Global Trader Guide to Global Markets 2017 by ML Business Content

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ZAMBIA 2017 What to Look Forward to in 2017

Mafipe Chunga Senior Manager, Advisory KPMG

Benson Mubanga Senior Manager, Tax KPMG

here is no shortage of doom and gloom analyses of Zambia’s recent economic short comings. Dooms day pundits were effortlessly chanting illconsidered mantras of depressed copper prices, exchange rate nightmares, prolonged black outs and empty fuel pumps all before a general election that sent jitters amongst cautious investors. Counterintuitively, the level of interest in investing in Zambia continues to rise. As business advisors in this industry for close to a decade, this year marks a new high for enquiries to prepare business plans, support acquisitions, disposals and develop market research studies. Whilst the narrative of negative economic performance is predominant, Zambia’s harsh economic climate will affect consumers and producers positively. Examined from this perspective, three good things will happen in 2017, and with the right government interventions, this can happen even faster. Granted, large established businesses in Zambia will be convinced by the negative expectations of poor economic performance, and will make the decision to exit the market. Local lamenters will cry, “How can they leave? Investor confidence in

Zambia is falling”, and the answer to that from the unemotional shareholders will be, “if our business interests do not meet performance targets, we must sell.” Therein lies the opportunity for more robust players to enter the Zambian market, to acquire such mature businesses and restructure them. This will result in improved services at more competitive rates, a process that has already begun and will accelerate in 2017. The writing is on the wall in the manufacturing sector with the exit of Phelps Dodge, one of the founding shareholders of ZAMEFA, and the arrival of the UK’s largest life insurer Prudential. The catch is that multinational companies tend to have one size fits all policies across Africa, without doing research and looking into what local consumers really want, for instance, being inundated with offers to transfer money to relatives in distant rural areas, or make calls at midnight, is hardly relevant to an urban based family that sleeps all night. If MNC’s continue to market products and services in this way it will be a costly and fruitless exercise, regardless of the strength of the investor, in name or pocket. Consumers are now more cautious

about their expenditure, not that they are unable to spend their hard earned wealth, but rather investors in such times will need to research and innovate more in order to tap into their pockets. In this new business climate, foreign direct investment will increase. Yes increase. Interest rates in more advanced economies are hovering around 1%, while commodity prices remain depressed. These two factors alone mean that if you have access to international capital and invest it in a business that has Kwacha costs and US$ revenues, you are on the path to becoming the next Dangote. Zambia’s agricultural potential falls into this bracket with investments in cotton, maize, soya, tobacco and other cash crops in a position to grow rapidly. As that unfolds, we can expect foreign direct investment, particularly into the agricultural sector, to rise sharply. 2017 will be yet another opportunity for Zambia to stand out as a leading investment destination, giving attractive rates of return, creating employment, generating foreign exchange and much needed tax revenues. In your next reading of Zambia’s economic prospects, remember the opportunities that lie ahead, now more than ever.

CONTENTS

CONTENTS Forewords Mark Lane, editor, Global Trader �� 5 David Riches, British Chambers of Commerce director for Commercial, Trade and Marketing �� 7 Lesley Bachelor OBE, director general, Institute of Export and International Trade �� 9 Dr Adam Marshall, director general, British Chambers of Commerce �� 11 Africa Africa: open for business �� 18 Supply chain transparency and the UK’s Modern Slavery Act �� 20 Infrastructure project opportunities in Africa 21

TEAM Managing Editor MARK LANE mark.lane@gtglobaltrader.com marklanebusiness@gmail.com

Ghana foreword: Tony Burkson, UK-Ghana Chamber of Commerce �� 23 Ghana country profile �� 25 Libya country profile �� 29 Cameroon country profile �� 31 Nigeria country profile �� 33 Tanzania country profile �� 41

Features Writer PETER JACKSON

Ivory Coast country profile �� 43

Media Designer BRAD KIRKPATRICK

Zambia foreword: John Paton, British Chamber of Commerce in Zambia �� 47

Head of Production MARK LANE

Morocco country profile �� 45

Zambia foreword: HE Mr. Muyeba S Chikonde, High Commissioner �� 48 Zambia country profile �� 49 Asia Foreign exchange and the Asian markets �� 51

Global Trader acknowledges the assistance of UKTI and the Foreign and Commonwealth Office in preparing this publication. Information used is subject to Crown Copyright. Additional sources include the CIA Factbook, Wikipedia, Economist Intelligence Unit, the World Bank and the respective countries’ government and investment promotion agency.

Trading with China: the key considerations �� 52 Bahrain country profile �� 55 Kuwait foreword: Martin Hall, Kuwait British Business Centre �� 59

Europe Europe: how will rising protectionism affect British exporters? �� 78 Cracking the German market �� 80 UK: the new Union Customs Code changes 81 Europe: overview �� 83 Turkey foreword: Chris Gaunt, British Chamber of Commerce Turkey �� 88 Turkey country profile �� 89 FX volatility and Brexit �� 91 North America Trading with the US: the key factors �� 92 TTIP: a complicated task �� 94 The currency implications of exporting to the USA �� 95 Cuba: a complex market of potential �� 96 Panama foreword: HE Mr Daniel E. Fabrega, Ambassador of Panama to the UK �� 97 Panama country profile �� 99 Mexico foreword: Teresa de Lay, British Chamber of Commerce in Mexico �� 103 Mexico country profile �� 104 Trinidad & Tobago foreword �� 107 Trinidad & Tobago country profile �� 108 United States country profile �� 110 Cayman Islands country profile �� 113 Oceania Interview: David Milner, chief executive of Tyrells �� 114 Managing currency issues ‘Down Under’ �� 116 Trading and investing in Australia and New Zealand �� 117 Australia country profile �� 118

Kuwait country profile �� 60

New Zealand country profile �� 120

Lebanon country profile �� 63

South America Gabriela Castro-Fontoura on opportunities for UK businesses in South America �� 122

Taiwan foreword: Steven Parker, British Chamber of Commerce Taipei �� 68

The impact of collapsing oil prices on Venezuela and Brazil �� 125

Published by Zinc Media, 13th Floor, Portland House, Bressenden Place, London SW1E 5BH

Taiwan country profile �� 69

Thailand country profile �� 75

Colombia foreword: Maria Claudia Lacouture, ProColombia �� 131

T: 020 7878 2311 F: 020 7691 7106 E: hello@zincmedia.com W: www.zincmedia.com

China and European real estate �� 77

Colombia country profile �� 132

Thailand foreword: Greg Watkins, British Chamber of Commerce Thailand and Marcus Winsley, UKTI Bangkok �� 73

Brail country profile �� 127

We very gratefully acknowledge the support of the firms whose advertisements appear throughout this publication. As a reciprocal gesture we have pleasure in drawing the attention of our readers to their announcements. It is necessary however for it to be made clear that whilst every care has been taken in compiling this publication and the statements it contains, neither the promoter involved nor the Publisher can accept responsibility for any inaccuracies, or for the products or services advertised.

This publication is now available as an E-book http://global.gtglobaltrader.com

OVERVIEW | MARK LANE

No time for panic: keep calm and carry on Mark Lane Editor, Global Trader Any examination of the outlook for UK businesses involved in international trade in the next 12 months must take account of the Brexit-shaped elephant in the room. Upsetting the predictions of bookmakers, pollsters and pundits, the British electorate voted to leave the EU, an organisation originally founded as a trading bloc, and this has to have implications for business. Those implications are not necessarily easy to identify but a number of points can be made. First, nothing legal or constitutional will happen for at least two years – a clock that only begins to tick once the UK has invoked Article 50 of the Lisbon Treaty. In the meantime, the UK will remain in the European Single Market and it will not be signing any bilateral trade deals with any non-EU countries. However, this does not mean that trade will not be affected. It is possible that in the short-term, there may be an unwillingness among some European consumers and businesses to buy from a country which is seen as ‘deserting’ the European project. Most businesses are likely to be more hard-headed but they may still be unwilling to enter into any longer-term arrangements until the UK’s trading status outside of the EU is clarified. Will it be part an EFTA (European Free Trade Association) state, along with Iceland, Liechtenstein and Norway, giving access to the Single Market? Brexit soon made itself felt on the foreign exchanges. After the referendum, the pound was trading at a two-and-a-half-year low against the euro and a 31-year low against the US dollar and it has slipped further since. This gives a shot in the arm to UK exporters, immediately making their goods and services more competitively priced. However, it would be a bold forecaster who predicted which way exchange rates will move over the coming months as the UK is not the only nation facing problems and uncertainties. Italy’s debt is soaring and it faces a banking crisis which has been heightened by the Brexit vote. The country held a referendum in October in which the voters rejected proposed

constitutional reforms, a verdict which resulted in the fall of the government. In March 2017 the Netherlands goes to the polls in a general election, followed in April and May by French presidential election and then, in September, Germany holds its federal elections and, while Angela Merkel remains favourite, nothing is guaranteed. Each and all of these events have the potential to cause a major political upset and put the euro under the kind of pressure seen during the Greek crisis – a crisis which is far from being resolved. On the other side of the Atlantic, Donald Trump won the presidential election and is now the leader of the most powerful country on earth and the greatest economy. He was elected on an America First manifesto of trade protectionism and, while there were hopes that Trump the president would be far more centrist than Trump the candidate, the early signs are that this is not going to be the case. For more than a year now, governments everywhere have sought to devalue their own currencies in order to make their economies more competitive in a global economy that has shown anaemic levels of demand. For fear of retaliation, they have not wanted to be seen doing this too overtly but have been happy to put downward pressure on their own currencies. In this context they will be eyeing the UK’s devaluation enviously. As I write, political shocks are hitting the headlines almost daily, and not just in the UK. So, the global trading outlook is certainly confused, but then businesses can take comfort from the fact that it usually is. In such times they can only hold fast to the British maxim: Keep Calm and Carry On.

the British electorate voted to leave the EU, an organisation originally founded as a trading bloc, and this has to have implications for business

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Safer trading in an uncertain world Despite the political upsets and anaemic economic growth of 2016, there are still opportunities out there for shrewd exporters as Coface’s Grant Williams explains

Q How would you describe the general outlook for exporters in 2017? A 2016 saw the slowest growth in trade and output growth since the financial crisis but Coface expects the outlook to improve slightly this year. We estimate global economic growth of 2.7% in 2017, driven by steady improvement in advanced economies and a rebound in activity within emerging economies such as Brazil. This is reflected in Coface’s January country trade risk assessments which included more upgrades than downgrades for the first time since June 2015, including Spain, Cyprus and several emerging countries. Unfortunately, political risk remains a major concern. In Europe, for example, there is real uncertainty surrounding national elections in France, this year which will determine the direction of the country’s economic policy. In addition, there are heightened security threats in Turkey and Russia, as well as continued public discontent with the Government in South Africa. Q What impact could Brexit and the Trump presidency have on trade risk? A Britain’s EU referendum result and the election of Donald Trump were a blow to existing trading relationships. While the UK will not exit from the EU before April 2019 at the earliest, its trading with the EU will inevitably be less open because of the Government’s desire to end freedom of movement and withdraw from the Single Market. UK exporters should be helped by the depreciation in sterling since the referendum but ultimately this is less important than the level of external demand. Meanwhile, President Trump has withdrawn from the Trans-Pacific Partnership trade deal and signalled his enthusiasm for protectionist measures. 6

The negative impact of higher tariffs will be most felt in Honduras, El Salvador and Mexico which earn up to 30% of their GDP from exports to the US, although Vietnam and Thailand will also be hard hit. Within the US, Coface predicts that the expansionist budgetary policy promised by Mr Trump will provide a modest boost to US growth but with corporate profitability struggling in 2016, we still anticipate a rise in business insolvencies. Q What emerging countries represent the worst and best risks for UK exporters? Corporate debt is a particular concern in emerging countries, especially Turkey and China. China has also seen a rise in banking sector bad debt, alongside Russia, India and Brazil which has led to a tightening of credit facilities. Coface has just downgraded its country risk assessments of Mexico, Jordan, South Africa and Mauritania, while Turkey remains on the negative watch list. More positively, the risk profiles of Estonia, Bulgaria, Serbia and Hungary are improving and Coface’s business climate ratings for Central Europe are generally higher than for other developing regions, reflecting the better financial information and protection for creditors. We have also upgraded our country risk assessment for Ghana, Kenya and Argentina which is expected to see growth after important reforms, including the deregulation of exchange controls. Q What sectors are currently high risk and which represent the best opportunities for exporters? A Each Quarter, Coface evaluates 12 sectors across six regions of the world. During 2016 there were 23 downgrades compared with 10 upgrades and this trend is likely to continue in 2017 as low commodity prices continue to dampen profitability in sectors like metals and energy.

At the end of 2016, we found North America to be most weakened with retail and textiles now designated high risk and the sluggish construction sector now considered high risk. In the Middle East, three-quarters of sectors are considered as “high” or “very high” risk. The exceptions are pharmaceuticals (low risk) and paperwood and transport (medium risk). In line with Coface’s more upbeat country risk assessments for Central Europe, the region also has the best sector risk profile with all but three sectors rated medium or low risk. Coface has upgraded transport to medium risk, while the automotive sector remains low risk. Q Information is your greatest asset in an uncertain trading environment. Coface’s regular country and sector risk reports are intended to help companies reduce their exposure to risky business and focus on their strongest markets. The reports are freely available at http://www.cofaceuk. com/Economic-studies. A Credit insurance is the other important part of the equation, enabling exporters to assess the creditworthiness of customers and protect their business if the worst should happen. Options include whole turnover cover, insurance for strategically important customers or specific risks. To find out how Coface can support your export business, contact us on 0800 085 6848 or visit www.cofaceuk.com

FOREWORD | DAVID RICHES

Forging your path in international trade David Riches BCC executive director for Commercial, Trade and Marketing

It’s been a busy time indeed for Britain’s businesses – who have had to navigate uncertainties in the global economy and the UK’s changing relationship with the EU. All the while, they have had to maintain a focus on the day to day running of their business, plan ahead for the future, as well as think about how to forge their path in international trade. On this point, we at the British Chambers of Commerce (BCC) hear time and time again how daunting exporting can seem for businesses – a sentiment corroborated by the UK’s subdued trade figures. Why, in a nation renowned for its trading power, is this the case? British companies, often very successful in their home market, can reap great rewards by going overseas. The challenge, however, is navigating the effort that is required to do so – involving research, documentation, finding distributors or partners – and knowing who to turn to for help. It is undeniable that establishing an overseas presence requires work, time and investment. But those that have successfully done so, have seen significant returns from it. It’s worth remembering that even brands that are household names were once young businesses and first-time exporters. They took risks, made mistakes and learnt from their peers. No company can do everything on their own – and supporting businesses is where organisations such as the Chambers of Commerce can be most helpful. Over recent years, the BCC has been building up a Global Business Network of overseas Chambers. The network,

comprising of over 40 Chambers across every continent, as well as 52 Accredited Chambers in the UK, acts as an agile and reliable support system for businesses wishing to make it internationally. Each Chamber has a diverse membership of both services and goods companies, willing to share advice and provide trusted connections. This means that a member business of a local Chamber in the UK can benefit from ‘takeoff’ services such as documentation, foreign exchange support, market seminars – as well as initial connections to Chambers all around the world. In turn, these can provide ‘landing’ services in-market with introductions to local partners, market entry support, overviews of cultural do’s and don’ts, and much more. This year has certainly seen an uncertain business and political environment, both in the UK and abroad. But this does not mean that UK businesses should shy away from the many untapped opportunities around the world – particularly when help is readily available to them. No one understands business needs better than other businesses, and few organisations can draw on as much commercial and practical expertise as British Chambers of Commerce are able to do. Learn about the opportunities available to you in this issue of Global Trader, join your local Chamber (visit www.britishchambers.org.uk/ or ww.exportbritain.org.uk to learn more) and grow your businesses overseas – with the confidence that you are supported every step of the way.

It is undeniable that establishing an overseas presence requires work, time and investment. But those that have successfully done so, have seen significant returns from it

FOREWORD | LESLEY BACHELOR

Globalisation – a greater good? Lesley Bachelor OBE Director General of the Institute of Export & International Trade There has been much stated about the pros and cons of globalisation. Critics include groups such as environmentalists, anti-poverty campaigners and, surprisingly, trade unionists.

countries - it is not helping to close the gap between the world’s poorest countries and the world’s richest. Unsurprisingly, the majority of TNCs are based in the US and UK.

They claim that globalisation helps the richest countries to continue to dominate world trade at the expense of developing countries. The role of Least Economically Developed Countries (LEDC) in the world market is mostly to provide the North and West with cheap labour and raw materials.

Factors attracting TNCs to a country include cheap raw materials and labour supply, good transport links and infrastructure and access to markets where the goods are sold. These factors can be seen in many emerging markets and are often linked to the rising middle classes in these markets. With hundreds of millions of people estimated to join the middle classes in Africa, South America, China and India, the opportunities are very tempting for UK & US companies.

Proponents of globalisation point to the number of people globally who have benefited from it. According to the World Bank, between 1981 and 2010, we witnessed the single greatest decrease in material human deprivation in history. At a time when the population of the developing world has increased by almost 60%, the number of those in extreme poverty (subsisting on less than $1.25 per day) has dropped from around 50% to around 20%.

Is globalisation really so bad? Given the sheer number of people that have been lifted out of absolute poverty and especially now, when our own economy is beginning to feel so fragile and vulnerable, can we afford to start worrying about the impacts of globalisation at this stage?

Proponents of globalisation point to the number of people globally who have benefited from it

Are we not just part of a moving system of civilisation that sees cultures, empires and regimes ebb and fall? Of course, if that was simply the case this would all be quite straightforward however, the next stage of globalisation begins skewing market forces that can take their toll as internationalisation steps in.

There are no guarantees that the wealth from inward investment will be used to benefit a local community. Profits are invariably sent back to the More Economically Developed Countries where the Transnational Corporations (TNC) are based. Economies of scale that the TNC can use often drive local companies out of business however, the transitory nature of the TNC is that if it becomes cheaper to manufacture elsewhere, the TNC will close the operation with the resultant job losses.

So “drawbridge up versus drawbridge down”, as the Economist recently wrote… The fact is, along with boosting our country’s economic resilience and addressing global challenges such as climate change, promoting economic integration is one of our three strategic priorities.

Likewise, the TNC home country may lose out in the job market to a LEDC, thus creating an imbalance in both trade and social mobility.

So what is globalisation really about and why has it happened? Globalisation has been happening for centuries however it has sped up over the last 50 years mainly due to the rate of innovation in communication and transportation technologies. Movement of goods, people and services has never been easier, which in turn is bringing more questions about the need to trade and how to govern its growth. Freedom to trade is the cornerstone on which organisations like the World Trade Organisation (WTO) are founded, promoting free trade between 164 countries who are all committed to removing barriers between them.

Surely, economic integration can be a powerful force promoting efficient markets and reform. We have seen that globalisation increases competition in product markets, it widens the range of financing sources available for investment, it allows countries to opt into institutional arrangements of a higher standard and it imposes strict discipline on governance, legal, regulatory and other institutions. Openness to international markets, globalisation if you will, also spurs investment and innovation within businesses and economies as a whole. Economic integration, and through it globalisation, empowers entrepreneurs and consumers alike. They also create new incentives and opportunities for everybody involved in a modern economy. So let’s support integration through cross-border financial flows and investment, trade finance, infrastructure, improved skills and standards in SMEs, policy dialogue and partnerships with institutional investors. This may not be the best time to change the plan.

The biggest companies are no longer national but multi-national corporations with subsidiaries in many countries (TNCs). Although globalisation is probably helping to create more wealth in developing

COMMENT

Why is the financial supply chain still stuck in the digital dark ages? Ian Kerr CEO, Bolero International Ltd In the world of logistics and the physical supply chain, digitisation is now at the heart of everyday operations.

shipping container is moved on the dockside of a major port, for example, it is very likely its sensor will alert its owner to the fact.

Everything from routing to planning is conducted on a digital platform, delivering big gains in efficiency and security.

In fact digitisation is advancing across all fronts in the physical supply chain. Coca Cola has automated its warehouses and Amazon is now well-advanced in its adoption of drones for delivery.

Technologies such as RFID, GPS and the Internet of Things, have opened the door to better-informed decision-making and more agile and collaborative organisations. Process automation and centralisation have made staff more efficient, while visibility, through the application of sensor technology, has given greater overall control, reducing risk and manifestly boosting productivity. If a

About Bolero www.bolero.net Bolero is a global leader in the electronic settlement of contracts between buyers and sellers. From initial purchase order to final payment including supporting trade financing and the documentary control of goods, Bolero helps organisations to improve cash-flow and working capital whilst increasing efficiency, control and visibility as well as mitigating risk and fraud. Bolero has led the way in driving the digitisation of global trade transactions, bringing the industryâ&#x20AC;&#x2122;s first electronic Bill of Lading solution to market. Today we power more than 6 million trade documents and $80bn worth of global trade transactions per annum connecting buyers, sellers, financiers, credit underwriters and payment providers and networks.

Dark ages However, when it comes to the financial supply chain that keeps the wheels of international trade turning, the picture is one of patchy uptake and a reluctance to embrace the digital future. Many institutions fail to see all the immediate advantages, remaining stuck in what we might term the digital dark ages. The adherence to paper-based processes, produces vastly complex trails of documents for each of the thousands of transactions a bank, for example, must handle. Bills of lading and letters of credit are two extremely important documents, but in a paper system they have to be couriered, manually checked, updated and stored. When banks and trading partners are handling thousands of transactions, keeping track of this stack of paperwork is extremely difficult. Not only will paper documents go astray, they are prone to errors, remain inaccessible to those who need to see them for much of the time and are costly to amend, keep and administer. Establishing where they are and authenticating them often proves frustratingly difficult, while security is a constant concern. Paper documents are also extremely vulnerable to forgery, either through the creation of bogus replicas or fraudulent amendment.

Switching is overdue Switching to digital alternatives, such as Boleroâ&#x20AC;&#x2122;s Xchange platform, that eliminate paper is the obvious answer. The advantages in terms of visibility, efficiency and security are almost immediate. The benefits of digitisation also help to reduce operational overheads such as staff costs as well as accelerating cash flow and slashing handling fees. Even so, uptake has been very tentative.

Digitisation no-brainer When there are such gains on offer, digitisation of processes in international trade does not require some great leap of faith. But we can see that it will require a critical mass to develop before the conservatism of large institutions is overcome. Admittedly, trade finance involves multiple participants, from established banks to shipping companies, insurers, regulators, customs and governmental bodies. Achieving consensus when there are so many interests to protect, is perhaps not easy. Yet banks are waking up to the massive opportunities in efficiency and security that digitisation offers, having regarded it as a topic that can be put off until another day. We can also see that the current downturn in commodity prices will force everyone involved in trade finance to consider how to cut costs and drive greater efficiencies from their processes. It makes a very compelling case for digitisation.

IN PROFILE

IN PROFILE: Bolero International Ltd The digitisation of trade finance is delivering significant benefits to corporates, banks, carriers and other Bolero trading partners. In addition to reducing the time, cost and risk of trading internationally, digitisation provides connected parties with greater visibility and transparency of the whole end to end process. For corporates, the reasons to go digital are driven by the need to reduce costs through increased efficiencies and working capital improvements by employing faster payment processing methods. Additionally, the increased visibility, along with the ability to audit and track all transactions, reduces the risk of fraud and regulatory non-compliance. Digitisation also provides Corporates with the opportunity to acquire quicker and easier access to finance. For banks and other financial institutions, digitisation offers similar benefits and advantages, from increasing efficiencies to reducing the risk of fraud. Banks also have greater visibility over the end-to end physical and financial supply chain, enabling them to offer more enhanced value added services. To make the most effective transition into the digital world, it is important to find a company with the right knowledge and expertise. For the past 18 years, Bolero has been a global leader in the electronic settlement of contracts between buyers and sellers. From initial purchase orders to final payments, including supporting trade financing and the documentary control of goods, Bolero helps organisations to improve cash-flow and working capital whilst increasing efficiency, control and visibility as well as mitigating risk and fraud. This is all accomplished through the Bolero exchange, which allows exporters, banks, carriers, importers and other trading parties to connect and transact seamlessly over a common digital network irrespective of message format or protocol. Bolero provides a wide range of solutions in different vertical sectors designed specifically for the electronic management and communication of trade finance documents

and related instructions, including open account, letters of credit, guarantees, standbys and documentary collections. Bolero is leading the way in driving the digitisation of global trade transactions, bringing the industryâ&#x20AC;&#x2122;s first electronic Bill of Lading solution to market, and its innovative

cloud-based messaging services eliminate the need for paper trade documents. Today, we power trade across 5 continents and deliver in excess of $80bn worth of global trade transactions per annum, connecting buyers, sellers, financiers, credit underwriters and payment providers and networks.

