.”

conventional tastes in both art and odours, said K.J. Baysa, chief strategy officer of the Institute for Art and Olfaction in Los Angeles. De Cupere’s work “is certainly not what one thinks of when one mentions artworks that involve scent, because we are accustomed to its association with the pleasing notes of perfumes,” Baysa said. “Art with an edge is not meant to appeal to the masses.” De Cupere is more optimistic. “People are not used to it yet,” he said. “They find it crazy. But smell has a lot of possibilities.”

Edinburgh’s Restaurant Revolution

21212

The Scottish restaurant scene is evolving rapidly, with the country now boasting 16 Michelin stars and the capital, Edinburgh, has four of these, reports Robin McKelvie.

he year is 1999. I am tasked with writing a fine dining restaurant guide to my home city of Edinburgh and I have to concede it is not the most enticing prospect.

Scotland, as a country, cannot even muster five Michelin stars. Fast-forward to 2015 and things could not be more different. Scotland today has 16 Michelin stars and the burgeoning Scottish capital itself is today home to a quintet of Michelin starred restaurants. TV chefs abound in swish eateries as Edinburgh forges a name for itself on the global foodie map, pulling in gastronomes from well beyond Scotland. Edinburgh’s success on closer inspection has not been an overnight one. It is built on Scotland’s remarkably well-stocked culinary larder. Just ask the French, as France is Scotland’s largest export customer. French chefs have long known about the quality of Scotland’s beef, lamb and game. They are also fond of the superb soft fruits and the rich seafood bounty hauled from the cold, nutrient rich waters of a country with over 10 per cent of Europe’s coastline. Quality local produce is one thing, but knowing what to do with it is quite another. This is where Edinburgh has really impressed me since 1999 as a flurry of distinguished chefs have emerged in the city, while others have been attracted from elsewhere by the emerging culinary scene. They have timed their move well as over the last decade there has been an unprecedented interest in food amongst Scots, who as a nation have become more knowledgeable and discerning as cooking books have become bestsellers and TV chefs household names. Number One at the palatial five-star Balmoral Hotel is Edinburgh’s Michelin old timer. Under the expert stewardship of executive chef Jeff Bland Number One is anything but bland, having just retained its Michelin star for the 13th year in a row. Eschewing the complacency that taints some hotel restaurants, Number One evolves with constant creative energy. January 2015 saw an impressive facelift that has brilliantly brought the bar and restaurant areas together. The temptation to cram in extra tables has been mercifully resisted despite the high demand to dine here. The current head chef at Number One is Brian Grigor. This year, Grigor has put even more of his own stamp on Number Portfolio

71 Martin Wishart

May 2015

The Kitchin

Number One

Essentials

Cuisine

One with his Scottish Experience tasting menus bringing creativity to local produce. Grigor explains: “It’s about celebrating the best of Scottish produce, taking great ingredients and doing different things with them.” My senses go into overdrive as the dome above my Highland smoked salmon is lifted to envelop me in a whiff of peaty smoke. The meat choice for the largest course is daring too, native mountain hare. Legendary restaurant director Gary Quinn completes the impressive picture. He has been caressing diners from canapés all the way through to the warm glow of a digestif

the latter. Scottish seafood bursts through

since I first visited in 1999.

the dishes with crab from Loch Fyne and plump Orkney scallops, the latter brought

Clockwise from left: Hand dived king scalllops at Number One; Martin Wishart; Smoked salmon at Number One; Chocolate dessert at Number One.

THE EPICENTRE OF the Edinburgh

alive with GoldRush apple, avocado,

Michelin star revolution is down in the old

crème fraîche, lavender and Castel di Lego

Port of Leith. At the heart of the action is

vinaigrette. The wine is equally delicate

Martin Wishart, which opened the year I

and thoroughly thought through with dry

wrote my food guide and won a Michelin

Hungarian Tokaji an inspired foil to the

in size, as they have bought and knocked

star two years later in 2001. Wishart is a

fruits of Scotland’s Atlantic coast.

through into the premises next door. On

roasted grouse (the Scottish game bird). This year has seen The Kitchin double

my two previous visits I was impressed

serious Francophile with an impressively light touch. His refined dining room is

NEARBY, TOM KITCHIN opened

to see Kitchin himself working hard

Edinburgh’s most formal, but not stuffily

his more relaxed gastronomic temple in

throughout service in the open kitchen.

so with a gentle hum of conversation

2006, won a Michelin star in 2007 and

Joining him during a busy dinner service

rather than the deathly silence that

has become a bona fide TV personality.

for a moment this time I find his focus

constrains some Michelin restaurants.