Bolero International Ltd Global Headquarters Hersham Place Technology Park Molesey Road Walton-on-Thames Surrey KT12 4RZ United Kingdom Tel: +44 20 7759 7000 Fax: + 44 20 7759 7001 Singapore Office Level 27, Prudential Tower 30 Cecil Street 049712 Singapore Tel: +65 6831 2923

Hong Kong Office Unit 4609, Level 46 The Center 99 Queenâ&#x20AC;&#x2122;s Road Central Hong Kong Tel: +852 8208 4060 Japan Office Bolero International Limited 5F, Yaesu Dori Building 3-4-15 Nihonbashi, Chuo-Ku, Tokyo 103-0027 Japan Tel: + 81 3 6870 3538 www.bolero.net

Contacts: United Kingdom Ian Kerr Chief Executive Officer ian.kerr@bolero.net Tel: +44 20 7759 7079 M: +44 7786 962 888

Hong Kong Ross Wilkinson Regional Director, Asia Pacific ross.wilkinson@bolero.net Tel: +852 8208 4060 M: +852 9096 8946

Simon Streat Vice-President, Product Strategy simon.streat@bolero.net Tel: +44 20 7759 7013 M: +44 7983 169 160

Singapore Neil Johnson Head of Business Development, Asia Pacific neil.johnson@bolero.net M: +65 9877 6688

Paul Mallon Head of Customer Engagement and Legal paul.mallon@bolero.net Tel: +44 20 7759 7018 M: +44 7884 238 383

Japan Yoshi Maruyama Regional Director yoshi.maruyama@bolero.net Tel: +81 90 3104 5775

FOREWORD | ADAM MARSHALL

We must not let Brexit hold us back Dr Adam Marshall Director General of the British Chambers of Commerce (BCC)

The past year has been a challenging period for UK businesses. The shadow of uncertainty cast by the EU referendum, combined with slower economic growth, have led some firms to put expansion and export plans on hold for the time being. In this light, it’s more important than ever for the government to provide tangible and logistical support to companies. This is a critical time for UK exports. Our research shows that exporting sales and orders have been strong since the EU referendum, but are some way off historic highs. While some businesses are benefitting from the fall in the pound, its advantages are not being felt widely. That said, many UK firms are continuing to grow in spite of these obstacles and headwinds. The BCC’s Quarterly Economic Survey (QES) suggested that the UK economy was showing resilience, and that confidence in future turnover, hiring expectations and investment in plant and machinery had improved in the final quarter of 2016, having fallen in the aftermath of the EU referendum.

Time to take action Improving our export performance will be key to driving wider UK economic growth in the coming years. To achieve this, both businesses and government will need to work together to nurture stronger export performances – a job that will take a decade or more to see through to fruition. However, there is practical support available for UK exporters, that can help them identify and break into new markets.

Direct access to on-the-ground support in new markets is a key way of improving the competitiveness and success of UK exporters, and the BCC and the Chamber network are playing our part by actively expanding our Global Business Network to link British firms with customers and opportunities in the fastest-growing economies overseas.

The BCC’s Quarterly Economic Survey suggested that the UK economy was showing resilience, and that confidence ... and investment in plant and machinery had improved in the final quarter of 2016 To support this, we launched the BCC Global Business Network in 2015 as a brand that reflects the increased international focus of the organisation, and the services that Chambers offer to businesses, focusing on the rising importance of helping UK firms succeed in exporting. The British Chambers of Commerce works not only with 52 Accredited Chambers in the UK – but also has connections with British Chambers of Commerce in 40 markets worldwide, and is continuing to expand its reach. The UK has weathered numerous storms before, making us more resilient and dynamic in the process. We need to ensure that the period of transition in our relationship with our European neighbours does not hinder our current trading partnerships, and does not hold us back from exploring new opportunities at the same time. British products and services still have an excellent reputation worldwide, and we need to remind the world of what we have to offer, and to help UK firms to take full advantage of this.

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Q&A

Your no.1 choice for international payments Helping small-medium businesses save money on their international payments since 2009, CurrencyFair has over 150,000 customers in the UK and around the world. Ben Geoghegan is the company’s Inbound Marketing Manager. Here, he answers Global Trader’s questions on the credentials of CurrencyFair Ben Geoghegan

Q Why should companies involved in international trade avoid using banks for their currency exchange? A If your business needs to pay foreign suppliers or take payments from overseas customers, you should avoid using your bank or broker because you’ll lose money from their hidden exchange rate margin and expensive sending fees.

Banks tend to charge anywhere from 1% to 5% margin on top of the base exchange rate. This means that, for every £100 you send or receive, the bank keeps £1 to £5 for itself.

Q How do you believe you differ from other companies involved in the currency business? A Most people don’t know that one of the biggest costs when sending money overseas is the exchange rate.

Obviously, the more you send or receive from abroad, the more the bank keeps.

Q What is CurrencyFair For Business? A CurrencyFair For Business makes it far easier and cheaper for companies to send and receive payments worldwide.

Business owners and managers now have more control and visibility on the exchange rates for their payments and receivables. As a result, the savings are hard to beat.

When banks transfer your money from one country to another, they can be slow and expensive. Most banks will charge you a transfer fee and give you a terrible exchange rate which reduces the amount of money that comes out the other side. The bank at the other end may often then charge you a receiving fee.

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AFRICA | DIT

Africa:

open for business Regional director for Department of International Trade London, Parveen Thornhill looks at the opportunities awaiting British businesses in Africa

London is one of the biggest exporting hubs in the United Kingdom. Last year, London alone exported an average of £32bn worth of goods to overseas markets, HM Revenue & Customs figures reveal. Yet there are still some markets that remain largely untapped by London businesses. One of those is Africa. The continent is growing fast. Its consumer-facing industries are due to grow by $400bn by the end of this decade, research by McKinsey shows. The International Monetary Fund (IMF) expects Sub-Saharan Africa to grow at a rate of four per cent in 2016 and 4.7 per cent in 2017, whilst North Africa, together with the Middle East, Afghanistan and Pakistan, is projected to grow 3.6 per cent in 2016 and 2017. Africa’s population is also growing fast. It is home to nearly 1.2bn people, up from just 312m 50 years ago, according to the United Nations Population Division. According to the Unicef report ‘Generation 2030 | Africa’, the continent’s population is set to double in the next 35 years. As a result, many African countries are increasingly opening up to business, including Nigeria and Ghana, where DIT will be taking a trade mission of London companies later this year. Take Ghana, a resource rich country that has experienced decades of stable growth – and this is expected to continue. The IMF expects Ghana’s GDP to grow 4.5 per cent and 7.7 per cent in 2016 and 2017 respectively. Ghana has also produced a development programme, Ghana-Vision 2020, which sets out how the country will foster sustainable

economic growth, with private sector activity and openness to trade playing a key part. According to the African Development Bank, Ghana is already making headway. Despite a drop in global oil prices, the oil-rich country’s economy has picked up and it has managed to halve poverty. Political stability is helping the country secure private sector investment, with public infrastructure being a major priority. DIT London has been working with a number of London-based businesses to help them gain a foothold in Ghana. One of the many companies who have found success in Ghana is supply chain solutions specialist, Dints. DIT worked closely with Dints during the development of its Vendor Managed Inventory (VMI) product to create opportunities for the UK’s extensive mining supply chain to grow their export business. Thanks to this close cooperation, Dints recently secured a major contract with Gold Fields Ghana, the Ghanaian arm of one of the world’s largest gold mining firms. Gold Fields will be using Dints’ VMI product across procurement, supply chain and inventory management, as well as providing flexible finance options, creating significant savings to miners. According to CEO Geoffrey de Mowbray, the VMI has been transformational for Dints and the support of DIT – invaluable.

The International Monetary Fund expects Sub-Saharan Africa to grow at a rate of four per cent in 2016 and 4.7 per cent in 2017

AFRICA | DIT

trade missions can often be a natural first step to export success. In the past two years, UKTI has led a number of trade missions to Africa, including Angola, Rwanda, Tanzania, Kenya, Mozambique and South Africa Africaâ&#x20AC;&#x2122;s largest country by population and second largest economy, Nigeria, is another export market that existing or budding exporters should keep a close eye on. Despite growth being sluggish and oil production contracting in recent years, the outlook for Nigeria is positive. Its GDP is expected to grow by 2.3 per cent in 2016 and 3.5 per cent in 2017, according to figures released by the IMF. Annual GDP could even exceed $1.6tr in 2030, making Nigeria a top 20 global economy, a McKinsey report from 2014 projected. Nigeria also has a growing middle class and a relatively young and educated population. This large consumer base ensures that major infrastructure investment, for instance, remains a government priority. Like Ghana, Nigeria is also part of the Economic Community of West African States (ECOWAS), meaning that exporting to it provides easy access to the 14 other ECOWAS markets.

One of the businesses that joined a recent trade mission is Hampstead-based engineering, procurement and project management company GEP UK Ltd. The business joined two recent DIT missions to African countries, visiting Nigeria, Ghana, South Africa and Mozambique along with other British companies. Fact finding visits allowed the business to learn more about the market, economy and relevant industries in each of the countries, whilst meetings with government authorities and business executives created a foundation on which it could establish its strategy for future involvement and activities in these countries. According to Farzin Haghani, Chairman GEP UK Ltd, meeting local companies has led to GEP now investigating oil and gas projects in Mozambique.

For companies looking to export to the African continent, trade missions can often be a natural first step to export success. In the past two years, DIT has led a number of trade missions to Africa, including Angola, Rwanda, Tanzania, Kenya, Mozambique and South Africa. Alongside this, it has assisted London businesses by providing market insight aimed at making access to the growing African market easier.

Through trade missions and expert advice, we want to help London-based businesses export more to the Middle East, North Africa and Sub-Saharan Africa. In 2015, these markets accounted for 8 per cent of all goods exported. We want to see this figure grow. After all, the continent holds huge potential for London companies and its growth opportunities are not something London businesses can afford to ignore. Africa is open for business. The question is, are we ready to trade? DIT can help businesses do what it takes to seize the opportunity.

AFRICA | FEATURE

Supply chain transparency and the UK’s Modern Slavery Act Peter Kasanda

Partner (Tanzania)

Brett Hartley

Senior associate (London) at Clyde & Co

According to the 2016 Global Slavery Index (GSI) there are an estimated 45.8 million people trapped globally in various forms of modern slavery – a term used by the UK Government to encompass slavery, servitude, forced and compulsory labour, and human trafficking. From a regional perspective, the GSI indicates that Sub-Saharan Africa accounts for approximately 13.6 per cent (6,245,800) of the world’s enslaved population. Although this figure is significant, comparatively it falls well short of India (18,354,700) and essentially double estimates for China (3,388,400). In absolute numbers, the African countries with the highest estimated number of modern slaves are Nigeria (875,500) and the Democratic Republic of Congo (873,100). Whether in Africa or elsewhere, no region or country is immune from the scourge of modern slavery, although each will have its own particular issues and risk profile. For example, Tanzania has been identified as a source, transit and destination country for modern slavery, with its export economy built on commodities vulnerable to labour exploitation, including gold, coffee, cotton, tea and tobacco. Forced and child labour is of particular concern, with child labour in small gold mines remaining a public problem the Tanzanian Government is actively trying to address.

The UK’s Modern Slavery Act The Modern Slavery Act 2015 (MSA) is the UK Government’s latest response to modern slavery. The MSA includes landmark supply chain transparency provisions requiring ‘commercial organisations’ (body corporates and partnerships) supplying goods or services, with a global turnover of £36m or more, and carrying on business in the UK to publish an ‘annual slavery and human trafficking statement’ on their website. This is a statement of the steps taken to ensure modern slavery is not taking place in the organisation’s business or supply chains anywhere in the world. It is designed to incentivise large organisations to take responsibility for eliminating modern slavery throughout their supply chains. Of course, any African-based company that has a demonstrable business presence in the UK and meeting the turnover requirement will also need to report.

Complying with the MSA Although there is no prescribed content for a statement, the MSA provides examples of what may be included, such as details of policies in effect and the due diligence undertaken across an

organisation’s business and supply chains to identify modern slavery risks. Statutory guidance issued by the UK Home Office provides further details on what may be included in a statement and guidance on best practices to underpin the statement. Organisations investing in Africa should take a proportionate and risk-based approach to labour exploitation in their supply chains, taking into account sectoral and country risks. Enhanced human rights due diligence will be essential for those operating in, or sourcing goods or services from, high risk sectors or countries, particularly conflict zones. Clear procurement rules, contractual protections (including warranties, audit rights and supplier obligations to comply with applicable codes of conduct) and consistent and culturally sensitive messaging throughout the supply chain may all have a role to play. Organisations should also reflect on how they will respond to cases of modern slavery if found, what level of support they are willing to give suppliers to remedy any issues, and how they can adapt incentive packages to reduce supplier reliance on exploited labour.

Where to from here? The UK is leading the charge on supply chain transparency, which will inevitably impact on how organisations caught by the MSA’s reporting requirement approach their business and supply chains in Africa. Clearly Africa presents significant investment opportunities, and its often abundant and low cost labour supply is undeniably attractive. However, organisations may need to consider investing more time and resources to ensure they are not complicit in labour exploitation when taking advantage of these opportunities.

Organisations investing in Africa should take a proportionate and risk-based approach to labour exploitation in their supply chains, taking into account sectoral and country risks

AFRICA | FEATURE

Infrastructure project opportunities in Africa

MARK LANE previews some of the major infrastructure projects both underway and planned in Africa

Africa looks like becoming the new land of opportunity with huge infrastructure projects planned or underway.

of the local market because you now have infrastructure that enables these mega construction projects to be done in Nigeria.”

Tim Ball, from law firm Charles Russell Speechlys, points out that the continent is more developed and politically stable than it has been for decades.

Elsewhere, Turner & Townsend has won the contract to project manage the construction of the US$1.55bn, 340-mile Horn of Africa Pipeline that will transport jet fuel, diesel and gasoline from the port of Djibouti to central Ethiopia.

He says: “There are enormous opportunities in Africa and there have been for a while. The difficulty is that it doesn’t have the hard infrastructure – roads, rail, airports and ports.”

The project includes the creation of an import facility and a buffer storage tank farm in Damerjog, Djibouti, which will be linked to a storage terminal and truck loading facility near the Ethiopian capital Addis Ababa.

It is a big continent and these opportunities are not evenly distributed. “West Africa is developing the fastest. Tanzania, Kenya, Uganda is the second division as far as development and exciting projects,” says Ball. One of the infrastructure developments in West Africa is LADOL Integrated Logistics Free Zone Enterprise.

“All that pales into insignificance from comparison to the additional investment we are expecting from investment in capacity in LADOL and outside of LADOL,’’ says LADOL’s managing director Dr Amy Jadesimi. She underlines the importance of LADOL, the only industrial free zone in Nigeria, and its attraction to offshore operators. She says: “If you are looking at deep offshore blocks like the Egina Field, which are about 24 hours sailing from Lagos, we halved the current cost of supporting those blocks. “These cost savings are important because they open up the Nigerian market, modernise it and turn it from a place where people do the minimum possible level of activity to an attractive destination.”

LADOL has invested US$500m so far and expects to spend an additional US$100m in the next two years. It has built the Lagos Deep Offshore Logistics Base to deliver oil and gas fabrication, ship maintenance, vessel support as well as logistics services. LADOL is also working in collaboration with Samsung Heavy Industries to develop for Total the Egina Floating Production Storage and Offloading Vessel (FPSO) to service the deep offshore fields near Lagos. LADOL’s vision is to foster an ecosystem of companies in the Free Zone to expand the base’s menu of support services and facilities.

There are inevitably challenges in developing infrastructure projects in Africa. Public and private sector partnerships don’t always go according to plan. “If you build a superhighway, will the locals use it if they have to pay? Often, the answer is no. So, it’s not bankable, or viable,” says Tim Ball. There is also increasing competition from the Chinese, are hungry for commodities and who are not bound by the UK Bribery Act. “Morally it’s a great idea,’’ says Ball. “But, when it comes to having a level playing field for competition in places like Africa, it puts us at a very major competitive disadvantage.”

She argues that the fall in the oil price has made the LADOL proposition more attractive, as oil companies seek cost savings. The completion of the fabrication yard also has enormous infrastructure implications. She explains: “Having a facility that has the largest crane capacity in Africa and that has the heaviest, deepest quay wall that can accommodate everything from a VLCC to a submersible totally changes the dynamics

There are enormous opportunities in Africa and there have been for a while

However, the potential prizes are enormous. Dr Jadesimi says: “West Africa is one of the few places in the world where you have a huge growth opportunity, not just with the existing market, by building capacity, but also through the creation of a middle class with upward of 100 million people in it which then gives you consumer opportunities within related industries.” 21

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GHANA | FOREWORD

Advancing on all fronts Tony Burkson CEO UK-Ghana Chamber of Commerce

Ghana has evolved into a stable and mature democracy over the last two decades and continues to show good performance on democratic governance, arising from a strong multi-party political system, growing media pluralism and strong civil society activism. Ghana is constantly ranked among the top three in Africa for freedom of the press and freedom of speech. The broadcast media is the strongest, with radio being the most farreaching medium of communication. While all these put Ghana in an enviable political position, and provide it with formidable social capital, the country faces some difficult decisions on the macroeconomic front. The country continues to experience decent economic growth despite the twin challenges of falling commodity prices and an energy crisis that the Government continues to grapple with. The fall in commodity prices and the resulting budget deficit forced the Government into an IMF programme in 2015, the programme allowed the country to access a $1bn loan facility in exchange for public sector reform and fiscal consolidation. Ghana continues to exceed expectations on the reform side as well as fiscal consolidation, reducing the deficit from 10 per cent of GDP in 2014 to 7 per cent in 2015. The deficit is expected to fall further in 2016. According to the world bank Ghana’s real gross domestic product (GDP) growth is projected to rebound to 5.2 per cent in 2016 from 3.4 per cent in 2015 reflecting the positive impact of more a stable energy supply and increased contribution from the oil and gas and agriculture industries. Energy supply is expected to improve following the emergency measures including the use of power barges. The country’s medium-term growth prospect is strong with 8.2 per cent in 2017 and moderating to 7.5 per cent in 2018 under the assumption that fiscal adjustment remains on track with the support of the International Monetary Fund (IMF) and other development partners.

On the monetary front, currency depreciation has moderated significantly and the TEN oil field is expected to grow oil production by almost a fifth and double gas output – most welcome news for the power sector. Nevertheless, Fitch has affirmed its B- rating for Ghana citing concern that elections this year will lead to spending slippages amongst other downside risks. The 2016 budget highlighted the key sectors that the Government was going to be focusing on in other to continue to grow the economy and deliver its “Better Ghana” agenda. Below are some the key highlights of Government plans:

Energy Sector • T he Energy sub-sector has typically received the largest contribution of the Economic Sector’s budgetary allocation, with an average of 43 per cent over the past three years • I mproved consolidation of Electricity Company of Ghana (ECG) revenue, with increased installation of prepaid electricity meters • C ommencement of the construction of seven primary substations

Ministry of Power • I nstallation of 1,053 MW generation capacity • Commencement of the construction of seven primary substations • Implementation of rooftop systems of up to 20,000 buildings under the National • Solar Rooftop Programme • Scaling up of the on-going Rural LPG • Institutional development and capacity building in ECG, NEDCO and regulatory agencies under the GEDAP 3 project • Also the procurement of power barges will go a long way to improve the power crisis in the country • Connection of over 1,500 communities to the national grid from various interventions; and Continuation of the implementation of the projects under the Millennium Challenge Compact

Ministry of Petroleum • I nstallation of FPSO J.E.A Mills and the completion of all subsea installations will pave the way for oil and gas production in the Tweneboa-Enyenra-Ntomme(TEN) Project with first oil expected in the third quarter of 2016 • Development of a Natural Gas Implementation Strategy to address the infrastructure requirement, funding and institutional mandates for Gas Sector Agencies

Ghana is constantly ranked among the top three in Africa for freedom of the press and freedom of speech

Ministry of Food and Agriculture • C ontinuation of Government’s drive to accelerate agriculture modernisation and sustainable natural resource management; implementation of rice development strategy • I mprovement of the road network in the cocoa growing communities • F or the 2015/16 cocoa season, COCOBOD has set aside US$150,000 for the rehabilitation of cocoa roads • F unding of the Shea Unit of COCOBOD as part of COCOBOD’s operational activities to revamp the Shea industry. The Shea Development Strategy (SHEDS) • S HEDS has been formulated in close collaboration with stakeholders to provide a long-term development perspective for the Shea sector 23

GHANA | COUNTRY PROFILE

Canada has contributed C$206m to the United Nations World Food Programme (WFP) to assist almost one million people in Ghana over the next five years. The WFP in Ghana has said that the programme, known as the Enhanced Nutrition and Value Chain (ENVAC), aims to promote sustainable agricultural production among smallholder farmers.

GHANA KEY FACTS

These will then supply industrial and community-level food processors with good quality staple crops to be processed into fortified nutritious foods.

Official name: Republic of Ghana Capital: Accra Area: 238,533 sq km Population: 26,327,649

to position it as a major player in the mining and the oil and gas sectors. The project is on a 26-acre site out of which 10,000 square metres would constitute the repair centre while a warehouse would occupy 5,000 square metres. It is expected to be completed by the end of the year.

Overview Ghana, thanks to the bounty from increased oil revenues, enjoys one of the highest growth rates in the world and is considered to be one of the most stable, peaceful and democratic countries in Africa.

Main language: English GDP: $36.04 billion (2015 est.) GDP growth: 3.5% (2015 est.) GDP per capita: $4,300 (2015 est.) Inflation: 17.2% (2015 est.) Labour force: 11.54 million Unemployment: 11% Monetary Unit: Cedi

There are immensely strong cultural and business links between Ghana and the UK

GDP by sector

% of total

Agriculture �� 20.7% Industry ��27.7% Services ��51.6%

Main industries Mining, lumbering, light manufacturing, aluminium smelting, food processing, cement, small commercial shipbuilding

Main exports Gold, cocoa, timber, tuna, bauxite, aluminium, manganese ore, diamonds

Main imports Capital equipment, petroleum, foodstuffs

Canada’s contribution will enable WFP to improve the nutritional status of 14,000 pregnant and nursing women, and 35,000 children, as well as boosting the income of smallholder farmers in the Ashanti, BrongAhafo, Northern, Upper East and Upper West regions. In the Northern Region one in three children is said to be stunted and likely to suffer mental and physical damage and anaemia affects four out of five children, according to the WFP. Mantrac Ghana, the sole authorized dealer for Caterpillar Products in Ghana, is investing US$40m to build a Cat Engine Centre to support Ghana and other countries in the West Africa sub-region. The company says the investment is to help

With free and fair elections and three changes of government over the last 20 years, and steady governance and economic development, it is something of a leading light in the African continent. With some justification it is seen as one of the best countries in Africa to invest in, which is why so many positive noises come from the world’s banking and business leaders. Ghana is in the Gulf of Guinea in West Africa, just north of the Equator, and the Greenwich Meridian runs right through the industrial city of Tema and close to the capital Accra, putting Ghana right at the centre of the world map. There are immensely strong cultural and business links between Ghana and the 25

GHANA | COUNTRY PROFILE

UK. Thousands of Ghanaians have been educated in the UK and many more have strong family ties. Ghanaians recognise the UK brand as a sign of quality, adaptability and innovation. It has enjoyed steady growth over the past decade. The country is the world’s second-biggest cocoa producer, Africa’s second biggest gold exporter, and one of the continent’s newest oil and gas producers. With an open and entrepreneurial approach to business, English as the official language, a secure, peaceful and friendly environment for international visitors, Ghana is fast developing as the leading gateway to Africa.

Economy Ghana’s economy was strengthened by a quarter century of relatively sound management, a competitive business environment, and sustained reductions in poverty levels, but in recent years has suffered the consequences of loose fiscal policy, high budget and current account deficits, and a depreciating currency. Ghana has a market-based economy with relatively few policy barriers to trade and investment

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GHANA | COUNTRY PROFILE

in comparison with other countries in the region, and Ghana is well-endowed with natural resources. Agriculture accounts for nearly one-quarter of GDP and employs more than half of the workforce, mainly small landholders. The services sector accounts for about half of GDP. Gold and cocoa exports, and individual remittances, are major sources of foreign exchange. Expansion of Ghana’s nascent oil industry has boosted economic growth, but the recent oil price crash has reduced by half Ghana’s 2015 anticipated oil revenue. Production at Jubilee, Ghana’s offshore oilfield, began in mid-December 2010 and currently produces roughly 110,000 barrels per day. The country’s first gas processing plant at Atubao is also producing natural gas from the Jubilee field, providing power to several of Ghana’s thermal power plants.

SELECTED OPPORTUNITIES Oil and gas Oil reserves are estimated at around two billion barrels. There have been about 24 new oil and gas discoveries since the Jubilee discovery in 2007. Oil and gas production will be boosted by the: • Ten fields which are on track for output in July/August 2016 • Offshore Cape Three Points (OCTP) oil and gas project with oil production expected to start in 2017 and gas in 2018 Opportunities exist in virtually every area of the petroleum industry, both upstream and downstream.

Infrastructure Ghana’s infrastructure spending has significantly increased over the past few years following an adoption of a PPP approach to financing development.

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk British High Commission Commercial Section Osu Link, off Gamel Abdul Nasser Avenue PO Box 296 Accra Ghana T: 00 233 30 2 213 231

A draft National infrastructure Plan has been developed to help address the estimated $1.5bn per annum infrastructure gap. In addition a Ghana Infrastructure fund (GIF) has been created which will be used to: • provide quality and affordable housing • improve Information, Communications and Technology (ICT) infrastructure • improve transport links • expand access to drinkable water throughout the country • expand ports, airports etc Opportunities for UK companies include development of: • low cost residential housing and quality high rise apartments • industrial and warehousing facilities • materials and equipment supplies

• commercial buildings such as shopping malls, offices and storage • water treatment services • manpower and training in the rail sector

Agriculture Agriculture is the backbone of the Ghanaian economy. It’s a major foreign exchange earner contributing an estimated 19 per cent to the country’s GDP in 2015. Major stakeholders and government are looking for ways to improve agri-business through the use of modern technology. There are opportunities for UK companies in the following areas: • agro processing industry (to add value, reduce post-harvest losses and expand demand) • fresh produce handling such as establishment of commercial pack houses for handling of fruits and vegetables • processing agricultural products (cereal, fruit, vegetables, livestock and fisheries) • technological and support services • floriculture

Health The health sector in Ghana has witnessed significant investment in infrastructure recently. There are investment opportunities for UK companies in the health sector in: • drugs and pharmaceuticals • research and development facilities • hospital equipment • laboratories • health centres • hospitals and clinics

LIBYA | COUNTRY PROFILE

LIBYA KEY FACTS Official name: State of Libya Capital: Tripoli Area: 1,759,540 sq km Population: 6,411,776 Main language: Arabic GDP (current): $38.3bn (2015 est.) GDP growth: -6.4% (2015 est.) GDP per capita: $14,600 (2015 est.) Inflation: 8% (2015 est.) Labour force: 1.195 million Unemployment: 30% (2004 est.) Monetary Unit: 1 Libyan dinar (LD) = 1,000 dirhams

In January, Libya, which has Africa’s largest crude oil reserves was pumping 715,000 barrels a day of oil, the highest level since 2014.

The state oil company, National Oil Corp, NOC, said it was on track to continue raising output this year as the country restored much of the production lost amid political chaos and conflict

The state oil company, National Oil Corp, NOC, said it was on track to continue raising output this year as the country restored much of the production lost amid political chaos and conflict. Now that blockades at the North African state’s main oil ports are ended, NOC estimates that output could reach 1.25 million barrels a day by the end of 2017. January’s production was up 23% on November’s figure. This could cause problems for OPEC and other major suppliers that have agreed to pump less crude in an effort to end a global glut to raise prices. OPEC countries exempted Libya from cutting output as the nation works to restore its oil industry.

GDP by sector

% of total

Agriculture �� 17% Industry ��63.8% Services �� 33.6% (2010 est.)

Main industries Petroleum, petrochemicals, aluminium, iron and steel, food processing, textiles, handicrafts, cement

Main exports Crude oil, refined petroleum products, natural gas, chemicals

Main imports Machinery, semi-finished goods, food, transport equipment, consumer products

The country pumped 1.6 million barrels a day before the 2011 revolt toppled dictator Colonel Gaddafi and sparked years of fighting between rival governments and militias. The Al-Sharara field, operated by Repsol, is pumping about 153,000 barrels a day, and NOC is aiming for its output to reach 250,000 barrels a day by May. NOC says Libya needs investment of US$100bn to US$120bn to rebuild its oil industry but BMI Research said the highlevel of risk would remain a major deterrent to investment this year in Libya. The Libyan Parliament, the House of Representatives, declared that a conference held in London in January on investment and the reconstruction of Libya was legally invalid and placed no obligations on the Libyan state.

Overview Libya, a mostly desert and oil-rich country with an ancient history, has more recently been known for the 42-year rule of the mercurial Col Muammar Gaddafi – and the chaos that followed his departure. Libya was under foreign rule for centuries until it gained independence in 1951. Soon after oil was discovered and earned the country immense wealth. Col Gaddafi seized power in 1969 and ruled for four decades until he was toppled in 2011 following an armed rebellion assisted by Western military intervention. In recent years the country has been a key springboard for migrants heading for Europe. Concerns have also been raised over the rise of Islamist militancy there. The toppling of long-term leader Muammar Gaddafi in 2011 led to a power vacuum and instability, with no authority in full control. The National Transitional Council (NTC), a rebel leadership council which had fought to oust the Gaddafi government, declared Libya ‘’liberated’’ in October 2011 and took over the running of the country. However, it struggled to impose order on the many armed militia that had become active in the months leading up to the ousting of Gaddafi. In August 2012 the NTC handed power to the General National Congress (GNC), an elected parliament which went on to select an interim head of state. Voters chose a new parliament to replace the GNC in June 2014 – the Council of Representatives (CoR), which relocated to the eastern city of Tobruk, leaving Tripoli controlled by powerful militia groups. 29

LIBYA | COUNTRY PROFILE

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk British Embassy 24th Floor  Tripoli Towers Tripoli Libya E: trade.libya@fco.gov.uk

The Islamic State extremist militia took advantage of the conflict between forces loyal to the outgoing GNC and the new parliament to gain control of several coastal cities, including Derna and Sirte.

day. The Central Bank of Libya continued to pay government salaries to a majority of the Libyan workforce and to fund subsidies for fuel and food, resulting in an estimated budget deficit about 49 per cent of GDP.

key dates in libyan history

Late in 2015, the UN brokered an agreement to form a new “unity” government – the Presidency Council, headed by unity Prime Minister Fayez Sarraj – but both Tripoli and Tobruk administrations were reluctant to acknowledge its authority.

Libya’s economic transition away from QADAFI’s notionally socialist model has completely stalled as political chaos persists and security continues to deteriorate. Libya’s leaders have hindered economic development by failing to use its financial resources to invest in national infrastructure. The country suffers from widespread power outages in its largest cities, caused by shortages of fuel for power generation. Living conditions, including access to clean drinking water, medical services, and safe housing, have all declined as the civil war has caused more people to become internally displaced, further straining local resources.

4th century BC – Greeks colonise Cyrenaica in the east of the country, which they call Libya.

Mr Sarraj and some of his deputies finally arrived in Tripoli in March 2016 and set up their headquarters in a heavily-guarded naval base.

Economy Libya’s economy, almost entirely dependent on oil and gas exports, struggled during 2015 as the country plunged into civil war and world oil prices dropped to seven-year lows. In early 2015, armed conflict between rival forces for control of the country’s largest oil terminals caused a decline in Libyan crude oil production, which never recovered to more than one-third of the average preRevolution highs of 1.6 million barrels per

Extremists affiliated with the Islamic State of Iraq and the Levant (ISIL) attacked Libyan oilfields in the first half of 2015; ISIL has a presence in many cities across Libya including near oil infrastructure, threatening future government revenues from oil and gas.

7th century BC – Phoenicians settle in Tripolitania in western Libya, which was hitherto populated by Berbers.

74 BC – Romans conquer Libya. AD 643 – Arabs conquer Libya and spread Islam. 16th century – Libya becomes part of the Ottoman Empire, which joins the three provinces of Tripolitania, Cyrenaica and Fezzan into one regency in Tripoli. 1911–12 – Italy seizes Libya from the Ottomans. Omar al-Mukhtar begins 20year insurgency against Italian rule. 1942 – Allies oust Italians from Libya, which is then divided between the French and the British. 1951 – Libya becomes independent under King Idris al-Sanusi. 1969 – Col Muammar Gaddafi, aged 27, deposes the king in a bloodless military coup. 1992 – UN imposes sanctions on Libya over the bombing of a PanAm airliner over the Scottish town of Lockerbie in December 1988. 2011 – Violent protests break out in Benghazi and spread to other cities. This leads to civil war, foreign intervention and eventually the ouster and killing of Gaddafi. 2016 – Following years of conflict, a new UN-backed “unity” government is installed in a naval base in Tripoli. It faces opposition from two rival governments and a host of militias.

CAMEROON | COUNTRY PROFILE

Cameroon prizes foreign investment CAMEROON

Cameroon devotes significant resources to several large infrastructure projects currently under construction, including a deep sea port in Kribi and the Lom Pangar Hydropower Project

Modest oil resources and favourable agricultural conditions provide Cameroon with one of the best-endowed primary commodity economies in Sub-Saharan Africa. Oil remains Cameroon’s main export commodity, and despite falling global oil prices, still accounts for nearly 40% of export earnings. Cameroon’s economy suffers from factors that often impact underdeveloped countries, such as stagnant per capita income, a relatively inequitable distribution of income, a top-heavy civil service, endemic corruption, continuing inefficiencies of a large parastatal system in key sectors, and a generally unfavourable climate for business enterprise. Since 1990, the government has embarked on various IMF and World Bank programs designed to spur business investment, increase efficiency in agriculture, improve trade, and recapitalise the nation’s banks. The IMF continues to press for economic reforms, including increased budget transparency, privatisation, and poverty reduction programmes. The Government of Cameroon provides subsidies for electricity, food, and fuel that have strained the federal

budget and diverted funds from education, healthcare, and infrastructure projects, especially in 2015, as low oil prices have led to lower revenues. Cameroon devotes significant resources to several large infrastructure projects currently under construction, including a deep sea port in Kribi and the Lom Pangar Hydropower Project. Cameroon’s energy sector continues to diversify, recently opening a natural gas powered electricity generating plant. Cameroon continues to seek foreign investment to improve its inadequate infrastructure, create jobs, and improve its economic footprint, but its unfavourable business environment remains a significant deterrent to foreign investment. Yaounde is the nation’s political capital, but Douala, the largest city, serves as the economic capital of Cameroon and the Central African region. Almost all transport in and out of Cameroon, Chad, and the Central African Republic transits through Douala’s port, located slightly inland from the Gulf of Guinea, on the banks of the Wouri River.

ASHUNCHONG AND PARTNERS LAW FIRM ASHUNCHONG AND PARTNERS is a multinational Douala-based Cameroon law firm. The firm is one of the reputable law firms in Cameroon and Africa, focusing on rendering quality services to worldwide clients. We are a bijural firm handling legal issues in French and English respectively. Ashunchong & Partners is a full service law firm with trained legal professionals who understand the client’s perspective to provide time bound legal services.

OUR SERVICES We incorporate all kinds of companies in Cameroon, and proffer legal advise to many foreign companies in Cameroon. We handle issues touching on corporate and commercial law, maritime and shipping law, oil and gas law, mining law, business law, investment law, contracts law, telecom law, banking, intellectual property, debt recoveries, commercial litigation and immigration law. We also negotiate contracts on behalf of our clients with the government, and carry out due diligence on behalf of our clients.

CONTACT ASHUNCHONG AND PARTNERS RUE BEBE ELAME AKWA DOUALA P.O Box 8925 CAMEROON - AFRICA T: +237 678 66 26 99/+237 695 88 83 86 F: +237 23 10 76 27 E: info@ashunchong-partners.com W: www.ashunchong-partners.com

Bar. ASHUNCHONG Paul T.A

NIGERIA | COUNTRY PROFILE

NIGERIA KEY FACTS Official name: The Federal Republic of Nigeria Capital: Abuja Area: 923,768 sq km (356,669 sq miles) Population: 181,562,056 (2015 est.) Main language: English GDP (current): $490.2bn (2015 est.) GDP growth: 2.7% (2015 est.) GDP per capita: $6,100 (2015 est.) Inflation: 9% (2015 est.) Labour force: 57.46 million Unemployment: 23.9% (2011 est.) Monetary Unit: 1 Nigerian naira = 100 kobo

It hopes that closing land borders will revitalise Nigerian industries and attract business to the port at Lagos, Nigeria’s economic capital and largest city

Nigeria, a nation of 190 million people, last year entered its first recession since 1994 and in response Nigerian President Muhammadu Buhari’s government has introduced protectionist policies. It has banned a range of more than 20 items – including cars – from being imported by land. It hopes that closing land borders will revitalise Nigerian industries and attract business to the port at Lagos, Nigeria’s economic capital and largest city. Nigeria is also seizing back one of Africa’s richest oil blocs and, according to reports, will prosecute petroleum giants Shell and Eni in a US$1.2bn corruption scandal.

GDP by sector

% of total

Agriculture �� 20.6% Industry ��25.6% Services ��53.8%

Main industries Crude oil, gas, coal, tin, columbite; rubber products, wood; hides and skins, textiles, cement and other construction materials, food products, footwear, chemicals, fertilizer, printing, ceramics, steel

Main exports Petroleum, petroleum products, cocoa, rubber

Main imports Machinery, chemicals, transport equipment, manufactured goods, food and live animals

However, General Electric Co has proposed investing in Nigeria’s oil refineries, potentially convening a consortium of companies to improve capacity at the run-down facilities. GE’s plan and similar promises from other companies to work with Nigeria to rehabilitate the country’s three oil refineries could help the government as it tries to reduce imported oil products. Imports are eating into nation’s scarce foreign currency, but the run-down state of the country’s refineries, which are also subject to frequent pipeline attacks, is worsening the situation. Nigeria also suffers from acute power generation problems. Of its current estimated electricity demand of 12,000MW, only 3,000MW is generated. But it is estimated that 40,000MW is needed to sustain planned industrialisation projects.

In July 2016, Nigeria signed 14 power purchase deals with utility-scale solar power developers, projected to bring about 1,200MW to the grid. Earlier in 2015 it reformed renewable power generation policies and recently announced a US$3bn energy modernisation fund to improve efficiency and the use of energy sources such as liquefied petroleum gas.

Overview British influence and control over what would become Nigeria and Africa’s most populous country grew through the 19th century. A series of constitutions after World War II granted Nigeria greater autonomy; independence came in 1960. Following nearly 16 years of military rule, a new constitution was adopted in 1999, and a peaceful transition to civilian government was completed. The government continues to face the daunting task of reforming a petroleum-based economy, whose revenues have been squandered through corruption and mismanagement, and institutionalising democracy. In addition, Nigeria continues to experience longstanding ethnic and religious tensions. Although both the 2003 and 2007 presidential elections were marred by significant irregularities and violence, Nigeria is currently experiencing its longest period of civilian rule since independence. The general elections of April 2007 marked the first civilian-to-civilian transfer of power in the country’s history and the elections of 2011 were generally regarded as credible. In January 2014, Nigeria assumed a nonpermanent seat on the UN Security Council for the 2014–15 term. 33

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Our staff The most important resource in any school is the staff and Day Waterman College has gone to great lengths in ensuring that the staff recruited are the very best available. Students are morally guided and inculcated with sound principles by experienced, certified teachers who are committed to the aims and ethos of our College.

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NIGERIA | COUNTRY PROFILE

Economy Following an April 2014 statistical ‘rebasing’ exercise, Nigeria has emerged as Africa’s largest economy, with 2015 GDP estimated at $1.1trn. Oil has been a dominant source of income and government revenues since the 1970s. Following the 2008–9 global financial crises, the banking sector was effectively recapitalised and regulation enhanced. Nigeria’s economic growth over

the last five years has been driven by growth in agriculture, telecommunications, and services. Economic diversification and strong growth have not translated into a significant decline in poverty levels, however – over 62 per cent of Nigeria’s 170 million people still live in extreme poverty. Despite its strong fundamentals, oil-rich Nigeria has been hobbled by inadequate

power supply, lack of infrastructure, delays in the passage of legislative reforms, an inefficient property registration system, restrictive trade policies, an inconsistent regulatory environment, a slow and ineffective judicial system, unreliable dispute resolution mechanisms, insecurity, and pervasive corruption. Regulatory constraints and security risks have limited new investment in oil and natural gas, and

LEGAL EXPERTS FOR NIGERIA We provide a wide range of legal services in the following areas: • Arbitration & Alternative Dispute Resolutions

• Aviation, Shipping and Transport • Banking & Finance • Constitution & Statutory Interpretations

• Corporate & Commercial Law Practice

• Civil & Criminal Law & Practice • Chieftaincy Matters • Debt Recovery • General Litigation

• Immigration • Insurance & Pension • Investment & Securities • Maritime Law • Mergers & Acquisitions • Oil & Gas, Energy and Natural Resources Law

• Pre & Post Election Dispute Resolutions

• Real Estate Law & Consulting • Intellectual Property

(Legal Practitioners & Notaries Public)

CONTACT Plot 22, Temilola Akinbode Road, (Road 69), Off Freedom Way (New 3rd/Ikate Round About), Lekki Peninsular Phase 1, Lekki, P. O. Box 72799 Lagos, Nigeria. Telephone +234-1-2122700, +234-909-532-1456 Email rtlagos@rickeytarfa.com Web http://www.rickeytarfa.com

PROFILE

A quality syndicated approach to client needs Global Trader turns the spotlight on leading Nigerian law firm Abuka & Partners

Formation ABUKA & PARTNERS, Legal Practitioners, was practising under the name and style Abuka, Ajegbo, Ilogu & Nwaogu. It was founded on 28th March, 1979 by the four name-partners, who had practised individually and separately until that date. The partners have been in the legal profession since 1970. Following a restructuring of the law firm, we adopted the shorter and simpler name ABUKA & PARTNERS, Legal Practitioners.

Location of offices The firm maintains offices in Lagos and Abuja. Lagos was the earliest base of the firm. As the seat of Government has gradually moved from Lagos to Abuja, our Abuja office places the law firm in the best position to conduct dealings with Government on behalf of our clients in the new capital. The firm has won the respect of the Nigerian government and of foreign embassies in Nigeria.

Credentials Abuka & Partners are members of the Nigerian Bar Association, the International Bar Association, the American Bar Association (International Associates), the Lagos Chamber of Commerce, the NigerianBritish Chamber of Commerce (Honorary Life President), the Nigerian-German Business Association, and of the Equipment Leasing Association of Nigeria.

Divisions of the firm The different branches of the law in which we practice are segregated into specialized divisions. The heads of these divisions constantly up-date the database of their divisions and bring the benefits of knowledge and experience gained from seminars, workshops and refresher courses attended by members of the firm both locally and abroad. These facilitate computer-aided research which impacts greatly on the highly dynamic practice of law. We adopt syndicated approach to our clients needs. Syndication is the means whereby our specialists in different fields bring their skills together to bear upon each client’s problem. Syndication

ensures that the solutions we offer to our clients are in-depth and comprehensive. It addresses all aspects of the matter in hand.

Special practice areas Foreign Direct Investment (FDI), private joint ventures, immigration, labour/ employment. On behalf of our clients we undertake full compliance with Nigerian statutory framework for foreign direct investment into Nigeria. The framework includes incorporation, business permit and expatriate quota, capital importation and certificate of capital importation, commencement of business, registration with the Nigerian Investment Promotion Commission, registration with the National Office for Technology Acqusition (NOTAP), taxation and repatriation of dividends. Full Corporate and Commercial Law: Company incorporation and post incorporation obligations, statutory compliance, corporate governance. Oil & Gas, construction, commercial real estate, infrastructure, power; mining and mineral processing, communications, financial law, trademarks (Intellectual Property generally), Litigation & Alternative

Dispute Resolution. Financial Law: Banks and Banking Law, Capital and Money Market Law, Secured Credit Transactions, Equipment Leasing and Finance Law, Insurance Law, Taxation, Securities). Trade Mark: Acting as Agents and Attorneys representing owners of trademarks, copyrights, patents and designs around the world; applying for registration, defending and opposing applications for registration of intellectual property rights and obtaining certificates of registration, and renewals.

Litigation and alternative dispute resolution We effect settlement of commercial and non-commercial disputes through instituting or defending court proceedings or through Alternative Dispute Resolution (ADR); and supervising the execution of court judgments.

Service delivery We maintain the best standards of professionalism, ethic and integrity. We recognize that every client is unique and, to that extent, our service to each client is personalized as if the client were our only client. We treat each client’s business in strict confidence. We detail a “managing attorney” for all the work performed for each client. We are responsive to our clients’ enquiries and have a good understanding of the way the European and US like to do business. The firm has Nigerian statutes and case law in its computer database, which is updated regularly in accordance with the development in Nigerian law to ensure that the database is current. CONTACT Patrick Abuka, MBA, LL.M Solicitor & Advocate of the Supreme Court of Nigeria from 1974 Managing Partner ABUKA & PARTNERS Legal Practitioners Western House, 10th Floor, 8-10, Broad Street, PO Box 7022, Lagos, Nigeria, West Africa T: +234 803 305 4371 +234 805 2363 930 +234 708 589 9820 +234 705 591 9874 +234 1 418 1728; +234 1 875 0974 E: abukapc@yahoo.com lagos@abukapartners.com.ng patabuka@hotmail.com E: Patrick.Abuka@abukapartners.com.ng www.abukapartners.com.ng

Q&A

Abuka & Partners Q&A Global Trader meets Mr. Patrick Abuka, the Principal and Managing Partner of Abuka & Partners, and discovers a professional law firm with a great deal to offer clients Q What are the main areas of practice provided by Abuka & Partners? A Corporate and Commercial Law, Financial Law, Trade Marks (Intellectual Property), Maritime Law, Oil and Gas, Litigation & Alternative Dispute Resolution. Q What are the main challenges facing overseas companies trading in Nigeria and why is it important to work with firms such as yours? A Nigerian company law recognises three categories of overseas business interests: (a) foreign companies doing business with Nigeria and (b) foreign Companies intending to carry on business in Nigeria and (c) companies doing business in Nigeria. The challenges faced by overseas business interests depend on which of these categories they fall into. (a) Foreign companies doing business with Nigeria are not domiciled in Nigeria. Therefore they have no legal obligations of compliance with the Nigerian Company Law, Companies and Allied Matters Act (CAMA). They are subject mainly to laws of international trade. They may require representation by local counsel in the fulfilment of international contracts by way either of prosecution or defence. In such event, it is important for such foreign companies to work with law firms such as ours that have years of proven expertise and experience in the applicable laws. (b) Foreign companies intending to carry on business in Nigeria. The main challenge this category of business interest faces is to find the right lawyer for the right services. Speed in achieving incorporation and obtaining all the necessary permits and approvals is often of major concern to the wouldbe investor. Such firms as ours, with over forty years experience and proven expertise in this area would be vital for the foreign business interest. (c) Companies doing business in Nigeria. The challenges faced by this category of companies are in the areas of post incorporation obligations such

as statutory compliance, corporate governance, taxation, employment, etc. Abuka & Partners are well known to many local and foreign companies for their expertise in all these areas material to doing business in Nigeria. Q What can Abuka & Partners offer to UK companies looking to do business in Nigeria? A In addition to the considerations mentioned above, we offer integrity and track record of satisfactory service. Our loyal clientele of more than forty years in professional relationship speak eloquently to this fact. Q Describe the current business climate in Nigeria, how busy is your firm at the moment? A Except for the deficit in infrastructure (which in itself is a major business opportunity), Nigeria unarguably has the best business investment climate in Africa. With population of more than 170 million, well-educated working class, largest market, and largest economy in Africa; drawing largest investment consistently for many years consecutively. Nigeria is in need of everything and yields the most return on investment compared to the rest of the world. Geographically located as the major gateway to the Economic Community Of West African States (ECOWAS). Q What do you see as the key strengths of your law firm? A Our key strengths are experience (40 years), proven expertise, professionalism, speed, never failing to deliver. Q Describe your client base, sector expertise and the type of companies you are looking for new business from.

‘WE HAVE BEEN WORKING FOR SOME OF THE FORTUNE 500 COMPANIES AND OTHER MAJORS AS CLIENTS FOR MANY YEARS’

Mr. Patrick Abuka – Biography Mr. Patrick Abuka is the Principal and Managing Partner of Abuka & Partners. Born 17th February, 1942, he attended the Universities of Ife and Lagos and graduated with Masters degrees in Law and Business Administration. He has been in the legal profession since 1970. He is a Solicitor and Advocate of the Supreme Court of Nigeria since 1974. Here, he answers Global Trader’s questions on the expertise and strengths of his law firm and trading challenges in Nigeria.

A We have been working for some of the Fortune 500 companies and other majors as clients for many years. Their recommendations have been responsible for our growth. We have a structure that can accommodate more such companies in our practice areas mentioned above. Q What are the future aspirations for Abuka & Partners? A Our future aspiration is to continue helping people achieve their business objectives.

CONTACT Patrick Abuka, MBA, LL.M Solicitor & Advocate of the Supreme Court of Nigeria from 1974 Managing Partner ABUKA & PARTNERS Legal Practitioners Western House, 10th Floor, 8-10, Broad Street, PO Box 7022, Lagos, Nigeria, West Africa T: +234 803 305 4371 +234 805 2363 930 +234 708 589 9820 +234 705 591 9874 +234 1 418 1728; +234 1 875 0974 E: abukapc@yahoo.com lagos@abukapartners.com.ng patabuka@hotmail.com E: Patrick.Abuka@abukapartners.com.ng www.abukapartners.com.ng

NIGERIA | COUNTRY PROFILE

Nigeria’s oil production has contracted every year since 2012. Because of lower oil prices, GDP growth in 2015 fell to around three per cent, and government revenues declined, while the non-oil sector also contracted due to economic policy uncertainty. President BUHARI, elected in March 2015, has established a cabinet of economic ministers that includes several technocrats, and he has announced plans to increase transparency, diversify the economy away from oil, and improve fiscal management. The government is working to develop stronger public-private partnerships for roads, agriculture, and power. The medium-term outlook for Nigeria is positive, assuming oil output stabilises and oil prices recover.