The Kitchin champions in his own words

has clearly not changed: “I now have what

a “Nature to Plate” philosophy. Seasonality

I call a grown up restaurant with the

the six course tasting menu. Catering to

is to the fore such as meat cuts with

refurbishment. My focus remains the same,

demand there is now also a vegetarian

langoustine tails. Sparkling starters include

though, not on TV or cookery books, but

and lighter fish-tasting menu. I choose

the sea urchin bisque and in season a whole

on the ingredients and the cooking.”

For the full Wishart experience opt for

Portfolio

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Essentials

Cuisine

BACK SOUTH TOWARDS the city

Clockwise from left: The Kitchin – Rockpool; Tom Kitchin; The Kitchin – Razorclams; The Kitchin interior.

centre is perhaps the most innovative of the Michelin quintet. 21212 impressively won its Michelin star just over a year after opening in 2011. Paul Kitching decamped

is chef patron Dominic Jack. He may have

from Manchester in England to join the

taken over as the protégé of Tom Kitchin,

Edinburgh revolution and his 21212 won

but he has quickly made this refined

‘Best New Restaurant’ at Restaurant

dining space his own and well deserves the

Magazine’s UK awards the year they

Michelin star awarded in 2011.

opened. Kitching is an ambitious

WHO’S NEXT FOR A MICHELIN STAR IN EDINBURGH? The Pompadour: The re-opening in 2012 by the Galvin Brothers in the city’s Caledonian Hotel has yet to yield a star, though many local gastronomes feel it deserves one. Restaurant Mark Greenaway: A chef with much of the flair of Kitching and the TV presence of Kitchin only lacks a well deserving star. Plumed Horse: In 2011, famously fiery Tony Borthwick lost his star here. Borthwick is desperate to regain it and his hard work may well soon pay off.

Jack firmly buys into Kitchin’s experimenter fascinated by the science of

‘Nature to Plate’ mantra with ultra fresh

food in the mould of English über chef

Scottish produce perfectly prepared and

Heston Blumenthal.

immaculately presented. He also whips in

Kitching does, though, mercifully eschew

his own Francophile touch. The highlights

an over reliance on trendy foams and strong

are the excellent value three-course lunch

seasoning to create palate challenging, but

and six-course dinner menus. My highlight

ultimately satisfying, dishes such as chicken

is one of his signature dishes, roasted tail of

with cheesy chips, bacon, blue cheese,

North Sea monkfish wrapped in Ayrshire

prunes and flapjack. This is typical – a

ham with a sweet pepper marmalade and

dish that sounds like it should not work,

‘Pink Fir Apple’ potatoes.

but which is both brilliantly conceived and

If you make a foodie trip to the

executed. Since my last visit the confines of

Scottish capital today you can savour

the restrictive 21212 menu formula has been

a very different city to the one I faced

broken and diners have more choice. 21212

back in 1999 researching my fine dining

is all the better for it.

restaurant guide. In Edinburgh 2015style it is not so much about the famous

THE NEWEST ARRIVAL on the

tourist thoroughfare of the Royal Mile,

Michelin scene, Castle Terrace, opened in

but more about the Michelin Mile in a

the shadow of Edinburgh’s landmark castle

city that is really emerging on the world’s

in 2010. The mercurial talent at the helm

gastronomic map. Portfolio

Essentials

Environment

Portfolio

rs e h s u M , e i s V r s e g s o y D d e Ge Sl d an th w o r G With

Russiaâ&#x20AC;&#x2122;s remote Kamchatka Peninsula is famed for its natural beauty and rich wildlife. But ambitious development plans are now threatening the environment, reports Neil MacFarquhar.