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk Nigerian British Chamber of Commerce E: info@nbccuk.org T: +44 (0) 3300 241 126 W: www.nbccuk.org

SELECTED OPPORTUNITIES

Infrastructure Nigeria’s infrastructure spending has increased recently. The Nigerian government is developing the infrastructure using both public and private partnership (PPP) mechanisms. Nigeria needs approximately USD 500 billion for critical infrastructure development. The Nigeria Infrastructural Fund (NIF) has been created to help address this. Other real estate funds have also been set up. The funding will be used to: • create new housing • improve public services • develop the tourist sector • improve transport links Opportunities for UK companies include: • import and distribution of materials and equipment • hospitality and recreation real estate • warehousing, haulage and logistics • mass housing and road construction

• manpower development and training in the rail subsector • services for loading and offloading goods Offshore Liquid Natural Gas (LNG) Nigeria has the ninth largest gas reserves in the world and the largest in Africa. Domestic and industrial consumption of gas in Nigeria is below 20 per cent. The government has allocated USD 450 million out of the USD one billion raised in July 2013 for the gas infrastructure. It has set aside and extra USD eight billion for improvements in the sector. Opportunities exist for: • gas gathering • construction • operating and securing processing facilities and pipelines

Agriculture Nigeria has over 80 million hectares of arable land and agriculture contributes over 42 per cent of Nigeria’s GDP.

The growth potential of this sector is enormous. The Federal Ministry of Agriculture and Rural Development (FMARD) has implemented the Agricultural Transformation Agenda (ATA). The ATA has been set up to reposition agriculture as the primary sector to grow the Nigerian economy. Recently, the agriculture sector has received attention from investors who have realised the potential of the market. Many state governments have entered into partnerships with private sector companies. The opportunities for UK companies in this sector include: • equipment supply • education and training • food processing and manufacture • haulage, storage and waste recycling • poultry and fish farming • commercial mechanised farms

Zappex has grown to become one of the leading Freight and Forwarding companies in Tanzania, with 23 youthful, dynamic, highlyqualified and well dedicated professionals in the field of Freight Forwarding. Your consignments will be safe, moved on a timely basis to the correct place, along with the appropriate documentation and fitting your requirements at an affordable price. Zappex has made a vast experience on handling clearance services pertaining to international Exhibitions, Local and Transit goods, Project materials including Heavy Machinery for Land and Marine Works, Survey and Test Equipments, etc. Individual shipment including Cars and Loose Cargo. Our Key Disciplines: • Air Freight for both Import and Export • Project Cargo Handling • Dry Cargo Chattering by sea • LCL Consolidator • Ship Chattering • Shipping Consultancy • Warehousing • Road and Rail Transport • Export Packaging Lumumba/Uhuru St. Corner Plot No.19/20 Second Floor, Plot No. 19 Dar-es-Salaam Tanzania Tel: +255 22 2183372/22 2182733 Fax: +255 22 2184578 Mob: +255 755 248 983/754 280 488 Mob: +255 753 666 777 Email: info@zappex.co.tz www.zappex.co.tz

TANZANIA | COUNTRY PROFILE

TANZANIA KEY FACTS Official name: United Republic of Tanzania Capital: Dodoma (official), Dar es Salaam (commercial) Area: 945,087 sq km (364,900 sq miles) Population: 51,045,882 Main language: English, Swahili GDP (current): $44.9 billion (2015 est.) GDP growth: 7% (2015 est.) GDP per capita: $2,900 (2015 est.) Inflation: 5.6% (2015 est.) Labour force: 26.11 million (2015 est.) Unemployment: Not known Monetary Unit: 1 Tanzanian shilling = 100 cents

Tourism is growing in importance and ranks as the second highest foreign exchange earner after agriculture

Tanzania has started tapping an estimated 58 trillion cubic feet of natural gas from offshore fields for domestic use, and is also exploring for oil in Lake Tanganyika in the west. However, Tanzanian officials have said it will be a decade before an estimated 55 trillion cubic feet of gas is pumped and sold. Halliburton is reported to have scaled back operations in the wake of falling gas prices.

GDP by sector

% of total

Agriculture �� 26.5% Industry ��25.6% Services ��47.3%

Main industries Agricultural processing (sugar, beer, cigarettes, sisal twine); diamond, gold, and iron mining, salt, soda ash; cement, oil refining, shoes, apparel, wood products, fertiliser

Main exports Gold, coffee, cashew nuts, cotton

Main imports Consumer goods, machinery and transportation equipment, industrial raw materials, crude oil

Tanzania’s oil and gas legislation to secure land for a liquefied-natural-gas plant near Dar es Salaam stalled for four years, before finally being approved a few months ago, more than a year into the gas-price slump. In March 2016, Dubai-based Dodsal Group said it had verified new onshore reserves near Dar es Salaam worth US$8bn at today’s gas prices. It has been reported that negotiations over how to build and operate the terminal with companies, including Exxon Mobil, Royal Dutch Shell and Ophir Energy, would take 18 months to three years. However, Tanzania did not borrow against future gas earnings and its new government is cutting spending and fighting corruption. Apart from gas, the IMF expects growth in Mozambique and Tanzania to be more than six per cent this year — twice that of its neighbours — although that pace is slower than in recent years and partly reflects the

carry-over effects of the US$30bn in foreign investment over the past five years. In Tanzania’s construction industry growth has averaged almost 12 per cent over the past 10 years.

Overview Located along the coast of the Indian Ocean, Tanzania is a member of the East African Community, along with Kenya, Uganda, Rwanda and Burundi. Its geographical neighbours are Malawi, Mozambique, Zambia and Democratic Republic of Congo. Dar es Salaam is the largest port of entry and the economy relies heavily on agriculture, which accounts for nearly half of GDP and employs 80 per cent of the workforce. Tourism is growing in importance and ranks as the second highest foreign exchange earner after agriculture. Mineral production (gold, diamonds, tanzanite) has grown significantly in the last decade. It represents Tanzania‘s biggest source of economic growth, provides over three per cent of GDP and accounts for half of Tanzania‘s exports. Tanganyika was first a German colony, then a League of Nations mandated territory under British administration and later a UN trust territory, remaining under British control. The union of Tanganyika and Zanzibar took place in 1964. Zanzibar has its own President and a separate parliament, which 41

TANZANIA | COUNTRY PROFILE

is responsible for all issues except for eight ‘Union competences’ which include foreign and defence policy.

SELECTED OPPORTUNITIES

Economy

Energy

Tanzania is one of the world’s poorest economies in terms of per capita income, but has achieved high growth rates based on its vast natural resource wealth and tourism. GDP growth in 2009–15 was an impressive 6–7 per cent per year. Dar es Salaam used fiscal stimulus measures and easier monetary policies to lessen the impact of the global recession. Tanzania has largely completed its transition to a market economy, though the government retains a presence in sectors such as telecommunications, banking, energy, and mining.

Recent exploration activity in Tanzania’s deep offshore waters has led to the discovery of 46.5 trillion cubic feet of natural gas. More is expected as drilling continues.

The economy depends on agriculture, which accounts for more than one quarter of GDP, provides 85 per cent of exports, and employs about 80 per cent of the workforce; agriculture accounts for seven per cent of government expenditures. All land in Tanzania is owned by the government, which can lease land for up to 99 years. Proposed reforms to allow for land ownership, particularly foreign land ownership, remain unpopular. The financial sector in Tanzania has expanded in recent years and foreign-owned banks account for about 48 per cent of the banking industry’s total assets. Competition among foreign commercial banks has resulted in significant improvements in the efficiency and quality of financial services, though interest rates are still relatively high, reflecting high fraud risk. Recent banking reforms have helped increase private-sector growth and investment. The World Bank, the IMF, and bilateral donors have provided funds to rehabilitate Tanzania’s aging infrastructure, including rail and port, that provide important trade links for inland countries. In 2013, Tanzania completed the world’s largest Millennium Challenge Compact grant, worth $698 million, and, in December 2014, the Millennium Challenge Corporation selected Tanzania for a second Compact. In late 2014, a highly-publicised scandal in the energy sector involving senior Tanzanian officials resulted in international donors freezing nearly $500 million in direct budget support to the government. The Tanzanian shilling weakened in 2015 because of lower gold prices, election-related political risk, and outflows from emerging market currencies generally.

There are opportunities for UK companies in: • oil and gas exploration • development and construction of Liquefied Natural Gas (LNG) plants There are also untapped sources and opportunities for renewable energy including: • geothermal • wind • biomass • solar • natural gas • coal

Mining Tanzania has the largest gold reserves in Africa, behind South Africa. Gold exploration is intensifying. In addition to gold, opportunities exist for the mining of: • coal • uranium • nickel • iron ore • tanzanite gemstone

and data are growing at a rate of more than 50 per cent per year. Opportunities for UK companies include: • • • •

extending the fibre-optic network provision of ICT hardware education and training systems to support information flows

Agriculture Agriculture is the biggest sector in the Tanzanian economy. It accounts for about half of national income. There is a huge availability of arable land and labour force. Opportunities exist for UK companies in: • agro-processing • machinery manufacturing • irrigation infrastructure development • production of flowers, fruits and vegetables • production of traditional ‘cash crops’ such as coffee, tea, pyrethrum, cashew, sugar, cotton and sisal

Security This sector is steadily growing and becoming more sensitive.

Information and Communications Technology (ICT) The ICT sector has grown by more than 10 per cent per year over the last five years. However, Tanzania has a limited fibre-optic network and affordable telecom service. Demand for communication services like fixed-line, broadcast

There is demand for: • • • •

security services patrol vessels basic utility and training aircraft improved maritime situational awareness • training on military skills • training for criminal investigation and prosecution

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk British High Commission Umoja House Garden Avenue P.O. Box 9200 Dar es Salaam Tanzania E: DarCommercial@fco.gov.uk T: +255 (0) 22 2290000

IVORY COAST | COUNTRY PROFILE

Business opportunities in Ivory Coast

To help The Ivory Coast become an emerging country by 2020, the government has prioritised Public Private Partnerships (PPP).

The Ivory Coast (also known as the Côte d’Ivoire) is one of the largest economies of the Economic Community of West Africa States (ECOWAS). It represents around 40% of the West African Economic and Monetary Union (WAEMU) Gross Domestic Product (GDP).

It has also increased social spending and invested heavily in infrastructure projects.

The African Development Bank (AfDB) and many Francophone (French speaking) west African operations have their headquarters in the economic and administrative capital of Abidjan. Many well-known UK companies operate in the Ivory Coast such as Aggreko, Amara

IVORY COAST

Mining, Crown Agents, Diageo, G4S, GlaxoSmithKline, Jaguar Land Rover, Price Waterhouse Cooper, Randgold, Regus, Rolls Royce Marine, Standard Chartered Bank and Unilever. Benefits for UK businesses exporting to Côte d’Ivoire include: • a business and transportation hub for west Africa • infrastructure network is superior to most other west African countries • significant mining potential The Ivory Coast is well on its way to recovery after a difficult start to the 21st century. The International Monetary Fund (IMF) forecasted GDP growth to reach 8.4% in 2016. There has been significant progress towards implementing structural changes to strengthen and improve the business environment. However, many sectors remain in state-ownership due to profitablility issues and reform requirements.

The services sector represents the largest segment of the economy and provides the biggest contribution to growth. Transport and communications activities were on the rise, benefitting from the rebound in agriculture and the increase in household incomes. Substantial investments in agro-industry and the extractive and food industries have been made recently. In 2015, imports of goods from the UK totalled around £123m. The major UK exports to the Ivory Coast included: • dairy products • textiles • cars There are four main areas of opportunity for UK companies seeking new business in the Ivory Coast: mining, agriculture, oil and gas, and infrastructure development.

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Q&A

A first class Moroccan law firm Q What are the main services provided by the Bakouchi & Habachi HB Law Firm LLP? A Corporate, finance and investment funds: loan finance; debt capital markets; acquisition finance; restructuring; local debt finance transactions; structured finance; share and all assets; security; insolvency; manager and administrator transfers of control; regulatory consents and fund investments; advice on regulatory issues including sanctions, FATCA; equity capital markets; mergers and acquisitions: joint ventures and shareholder arrangements; re-organizations and disposals; corporate restructuring; Stock Exchange listings; sale and purchase documentation; regulatory advice; intellectual property; trademarks. Litigation, insolvency and restructuring: fraud and asset tracing; company advice; claims against directors; shareholder disputes; trust litigation; distressed funds; banking and contractual disputes; insurance; warranty claims; property and employment disputes; professional negligence claims; administrative law and judicial review; IP disputes; debt and equity rescheduling and refinancing;

distressed mergers and acquisitions; distressed funds advice; formal insolvency proceedings and office holders’ conduct, powers and regulation; debt recovery. Regulatory: anti-money laundering compliance; terrorist financing compliance; financial services regulation; sanctions; tax and tax information exchange; FATCA; insurance and reinsurance regulation. Q In what ways can you assist UK companies hoping to enter, or already doing business in, the Moroccan market? A As a Moroccan independent law firm, HB Law Firm has a very good knowledge of the Moroccan market and therefore can provide suited and creative solutions that will answer the clients’ needs and expectations. Q Please describe the current business climate in Morocco. A Aware of the fact that investment is a key factor to ensure sustainable and sustained economic growth, Morocco has liberalized its economy by easing procedures, providing better protection to private operators through introducing new laws aiming at improving investment conditions and, thus, acquiring

GLOBAL TRADER put questions to Kamal Habachi, partner in the leading Moroccan law firm, Bakouchi & Habachi HB Law Firm LLP, and finds out about the excellent credentials of his Casablanca-based legal practice

significant flow of domestic and foreign private capital, including: labour code, intellectual property and data protection. Q What are the key strengths of your law firm? A The firm works in different languages so that it can efficiently respond to clients’ needs. Q How do you see the future development of the Bakouchi & Habachi HB Law Firm LLP over the next five years? A Our development is based on the development of our client, we move and grow-up with them, our priority is the satisfaction of the client, we insist on the proximity and we prefer to maintain a human size office in order to reach our client objectives.

CONTACT: Bakouchi & Habachi HB Law Firm 6, Street Farabi, Bd Rachidi, Residence Toubkal, 2nd floor Gauthier, Casablanca Morocco Phone : +212 522 47 4193 Fax : +212 522 47 1082 Email : contact@hblaw.ma Web: www.hblaw.ma

MOROCCO | COUNTRY PROFILE

MOROCCO

KEY OPPORTUNITIES FOR UK BUSINESSES Financial services The Casablanca Stock Exchange is the second largest in Africa and aspires to be the regional hub. The London Stock Exchange was selected as a strategic and technology partner for the Casablanca Stock Exchange. In June 2014 the two entities signed a partnership to support the development of Moroccan capital markets. There is huge potential for the UK and Morocco to work more closely as strategic partners in: • banking • insurance • participative or Islamic finance • Public Private Partnership (PPP) • capital markets

Energy Morocco has an ambitious strategy to develop renewable energy resources. The strategy focuses on awareness of environmental issues and the need for energy efficiency. The aim is to make Morocco less reliant on energy imported energy. Approximately 94% of energy needs in 2011 were imported, which leads to opportunities for UK companies in: • renewable energy • energy efficiency • hydrocarbon exploration. • environment, water and waste management • upstream oil and gas and minerals exploration (many British companies operate in this sector in Morocco)

Education and training There is a demand for UK education and training at all levels. Vocational training across all industries offers much potential for UK expertise. 2014 introduced the first ever English Baccalaureate ‘English option’ to the Moroccan International Baccalaureate (IB) program in Moroccan state schools. There is also a growing demand for UK companies with: • schooling • English language provision • academic partnerships with universities

Morocco: an important emerging market Morocco has capitalised on its proximity to Europe and relatively low labour costs to work towards building a diverse, open, market-oriented economy. Key sectors of the economy include agriculture, tourism, aerospace, automotive, phosphates, textiles, apparel, and subcomponents. Morocco has increased investment in its port, transportation, and industrial infrastructure to position itself as a centre and broker for business throughout Africa. Industrial development strategies and infrastructure improvements – most visibly illustrated by a new port and free trade zone near Tangier – are improving Morocco’s competitiveness. In the 1980s, Morocco was a heavily indebted country before pursuing austerity measures and pro-market reforms, overseen by the IMF. Since taking the throne in 1999, King Mohammed VI has presided over a stable economy marked by steady growth, low inflation, and gradually falling unemployment, although poor harvests and economic difficulties in Europe contributed to an economic slowdown. To boost exports, Morocco entered into a bilateral Free Trade Agreement with the US in 2006 and an Advanced Status agreement with the EU in 2008. In late 2014, Morocco eliminated subsidies for gasoline, diesel, and fuel oil, dramatically reducing outlays that weighted on the country’s budget and current account. Subsidies on butane gas and certain food products remain in place. Morocco also seeks to expand its renewable energy capacity with a goal of making renewable more than 50% of installed electricity generation capacity by 2030. Despite Morocco’s economic progress, the country suffers from high unemployment, poverty, and illiteracy, particularly in rural areas. Key economic challenges for Morocco include reforming the education system and the judiciary.

Nevertheless, Morocco is an important emerging market. It has been identified as part of a group of fast-growing nations described as ‘African Lions’. Morocco is in a strategic location for access to Europe. It is also well located as a platform for reaching other international markets, especially North and West Africa. With Africa increasingly seen as a future engine of global growth, Morocco is a potential gateway to the continent for UK companies. Many UK companies are already doing business in Morocco, including G4S, GlaxoSmithKline, Shell Vivo Energy, Unilever, and Marks and Spencer, to name a few. There is also an increasing footprint from UK law firms and oil and gas exploration companies Strengths of the Moroccan market include: • good communication network and global transport connections • strategic geographic location and gateway to Africa • open Skies Agreement with the European Union (EU) and low cost flights from the UK • strong banking and finance sector • ‘advanced status’ with the EU since 2008 • competitive labour costs • tax incentives, no restrictions to capital and ease of repatriation for profits and dividends • Morocco was ranked fairly high in the World Bank 2016 Doing Business Report, moving up 5 places from 2015 The UK is one of Morocco’s oldest partners with 2013 marking 800 years of diplomatic relations. UK links to Anglophone Africa and Morocco’s Francophone African links create a platform for new business relationships. UK exports of goods to Morocco £573m in 2014. Bilateral trade in goods and services is worth around £1.8bn. The UK is among the top six foreign investors in Morocco. 45

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ZAMBIA | FOREWORD

A fast-emerging African market John Paton CEO, British Chamber of Commerce in Zambia British Companies have been active in Zambia for over a hundred years, the first probably being the British South Africa Company in 1891 and later the opening of the Kansanshi mine by George Grey in 1899. Britain still accounts for the highest level of foreign direct investment in what is now Zambia, and British companies are today active in most sectors of the economy, from mining to manufacturing, agriculture, tourism, health, education, financial services, ICT and more recently renewable energies. Tullow Oil recently announced it would be investing $69m exploring for hydrocarbons in the north of Zambia. With some 40 per cent of the region’s water supply, good agricultural land and an abundance of minerals, Zambia remains a country of opportunity. Doing business has improved in recent years and successive governments have put in place the necessary policy instruments to make life easier for domestic and foreign investors alike, even if the implementation of these policies still presents a challenge at times. The British business community has met informally with the British High Commissioner and his staff, together with representatives of the Department for International Development and the UK Trade and Investment, for many years. This was formalised with the incorporation of the British Chamber of Commerce in late 2014 and its formal launch in February 2015. Today its members include major UK companies such as Standard Chartered Bank, Unilever, Zambia Sugar, accounting and audit firms such as KPMG and BDO, the Intercontinental Hotel and the Prudential, a recent investor. Key features of Zambia and its economic, geographic, social and economic environment are:

Market access Zambia is bordered by eight countries and as a member of a number of regional and international groupings makes Zambia

strategic both in its location and abundance in natural resources. These include the Common Market for Eastern and Southern Africa (COMESA), which is currently a customs union, and the Southern Africa Development Community (SADC) Free Trade Areas (FTA). Zambia is also in the forefront in pushing for the establishment of the Tripartite Free Trade Area composed of COMESA, SADC and the East Africa Community. In addition, the Government has signed and is currently implementing a number of bilateral trade agreements such as with China, Canada and Japan. Zambia is a member of the World Trade Organization (WTO) and currently chairing the LDC group at WTO.

Trade Zambia’s exports in 2014 amounted to almost $9.7bn and imports $9.5bn. Main exports were copper, inorganic chemicals, precious stones and metals, sugar and confectionery, industrial machinery, tobacco, natural minerals and stone and animal feeds. Principal imports comprised industrial machinery, ores (mostly for processing), oil and mineral fuels, motor vehicles and parts, electrical machinery, iron and steel, fertilisers, plastics and pharmaceuticals. The country’s main export partners were Switzerland, China, DRC, South Africa and Singapore while imports came mainly from South Africa, DRC, China, Kenya and India. The UK accounted for some one per cent of Zambia’s exports and about 2.5 per cent of imports – clearly room for growth.

Natural resources Zambia has a vast resource endowment in terms of land, labour and water, indicating the high potential to expand and/or excel development. Zambia has a total land area of 75 million hectares (752,000 square km), out of which 58 per cent (42 million hectares) is classified as medium to high potential for agricultural production. Zambia stands out as one of the prime

tourism destinations in Africa offering a wealth of natural tourism assets – waterfalls, lakes and rivers holding about 40 per cent of Southern Africa’s water, ‘wildlife protected areas’ occupying about 10 per cent of the country’s total land area, and a tropical climate.

Stable governance Zambia practices a system of multiparty democracy with Members of Parliament and the President who is also the Head of State. There is a stable legal environment governed by the rule of law. 1. Political stability since attaining independence in 1964. 2. The country is one of Africa’s most peaceful, tolerant and democratic states with extremely low levels of crime. 3. Westminster-style government and sound governance structures based on the rule of law and respect for private property. Elected government officials, parliamentary system. 4. Independent judiciary with established court systems with separate commercial courts. In February 2016, the British Chamber of Commerce was privileged to host the Lord Mayor of London at an event to meet its members. As the Lord Mountevans noted following his visit: “There are clearly some immediate challenges to be overcome, but the longer-term potential of the Zambian market was indeed clear and we very much hope that the appropriate policy settings will be put in place by the authorities to encourage the engagement of British businesses who should be well placed to benefit from them.” 47

ZAMBIA | FOREWORD

A destination of choice for business and pleasure HE Mr. Muyeba S Chikonde High Commissioner for the Republic of Zambia Zambia is a land-locked country of 752,000 sq km with a population of 15 million, centrally located in the southern part of Africa. Zambia shares borders with eight nations, namely; Angola, DRC Congo, Tanzania, Malawi, Mozambique, Zimbabwe, Botswana and Namibia. Zambia has a democratic system of government and has enjoyed peace and political stability since independence on 24 October 1964. Coupled with macroeconomic stability, the country offers favourable environment for doing business. Zambia is richly endowed with a myriad of natural resources and tourist attractions and heritage sites. The government of Zambia adopted liberal economic policies that have allowed the private sector to flourish resulting in consistent and positive economic growth, averaging over six per cent in the last 10 years. The said economic growth opened up opportunities for both local and foreign investors. In order to ensure sustainable economic development, job and wealth creation, the government has prioritised the agriculture sector as part of the economic diversification programme. In this regard, government has established farm blocks in all 10 provinces comprising 100,000 to 120,000 ha of arable land for farming where government is providing basic infrastructure; roads, electricity and dams for irrigation. There is also huge potential in agro-processing and value addition.

The other priority sectors include energy, manufacturing, infrastructure and tourism. In the manufacturing sector, the government has established multi-facility economic zones and industrial parks to enhance value addition, and offers fiscal incentives to those companies that invest in the priority sectors. While over 80 per cent of Zambiaâ&#x20AC;&#x2122;s electricity generation is hydropower, government is encouraging the exploitation of other forms of clean and renewable energy such as solar, biomass and wind. Being centrally located, Zambia is key to regional transit trade facilitation, creating opportunities for major infrastructure development projects including roads, rail lines, bridges and airports. The Zambian government launched the Link Zambia 8000 road project for construction of 8000km of bituminous roads to facilitate easy movement of goods across the country and through to other countries. As a member of COMESA and SADC, Zambia enjoys duty-free market access to both all of the member states that fall under those banners. The country also enjoys preferential market access to the EU, to India under the duty-free trade preference scheme and to America under AGOA. In the tourism sector, Zambia is endowed with the largest concentration of wildlife in its natural, preserved environment spread over 19 game parks, in addition to one of the seven natural wonders of the world, the mighty Victoria Falls, and other heritage sites around the country. The sector offers huge investment opportunities in terms of hotels and lodges, tours and safari. Serviced by a

number of international airlines and a good road network, Zambia is the best tourist destination of choice. In order to facilitate business, government implemented administrative reforms that resulted in the creation of the one-stopshop, the Zambia Development Agency (ZDA), mandated to promote investment into Zambia and facilitate trade. Through ZDA, government offers fiscal and non-fiscal incentives to investors, particularly in the priority sectors, including a tax holiday on corporate income tax for the first five years, and duty free importation of capital goods and machinery. The United Kingdom continues to be a key trade partner for Zambia. According to 2014 trade figures, UK exports to Zambia were $247,021,350 while Zambia exported to the UK a total of $97,779,650, showing a trade balance in favour of the UK. Zambiaâ&#x20AC;&#x2122;s exports to the UK include raw materials, copper, precious stones, scrap metals and other non-traditional exports. The UK is Zambiaâ&#x20AC;&#x2122;s second largest non-African source of FDI. It is thus my honour and privilege to invite you to make Zambia your destination of choice for both business and pleasure. For more details, please contact us: Zambia High Commission 2 Palace Gate, Kensington London W8 5NG Tel: +44 203876 1985 Email: info@zambiahc.org.uk

The government of Zambia adopted liberal economic policies that have allowed the private sector to flourish resulting in consistent and positive economic growth, averaging over six per cent in the last 10 years

ZAMBIA | COUNTRY PROFILE

ZAMBIA KEY FACTS Official name: Republic of Zambia Capital: Lusaka Area: 752,614 sq km (290,586 sq miles) Population: 15,066,266 Main language: English GDP (current): $21.89bn (2015 est.) GDP growth: 3.6% (2015 est.) GDP per capita: $3,00 (2015 est.) Inflation: 10.1% (2015 est.) Labour force: 6.906 million (2015 est.) Unemployment: 15% (2008 est.) Monetary Unit: 1 Kwacha = 100 ngwee

Russia is ready to help develop nuclear power industry in Zambia and this could include the construction of a nuclear research centre. The two countries have signed a co-operation agreement on peaceful atomic energy and have already agreed to train 20 students from Zambia a year in Russian universities. Also, the construction of a nuclear research centre in Zambia may be the next step toward further bilateral projects in power plant construction. In a further development, iWayAfrica Zambia is to launch its fibre to the premises offer to business and consumers.

GDP by sector

% of total

Agriculture ��8.6% Industry ��31.3% Services ��60%

Main industries Copper mining and processing, construction, foodstuffs, beverages, chemicals, textiles, fertilizer, horticulture

This is the latest connectivity service to be launched by iWayAfrica Zambia, which is also part of Gondwana International Networks, a pan-African communications service company. The company said the new fibre service had already been successfully deployed to major corporates seeking to establish dual-links. The new service consolidates iWayAfrica’s position as a leading Internet service provider in Zambia. With an already strong market share in VSAT satellite services, iWayAfrica Zambia now provides connectivity to remote farmers, lodges and other areas with limited infrastructure, as well as in urban areas.

Commercial and residential property developer and owner Acsion plans to develop an office complex in Zambia. It aims to take advantage of Zambia’s limited available infrastructure for multinational companies with its planned Offices@Lusaka development and is negotiating with a local land owner to co-develop up to 20,000 sq m of office space on a site close to the Manda Hill Shopping Mall.

Overview The country is landlocked on the northern edge of southern Africa, and borders eight other countries (Botswana, Namibia, Angola, DRC, Tanzania, Malawi, Mozambique and Zimbabwe). It has a land area almost equivalent to that of the UK and France combined. It has vast, sparsely populated rural areas and rapidly increasing urban areas in the capital Lusaka, and the Copperbelt. In 2010, the World Bank named Zambia one of the world’s fastest economically reformed countries. The Common Market for Eastern and Southern Africa (COMESA) is headquartered in Lusaka.

Economy Zambia has had one of the world’s fastestgrowing economies for the past ten years,

Main exports Copper, minerals, tobacco

Main imports Machinery, transportation equipment, petroleum products, electricity, fertilizer; foodstuffs, clothing

Although the country’s main exports remain metals and minerals, particularly copper and cobalt, emphasis is also on non-traditional exports such as vegetables, flowers, cotton, tobacco, cement and textiles

ZAMBIA | COUNTRY PROFILE

KEY ZAMBIA SECTORS Mining The Zambian economy has historically been based on the copper mining industry. Output of copper had fallen to a low of 228,000 metric tons in 1998 after a 30-year decline in output due to lack of investment, low copper prices, and uncertainty over privatisation. In 2002, following privatisation of the industry, copper production rebounded to 337,000 metric tons. Improvements in the world copper market have magnified the effect of this volume increase on revenues and foreign exchange earnings.

Agriculture

It has a land area almost equivalent to that of the UK and France combined. It has vast, sparsely populated rural areas and rapidly increasing urban areas in the capital Lusaka, and the Copperbelt

Agriculture plays a very important part in Zambia’s economy providing many more jobs than the mining industry. Zambeef Products Ltd is the leading agri-business in Zambia with over 4,000 employees, producing row crops, cattle, pork, chicken, eggs, dairy products, leather, fish, feedstock and edible oil. Zambeef operates eight abattoirs, four farms and numerous retail stores (also in co-operation with Shoprite) and a fast-food chain (ZamChick Inn) throughout the country.

Tourism with real GDP growth averaging roughly 6.7 per cent per annum. Zambia’s dependency on copper makes it vulnerable to depressed commodity prices, but record high copper prices and a bumper maize crop in 2010 helped Zambia rebound quickly from the world economic slowdown that began in 2008. Privatisation of government-owned copper mines in the 1990s relieved the government from covering mammoth losses generated by the industry and greatly increased copper mining output and profitability, spurring economic growth. Copper output increased steadily from 2004, due to higher copper prices and foreign investment, but weakened in 2014, and Zambia was overtaken by the Democratic Republic of Congo as Africa’s largest copper producer. Despite strong economic growth and its status as a lower middle-income country, widespread and extreme rural poverty and high unemployment levels remain significant problems, made worse by a high birth rate, a relatively high HIV/AIDS burden, and by market-distorting agricultural policies. Economic policy inconsistency and poor budget execution in recent years has hindered the economy and contributed to weakness in the kwacha, which was Africa’s worst performing currency during 2014. 50

Zambia has raised $3bn from international investors by issuing separate sovereign bonds in September 2012, April 2014, and July 2015, significantly increasing the country’s public debt as a share of GDP. Zambia’s economy in 2015 took hits from greatly depressed copper prices and a drought that has caused a significant cut in power generation.

Investment climate

Zambia has some of nature’s best wildlife and game reserves affording the country with abundant tourism potential. The North Luangwa, South Luangwa and Kafue National Parks have one of the most prolific animal populations in Africa. The Victoria Falls in the Southern part of the country is a major tourist attraction. With 73 ethnic groups, there are also a myriad of traditional ceremonies that take place every year.

Barriers to trade have been substantially reduced. The main trade policy instrument is done through customs duties, which have even been reduced to support private sector growth and export competitiveness. In addition, a number of incentives have been introduced to develop export industries. The Zambia Revenue Authority is responsible for the administration of customs duties. Although the country’s main exports remain metals and minerals, particularly copper and cobalt, emphasis is also on non-traditional exports such as vegetables, flowers, cotton, tobacco, cement and textiles. Major imports include crude oil, mining equipment, machinery, iron steel, vehicles, and transport equipment. Although Zambia is a landlocked country, it has easy access to the sea ports of Durban in South Africa, Dar-es-Salaam in Tanzania.

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk British Chamber of Commerce Zambia E: john.paton@britishchamberzambia.org T: +260 965 18 01 44 W: www.britishchamberzambia.org

ASIA | FEATURE

Foreign exchange and the Asian markets Dr. Peter Hahn Henry Grunfeld Professor of Banking, The London Institute of Banking & Finance

In the immediate aftermath of June’s referendum, when it became clear that the UK had, after nearly 40 years, taken the decision to leave the European Union, the most obvious and immediate effects were felt within the global currency and foreign exchange (FX) markets. Within minutes of trading opening, and throughout the day, the Pound slumped to decade lows against the Dollar and, at the time of writing, it is showing few signs of recovery. Discussion soon turned to the long-term role of the Pound and its viability on the international markets. Given the UK’s historic economic strength, the Pound, along with the Dollar has long been regarded as a stable reserve currency and part of the backbone which underpins international trade. But, in this post-Brexit world, how long will the UK’s trading partners want exposure to long-term depreciating currency, if that becomes the UK’s economic strategy and how will it affect importers and exporters? And will the World’s “third currency”, the Chinese Renminbi, used on external markets, subsequently present a challenge to the Euro/Pound primacy? These questions may also be asked about the Euro. Fundamentally, both the UK and the USA are import economies, and bring in far more goods and services than they export and Brexit or not, this is unlikely to change. What this means is that the global markets are saturated with Pounds and Dollars, which is not the case with China, which is fundamentally an export economy and also tightly controls its internal currency. Consequently, there is not enough Renminbi to support the volume of international trades made in both the short and long-term, or act as a reserve currency if other central banks and their governments grow more comfortable with Chinese political and economic stability, both pointing to the centuries long stability of the UK and US. Another factor in the Pound’s favour is, counterintuitively, the issue of automation in FX markets. In theory, automation, whereby it is the algorithm of the virtual, rather than the physical hand of the trader which ultimately makes the trading decision, should make it easier for “secondary” currencies to displace the more established and lead to a more efficient and fairer market. The idea here is

that an FX trade carried out by a computer cuts out the necessity a primary currency trade, so a South African exporter trading with India, would forego trading Rand into Dollars or Pounds and then from Dollars or Pounds into Rupees. Yet this is unlikely in reality due to simple liquidity. This is because trade in currency is often done in pairs, which means a forex trade is done through a currency and a primary currency like the USD or GBP. These pairs tend to be quite traditional and built into the daily market algorithms of major investors as they manage their risks – they are easier to enter and exit as in a way liquidity begets liquidity – so the Pound/Dollar and Pound/Yen are more favourable than other pairs. New pairs tend to grow organically too, so automation in effect will play very little part in promoting one currency ahead of the Pound. What might happen is that automation will help secondary currencies to become more liquid, but they will still struggle to match the volume of the primary currencies and their pairs trading. Fundamentally, the turmoil we are experiencing in the forex markets, while creating immediate instability, is based on the political, rather than the economic and long-term it is unlikely to displace the Pound on the global currency markets, or allow the Asian markets to gain precedence. Whatever the long-term implications of Brexit, it will not change the fact that the UK is an import economy. Similarly, automation is unlikely to break up traditional currency pairings, meaning that forex will continue with the US Dollar and British Pound. The real question is whether UK political challenges lead to economic ones. Will this take two months or two years to observe? Regrettably, the longer it takes, the more likely the result and that will be negative.

Fundamentally, both the UK and the USA are import economies, and bring in far more goods and services than they export and Brexit or not, this is unlikely to change

CHINA | FEATURE

Trading with China: the key considerations Chinese market expert Paolo Giabardo with his comprehensive guide to doing business in China

China has captured the imagination of traders for a millennium; a fact reflected in the sheer volume of literature that points to the country’s historical trade with the West and, just as frequently, plays up its tantalising potential. However these exotic (albeit clichéd) invocations of Marco Polo, gunboats and limitless wealth have, more recently, given way to concern.

China holds great potential for UK importers, if they have the right support and planning

By correcting and clarifying some of the misinformation surrounding the country, businesses can unlock global opportunities. First of all, those sounding the death knell for Chinese trade do so prematurely. It has been widely reported that labour costs are rising in China, but firms should remember that China isn’t just a source of low-cost labour and cheap manufactured goods. China is, and has been for some time, a highly developed economy made up of many well-established businesses. Secondly, to get first hand experience of how much China has progressed, I encourage everyone who has not been recently to visit. The more I travel in that country, the more I’m amazed by China’s huge leaps forward: cranes are everywhere and muddy

These warnings can be legitimate. Doing business with China presents very real opportunities but also challenges; from cultural barriers to operational differences and expectations. These challenges have recently been exacerbated by China’s economic slowdown. My work with SMEs has shown that there is a great deal of misinformation around China. SMEs may feel they lack the presence to assume the risk of dealing with China and often don’t have access to the advice they need. Despite this, China holds great potential for small and mid-sized UK importers, if they have the right information, support and planning.

roads, which were common at the turn of the century even in Beijing, are now replaced by skyscrapers. There’s also no substitute for a site visit, enabling you to build valuable supplier relationships. Relationships in China are key, so if you can’t make the trip a video conference call is a good alternative compared to an email. Chinese business culture is distinct, with an emphasis on not losing face in business deals. Getting close to your suppliers means building personal trust and should be done by demonstrating your competence, expertise and work ethic. This said, trust works both ways. Chinese companies must file for a registration number with their Ministry of Commerce. Be sure to check this. If your supplier lacks a registration number you may want to reconsider the partnership. Once you’ve done the initial groundwork, be clear about your needs. Of course, this applies to any supplier but, if you’re working with manufacturers on the other side of the world, leave no room for confusion about what you’re buying, how you want to work and the effect the relationship will have on your extended supply chain.

CHINA | FEATURE

At this point, finance becomes essential. Even with well-established customers, Chinese companies will typically ask for a 30 per cent deposit up front before they start work. This is followed swiftly by a balancing payment on confirmed shipping to your agents. Having parted with often significant funds, it could take in excess of six weeks for your products to be shipped. This wait can be an anxious one, so make sure to have capital available in the meantime, potentially seeking short term business lending to manage your cash-flow effectively. Anxiety is also increased if you are unsure of your legal position. If you’re having your own designs manufactured, don’t forget to consult lawyers or advisers well versed in the protection of intellectual property (IP). Get advice about non-disclosure agreements, dispute resolution and local contract laws. Intellectual property is a large issue in China and a central reason for the Chinese exclusion from the US-led Trans Pacific Partnership deal. Finding the right supplier and agreeing terms is just one end of the chain. Equally important are the steps you put in place for local quality control (either by visiting the production line or hiring a local agent), packaging, transit to docks and sea or air freight. There are many freight-forwarding businesses that can build a complete solution; smaller or more time-sensitive consignments can be handled by wellknown fulfilment and courier businesses, so these are well worth looking into. You should also be sure to check the calendar. Chinese holidays are big affairs and can often impact production. Chinese ‘Spring Festival’ (New Year) is the country’s biggest national holiday. Lots of factories shut down as workers return home to their families. That means production halts and logistics slow to a crawl. It’s also worth watching out for May Day, the Dragon Boat festival in June and National Day in October. Currency fluctuations can ruin margins and, when trading with China, businesses must keep an eye on the US Dollar.

Most trade with Chinese suppliers is still priced and settled in US Dollars, so Dollar movements against both Sterling and the Renminbi (RMB or “Yuan”) should be on your radar. China has opened up their currency in recent years and many Western customers see value in doing deals in Yuan. Seek the help of a currency specialist to access the Yuan and risk management strategies to protect your business from currency volatility. If you’re not getting a third party to handle the paperwork, there are a host of import regulations, tariffs and duties to consider, both local to the UK and EU-wide. The two systems to remember are SAD and CHIEF. SAD is the CDD form, Single Administrative Document – an import declaration to HMRC. These are submitted via Customs Handling of Import and Export Freight system. Firms will also need commodity codes for whatever you’re importing, and be prepared for VAT and any duty.

Above all, when importing from China you should always seek help. If you’re heading to China for the first time or even looking at changing suppliers, getting specific help from specialists, trade associations or government agencies and embassies is invaluable. And remember: thousands of UK entrepreneurs now have direct experience of working with Chinese suppliers. Don’t be afraid to ask your contacts for their own tips and experiences! Paolo Giabardo is UK country manager for Ebury, leading the company’s expansion in the UK, Ireland and other EEA markets

BAHRAIN | COUNTRY PROFILE

BAHRAIN KEY FACTS Official name: Kingdom of Bahrain Capital: Manama Area: 760 sq km Population: 1,378,904 Main language: Arabic (official), English, Farsi, Urdu GDP (current): $31.82 billion (2015 est.) GDP growth: 2.1% (2016 est.) GNI per capita: $50,300 (2016 est.) Inflation: 3.5% (2016 est.) Labour force: 809,700 Unemployment: 4.1% (2014 est.) Monetary Unit: 1 Bahraini dinar = 1,000 fils

Bahrain is a Muslim country, but while a majority of its population of 1.4 million is Shia, it is ruled by a Sunni king, whose family holds the main political and military posts. This has led to long-running tension in the kingdom, which has sporadically boiled over into civil disobedience and the government called in the Saudi military to crush protests by demonstrators demanding a greater say in government in early 2011. The country is home to the US Navy’s Fifth Fleet.

British goods and services are well regarded for quality, but price is normally a determining factor of sale

In 1931 Bahrain was one of the first Gulf states to discover oil and to build a refinery but it has never reached the levels of production of some of its neighbours and it has had to diversify its economy. However, it is still dependent on oil and the economy was stalling due to the weak oil market last year. Analysts believe, however, that in the second half of 2016, the non-oil sector continued to expand. Progress also continued to be made with key infrastructure projects which are estimated to be worth a total of US$32bn.

GDP by sector

% of total

Agriculture ��0.3% Industry ��33.8% Services ��65.9%

Main industries Petroleum processing and refining, aluminium smelting, iron pelletisation, fertilizers, Islamic and offshore banking, insurance, ship repairing, tourism

These include an oil pipeline connecting Bahrain to Saudi Arabia and the Alba smelter expansion. This strong infrastructure investment, which has been made possible by support from the GCC Development Fund, has helped to stimulate the economy. There is also private sector investment and planning and engineering firm SSH has been awarded the contract to design Eagle’s Hills new Marassi Boulevard scheme in Bahrain, which comprises four low-rise residential buildings ranging from seven to ten floors.

Main exports

Economy

Petroleum and petroleum products, aluminium, textiles

Low oil prices have generated a budget deficit of at least a $4 billion deficit in 2015, 13% of GDP. Bahrain has few options for covering this deficit, with meagre foreign assets and a constrained borrowing ability,

Main imports Crude oil, machinery, chemicals

stemming in part from a sovereign debt rating averaging just above ‘junk’ status. Oil comprises 86% of Bahraini budget revenues, despite past efforts to diversify its economy and to build communication and transport facilities for multinational firms with business in the Gulf. As part of its diversification plans, Bahrain implemented a Free Trade Agreement (FTA) with the US in August 2006, the first FTA between the US and a Gulf state. Other major economic activities are production of aluminium – Bahrain’s second biggest export after oil – finance, and construction. Bahrain continues to seek new natural gas supplies as feedstock to support its expanding petrochemical and aluminium industries. In 2011 Bahrain experienced economic setbacks as a result of domestic unrest driven by the majority Shia population, however, the economy recovered in 201215, partly as a result of improved tourism. In addition to addressing its current fiscal woes, Bahraini authorities face the longterm challenge of boosting Bahrain’s regional competitiveness—especially regarding industry, finance, and tourism— and reconciling revenue constraints with popular pressure to maintain generous state subsidies and a large public sector.

Challenges Bahrain is a relatively easy place to do business. However, there are a number of challenges including: • delays in payment • bureaucracy within government agencies, especially for getting licenses • need to employ a certain quota of Bahrainis to comply with Bahrainisation rules, which aim to improve local employment prospects and reduce reliance on imported labour • government documentation in Arabic British goods and services are well regarded for quality, but price is normally a determining factor of sale. 55

Origin Consulting Company W.L.L. was established in 1998 as a consulting house. With an excess of 30 years of experience in consulting and human capital development, and the fusion of innovation and experience, it came into being one of the best provider of the following services in the Kingdom of Bahrain: ADVISORY SERVICE HR Consultancy: Competency & KPI Analysis; Jobs Evaluation; Job Descriptions; Organisation Charts; Business Consultancy: Sales Improvement Program; Design of Business Plans; Strategic Planning; Financial Consultancy: Building Financial Models; Financial Research Services; Controls DEVELOPMENT SOLUTIONS Design and delivery of bilingual training programs Facilitation of international training certifications On the job training/E-Learning Coaching and Mentoring Programs (Leadership) Customized business excellence programs EVENTS MANAGEMENT We organise periodic and relevant workshops, conferences to address topical people-related themes and exhibitions. SPECIAL PROJECTS Research and Analysis Quality and Benchmarking Certification Dental Assistant Programme HR Gallery Human Resource Excellence Origin Group is operating with 13 partners worldwide in addition to its headquarters in the Kingdom of Bahrain.

CONTACT Origin Group Jeera II 7th floor, Building 2347 Road 2830, Block 428 P.O.Box 24040 Seef District Kingdom of Bahrain Tel: +973 17 552 878 Fax: +973 17 552 890 info@origin.com.bh www.origin.com.bh

BAHRAIN | COUNTRY PROFILE

SELECTED OPPORTUNITIES IN BAHRAIN Education

Healthcare

The British schooling system is considered to be the benchmark in Bahrain, both at secondary and higher education levels. Demand for UK degrees is high with the UK being the preferred choice for Bahraini students pursuing higher education abroad.

The Bahraini government allocated 2.8% of its overall spending towards healthcare in 2014, aiming to improve the quality of healthcare.

Bahrain’s spent 2.6% of GDP on public education in 2014 with the aim of improving standards across the educational spectrum. There are opportunities for cooperation in the education sector, including: • programme development within healthcare, social sciences, energy, technology and creative sectors • higher education partnerships • vocational education and training • financial services qualifications, including Islamic Finance • training and Continuing Professional Development (CPD) for staff • special education needs • collaborative research with universities

Bahrain’s economy. It has just over 400 financial institutions, which account for 16.5% of Bahrain’s GDP. It’s already home to a number of British financial and professional services firms.

A number of hospitals are undergoing modernisation with UK products held in high regard. Opportunities for UK companies include: • pharmaceuticals • medical equipment • facilities management • training courses for staff • establishing nursing homes • Information and Communications Technology (ICT)

There are opportunities for providers of: • Islamic finance • legal services • infrastructure finance • insurance and reinsurance (both conventional and Islamic) • education, training and qualifications • asset management • private banking • capital markets

Financial and professional services

• transport and engineering consultancy • provision of specific products or materials • project and programme management • operation and maintenance • technical road knowledge and expertise relating to bridge engineering, road safety, training and intelligent transport systems (ITS)

Bahrain is regarded as the best regulated financial services centre in the Middle East. It’s an attractive location to set up operations and has a leading edge in the region in the Islamic finance and insurance sectors. Financial and professional services are currently the fastest growing sector in

Opportunities include:

Established in 1975, Salman Abdulla Sahwan - Attorneys and Legal Consultants, is one of the leading law firms in the Kingdom of Bahrain.

SPECIALIST AREAS Commercial Law Corporate Law Arbitration Dispute Resolution & Litigation Banking & Finance Bankruptcy & Liquidation Civil Law Construction & Land Law Employment Law Estate and Trust Franchising Import and Export Inheritance & Will Insurance and Reinsurance Intellectual Property Criminal Law Personal Injury

CONTACT: Salman Abdulla Sahwan Attorneys Office 23, Al Dana Building Diplomatic Area | Manama, Kingdom of Bahrain Tel: (+973) 17 531-566 info@sahwanlaw.com W: www.sahwanlaw.com

KUWAIT | FOREWORD

A market on the move Martin Hall CEO of Kuwait British Business Centre

Opportunity The Office of National Statistics reports exports to Kuwait from the UK of £1.3bn for 2014 (Services £748m/Goods £555m). The friendly relationship and shared history that exists between the UK and Kuwait results in a keenness to trade with UK companies, yet Kuwaitis are shrewd business people and while favouring the quality UK companies can offer, the best price always wins. Kuwait’s, perhaps unfair, reputation for slow decision-making, mainly due to scrutiny from the region’s most advanced parliament, has limited the competition UK companies face compared to other Gulf Markets like the UAE. However, competition exists from the USA, China, South Korea, Germany and France. Accordingly, while it might take longer to establish here, once you get a foothold, you can enjoy a lifetime of business relationships. As Kuwait develops its infrastructure in a bold move to diversify the economy away from oil and gas (which makes up 95 per cent of exports) infrastructure investments in hospitals, roads, a metro, power and water plants, schools and housing are attempts to set the underlying conditions from which a broader economic base can emerge. These projects form part of Kuwait’s Development Plan approved by the Government in February 2015 and are worth $US 117.65bn. A new body, the Kuwait Authority for Partnership Projects (KAPP), has been tasked with driving these projects forward on a PPP basis. The Kuwaitis recognise UK experience and understanding of the PPP model and UK consultants, lawyers and engineers are almost exclusively providing advice to KAPP across the board.

Kuwait’s “Strategy 2030” in the oil and gas sector is an attempt to drive production up from 2mbpd to 4mbpd and keep it there, with an associated investment of $US42bn in upstream production, downstream refining (including the construction of the vast Al Zour refinery) and associated petrochemical plants, moving Kuwait up the hydrocarbon value chain. This investment in oil and gas, unaffected by the recent weakening of oil prices plans to make the most of Kuwait’s natural resources while it can and provide the long-term stability required to develop long-term alternatives to oil. UK expertise and trusted delivery is already seeing many contracts awarded to British business.

A supportive legal framework To encourage this economic reform and to deliver the projects contained within the Kuwait Development Plan, Kuwait requires involvement, in country presence and delivery from the international business community. Recognising and acting on that, new initiatives from the government mean investing and doing business in Kuwait has become easier than ever before. Our partners at the Kuwait Direct Investment Promotion Authority (KDIPA), established under the 2013 Foreign Direct Investment Law, now offer UK business the chance to retain up to 100 per cent of their new Kuwaiti business – a first for the GCC. Targeting the knowledge and skills transfer that international business can offer and creating jobs for a generation of young Kuwaitis, rather than looking necessarily for capital investment, this new route to market is significant and has already attracted the likes of GE, IBM and Huawei to Kuwait. Investors also benefit from tax breaks and other attractive incentives.