May 2015

“The territory is not as big as Alaska,” said Sergey Rafanov, the director of the World Wildlife Fund’s local branch. “Everything is compact here, and the interests of these various industries conflict. If you want to dog sled or to see volcanoes, will you come if

there is a huge iron processing plant on the Pacific shore with two smokestacks?”

hen Vladislav Revenok,

peninsula that well. About 80 per cent of

an Orthodox priest, first

the population lives in three southern cities.

participated in the obscure

But isolation no longer provides the same

master plan. Since the local government

Russian version of Alaska’s Iditarod, he

insurance. Kamchatka is caught between

depends solely on federal funds, it is never

found himself in places so isolated that he

ambitious plans to develop untapped

sure which projects might be funded and

was mobbed by villagers demanding to be

resources like gold and oil, and efforts to

hence plans each in isolation.

baptised. They told him he was the first priest

preserve its natural splendour. Oil exploration has started in the Sea of

to visit the outback of the already remote Kamchatka Peninsula in about 50 years.

The problem, he said, is the lack of a

SENIOR GOVERNMENT OFFICIALS

Okhotsk, which separates the peninsula

vow to reconcile the competing demands.

from mainland Russia, and the first natural

“The quality of life of our population

Revenok, a veteran musher, said by

gas wells now operate onshore. Two gold

depends on the calibre of the protection

telephone after finishing the arduous, 17-day

mines are already working, and 10 more are

measures. Why would we cut off the branch

race in late March. “When I arrive at the

in the planning stages.

on which we are sitting?” said Vladimir

“Only a few small villages see us,”

Local officials want Petropavlovsk to

finish line, and see all those people waiting –

Galitsin, the minister of fisheries and

journalists, the crowd, so many cars – I feel

become the main transit harbour for

the deputy chairman of the Kamchatka

like I am arriving back on a different planet.”

hulking container ships that can deflect ice

government. “A sensible balance can be

as they ply the Arctic route between China

reached that both safeguards the natural

a measure of protection for its astounding

and Europe. In addition, the government

resources and allows for the exploitation of

beauty: a crown of 300 volcanoes including

is trying to raise the number of tourists to

various deposits.”

around 25 that are still active; a central

300,000 from 40,000 annually.

Kamchatka’s very isolation once afforded

Sceptics worry that the development

valley of erupting geysers; rivers so red and

Environmentalists have doubts. Populations of the largest bears and big-

so thick with spawning salmon that walking

plans threaten to overwhelm what

horned sheep have already been decimated,

on water seems distinctly possible; oceans

amounts to a giant nature preserve about

they said, because trophy hunters from the

inhabited by crabs the size of turkeys.

1,250 kilometres long and more than 480

United States and Europe were unleashed

kilometres across at its widest point.

without regulations. A black market for

Even many locals do not know the 1,000 Miles

RUSSIA

ALASKA

SIBERIA Bering Sea Sea of Okhotsk

KAMCHATKA PENINSULA

PetropavlovskKamchatsky CHINA

North Pacific Ocean

Above: (L-R) Indigenous Koryak artists during a religious event, in Esso, Kamchatka Peninsula, Russia; A sledder is comforted by his dogs during the annual Beringia dog sled race through the Kamchatka Peninsula. Left: Vladislav Revenok, an Orthodox priest, conducts service at a church.

JAPAN

Portfolio THE NEW YORK TIMES

Essentials Environment Left: Workers sort fish at a processing plant in PetropavlovskKamchatsky. Below: Klyuchevskaya Sopka, the highest active volcano in Asia, looms over PetropavlovskKamchatsky.

sled dogs to Kamchatka through Moscow is prohibitive, organisers said, and until last year the first prize was only a Russian off-road vehicle. The race was named after a legendary land mass said to have once linked the region to Alaska, allowing indigenous people to transit freely. Kamchatka’s indigenous population currently numbers about 15,000. The Beringia starts with a one-day

Kamchatka falcons fetches $50,000 per bird

days, logistical and bureaucratic hurdles

exhibition event held on a groomed

in the Persian Gulf nations, Rafanov said.

still make it impossible to move fresh fish to

racetrack near the capital because the

western Russia on a regular basis.

starting point of the main 950-kilometre

In Soviet times, Kamchatka was a naval base closed to foreigners. After the

It has been said that Kamchatka is so far

race can be difficult to reach. Few roads

1991 collapse of the Soviet Union, the

east of Moscow that it is practically west.

cross the northern part of the peninsula,

population gradually ebbed, dropping by

The nine-hour flight from Moscow lasts

and helicopter charters cost more than

around a third, to 300,000. To stem that

almost three times longer than flights from

$5,000 a day.

flow, Kamchatka needs jobs and critical

Anchorage. (Those run only in the summer.)

infrastructure, like an independent energy source. Volcanic steam powers a rare

It is little wonder, then, that Kamchatkans look to Alaska for inspiration for everything from building a tourism industry to making protective bootees for their sled dogs.

It is little wonder, then, that Kamchatkans

Kamchatka also produces savage, unpredictable weather. After a particularly

look to Alaska for inspiration for everything

snowy February, the city manager was fired

from building a tourism industry to making

for not clearing the streets fast enough.

protective bootees for their sled dogs.

Colossal snow banks lined every road. “We

“The land, the nature, the traditions,

prefer not to mention and not even to think

the dogs, it is all so close, they share the

about the weather,” Sitnikov quipped when

same roots, and you know that Alaska

asked for a forecast.

used to be Russia,” said Alexei Sitnikov, the

The exhibition event included a children’s

owner of the Siberian Fang Kennel and an ecotourism company. A 2∏-meter arched

race. One contestant, Ksenia Kasatkina, 16,

whale rib leaning against the front of the

apartment and dreams of competing in the

kennel came from a northern beach littered

Beringia after she turns 18.

with them, he said.

is raising four sizable dogs in a three-room

“It is a good sport in a place where we

geothermal electric plant, but that supplies

The annual Beringia dog sled race was

have snow for about nine months of the

only 30 per cent of local needs. The largest

conceived 25 years ago as Russia’s answer

year,” said her mother, Julya Daoudrich.

development schemes are likely to be

to the Iditarod, but it has never attracted

“Even when it melts in town, in July we can

shelved because of federal budget problems

the same international following. The red

take the dogs and the sleds to the slopes of

following a collapse in global oil prices.

tape and cost involved in transporting

the volcano.”

Fish, salmon roe and crabs constitute Kamchatka’s most famous exports. Strained relations with the West and Japan meant foreign sales were down by a third, to 200,000 metric tons, out of nearly 900,000 metric tons produced last year, Galitsin said. Kamchatkans hope that the Kremlin’s retaliatory economic sanctions banning salmon and other fish from places like Norway will increase demand for their products in western Russia. The problem is distance. In the time before planes and trains, it could take a year to reach Kamchatka from Moscow. These May 2015

Essentials

Sport

few times a year, rains sprinkle the dry mountains north of Beijing, feeding streams that

trickle down to catchments like the Yunzhou Reservoir. From its shores, the water shimmers and sparkles, a mirage that local farmers, can see but not touch. “We can’t use it,” said Cheng Lin, a 68-year-old farmer who, like others here, plants corn once a year and hopes for spring rains. “It’s for others, not us.” Instead, the water is earmarked for the greater Beijing area to the south, and in the winter increasingly for making snow. China, which has been constructing a tourism belt around Beijing centred on water-intensive sports like skiing, is

An Olympic Bid Where Snow Rarely Falls Beijing is bidding for the 2022 Winter Olympics although the region is officially semiarid. However, that is rapidly becoming the norm, reports Ian Johnson.

building a series of ski slopes in a bid to host the 2022 Winter Olympic Games. The International Olympic Committee has inspected the region’s facilities and is expected to make a final decision in July. If Beijing wins, it will become the first city to host both the Winter and Summer Games, which it held in 2008. Its only competitor is Almaty, Kazakhstan. According to Beijing’s bid, the environmental impact of the games would be “eco-friendly” and “sustainable.” In their three-volume filing with the IOC, organisers say they will use renewable energy and sustainable building materials. Forest cover lost to ski slopes or other facilities would be offset by new tree plantings elsewhere, in compliance with IOC requirements. “As there are abundant water resources near the ski resorts and the melted snow will be recycled,” the bid says, “snow-making during the games will not have any negative impact on the © 2015 New York Times News Service

local ecosystem.” “Abundant” is not a word often used

making it semiarid. Two-thirds of

“It just doesn’t snow in Beijing,” said

to describe Beijing’s water supply.

that precipitation falls in the summer.

Zhang Junfeng, an independent water

Although some parts of the city receive

In December and January, areas like

expert who has written and published

up to 58 centimetres of rain a year, the

Chongli, where the reservoir is, receive

widely on Beijing’s water troubles.

mountainous area, where the ski resorts

about a quarter of a centimetre of

“People get ideas by watching television

are being built and the games would be

precipitation, meaning they are usually

and sports and think it’s a great pastime,

held, receives 38 to 40.5 centimetres,

bare throughout the winter.

but it’s not sustainable.” Portfolio

A farmer fishes on the frozen Yunzhou Reservoir near Zhangjiakou, China, a growing resort town key to Beijing’s bid to host the 2022 Winter Olympics.