Developing Kuwait’s economic backbone At the same time as enhancing the conditions for international business Kuwait is also attempting to develop its own SME economy. Kuwait is a country of entrepreneurs, yet very few small businesses exist, with diversified family businesses of many years standing dominating the market place. To encourage Kuwait’s business people of the future the $US7bn National Fund for SME Development has been created and provides programmes and funding to nurture their development. UK SMEs partnering with Kuwaiti start-ups to develop even stronger businesses that can potentially grow regionally is but one idea welcomed by the fund.

Support There are around 100 UK businesses present in Kuwait and almost 6000 UK expatriates, there is a closely connected and supportive UK business community. Building on those foundations, the Kuwait British Business Centre, (KBBC) was established in October 2015 to further support UK exporters as part of the UK Trade & Investment Overseas Business Network Initiative. Offering UK business practical, in-market advice and assistance KBBC has already delivered services for 50 British companies through either our trade services, which have included market visits, trade missions and promotional events, business centre services, offering UK companies office space in our purpose built business centre and subscriber services through the Kuwait British Business Club.

KUWAIT | COUNTRY PROFILE

KUWAIT KEY FACTS Official name: The State of Kuwait Capital: Kuwait Area: 17,818 sq km Population: 2,788,534 (July 2015 est.) Main language: Arabic GDP (current): $120.7bn (2015 est.) GDP growth: 0.9% (2015 est.) GNI per capita: $70,200 (2015 est.) Inflation: 2.8% (2013 est.) Labour force: 2.473 million Unemployment: 3% (2015 est.) Monetary Unit: 1 Dinar = 1000 fils

Kuwait is to spend US$115bn on oil projects over the next five years, despite the slump in oil prices. Kuwait Petroleum Corp has said that more than 80 per cent of this will be spent on the local market and the rest abroad and more than two thirds will be invested in exploration and production. Kuwait aims to raise its production capacity – which is currently running at just over three million barrels a day – to four million barrels a day by 2020 and maintain that level it for another decade. Major projects include: plans to build four gathering centres; a key project to boost heavy oil production; and raising output of free natural gas to more than two billion cubic feet daily, from 150 million cubic feet.

GDP by sector

% of total

Agriculture ��0.4% Industry ��59.4% Services ��40.2%

Main industries petroleum, petrochemicals, cement, shipbuilding and repair, water desalination, food processing, construction materials

Main exports oil and refined products, fertilisers

Main imports food, construction materials, vehicles and parts, clothing

Besides the upstream projects, Kuwait is currently undertaking three downstream ventures costing more than US$30 billion. These include a new 615,000-bpd refinery and a clean fuel project to upgrade two of the three existing refineries, as well as a platform for LNG imports. However, Kuwait is looking at ways of maximising production at a lower cost and, as part of this, Kuwait Oil Company is exploring ways of using solar energy to extract oil. Instead of improving recovery rates by injecting gas, Kuwait is exploring renewable energy techniques – mainly from solar power – to cut gas import bills. The government has set a 15 per cent renewable energy target. Kuwait has enhanced oil recovery projects in the north and west, which are estimated to be some of the largest in the world.

Overview Kuwait is an oil-rich, tiny country which sits at the top of the Gulf. Flanked by powerful neighbours Saudi Arabia, Iraq and Iran, its strategic location and massive oil reserves make it one of the world’s richest countries per capita. A conservative state with a Sunni Muslim majority and a US ally, Kuwait stands out from the other Gulf monarchies for having the most open political system. But tensions have persisted between parliament and the cabinet, controlled by the ruling Al-Sabah family, and the government is facing increasing calls for radical political reform from the opposition.

Kuwait is roughly the size of Wales and the people are well educated and many speak English fluently Sheikh Sabah al-Ahmed al-Jaber al-Sabah has ruled Kuwait since January 2006. He served as foreign minister over a 40-year period during which time he was credited with shaping Kuwait’s foreign policy and steering the country through the Iraqi invasions in 1990. He served as prime minister from 2003 to 2006. As emir, he has maintained Kuwait’s pro-Western stance and pursued a policy of cautious reform. Kuwait is roughly the size of Wales and the people are well educated and many speak English fluently.

KUWAIT | COUNTRY PROFILE

Its oil fields were first exploited in the 1930s, and since the development of the petroleum industry after World War II and independence in 1961, oil has dominated the economy.

Economy Kuwait has a geographically small, but wealthy, relatively open economy with crude oil reserves of about 102 billion barrels – more than six per cent of world reserves. Kuwaiti officials plan to increase oil production to four million barrels per day by 2020. Petroleum accounts for over half of GDP, 94 per cent of export revenues, and 90 per cent of government income. In 2015, Kuwait, for the first time in 15 years, realised a budget deficit after decades of high oil prices. Kuwaiti authorities have tried to reduce the deficit by decreasing spending on subsidies for the local population, but with limited success. Despite Kuwait’s dependence on oil, the government has cushioned itself against the impact of lower oil prices, by saving annually at least 10 per cent of government revenue in the Fund for Future Generations. Kuwait has failed to diversify its economy or bolster the private sector, because of a poor business climate, a large public sector that crowds out private employment of Kuwaiti nationals, and an acrimonious relationship

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk Kuwait British Business Centre E: info@kbbcentre.com T: +965 9905 4631 W: www.kbbcentre.com

between the National Assembly and the executive branch that has stymied most economic reforms. The Kuwaiti government has made little progress on its long-term economic development plan first passed in 2010. While the government planned to

spend up to $104bn over four years to diversify the economy, attract more investment, and boost private sector participation in the economy, many of the projects did not materialise because of an uncertain political situation.

SELECTED OPPORTUNITIES Transport Infrastructure development at Kuwait International Airport (KIA) is a USD 6 billion project. It aims to expand capacity to handle 20 million passengers per year and become a major passenger and cargo hub for the region. The new passenger terminal was designed by a team led by the UK’s Foster and Partners. An estimated $3bn will be spent on: • reconstruction and extension of the existing runways • construction of primary and secondary access roads and taxiways, aircraft stands • enhancing control tower facilities • building new cargo facilities • upgrading other airport infrastructure Kuwait’s Metro system will expand to 160 kilometres and 69 stations over five phases. There are opportunities for UK companies throughout the supply chain for these transport projects.

Healthcare Healthcare in Kuwait represents a significant opportunity for UK companies. A programme is underway to increase hospital beds to 11,000 by 2016. It is designed to cope with the health needs of a growing, ageing and wealthy national population as well as a growing expatriate population. Healthcare is free for Kuwaitis.

There are opportunities for UK companies supply: • medical equipment • Information Technology (IT) • training • maintenance • facilities management • hospital management

Port development A massive new port and logistics facility will be developed over the next 20 years at Boubyan Island in the north west of Kuwait. This will be financed by the government of Kuwait in conjunction with the private sector. The facility will be linked to the GCC railway enabling the port to serve as a major deep-sea staging area for regional shipping and transportation. The wider aspects of the development will include: • housing • a free trade zone • industrial area The port is currently under construction. Opportunities for UK companies include consultancy, design and planning for the next phase.

Defence and security Kuwait has some significant opportunities in the defence and security sectors over the medium to long term. Healthcare, oil, infrastructure and transport projects will also all have security elements.

Q&A

A leading player in the Lebanon law sector Walid Abou Farhat answers Global Trader’s questions about his law firm, Abou Farhat Law Firm

Q What are the main services provided by the Abou Farhat law firm and how can you best assist UK companies hoping to enter the Lebanese market? A Abou Farhat Law Firm has been established since 1964. It is a boutique law firm where the main focus remains the client’s best interest. The Law Firm has developed to provide various legal services: Corporate, Taxation, Insurance, Venture and Acquisition, Intellectual Property, Family Matters, Property Laws and Litigation. As a legal firm we strive to provide our clients in an efficient and timely manner with accurate legal consultations that reflect the Lebanese laws and market with the aim to help the companies to understand and assess in the most accurate manner their investment rather than encouraging them to invest without being able to understand the full risks associated to their interests. Q Describe the current business climate in Lebanon. A Lebanon is a rather small country. Historically it used to be the place where West and East meet. Lebanon has a vibrant energy. It has strong banking, educational, hospitality and health care systems. Foreign languages are commonly spoken between the population. However Lebanon does not have a competitive infrastructure comparing to other cities in the Region mainly the GCC cities (i.e. Doha, Dubai etc). Lebanon nowadays is suffering because of the Syrian War and the political tensions in the region. Q What are the key strengths of your law firm? A The Law Firm is reputed and known, serving a diversified clientele. Q Can you explain how your client base is made up and expand on the type of companies that you are currently working with? A Currently the Law Firm serves international and national clients mainly in the Copyright field. Clientele may develop in the oil and gas sectors as those start to play an important part in the Lebanese economy. Q How do you see the future development of the Abou Farhat law firm over the next five years? A Abou Farhat has been able to expand despite the terrible war that hit Lebanon between 1975 and 1992. We strongly believe that the law firm will continue its growth despite all the current challenges and will be able to serve a broader diversified clientele in additional countries. CONTACT Walid Abou Farhat Abou Farhat Law Office Lebanon, Beirut, Badaro El Alam street, Darwish building (1) (M)+9613639009 – (O)+9611390019 & Fax +9611390049 (UAE) +971507398996 / Skype: wafarhat1 (Egypt) +201280073350 Email: waf@aboufarhatlawoffices.com

Walid Abou Farhat Born in Beirut, Lebanon in 1970. Studied at Notre Dame de Jamhour and graduated in 1988. Studied at Saint Joseph Law School in Beirut and graduated in 1992. Since 1995 Walid has been a partner at Abou Farhat Law offices in Beirut. Licensed as a lawyer by Beirut Bar association. Works in Jordan on cooperation with Kilani law firm, in United Arab Emirates with Ali Habib law firm and in Qatar with Ma3arri-El Hajj law firm. Has been awarded best Media Law Firm in Lebanon for 2011 & 2012 by Global Legal. Appointed as Copyright Legal advisor to HE Minister of culture in Lebanon as of 2014. He was retained as Copyright legal expert before the district Court in California in the legal case 2:07-cv-05715-CAS(PJWx) – Fahim v/s Jay Z & others. He has been retained as a lawyer and legal advisor for the past 15 years to many media players in Middle East. Has been actively involved in workshops with the Copyright Unit at Arab League, ICMP, Ministry of Economy Lebanon and United Arab Emirates and WIPO and has presented several publications especially in relation to Collective Management, Digital Distribution and other key issues. Among his publications are: • Challenges facing the Enforcement of Copyright Laws in the Arab Worlds (Federation of Arab lawyers seminars held at Jordan – October 2012) • Collective Licensing of Access to Copyright works in corporations. (Regional Seminar on Collective administration of rights in text and image based works held by WIPO and IP Unit Arab League and IFFRO – UAE – March 2010) • Why do creators support the establishment of reproduction Rights Organizations? (Regional Seminar on Collective administration of rights in text and image based works held by WIPO and IP Unit Arab League and IFFRO – UAE – March 2010) • Importance of collective Management against digital Piracy (Ministry of Economy BSA Seminar – Beirut April 2011) • Collective Management from Right Holders perspective (WIPO Regional Meeting for Heads of copyright Offices – Jordan December 2011) • Cultural and economic impacts of Collective Management in the Arab World ( WIPO Regional Meeting for Heads of copyright Offices – Jordan December 2011) • Impact of Collective Management on UAE economy (Workshop for directors of economic departments in UAE organized by Ministry of Economy – May 2013) • Publishing Challenges in UAE (Workshop organized by ICMP in Dubai – October 2012) • Importance of Music and movie productions on the Arab economies (Regional seminar on Copyrights with regards to Music and movie – Arab League, Cairo April 2014)

LEBANON | COUNTRY PROFILE

LEBANON KEY FACTS Official name: The Lebanese Republic Capital: Beirut Area: 10,452 sq km Population: 6,184,701 (2015 est.) Main language: Arabic GDP (current): $51.17 billion (2015 est.) GDP growth: 1% (2015 est.) GNI per capita: $18,200 (2015 est.) Inflation: -3.7% (2015 est.) Labour force: 1.628m Unemployment: N/A Monetary Unit: 1 Lebanese pound (or lira) = 100 piastres

Lebanon’s software piracy rate was 70 per cent in 2015, barely changed from 71 per cent two years earlier, according to the Business Software Alliance. This puts the country at the 37th highest piracy level among 111 countries worldwide and the sixth highest among 17 countries in the Middle East and North Africa. The survey covered operating systems, systems software such as databases and security packages, business applications and consumer applications such as games and personal finance and reference software.

GDP by sector

% of total

Agriculture �� 5.6% Industry ��24.7% Services ��69.7%

Main industries Banking, tourism, food processing, wine, jewellery, cement, textiles, mineral and chemical products, wood and furniture products, oil refining, metal fabricating

Main exports Jewellery, base metals, chemicals, miscellaneous consumer goods, fruit and vegetables, tobacco, construction minerals, electric power machinery and switchgear, textile fibers, paper

Main imports Petroleum products, cars, medicinal products, clothing, meat and live animals, consumer goods, paper, textile fabrics, tobacco, electrical machinery and equipment, chemicals

Lebanon’s software piracy rate was similar to that of China, and significantly higher than the global rate of 39 per cent and the Middle East and Africa rate of 57 per cent. Zimbabwe and Libya had the highest piracy rates in the world at 90 per cent each and the US had the lowest rate at 17 per cent in 2015. A report for the Byblos Bank group said that software piracy-related losses in Lebanon amounted to US$65m in 2015, unchanged from 2013 and compared to losses of US$52m in 2011 and US$46m in 2009. The report said that Lebanon accounted for 0.1 per cent of global losses. Meanwhile, IFC, a member of the World Bank Group, has signed a trade finance agreement with Societe Generale de Banque au Liban, one of the leading banks in Lebanon, to boost cross-border trade and help local businesses access international markets. Under the agreement, SGBL will join IFC’s Global Trade Finance Program, which supports banks as they deliver trade finance in challenging markets. IFC guarantees will help SGBL clients import critical commodities.

Overview With its high literacy rate and traditional mercantile culture, Lebanon has long been an important commercial hub for the Middle East. It has also often been at the centre of Middle Eastern conflicts, despite its small size, because of its borders with Syria and Israel and its uniquely complex communal make-up. Shia Muslims, Sunni Muslims, Christians and Druze are the main population groups in a country that has been a refuge for the region’s minorities for centuries.

With its high literacy rate and traditional mercantile culture, Lebanon has long been an important commercial hub for the Middle East Before the Syrian civil war erupted, there were signs that the revival of Lebanon’s tourism industry might lead the way to economic recovery. In 2010, shortly before the conflict began, tourism accounted for a fifth of Lebanon’s economic output. However, the fighting in Syria and the associated resurgence of sectarian tensions in Lebanon have severely jolted the country’s tourism industry and dented hopes of a return to the cosmopolitan prosperity of the 1950s and 1960s. 63

TAKING YOU HIGHER WITH A PERSONAL TOUCH In this challenging and changing world, you will find a reliable partner providing you with the right services to enhance your business growth and achieve your strategic goals. BDO, Semaan, Gholam & Co. provides services in four main areas: Financial Assurance Tax Consultancy Financial Advisory Business Valuation We conduct our services in: Lebanon, the Middle East, Africa and Europe.

Gholam Building, Sioufi Str. Achrafieh, Beirut, Lebanon P.O.Box. 11-0558 | Riad El Solh, Beirut, Lebanon Contact Person: Antoine Gholam Tel. +961 1 323676 | Fax. +961 1 204142 E-Mail. agholam@semaan-gholam.com www.bdo-lb.com

Senior Partner: Georges Gholam Partners: Antoine Gholam Nicolas Barakat Nehme Semaan Hani Abboud

LEBANON | COUNTRY PROFILE

Economy Lebanon has a free-market economy and a strong laissez-faire commercial tradition. The government does not restrict foreign investment; however, the investment climate suffers from red tape, corruption, arbitrary licensing decisions, complex customs procedures, high taxes, tariffs, and fees, archaic legislation, and weak intellectual property rights. The Lebanese economy is service-oriented; main growth sectors include banking and tourism.

huge debt burden. Pledges of economic and financial reforms made at separate international donor conferences during the 2000s have mostly gone unfulfilled, including those made during the Paris III Donor Conference in 2007, following the July 2006 war. Spillover from the Syrian conflict, including the influx of more than 1.1 million registered Syrian refugees, has increased internal tension and slowed economic growth to the 1–2 per cent range in 2011–15, after four

The 1975–90 civil war seriously damaged Lebanon’s economic infrastructure, cut national output by half, and derailed Lebanon’s position as a Middle Eastern entrepot and banking hub. Following the civil war, Lebanon rebuilt much of its war-torn physical and financial infrastructure by borrowing heavily, mostly from domestic banks, which saddled the government with a

SELECTED OPPORTUNITIES Oil and gas

Healthcare

Onshore seismic surveys are ongoing with promising preliminary reports.

The Lebanese healthcare market is worth over USD 4.88 billion per annum and is expected to expand 7–8 per cent per year.

Opportunities for UK companies include: • surveying • infrastructure design and construction • extraction management • infrastructure servicing and maintenance • corporate services and insurance • health and safety systems • oil trading regulation and services • shipping and pipeline management

The standard of medical care in Lebanon is one of the highest in the region. Lebanon’s private sector hospitals are constantly seeking to improve their services and upgrade their equipment.

Food and drink

Lebanon spends seven per cent of GDP on healthcare, the highest rate in the Middle East and North Africa (MENA) region. Around 95 per cent of pharmaceutical products are imported.

UK products make up around 14 per cent of Lebanon’s total food and drink total imports. Alcohol is widely consumed. 49 per cent of imported drinks are alcoholic beverages.

There are opportunities for UK healthcare companies to supply: • consultancy • high-tech medical equipment • pharmaceuticals

Prepared foodstuffs make up a large proportion of Lebanon’s food imports.

Education

Opportunities for UK companies include: • alcoholic beverages • confectionery • organic products

Fashion and retail Beirut is the fashion capital of the Middle East. Lebanese society is a consumptionoriented society with a tendency to spend on high end and premium goods. Franchising has proven successful in Lebanon for UK brands. There are franchising opportunities for international UK brands, which are still not available in the market.

At 90 per cent, Lebanon has the highest literacy rate in the Arab world. 10 per cent of the government’s budget is spent on education. The Ministry of Education and Higher Education’s (MEHE) main priorities are to support ICT in the education system. The UK is the fourth most popular destination for Lebanese students. More than 50 per cent of students pursue their higher education in English. Opportunities for UK companies include: • English language training centres • partnership with UK companies • education technology equipment

years of averaging eight per cent growth. Syrian refugees have increased the labour supply, but pushed more Lebanese into unemployment. Chronic fiscal deficits have increased Lebanon’s debt-to-GDP ratio, the fourth highest in the world; most of the debt is held internally by Lebanese banks. Weak economic growth limits tax revenues, while the largest government expenditures remain debt servicing, salaries for government workers, and transfers to the electricity sector. These limitations constrain other government spending and limit the government’s ability to invest in necessary infrastructure improvements, such as water, electricity, and transportation.

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk UK Trade & Investment Lebanon British Embassy Serail Hill Beirut Central District PO Box 11-471 Lebanon E: ukti.beirut@fco.gov.uk T: 00961 1 960800

ABOUJAOUDE & ASSOCIATES L AW Abou Jaoude & Associates Law Firm (AJA) has established itself as a leading legal practice mirroring the very best in the industry and maintains its position and market reputation as the single largest multi-practice law firm in Lebanon, with a team of 9-partners and 35 expert attorneys distinguished by an in-depth specialization and a sharp understanding of the commercial as well as the legal aspect of clients’ businesses. The Firm has earned its leading standing with a practice centered on high value corporate, M&A, banking, finance, telecoms, real estate, tax, and restructuring transactions. The Firm handles major local and cross-border deals and is renowned for advising on complex transactions of first impression in the region. The Firm regularly advises clients on crossborder acquisitions and corporate finance transactions in a wide array of sectors including telecoms, real estate, retail and banking, and has extensive experience in the regulatory process of acquisitions such as licensing, compliance and post-acquisition integration. The Firm’s recent representative experience includes several major private placements and acquisitions in the telecoms, real estate, retail and banking sector; the largest-ever asset backed issuance in Lebanon through the securitization of a large real estate portfolio; the acquisition of a listed bank in Europe; the acquisition of a real estate company through the issuance of convertible bonds for the development of a first-of-its-kind wellness resort; a ground-breaking multi-bank private placement initiative to finance the launch of a TV station; and the pioneer conversion of a financial company into an investment bank. As a dominant market advisor in banking and finance, and in addition to representing local and foreign banks on matters of corporate

F I R M governance and regulatory compliance, the Firm has a strong expertise in the expansion of a bank’s network through synergies between its commercial and investment banking activities and considerable experience advising on a wide range of domestic and international extensions of credit, such as syndicated facilities. The Firm represents commercial banks on issuances of preferred shares, and advises foreign banks on cross-border banking matters, marketing of collective investment schemes and online money remittances. The Firm’s added value is particularly sought after in structured finance and the Firm’s banking law experts combine legal capabilities and sophisticated business perspective with a creative and multidisciplinary approach to handle the structuring and documentation of financing transactions involving a broad range of traditional and newer asset classes. The Firm has acquired and maintains the biggest client base in the market with clients who contribute vitally to the country’s economic growth. A large number of the firm’s clients maintain a strong international presence throughout the MENA region, the UK, Europe and the US, and rely on the Firm’s wide resources for all their legal needs. The Firm works closely with a number of correspondents in various jurisdictions and is a member of the Geneva Group International’s (GGI) global multidisciplinary networks, allowing the firm to offer its clients reliable legal assistance on an international level. The Firm has been recognized as a market leader by reputable global legal directories, including Legal 500, Chambers & Partners and IFLR, and has reaped many awards in recognition of its expertise and achievements in the fields of M&A and banking.