Beijing used to be rich in water

“Of course they shouldn’t have ski

or enough for 42,000 people.

resources, but it dried up as its population

resorts,” said Hu Kanping, a retired

doubled over the past 25 years to an

hydrologist who writes reports for the

say that its expansion into water-stressed

estimated 22 million. A $62 billion

Chinese NGO Friends of Nature. In a 2011

environments like Beijing is increasingly

project to divert water to the north from

report, he wrote that the 11 ski resorts

the norm. Relatively dry or warm

the water-rich south has begun, but it is

then open in Beijing used an average of

countries like Turkey, India and Pakistan

expected only to stabilise the situation.

about 3.785 billion litres of water a year,

all have new resorts. The site of the

May 2015

Experts who follow the ski industry

Essentials

Sport

Below: Children learn to ski at the Changchengling resort near Zhangjiakou.

machines. Resorts in the Alps, by

for his village, Haituo, long after the

contrast, regularly receive more than

Games ended, he said. Most residents

100 centimetres of precipitation a year.

live off corn farming, herding and selling

Some of the most famous areas get 150

supplies to hikers. The planned investment is huge. For

last Winter Games, the Russian resort

centimetres. But even these regions are

town of Sochi, gets only about 53

now relying on artificial snow because of

the Xiaohaituo area, the government

centimetres of precipitation a year, which

climate change.

would invest $163 million, including

forced organisers to stockpile nearly

Another concern for conservationists

for a 14-hectare Olympic Village and

460,000 cubic metres of snow to ensure

is that both Beijing and Almaty plan

940 hotel rooms. In nearby Chongli,

adequate cover.

to build Olympic ski resorts in their

the investment is less – $95 million –

national parks. Beijing’s organisers are

because some facilities exist, such as

Carmen de Jong, a professor at the

planning to use Xiaohaituo Mountain

University Savoie Mont Blanc in France

in Yanqing National Park for the Alpine

who studies water and Alpine sports,

events. The mountain is part of a

said such developments are ecologically

protected nature reserve, and automobile

unsustainable. “This kind of development

traffic is banned. Officials have said

is a Martian-like plan,” she said. “It’s

construction will begin there only if

completely artificial.”

Beijing wins the bid.

The alternative to Beijing for 2022,

Zeng Lian, a local farmer, said he

Almaty, is not much better. It receives

hoped Beijing would win the bid. “The

just 56 centimetres of precipitation

leaders have been here several times,

a year, and it relies on dams and

and if Beijing wins, we can develop,” he

water towers to feed its snow-making

said. A ski resort would provide revenue

“as there are abundant water resources near the ski resorts and the melted snow will be recycled,” the bid says, “snow-making during the games will not have any negative impact on the local ecosystem.”

Portfolio

the Genting Grand Secret Garden, a Malaysian-owned resort that would host some of the Nordic events. On the nearby slopes, skiers were excited about the prospect of hosting the games. “This will complete the other facilities and boost tourism,” said Li Yun, a resident of Zhangjiakou who drove up for the day with his family. “The snow parks will become better and attract tourists from in and outside China.” All the snow parks in Chongli use artificial snow. During a visit in February, the ground next to the ski runs was dry and the nearby hills were brown, except for an occasional dusting of snow in shaded areas. ARTifiCiAl OR nOT, the new industries have brought relatively goodpaying jobs to the area. Service personnel can earn about $500 a month, compared with the subsistence-level farming that existed before. Until the resorts

Above: Fan Dengjun, a farmer in Jiuzhan, a village on the banks of the Yunzhou Reservoir in the mountains northwest of Beijing. Below: Apartment blocks and hotel rooms under construction at the high-end Genting Ski Resort.

daunting. Cheng, the farmer near the Yunzhou Reservoir, said agriculture was increasingly difficult because climate change had reduced rainfall. Pumping water out of the ground is also getting harder, he said. Studies show that Beijing’s water table has been sinking

began opening over the past decade, Chongli was officially designated an

but locals said rising water prices had

up to 61 centimetres a year. “This is the

impoverished county.

made snow-making too expensive. The

way it has always been,” Cheng said. “The

resort reopened recently in hopes that

water goes to the city people.”

The viability of this economy is open to debate. One of Chongli’s ski resorts, Duolemeidi, closed two years ago. Resort officials rejected requests for interviews,

Beijing wins the Games.

And yet like almost everyone

For those without jobs in the ski

interviewed in this area, he thought it

tourism industry, the prospects are

would be great if Beijing won the bid. “Right now I’ve only seen skiing on television,” he said. “But if we win, I’ll take a bus down to Chongli and see the snow myself.”

The viability of this economy is open to debate. One of Chongli’s ski resorts, Duolemeidi, closed two years ago. Resort officials rejected requests for interviews, but locals said rising water prices had made snow-making too expensive. May 2015

Essentials

Literature

Pouring Souls Into a Fading Craft When the prestige Italian book printer Zanardi found itself in financial difficulties, the employees banded together and bought the company, reports Gaia Pianigiani.

Portfolio

igh-end printing is an artisans’ job in Italy. For those books, the gluing and the binding

of the pages are predominantly done by hand. But at Editoriale Zanardi, a prestige book printer in northeast Italy, even the management fell into its workers’ hands last year, when they bought out the company that had employed them for years. Zanardi is one of the dozens of small and medium-size enterprises in Italy that were brought to their knees by the economic crisis, but whose employees trusted in the company enough to invest their unemployment and severance payments to create a cooperative and start producing again. This kind of bonding together to weather Europe’s tough economic times has grown more common, not only in Italy but also in Spain and France, all countries that take pride in maintaining small, often family-run, businesses. But Zanardi’s story, equal parts tragedy and resilience, also in many ways reflects the character of Padua itself. Through its long history, it has been conquered and ruled by many, among them Huns, Byzantines, Lombards, Venetians and Austrians. But it has produced masterworks, like Giotto’s Scrovegni Chapel, and created one of Italy’s oldest universities, where Galileo once taught. At the onset of Europe’s debt crisis, in 2008, Zanardi, which started in the 1960s as an artisanal rebinding shop in Padua, provided about 180 jobs. By 2012 that had shrunk to 105, after a series © 2015 New York Times News Service

of bad management decisions and the effects of the downturn left the company accumulating debt. Deeply distressed by the situation, one of the two owners committed suicide in the factory. “I thought, I am not going to give up, and I poured all of my soul here,” said Solimano Dal Corso, 42, the production Left: Serena Renier stitches a book at Editoriale Zanardi, a prestige book printer. May 2015

Essentials

Literature

manager of what is now the co-op.

was feasible, and whether their possible

“Five months with no salary were bad,

competitors were way ahead of them. “It

obviously, but five months of absence

cut, and became entrepreneurs,” he said.

turned out they were not,” he said, his

on the global market are very long,” said

“We are giving up a little bit now, and

hands on his hips as the printing machine

Mario Grillo, a business consultant who

investing in the future. This is how we do

rolled out fresh book pages on a recent

decided to invest in the co-op because he

things here.”

crisp morning.

fell in love with the books that Zanardi

“We became very flexible, took a pay

The odds of such a turnabout remain

Last May, Dal Corso, 20 colleagues and

produced. “Every competitor wanted the

long. Italian banks are extremely

brand and the clients,” he added. “None

reluctant to provide cash to businesses,

wanted the employees, but I always

especially to those in trouble. International investors are not interested in small or medium-size enterprises, but rather in big brands of global reputation, experts said. But in Italy, in particular, many workers nonetheless hold out faith that their specialised artisanal work can give them a unique niche, even in a

“Every competitor wanted the brand and the clients,” he added. “None wanted the employees, but I always believed that these people were essential to produce these books.”

believed that these people were essential to produce these books.” Zanardi used to have a global market share of about 30 per cent of prestige and arts books. Over the years, the company invented the patented Octavius binding that allows tailor-made editions, such as the 20,000 copies of the collected James Bond books and the limited edition of

globalised marketplace.

Goldfinger – 300 books all covered in Dal Corso has worked in the

the company’s former business consultant

leather and real gold powder. Zanardi

printing business for his entire career, and

drafted a business plan and took it for

also printed many Gallimard tour guides,

when Zanardi went bankrupt, he found

evaluation to the Ministry for Economic

children’s books and the memorial edition

himself unemployed and worked for other,

Development in Rome. More than five

of the German newspaper Bild, a thick

similar businesses in the area. He wanted

months later, the new co-op was granted

collection of front pages.

to figure out whether the co-op idea

a license from the commercial court

Below: (L-R) Books produced by Editoriale Zanardi; Gold pastels used for hot-printing lettering on book covers.