‘Abou Jaoude has acquired and maintains the biggest client base in the market with clients who contribute vitally to the country’s economic growth’

Carlos Abou Jaoude, managing partner

ABOU JAOUDE & ASSOCIATES Law Firm OMT Building, 266 Sami El Solh Ave. P.O.Box 116-5079, Beirut Museum 1106-2010 Beirut – Lebanon Tel : 961 1 395555 Fax: 961 1 384064 c.aboujaoude@ajalawfirm.com www.ajalawfirm.com

TAIWAN | FOREWORD

The hidden gem of Asia Steven Parker Executive director, British Chamber of Commerce in Taipei Dubbed the Taiwan Miracle, Taiwan is one of the four Asian Tigers, a member of the World Trade Organization, and is ranked highly in terms of freedom of the press, healthcare, education, economic freedom, and human development. Taiwan is an excellent place to do business in terms of its geographical location, educated workforce, comprehensive infrastructure, a sound legal environment, and a strong IT cluster. Taiwan is ranked 15th in the world by the Global Competitiveness Report of World Economic Forum, and as the 19th-largest in the world by purchasing power parity (PPP). Located in the heart of the Asia-Pacific region, Taiwan has an advantageous geographic location for trade and commercial operations with other Asian economies. In the past decades, Taiwan has moved from a manufacturing industrial economy to a more service-oriented economy. Traditionally dependent on exports such as electronics, machinery, and petrochemicals, Taiwan has strengthened its high tech and also financial industries. Enjoying a stable political relationship with the Asia region and the world, Taiwan has become a key offshore RBM financial centre, along with London and Hong Kong, with a 300 billion RMB deposit pool, and is also a major source of international finance with over GBP120 billion invested overseas. It has a sound legal environment with comprehensive protection for intellectual property rights. Taiwan has a number of high value opportunities identified by UK Trade and Investment as within reach for British Firms. UK’s goods exports to Taiwan continued to grow – by 6.8% in 2015, reaching

£1.16bn. Key export sectors include beverages (mainly whisky), machinery and mechanical appliances, pharmaceutical products, and vehicles. In addition, rail and infrastructure projects are a priority for the Taiwanese authorities and they have announced ambitious plans to build new metro lines, extend high speed rail stations, and provide major upgrades for traditional railways (mainlines) in Taiwan with major projects up to 2030. A major opportunity to highlight in Taiwan is in the field of nuclear decommissioning. Due to the impact of Japan’s Fukushima nuclear incident, Taiwan announced in November 2011 plans to decommission the No. 1 Nuclear Power Plant by 2018, No.2 by 2021, and No.3 Nuclear Power Plant will be decommissioned by 2024. Taiwan Power Company and UK’s Nuclear Decommissioning Agency (NDA) have signed a MoU to set up a UK and Taiwan cooperation framework for a nuclear decommissioning programme in Taiwan Power Company. The potential contract value to decommission the three nuclear plants is £1.4bn. Taiwan, the designated World Design Capital in 2016, has committed to cut carbon emissions to the levels recorded in 2000 by 2025. The programme will take a two-pronged approach which includes developing renewable energy sources, including the installation of a 3GW offshore wind capacity and the development of marine and tidal energy capability. Taiwan announced its first off-shore wind pilot project on 3 July 2012: three wind farms will be selected for this programme. Each project’s scales are between 100mw to

600mw. These projects are expected to generate £10bn in business opportunities for local and international equipment manufacturers, industry supply chain and services. There is also a national programme for marine and ocean current energy which at present is setting up guidelines and a major pilot programme. Currently the UK’s major exports to Taiwan are Scotch whisky, pharmaceuticals, stainless steel, vehicles, machinery, and semiconductor devices. However, the value of trade in services is much higher. Some major opportunities in Taiwan involve consultancy and products related to the following industries: rail transportation, lowering carbon emissions, nuclear decommissioning, renewable energy, high value manufacturing supply chain, chemical component handling and green technology implementation. Taiwan is also targeting six emerging industries and developmental support is required to enhance these programs; tourism, medicine and healthcare, biotechnology, green energy, culture/ creativity, and high end agriculture. The British Chamber of Commerce in Taipei has an Advisor Network of members who are willing to advise new companies interested in the opportunities here free of charge. Further market research and introductory services can be provided through the BCCT’s close relationship with UKTI in this market. For more information on what the advantageous location and environment in Taiwan can offer your business, the British Chamber of Commerce in Taipei is eager to hear from you. For further details please see www.bcctaipei.com

Currently the UK’s major exports to Taiwan are Scotch whisky, pharmaceuticals, stainless steel, vehicles, machinery, and semiconductor devices. However, the value of trade in services is much higher

TAIWAN | COUNTRY PROFILE

TAIWAN KEY FACTS Official name: Republic of China (ROC) Capital: Taipei Area: 36,188 sq km Population: 23,415,126 million Main languages: Mandarin Chinese (official), Min Nan Chinese (Taiwanese), Hakka GDP (current): $523.6 billion (2015 est.) GDP growth: 0.7% (2015 est.) GDP per capita: $46,800 (2015 est.) Inflation: -0.3% (2015 est.) Labour force: 11.64 million Unemployment: 3.8% (2015 est.) Monetary Unit: New Taiwan dollar

Taiwan’s Hon Hai Precision Industry and Pegatron Corp retained their rankings as second and third largest smartphone assemblers in the world

GDP by sector

% of total

Agriculture ��1.8% Industry ��35.4% Services ��62.8%

Main industries Electronics, communications and information technology products, petroleum refining, armaments, chemicals, textiles, iron and steel, machinery, cement, food processing, vehicles, consumer products, pharmaceuticals

Main exports Semiconductors, petrochemicals, automobile/auto parts, ships, wireless communication equipment, flat display displays, steel, electronics, plastics, computers

Main imports Oil/petroleum, semiconductors, natural gas, coal, steel, computers, wireless communication equipment, automobiles, fine chemicals, textiles

Taiwan’s share of the global smartphone assembly business has fallen in the face of growing competition in the world market. According to industry statistics, Taiwan’s share of the global smartphone assembly industry fell to 23.4 per cent in the three months to March 31 2016, down from 28.5 per cent in the fourth quarter of 2015. Smartphone brands in the US, Europe and Japan reduced their outsourcing and increased their in-house production in a bid to cut costs and take on rising competition, and this hit Taiwan’s smartphone assembly businesses. Also, Taiwan’s smartphone production in terms of volume for the first quarter fell 14.9 per cent from the fourth quarter of 2015. However, Taiwan’s Hon Hai Precision Industry and Pegatron Corp retained their rankings as second and third largest smartphone assemblers in the world. The major clients of Taiwan’s smartphone assemblers include Apple, Sony, Microsoft and BlackBerry: companies which suffered a slowdown in sales in the first quarter. Meanwhile, Advanced Semiconductor Engineering and Siliconware Precision Industries – Taiwan’s two leading chip testers – are to form a holding company to list on the Taiwan Stock Exchange and the New York Stock Exchange, which will own 100 per cent stakes in both ASE and SPIL,

though each ‘parallel sibling company’ will remain independent from the other. The tie-up marks the conclusion of a protracted takeover battle that began last August, when ASE announced that it planned to acquire its rival.

Overview The country is strategically located at the heart of Asia-Pacific and over the last three decades it has transformed itself into a thriving capitalist economy with a democratically elected government. Taiwan is now the 16th-largest trading nation in the world, according to the World Trade Organisation, with an economy founded on high-tech and creative industries. Over the last three decades, it has averaged annual GDP growth of around 8%. The country’s economic success was, initially, based on the manufacture of low-technology goods. Now, though, it has successfully moved into higher value manufacturing and exports, mainly in electronics and computers. It leads the world in the manufacture of computer-related products and semiconductors. It has developed one of the most advanced telecommunications networks in Asia and wireless penetration has almost reached 69

TAIWAN | COUNTRY PROFILE

saturation levels, and it aims to become the first country in the world to be entirely wireless. Almost half of the top 100 IT companies in Asia have a presence in Taiwan. Taiwanâ&#x20AC;&#x2122;s strategic location is one of its most significant advantages for international investors. It is within easy reach of major commercial centres and ports in the ASEAN region. The continuing liberalisation of links across the Taiwan Strait means that foreign companies are increasingly choosing Taiwan both as a market in its own right and as a stepping stone into China.

Economy Taiwan has a dynamic capitalist economy with gradually decreasing government guidance on investment and foreign trade. Exports, led by electronics, machinery, and petrochemicals have provided the primary impetus for economic development. This heavy dependence on exports exposes the economy to fluctuations in world demand. Taiwanâ&#x20AC;&#x2122;s diplomatic isolation, low birth rate,

TAIWAN | COUNTRY PROFILE

and rapidly aging population are other major long-term challenges. Free trade agreements have proliferated in East Asia over the past several years. Following the landmark Economic Cooperation Framework Agreement (ECFA) signed with China in June 2010, Taiwan in

July 2013 signed a free trade deal with New Zealand – Taipei’s first-ever with a country with which it does not maintain diplomatic relations – and, in November, inked a trade pact with Singapore. The island runs a trade surplus, largely because of its surplus with China, and its

foreign reserves are the world’s fifth largest, behind those of China, Japan, Saudi Arabia, and Switzerland. In 2006 China overtook the US to become Taiwan’s second-largest source of imports after Japan. China is also the island’s number one destination for foreign direct investment. Closer economic links with the mainland bring opportunities for Taiwan’s economy but also pose challenges as political differences remain unresolved and China’s economic growth is slowing. Domestic economic issues loomed large in public debate ahead of the 16 January 2016 presidential and legislative elections, including concerns about stagnant wages, high housing prices, youth unemployment, job security, and financial security in retirement.

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk British Chamber of Commerce in Taipei E: stephanie.wu@bcctaipei.com T: +886227 201 919 W: www.bcctaipei.com

SELECTED OPPORTUNITIES Consumer goods

The main projects are:

Taiwan’s GDP is the 19th largest in the world on a purchasing power basis. Taiwanese have more disposable income than counterparts in Korea, Japan, France or the UK. Increasing wealth is resulting in a growth in consumption including demand for foreign imports. 40 per cent of goods consumed are imported.

• • • • • •

rapid transit networks in main cities mainline railway upgrades Kaohsiung free port and eco-park Asia Pacific Maritime and Air Logistics Centre in Taichung Taoyuan International Air City urban regeneration and rural revitalisation projects across Taiwan • an island wide sewage system

The food and drinks sector is the fifth largest industry in Taiwan and one of the market’s fastest growing sectors. Local supermarkets, hypermarkets, and convenience stores are increasing ranges of imported foods to meet demand. Potential areas of opportunity for food and drink are linked to entertainment and convenience product ranges that can also follow the healthy trend in food services.

Education and skills development

The market for youth fashion is strongly influenced by Japanese and Korean styles and trends. Due to the increasing demand for quality products, there are opportunities in: • contemporary menswear and ladieswear • premium accessories • sportswear

Opportunities for UK companies involved in education and skills development include:

Construction The Taiwanese authorities have announced a number of large-scale public infrastructure projects which will generate opportunities over the next eight years.

Taiwan’s economic progress hinges largely on its ability to develop its human resources. Taiwan is strongly committed to education and skills sector development. Under the ‘Intelligent Taiwan’ project, £16.5bn will be allocated to 13 major individual project areas.

• • • • • •

English language learning Continual Personal Development (CPD) IT education digital learning vocational training teaching quality improvement in higher education

THAILAND | FOREWORD

Great opportunities for UK business in dynamic market Greg Watkins British Chamber of Commerce Thailand and

Marcus Winsley UKTI Bangkok

Ranked 49th out of 189 countries in the World Bank’s Annual Ease of Doing Business Survey, Thailand continues to offer exciting business opportunities for UK companies that are prepared to take a serious interest in this dynamic market. Thailand is keen to boost its competitiveness and Thais hold UK products, services and companies in high regard. With a population of 68 million, the second largest economy in ASEAN, a highly developed manufacturing sector, well-developed infrastructure and generally pro-investment policies, Thailand has a strong offer to UK companies. Thailand has transformed its economy into one of the most diverse in the region. GDP growth of 3.2 per cent was expected in 2016. As the country navigates its transition to a high-value economy, there are opportunities for British businesses in practically every sector, including but not limited to the following: • E ducation and skills: English language training, vocational training, STEM and equipment • D igital economy: 4G, data centres, security equipment

Greg Watkins

• C reative Industries: broadcast and related technology and content for digital channels • Agri-technologies • F ood processing and food snd drink products • C onsumer and retail products, especially British brands and products • A dvanced engineering, including automotive and aerospace • R enewable energy, especially waste to energy

Marcus Winsley

• S ervices, including financial, business and professional The British Chamber of Commerce Thailand (BCCT) celebrated its 70th anniversary in 2016. It is the oldest British Chamber in Asia and, with more than 600 corporate members and 130 events organised each year, it is one of the largest and most-active foreign chambers in Thailand. BCCT is one of the leading overseas BritChams in UK Trade and Investment (UKTI)’s Overseas Business Network initiative (OBNi) and leads on providing bespoke business support to British SMEs seeking to enter the Thai market.

For more information please connect with Greg Watkins at the following email address: greg@bccthai.com

Thailand has transformed its economy into one of the most diverse in the region. GDP growth of 3.2 per cent WAs expected IN 2016

THAILAND | COUNTRY PROFILE

THAILAND KEY FACTS Official name: Kingdom of Thailand Capital: Bangkok Area: 513,120 sq km Population: 67,976,405 Main language: Thai GDP (current): $395.3bn (2015 est.) GDP growth: 2.8% (2015 est.) GDP per capita: $16,100 (2015 est.) Inflation: -0.9% (2015 est.) Labour force: 39.12 million Unemployment: 1% (2015 est.) Monetary Unit: 1 baht = 100 satangs

A unified Thai kingdom was established in the mid-14th century

GDP by sector

% of total

Agriculture �� 10.4% Industry ��37.7% Services ��51.9%

Main industries Tourism, textiles and garments, agricultural processing, beverages, tobacco, cement, light manufacturing such as jewellery and electric appliances, computers and parts, integrated circuits, furniture, plastics, automobiles and automotive parts; world’s second-largest tungsten producer and third-largest tin producer

Main exports Food including rice, seafood and live animals, office equipment, textiles and clothing, rubber

Main imports Capital goods, intermediate goods and raw materials, consumer goods, fuels

Thailand was showing signs of economic recovery in the first quarter of 2017 and it is forecast that this will pick up speed.

Thailand from priority markets including the UAE, UK, France, Germany, Italy, Egypt and Kuwait.

The Thai economy is expected to grow 3.6% this year, a faster pace than the 3.2% growth forecast for 2016, according to the government, which also said that banks’ bad loans by year-end are expected to be lower than last year’s level.

Bangkok is one of Etihad Airways’ busiest routes with about 800,000 travellers in 2016.

In the private sector, Toyota Motor Thailand is looking for car sales this year to grow to 265,000 units, up 8.1% - its first growth projection in four years. It expects passenger vehicle sales to increase sharply by 26% to 110,000 units this year, but it expects a slight decline in commercial vehicles by 1.8% to 155,000 units. The company sees solid signs of recovery in 2017 because of continuing government stimulus packages to stimulate domestic consumption. For 2016, Toyota reported total sales dipped 7.9% to 245,087, marking a fourth straight contraction, with its market share declining by 1.4 percentage points to 31.9%. In a further positive move, UAE’s Etihad Airways and The Tourism Authority of Thailand (TAT) have signed a US$1m deal to increase tourism to Thailand. Under the agreement, the Abu Dhabi-based airline and TAT will jointly promote travel to

For 2017, TAT has set a target of 34.5 million international visitors, generating an estimated US$50bn) – a 10% increase year on year.

Overview A unified Thai kingdom was established in the mid-14th century. Known as Siam until 1939, Thailand is the only Southeast Asian country never to have been colonised by a European power. A bloodless revolution in 1932 led to the establishment of a constitutional monarchy. In alliance with Japan during World War II, Thailand became a US treaty ally in 1954 after sending troops to Korea and later fighting alongside the US in Vietnam. Thailand since 2005 has experienced several rounds of political turmoil including a military coup in 2006 that ousted then Prime Minister Thaksin Chinnawat, followed by large-scale street protests by competing political factions in 2008, 2009, and 2010. Thaksin’s youngest sister, Yinglak Chinnawat, in 2011 led the Puea Thai Party to an electoral win and assumed control of the government. A blanket amnesty bill for 75

THAILAND | COUNTRY PROFILE

individuals involved in street protests, altered at the last minute to include all political crimes – including all convictions against Thaksin – triggered months of large-scale anti-government protests in Bangkok beginning in November 2013. In early May 2014 YINGLAK was removed from office by the Constitutional Court and in late May 2014 the Royal Thai Army staged a coup against the caretaker government. The head of the Royal Thai Army, Gen. Prayut Chan-ocha, was appointed prime minister in August 2014. The interim military government created several interim institutions to promote reform and draft a new constitution.

The country has a well-developed infrastructure, a free-enterprise economy and generally pro-investment policies. Thailand is the only country in south-east Asia to have escaped colonial rule. Buddhist religion, the monarchy and the military have helped to shape its society and politics. Thailand is well placed to offer a gateway to both the ASEAN and Asia-Pacific markets, particularly India and China, many of which offer great business potential.

Economy With a well-developed infrastructure, a free-enterprise economy, and generally pro-investment policies, Thailand historically has had a strong economy, but it experienced slow growth in 2013–15 as a

result of domestic political turmoil and sluggish global demand, which curbed Thailand’s traditionally strong exports – mostly electronics, agricultural commodities, automobiles and parts, and processed foods. Following the May 2014 coup d’etat, tourism decreased 6–7 per cent but is beginning to recover. The Thai baht depreciated more than eight per cent during 2015. Thailand faces labour shortages, and has attracted an estimated 2–4 million migrant workers from neighboring countries. The Thai Government in 2013 implemented a nationwide 300 baht ($10) per day minimum wage policy and deployed new tax reforms designed to lower rates on middleincome earners. The household debt to GDP ratio is over 80 per cent.

SELECTED OPPORTUNITIES Transport and infrastructure Thailand plans to invest £66bn between 2015 and 2022 in strategic infrastructure projects. Projects include: • three new double track train lines • upgrading national rail network with double tracking and expansion of the Bangkok mass-transit system • airport and port expansion projects • road and bridge upgrades • water management and flood prevention There are opportunities for UK companies in the following areas: • project management • consulting engineering • design • operation • specialist innovative technology

Thailand is well placed to offer a gateway to both the ASEAN and Asia-Pacific markets, particularly India and China

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk British Chamber of Commerce Thailand E: greg@bccthai.com T: +66(0)2 651 5350 3 W: www.bccthai.com

Agri-business and food and drink Thailand offers significant opportunities for UK companies due to: • growing tourism • developing hotel and catering sector • increasing middle-class disposable income • large number of international residents • need for more sophisticated technology in agribusiness sector There are opportunities for UK companies in: • pig genetics and breeding • animal feed • innovative technology and products • British beef and lamb exports (once lifting of BSE ban confirmed) • organic and healthy food products • confectionary • premium made in UK food and drink products

• food packaging and processing equipment

Retail and consumer goods Thailand, and especially Bangkok, is witnessing a massive retail boom. New shopping malls and retail concepts are opening across the country and there is substantial demand for quality international products. Large retail groups are already home to leading British brands and have major investment plans. Opportunities for UK companies include: • new British brands (franchise or direct entry) • clothing • footwear • personal care, including cosmetics • giftware

Power and renewable energy 55 per cent of total energy consumption is imported and the deficit is growing. Thailand’s ‘energy masterplan’ aims to provide 25 per cent of total energy consumption from renewable sources by 2022. The Ministry of Energy is offering incentives for renewable energy in the form of Feed-in-Tariff (FIT) schemes. The BOI also offers a range of incentives for investment in the renewable energy sector. There are opportunities for UK companies in: • waste to energy • biomass and biogas • innovative technologies • advisory services

ASIA | FEATURE

China and Europe: an enduring match? As dynamics shift in both markets, Keith Breslauer asks whether China’s love affair with European real estate can go the distance China and Europe have, for some time now, been an ideal match.

and holder of foreign exchange reserves, the rapid rate of economic growth has been unsustainable.

In 2015, Chinese direct investment in European real estate reached €2.7bn. In fact, Europe has been an attractive option since the millennium, with its strengthening property markets attracting investors looking to profit from the recovery of countries including Spain, Portugal, France, and even Greece. The safe haven of London in particular has attracted sovereign wealth funds and institutional investors to plough money into the commercial property market, while individuals enticed by favourable exchange rates, the quintessentially British culture and the quality of educational establishments, have become one of the most significant demographics purchasing central London apartments.

In 2015, the economy experienced its lowest growth in 25 years. Property price-to-income ratios had risen to above 20 times, but an oversupply leading to a total of 657 square kilometres of unsold residential space – equivalent to the size of Singapore – ultimately saw around 30 per cent of the value of the property market wiped out before the government stepped in to introduce stimulus measures.

But with the economy in China now faltering and Brexit changing the dynamics of the UK market and sending shockwaves through the rest of Europe, can this love affair really last? Or will the falling value of sterling and the euro only serve to make the UK and Europe an even more appealing investment location? In the face of the recent vote to leave the EU, the UK is unlikely to fall out of favour with investors. Although the current political instability may cause some to hold off from investing in the UK while the dust settles, the weaker sterling may, in fact, make the UK more attractive to Chinese investors, who are likely to be more interested in exchange rates, availability and general economic environment than the complexities of the UK’s relationship with its neighbours. Despite China seeing three decades of rapid economic growth, etching its name as a major global economic superpower, as well as the world’s largest manufacturer, merchandise trader,

Although the current political instability may cause some to hold off from investing in the UK while the dust settles, the weaker sterling may, in fact, make the UK more attractive to Chinese investors

China’s slowdown has had a knock-on effect on property markets elsewhere: last year, well before Brexit, Chinese investors pulled out of a £455m purchase of Broadgate Quarter in London, sparking fears that the glory days might be coming to an end. As a result, the situation in China has led wealthy individuals and companies to look at alternative routes to export capital. The first four months of 2016 saw a five-fold increase in China outbound M&A activity from 2015 as investors pursued safehaven markets, encouraged by state-provided subsidies such as cheap capital and assistance from the Chinese government. What isn’t yet clear is the extent to which Brexit might encourage Chinese investors – at least in the short-term – to favour the US or destinations closer to home. In the residential market, those with a child studying or working in the UK form the most dominant market. It is likely they too will continue to invest assuming the trend for overseas study continues, which is particularly likely if the exchange rates continue to make property and fees for educational establishments cheaper for those from overseas. The situation in both Europe and China remains fragile, and only time will tell whether inward investment from China will continue in the way it has in recent years. Our guess is that with a weaker but stable Sterling currency, Chinese interest will continue and may in fact ramp up; we already have significant increased inbound interest. Rapidly changing markets highlights Patron’s on-the-ground knowledge, careful approach and price discovery to find the best risk adjusted returns on its investments. Keith Breslauer is managing director of specialist pan-European property investor Patron Capital

EUROPE | FEATURE

How will rising protectionism affect British exporters? Lesley Batchelor OBE Director General of the Institute of Export & International Trade

Protectionism is alive and well in the world of international trade. Despite the World Trade Organisation (WTO) framework, which seeks to counter the effect of subsidies, there has been a growing tendency by national governments to use more subtle forms of protectionism that fall outside its scope.

With global markets continuing to offer huge growth potential ... the importance of skilled staff to employers is unprecedented Much of this ‘hidden protectionism’ policy takes the form of export promotion or industrial reform. Well known subsidies include Common Agricultural Policy in the EU, cotton subsidies for US farmers and farm subsidies introduced by countries such as Russia. In 2012, the USA government imposed tariffs of up to 4.7 per cent on Chinese manufacturers of solar panel cells, claiming that they benefited from unfair export subsidies. Other hidden measures include: • domestic subsidies – government help (state aid) in the form of loan guarantees etc., • investment measures; • migration rules; • export subsidies; • public procurement restrictions; • technical barriers to trade – including product labelling rules and stringent standards such as the US FDA rules where an imported product can be refused entry if it simply ‘appears to violate’ local product standards. In its most recent (August 2016) annual report, the London-based Centre for 78

Economic Policy Research’s monitoring service, which defines protectionism as “Anything that hurts another country’s commercial interest” states, “Since 2012 the G20 has accelerated its resort to protectionism. In the first eight months of 2016 alone, G20 governments implemented nearly 350 measures that harmed foreign interests. The jumps in G20 protectionism in 2015 and 2016 coincide ominously with the halt in the growth of global trade volumes.” Whilst previously it was the BRICS countries (Brazil, Russia, India, China and South Africa) who were seen to be the worst offenders when it came to implementing protectionist policies, in the last year Australia, France, Germany, Italy, Saudi Arabia, the UK, and the USA have all shown a marked increase in their use. There seems to be a growing protectionist mood globally where that agenda plays well to domestic electorates, many of whom are still counting the cost of the last financial crisis. In the US, both Donald Trump and Bernie Sanders argued in the last presidential election campaign that American workers will lose as a result of the trade deals Barack Obama had negotiated. No fan of free trade, President Trump signalled that he would only agree to deals

if they directly and unilaterally benefit the US. He was quick to act and in his first week in the White House, abandoned the ambitious 12-nation Trans-Pacific Partnership and reportedly proposed a 10% import tariff across the board. His promised ‘America First’ approach also saw threats to block what he considers ‘illegal activities’ by Mexico and China in unfairly undercutting American trade. Many in the US are alarmed at reports of President Xi Jinping’s plans for China to become a maritime superpower. Investing in a global network of ports has reputedly made Chinese port operators the world leaders, while no nation carries more cargo than its shipping companies. Another statistic that might rattle Mr Trump is that five of the planet’s top ten container ports are in mainland China – with a sixth in Hong Kong. Quite how the Commander in Chief will react to such threats to traditional US supremacy in the coming years is anybody’s guess, but Europe might come under his scrutiny too.

EUROPE | FEATURE

Here, the EU is accused of using tax and monopoly investigations as a form of hidden protectionism to discriminate against large US companies, whilst at the same time turning a blind eye to similar ‘domestic’ cases. Despite the UK government having itself implemented a number of protectionist measures, Britain has a long tradition of championing free trade (and, as we begin our exit from the EU, we are now ready to re-establish our pre-eminence in this sphere).

Two questions remain: firstly, is university just about vocational learning or is it about teaching how to learn? Secondly, who is responsible for bridging the skills gap?

So what does all this mean for British exporters? • Uneven playing fields – competing against businesses which benefit from governmental investment and policies • Political uncertainty – US/EU/Brexit However it is easy to overstate the impact of protectionism on world trade as measures tend to be very industryspecific. The WTO with its 164 member countries has its work cut out managing each country’s commitments. Although its remit is to halt protectionism in the long term, short term, businesses – and by extension, countries – continue to find ways to get around the rules. What can we do? It goes back to the rationale behind starting the Institute in the first place: education. The need for businesses to catch up with a lost generation of skilled exporters is beginning to be an uncomfortable truth for the UK. The world has changed from a naïve place where charming manners or world domination will clinch a sale. With global markets continuing to offer huge growth potential for product and service-based businesses, the importance of skilled staff to employers is unprecedented. However, school and university graduates often lack the skills that companies seek.