According to the Cecop-Cicopa Europe,

completing the bankruptcy procedure,

the European confederation of industrial

and a lease on the machines and the

and service cooperatives, about 120

facilities. The company was open for

businesses became cooperatives in France

business again.

in 2011 and 2012, and 75 in Spain in 2012.

Portfolio

Above: Solimano Dal Corso works at Editoriale Zanardi.

“These enterprises cannot seek

“They have to look elsewhere, and those

Now the co-op aims to conquer a

who do make it are a drop in the sea, a

third of the previous market share,

rather limited phenomenon.”

with a fourth of the social capital and

Zanardi workers sought help from

the employees. They have made

international investors,” said Valter Conca,

Coopfond, an institution that has funded

partnership agreements with other

professor of management and technology

over 40 such co-ops since 2008, and

local rebinding businesses to get help.

at the Milan-based Bocconi University.

saved more than 1,200 jobs all over Italy.

They work in special shifts, with their

Coopfond provided economic resources and expertise to work through the transition. “It is usually an uphill journey,

It is usually an uphill journey, as these bankruptcy or a very serious economic companies often come from crisis,” said Aldo Soldi, general director of a bankruptcy or a very the fund. serious economic crisis,” AUSTRIA said Aldo Soldi, general SWITZERLAND director of the fund. as these companies often come from a

SLOVENIA

Venice

Milan

Padua Ligurian FRANCE Sea CORSICA 80 MILES

Adriatic Sea

Florence

ITALY Tyrrhenian Sea

Rome

THE NEW YORK TIMES

May 2015

schedules adjusting last minute to the company’s needs. “This is Italy’s richness, its working culture that should be promoted and preserved,” Grillo said, watching his co-op colleagues working the machines. “When people are fully engaged, China is not a real competitor. Italian artisans can still make a difference.”

Essentials

Other Business

Photos: Reuters

Banksy Sold for $175 A Palestinian man was lamenting his misfortune after selling his bombed-out doorway to a local artist without realising that the image painted on it was by Banksy and could be worth a small fortune. Rabea Darduna said he sold the iron-andbrick doorway of his destroyed house to a local man who offered him 700 shekels ($175) for it. Banksy, a British street artist who is famed for his ironic murals in unexpected places, visited Gaza earlier this year. “I had no idea what the value of the painting was or who this Banksy is,” a frustrated Darduna told Reuters. Banksy pieces regularly sell for more than $500,000. A mural painted on a shop in London in 2013 sold at a private auction for $1.1 million. Banksy, who is from Bristol in the west of England, has never revealed his true identity. The local man who bought it, graffiti artist and journalist Belal Khaled, said he had no plans to give the door back and no plans to sell it “at present”.

Shanghai’s Success Problem China’s stock trading fever has made the Shanghai Stock Exchange the world’s biggest in terms of turnover, surpassing the New York Stock Exchange, but the explosion in volumes has exceeded the ability of the exchange’s software to report it. The exchange’s trading turnover exceeded one trillion yuan ($161.28 billion) for the first time in April, but the data could not be properly displayed because its software was not designed to report numbers that high. “This is a software configuration issue, not a technical glitch,” the Shanghai Stock Exchange said in a statement, adding that trading and price quotes for individual stocks were not affected. The exchange said it would need to replace its current software, called SHOW2003, with one that can handle volume reporting to resolve the issue. Trading turnover on the Shanghai stock exchanges totalled $1.85 trillion in March, compared to $1.53 trillion at the New York Stock Exchange.

Graffiti Saves Spanish Village The village of Fanzara, home to 323

launched MIAU, the Unfinished

people, counts two bars, one butcher and

Museum of Urban Art, with his friend

a shop. But over the past year, this small

Rafa Gascu last summer. Gascu said:

village 50 miles north of Valencia has

“We wanted to build a museum where

quietly transformed itself into the street

anyone who wanted to create art in our

art capital of Spain, with more than

village could come and do it.” There’s just

40 murals by some of the country’s top

one condition: the artists must involve

street artists tucked among its beige and

the residents of Fanzara in the creative

grey walls.

process. Since its launch, visitor numbers

Javier Lupez, a lifelong fan of art,

have steadily grown. Portfolio

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