UK school-leavers have been labelled as ‘The worst in Europe for essential skills’ by the Chartered Institute of Management Accountants (CIMA), while the Confederation of British Industry (CBI) has reported on how a dearth of high quality apprenticeships is exacerbating numeracy and literacy problems – and creating an unskilled workforce. Two questions remain: firstly, is university just about vocational learning or is it about teaching how to learn? Secondly, who is responsible for bridging the skills gap? The first question cannot be addressed here, but the second we can debate. At the IOE&IT, the focus is on vocational study and the need for specific knowledge for a specific industry. Faced with the increasing demand created by the many changes to trade support delivery that the government plans, can we rely on industry to be champions of best practice? Or will it simply prepare cannon fodder in the knowledge that investing in staff training merely supplies other companies with trained employees?

exporters bemoaning its difficulties are missing the key point that countries across the world have realised – only learning how to do it right will enable them to be profitable and their exports sustainable. There is little evidence that companies have invested in progression planning. An ageing population of trainers and mentors reflects this lack of investment across the industry and the government is looking at placing experienced export managers into businesses – but is finding that these animals are rare indeed. So if asked to choose between making business react and making government reform education again, the response should perhaps be to view things from a demand aspect, rather than supply. The customers we need to be talking to are not the businesses but the students. In marketing terms, supplying a product to an audience that doesn’t know what it

According to the Federation of Small Businesses (FSB), over 33% of businesses say their recruits lack the basic skills needed while a CIMA report last year found that 31% of firms surveyed took more than two months to fill junior roles – with 75% of UK school leavers requiring significant training. Moving the responsibility to business brings a very simple equation to the fore: cost + time / benefit. After investing resource and money upskilling staff, each time a new recruit starts and is trained, at what point do they start to pay back that initial investment? Focusing on international trade and looking at the support available for it, the government is asking the IOE&IT to make trade easier; the response to which must be that ‘there is a particular knowledge set that is needed to sell into global markets and to support those sales’. New British

needs requires smarter marketing than simply fulfilling a demand. Turning this around and creating demand from students that will benefit most from being skilled requires a national marketing campaign that highlights how study can equip them with true social progression, broadening their horizons in every sense. As Einstein told us, ‘First learn the rules of the game; then go out and play it better than everyone else.’ 79

EUROPE | FEATURE

There are huge differences in the way the UK and German businesses operate but both approaches can work in unison, as GLOBAL TRADER discovered

Cologne, the home of BDG, where contemporary architecture contrasts with the historic landmark dome in the background

Cracking the German market: advice for UK SMEs Conducting thorough ‘homework’ is crucial to succeeding when launching a product or service on the German market. With its resilient economy, strong domestic consumer market and the fact that it is just one hour from the UK by air, there are many reasons why UK businesses can benefit from trading in Germany. However, as the largest economy in Europe and the fourth strongest economy in the world, the German market is extremely competitive and requires persistence and expert guidance if UK companies are to successfully achieve traction in this market. Third party experts such as BDG are finding that market research in advance should not be underestimated. Thim Werner, of Cologne-based Business Development Germany (BDG), says: “Starting a business in Germany is no easy task for a foreign company. Whilst Germany hosts 65 per cent of the world’s international trade fairs, launching at these shows can prove to be an expensive and fruitless endeavour, as it’s extremely difficult to stand out from the competition at large scale events. “There are no short-cuts. As German market experts, we advise businesses of all sizes on how to successfully enter the Europe’s leading market. There are systemic processes that can increase the chances of success and these largely hinge on the value of forward planning.”

Here Thim Werner of BDG offers advice on five crucial areas UK companies should focus on if they are to succeed in the German market: 1. Planning and market research in advance is essential. Conduct a SWOT analysis of your product or service to assess its feasibility for success in the German market and prepare a market entry business-plan. Such a business plan is mandatory when talking to banks or applying for benefits with German authorities.

Thim Werner

2. Develop a specific and strategic concept for the perfect implementation of your product or business idea. Pay heed to Germany’s distinctive business etiquette, this is crucial when trying to build a positive reputation and new business in the country. 3. For long-term success, businesses must ensure continuous quality control. Our experts can help at all three of these stages, offering the know-how on how to break into and cater for the demands of the German market in order to achieve long-term success. 4. Whatever form of company you choose, you will need to tackle a number of bureaucratic hurdles. The first important steps are to contact a financial or tax advisor. They will know if it is necessary to hire a notary and how to register the business at the local court (Amtsgericht). Shortly thereafter, the chamber of commerce should contact you, having received your details from the commercial register. 5. The basics of German company law have many similarities to those in Englishspeaking countries. It distinguishes between limited liability companies (equivalent to a British limited company), joint stock companies (equivalent of a British Public Limited Company), and various forms of partnerships. It is normally advisable to have a lawyer help you decide which is the most suitable for your needs and help you with the necessary paperwork.

EUROPE | FEATURE

Why UK traders should be aware of the Union Customs Code changes The largest change to UK and European Customs procedures in the last 20 years took place in May 2016, with the introduction of the Union Customs Code (UCC). The Institute of Export’s senior director for special projects, MIKE JOSYPENKO, examines the implications of some of the changes

Why has this happened?

And the bad news?

The European Union’s customs framework, the Community Customs Code, had required an overhaul for many years: introduced in the 1990s, member states had been discussing an updated framework for almost a decade.

A less welcome change is that those using the new Processing regime and other ‘Special Procedures’ (such as customs warehousing), now have to provide HMRC with financial guarantees. These cover the value of all real and potential customs debt on goods covered by the procedure (in other words, import duty and VAT).

One of the most significant areas of change is to the treatment of customs procedures that allowed traders to delay or defer payment of import duty or VAT when goods are imported under specific circumstances. The new code means major changes, some of which may benefit traders, but many of which may involve additional administration and cost.

What are the changes for traders who use Inward Processing Relief (IPR) or other procedures? Before the changes, UK traders using IPR could suspend payment of customs duties when goods were imported for processing and subsequent re-export outside the EU. The new process is now combined with Processing under Customs Control – another system, which allows imported goods to be processed without payment of duty under specific circumstances. Known collectively as ‘Processing’, this process operates with a number of changes. Other procedures, such as Custom Warehousing and End Use have also changed.

Has the code changed for better or worse? Both! One positive change for traders using IPR is that goods no longer have to be re-exported outside the EU after processing. In the past, traders using IPR were subject to ‘compensatory interest’ – a form of penalty – if the processed goods were not re-exported, or disposed of under approved methods within a specific timeframe. The new regime allows goods to be entered into free circulation after processing, without any penalty, subject to prior approval.

This is in addition to pre-existing duty and VAT deferment requirements, which was not previously the case in the UK. This change is intended to bring us into line with many other EU member states, where traders already have to provide such guarantees. An exemption is available for companies who are authorised by HMRC as Authorised Economic Operators (Customs) – AEO (C) who can apply for a waiver of guarantee for potential debts.

I only use the simplified version of IPR occasionally to process repairs of products. Does this also affect me? Yes. Previously, many UK companies used a simplified version of Inward Processing to handle shipments returned by overseas clients for repair or upgrade. The simplified scheme did not require prior authorisation and could be used on an ad hoc basis. Under the new code, the scheme is known as ‘authorisation by declaration’ and can only be used a maximum of three times per calendar year. Traders using this scheme now also have to provide guarantees for the potential duty in advance of the import shipment. Because users of this simplified system are not formally authorised, there was less scope for HMRC to communicate the changes to them; as a result, these significant changes have come as an unwelcome surprise to many companies.

Where can I find out more? HMRC has prepared a number of new application forms for the changed processes, as well as Customs notices and Information Papers – visit: https://www.gov.uk/government/publications/notice-3001special-procedures-for-the-union-customs-code Information is also available on https://www.gov.uk/government/collections/customs-informationpapers--2#customs-information-papers-2016

EUROPE | OVERVIEW

Opportunity still knocks in Europe, despite Brexit As the furore over Brexit settles down, MARK LANE takes a look at the trading landscape for UK businesses in some of the key economies of Europe

Recent events – namely the UK’s referendum vote to quit the EU – suggest a changed landscape for British businesses doing business with EU countries. However, it’s important to remember two things: first, the situation is a ‘will be’ and not an ‘is’, and, second, we do not know precisely what that changed landscape will look like. There will be no negotiation to decide Britain’s future relationship with the EU until the British government invokes Article 50 of The Lisbon Treaty, which then allows for a twoyear period of negotiation. The Government plans to invoke Article 50 before the end of March. This has been approved by the House of Commons but could be held up in the Lords. Clearly, we cannot know what the results of those negotiations will look like. Trade with the EU countries will certainly not be put on hold for two years or more, until all this works itself out; business and trade have their own agendas, so, for the medium term, we can analyse the environment for exporting to the continent in terms of current arrangements.

GERMANY The engine of the EU economy is Germany, whose economy, after recovering from the strain of reunification with the German Democratic Republic (East Germany) has proved resilient in the face of global economic uncertainty. The government has held firm to sound public finance, and deficit-cutting efforts keeping public spending under control. Labour market reforms to improve working-hour flexibility and reduce structural unemployment have helped to sustain the jobs market. However, in December 2013, the Christian Democratic Union formed a coalition government with the Social Democratic Party, which stalled economic reforms, with policy being focused on rescuing the euro. While growth has slowed, Germany’s unemployment rate is still one of Europe’s lowest and its industrialised economy generates average per capita incomes that are among the world’s highest. The German economy suffers from low levels of investment, and a government plan to

invest 15 billion euros during 2016–18, largely in infrastructure, is intended to spur needed private investment. Following the March 2011 Fukushima nuclear disaster, Chancellor Angela Merkel announced in May 2011 that eight of the country’s 17 nuclear reactors would be shut down immediately and the remaining plants would close by 2022. Germany plans to replace nuclear power largely with renewable energy, which accounted for 27.8% of gross electricity consumption in 2014, up from 9% in 2000. Before the shutdown of the eight reactors, Germany relied on nuclear power for 23% of its electricity generating capacity and 46% of its base-load electricity production. Domestic consumption, bolstered by low energy prices and a weak euro, are likely to drive German GDP growth again in 2017 Like its Western European neighbours, Germany faces significant demographic challenges to sustained long-term growth. Low fertility rates and a large increase in net immigration are increasing pressure on the country’s social welfare system and necessitate structural reforms. 83

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EUROPE | OVERVIEW

firms greater powers to cut working hours and reduce pay. In the face of the wave of public protest and to get the measures through parliament these reforms have been watered down. France, on the other hand, has been riven by industrial and political unrest with a wave of protests and strikes against labour market reforms.

FRANCE The French labour market is particularly inflexible with strict legislation for dismissal for open-ended and temporary contracts and employers face an additional burden in that the cost of labour, including social security contributions, is higher than in most other countries. The latest copy of the labour code runs to 3,500 pages. The government is trying to introduce reforms to lower some of the existing barriers to laying off staff, to allow some employees to work more than the current working week, which is capped at 35 hours, and to give

Economic growth in the first quarter was 0.5 per cent, but there are still some three million people unemployed, representing about 10 per cent or the workforce, compared to 4.3 per cent in Germany. This is the second highest rate among the G7 leading developed economies and almost one in four of under 25s are jobless. Gross domestic product per person grew more slowly in France between 1995 and 2007 than in any other OECD country, apart from Italy, and at the end of 2015, the economy had grown by just more than 2.8 per cent than its peak level at the onset of the financial crisis. This compares to six per cent for Germany, eight per cent for the UK and 10 per cent for the US.

ITALY To the south, Italy is beset by similar problems. It also has been suffering from slow growth, unemployment, weak public finances and structural problems. The country’s total real economy debt (that is, government, household and business) is around 259 per cent of GDP, up 55 per cent since 2007. A combination of weak growth and low inflation is driving Italy’s debt every higher, despite austerity and a primary surplus of two per cent of GDP. In the wake of the Brexit vote, the government attempted to shore up the Italian financial sector with a sizeable cash injection designed to mitigate some of the immediate financial risks. Italian banks are holding nearly a third of the 990bn euros of unpaid loans at top euro zone lenders, with 14 large banks sitting on 286bn euros of so-called “non-performing exposure” – loans, debt securities and off-balance sheet items.

Italy’s major banks and corporations are starting to feel the pain, with stocks in Monte dei Paschi di Siena, Banca Carige, Unicredit and Fiat falling dramatically in mid-January. One positive note is that Italy has managed to strike a deal with the European Commission to help its banks sell their non-preforming loans, which, while not solving problem, could reduce potential losses. This goes hand-in-hand with ongoing political instability. In October the government held a referendum on proposed constitutional reforms. The electorate returned a no vote, causing the government’s resignation. A general election is not due until 2018 but there are calls for an election this year.

EUROPE | OVERVIEW

CZECH REPUBLIC The Czech Republic, for example, has a long history of being an important and innovative manufacturing nation and it has one of the most developed and industrialised economic systems of Central and Eastern Europe. Since the end of Communist rule in 1989, the Czech economy’s transition to greater openness and flexibility has been accompanied by restructuring and liberalisation. Open market policies have encouraged global trade and investment flows and allowed the economy to build on the efficiencies achieved through earlier reforms. Low tax rates have encouraged the development of a vibrant private sector. The government has placed a high priority on fiscal discipline and is striving for budgetary balance after years of fiscal deficits.

SPAIN Italy’s neighbour to the west, Spain, has been enjoying better economic conditions. Spain’s central bank estimates the economy grew by 0.7 per cent in the second quarter compared with the previous three months, down from 0.8 per cent in the first quarter.

However, the jobless rate has been above that level for over five years, even as the country’s economy has been recovering. It is believed that some of this unemployment is overstated as some workers have undeclared jobs. Also, even if the rate remains high, there may be a level of consumer optimism because it has still fallen from 25 per cent two years ago. However, the government does not expect the jobless rate to fall below 15 per cent until 2019 and the country’s youth unemployment (those under 25) is still at 45.5 per cent. But all economies have their own characteristics and, it has been pointed out, that for various historical and structural reasons, unemployment above 20 per cent is not uncommon in Spain and has been at that level in three periods since Spain’s transition to democracy in the 1970s. From the previous unemployment rate peak in the 1990s, it took 14 years for it to decline to the wider European level.

The Bank of Spain said the economy was being fueled by increased consumer spending due to improving employment figures. Spain emerged from recession in late 2013 and is now one of the European Union’s fastest-growing economies, although its unemployment rate of 21 per cent remains the EU’s second-highest after Greece. 86

Still, it has to be a cause for worry that much of Spain’s working-age population lacks an education beyond high school and many of those have been unemployed for many years after the financial crisis of 2008, with almost a quarter having been without work for four years or more. These workers are increasingly losing contact with the industries they worked in, making it even harder for them to find jobs. But Europe and the EU is not just made up of the larger economies, there are also some important smaller players.

GDP growth increased strongly last year, partly due to EU-financed public investment. The economy advanced 0.4 per cent on quarter in the first three months of 2016, the same as in the previous period but lower than an initial estimate of a 0.5 per cent expansion. It is forecast that financial conditions and income growth will continue to support domestic demand, but falling public investment is weighing on growth. Although gains in market share are likely to be smaller than in recent years, stronger demand from European countries will support export growth. Headline inflation remains low, but robust wage growth and fading effects of food and energy price falls will push inflation to the two per cent target by the end of 2017. On the downside, lingering corruption increases the overall cost of doing business.

EUROPE | OVERVIEW

ROMANIA On the EUâ&#x20AC;&#x2122;s eastern borders, Romania, a member since 2007, is still recovering from the severe shock of the recent global financial crisis. The country continues to place a high priority on restoring fiscal sustainability and improving competitiveness by easing and rationalising the regulatory burden. Modest economic growth has resumed, and the government has made progress in reducing the public debt and budget deficit. On the other hand, the pace of privatisation and restructuring of state-owned enterprises has slowed. The prospects for

long term economic development are weakened by high levels of corruption exacerbated by a relatively inefficient judicial system. Romania is still heavily reliant on its agricultural sector but it is building an automotive sector. The top five exporters to the UK are all companies active in the car and car parts manufacturing industry: Ford, Takata-Petri, Automobile Dacia, Sews Romania, and Draexlmaier. Ford Romania, the second largest car producer in the local market, was the largest Romanian exporter to Great Britain in 2015. The UK ranks fifth among the top export destinations for goods produced in Romania, with total exports of almost 2.4 bn euros last year. It was surpassed by Germany, Italy, France, and Hungary. The UK accounts for

4.4 per cent of Romaniaâ&#x20AC;&#x2122;s total exports, and this increased by 10 per cent in 2015. The largest importer from the UK was drug manufacturer GlaxoSmithKline. The Romanian economy had more than 5,200 companies with British capital at the last count, with a total capital of 997m euros, representing 2.49 per cent of the capital invested by foreign investors on the local market.

RUSSIA Outside of the EU, one of the major economies is Russia. In 2014 it annexed the Crimea and this and its involvement in the civil war in Ukraine led to the imposition of Western sanctions. When the 50% collapse in the oil price was added to this, Russia entered recession in 2015. Most forecasters believe that the economy will only start to grow in 2017 and, even then, at a relatively modest one per cent to two per cent a year. Even if Russia had not suffered the external shocks of sanctions and the oil price, the economy still suffers from high corruption, excessive regulation, poor protection of property rights, lack of competition and openness, and the expansion of state-owned companies. These problems were already causing a slowdown in 2013. But, activity continues. Leading greenfield drilling company Surgutneftegaz has announced plans to bring into operation 19 greenfields in East and West Siberia in five years, The company accounts for nearly a half of greenfield wells drilling and commissioning in Russia and it plans to maintain the oil and gas production level over the next five years. Exports of Russian oil to China have jumped almost 42 per cent to more than 22 million tons from January to May and Russia has now overtaken Saudi Arabia to become the largest supplier of crude to China. In Russia, as in the rest of the continent, the picture is mixed and events are fast moving and the Brexit issue is just one among many on this vast and complicated continent.

TURKEY | FOREWORD

Turkey: open for business Chris Gaunt Chairman, British Chamber of Commerce in Turkey Seeking new business opportunities and partnerships in new markets is no easy task for anyone, let alone an SME with limited resources – especially at a time of political unrest across the globe. Daily business, however, continues largely unaffected whether it be in the UK or in Turkey, with trading opportunities presenting themselves across all sectors. Emerging markets offer high growth opportunities yet often seem to present more risks, which make it all the more difficult for a small company to take the bold decision to invest time and resources in what is perceived to be difficult and a step into the unknown. Turkey’s strategic geographical location, bridging Europe and the near East, makes it the closest, largest and fastest growing emerging market to the UK. Compared to the BRICS markets, Turkey is by far the easiest market to do business with. It offers opportunities in a wide variety of industries, capabilities and regional business knowledge and experience; this level of diversity has stimulated considerable interest for UK businesses in one of the fastest growing emerging market economies. The headroom for growth, supported by strong fundamentals; dynamic demographics, growing middle class, high net wealth, strong and well established private sector, well-regulated and highly developed Banking sector, is considerable and offers major opportunities for British exporters and investors. Priority sectors to focus on are Construction, Healthcare, ICT, Energy, Automotive, Finance and Consumer Goods together with high demand for UK brands, capability and know-how. The British Chamber of Commerce in Turkey is active in all these areas, seeking opportunities for investment, distribution and partnership for UK exporters in Turkey and the region including Iran. 88

The attractive Turkey proposition not only derives from its geographical proximity to the UK and its high-growth economy, but also on its ambition to join the EU and build closer links to Europe. This has resulted in harmonising legislation with the EU that includes business sensitive issues such as IP protection and anti-corruption, with the added bonus of a customs a union with the EU. Given Turkey’s centuries-old trading routes between the East and West, Turkish companies have a long tradition of how to business in the more difficult markets in the region, which makes partnership with a Turkish company a very attractive proposition. This is a model BCCT recommends for UK companies entering the market and to that end provides matching making and due diligence services to reach the best outcome.

Turkey’s strategic geographical location, bridging Europe and the near East, makes it the closest, largest and fastest growing emerging market to the UK

Turkey specialists. BCCT has been UKTI’s service delivery partner in Turkey for the past three years, with responsibility for twenty three business sectors, with strong support for SMEs. In 2015 alone, BCCT has welcomed 7 UK trade missions in cooperation with UK Trade & Investment, organised breakfast meetings and briefings, arranged B2B speed meetings, networking receptions, and has delivered further customised services, all designed to deliver the best possible outcomes for visiting organisations. Over five hundred services deliveries to UK companies have been completed – more than a third of which were provided to returning clients.

The World Bank’s ‘Trading Across Borders’, which incorporates the time and cost (excluding tariffs) associated with procedures (such as documentary compliance, border compliance and domestic transport) within the overall process of exporting or importing a shipment of good puts Turkey in 62nd place among 189 countries – between Chile and Mexico and 24 steps away from the UK (which ranks 38th).

Our core competency is turning export potential into concrete business transactions that create value and long term sustainability.

Turkey is one of UKTI’s high priority markets for British exporters and provides support and guidance in UK through its network of regional International Trade Advisors and

The UK has been the largest investor in Turkey over the last ten years with over £23 billion invested. In 2015 bilateral trade exceed £13 billion.

BCCT is a BCC-accredited Chamber and member of BCC’s Global Business Network, established over a century ago with a long tradition of building bilateral trade and investment between UK and Turkey.

TURKEY | COUNTRY PROFILE

TURKEY

KEY FACTS Official name: Republic of Turkey Capital: Ankara Area: 779,452 sq km Population: 79,414,269 Main language: Turkish GDP (current): $733.6bn (2015 est.) GDP growth: 3.8% (2015 est.) GDP per capita: $20,400 (2015 est.) Inflation: 7.7% (2015 est.) Labour force: 29.4 million Unemployment: 10.4% (2015 est.) Monetary Unit: Turkish lira

Political and security fears are severely damaging Turkey’s tourist industry and are hitting the Turkish economy hard.

Modern Turkey was founded by Ataturk, or ‘Father of the Turks’, in 1923 from the remnants of the defeated Ottoman Empire

Official figures reveal a drop in the number of overseas visitors to the country of 28 per cent, representing the biggest fall in 17 years. A wave of bombings, the ongoing crisis in neighbouring Syria and tensions with Russia following Turkey’s shooting down of a Russian jet fighter are blamed for scaring tourists away. This catastrophic fall in visitor numbers comes at a time when the Turkish economy can ill afford it, with slowing exports and weak private investment.

GDP by sector

% of total

Agriculture �� 8.1% Industry ��27.7% Services ��64.2%

Main industries Textiles, food processing, autos, electronics, mining (coal, chromate, copper, boron), steel, petroleum, construction, lumber, paper

Main exports Clothing and textiles, fruit and vegetables, iron and steel, motor vehicles and machinery, fuels and oils

Main imports Machinery, chemicals, semi-finished goods, fuels, transport equipment

And some economists forecasted that tourism revenue would drop by a quarter in 2016, costing around US$8bn, which represents one per cent of the country’s GDP. Over the summer holiday season European holiday makers usually flock to Turkey’s southern beaches but spring figures look ominous as tourism fell 28.07 per cent yearon-year in April, with 1.75 million people arriving. This was the biggest drop since May in 1999, when the Kurdistan Workers Party (PKK) militant group launched a bombing campaign and warned tourists to stay away after the capture of its leader Abdullah Ocalan.

Overview Straddling Europe and Asia Minor and steeped in history and culture, Turkey is a country of contrasts, both beguiling and bewildering in equal measure.

It has a modern, sophisticated population in Istanbul and the western side of the country generally, and there are many popular tourist resorts on the Mediterranean coast, such as Bodrum. Meanwhile, in the east, it is more deeply rooted in the conservative past, owing to its proximity to Syria, Iraq and Iran. However, in spite of its diverse nature, it is rapidly emerging as a high-growth market for many businesses. Indeed, the country is already Europe’s sixth largest economy. Its recent economic growth record, its talented, young workforce and its geographical location as a prime hub for regional market access make Turkey a hugely attractive destination for UK and European trade and investment. The political, economic and legal reform processes are part of Turkey’s drive towards membership of the European Union and key factors in encouraging new businesses to grow and prosper. Modern Turkey was founded by Ataturk, or ‘Father of the Turks’, in 1923 from the remnants of the defeated Ottoman Empire. Under his leadership, the country adopted wide-ranging social, legal and political reforms. After a period of one-party rule, an experiment with multi-party politics led to the 1950 election victory of the opposition Democratic Party and the peaceful transfer of power. Since then it has experienced several military coups but is now a stable democracy. 89

TURKEY | COUNTRY PROFILE

Economy Turkey’s largely free-market economy is increasingly driven by its industry and service sectors, although its traditional agriculture sector still accounts for about 25 per cent of employment. An aggressive privatisation program has reduced state involvement in basic industry, banking, transport, and communication. An emerging cadre of middle-class entrepreneurs is adding dynamism to the economy and expanding production beyond the traditional textiles and clothing sectors. The automotive, petrochemical, and electronics industries are rising in importance and have surpassed textiles within Turkey’s export mix. Oil began to flow through the Baku-TbilisiCeyhan pipeline in May 2006, marking a major milestone that has brought up to one million barrels per day from the Caspian region to market. The joint Turkish-Azeri Trans Anatolian Natural Gas Pipeline (TANAP) is moving forward to help transport Caspian gas to Europe through Turkey, helping to address Turkey’s dependence on imported gas, which currently meets 98 per cent of its energy needs.

era of strong growth averaging more than six per cent annually until 2008. Global economic conditions and tighter fiscal policy caused GDP to contract in 2009, but Turkey’s well-regulated financial markets and banking system helped the country weather the global financial crisis, and GDP rebounded strongly to around nine per cent in 2010–11, as exports returned to normal levels following the crisis.

Contacts

Airports

Energy

The Turkish Ministry of Transport, Maritime Affairs and Communications has committed to developing a third airport in Istanbul.

The Turkish energy sector needs more than USD 130 billion of investment by 2023. Demand for energy is increasing by 6–8 per cent annually. Turkey plans to reform energy production to meet increasing demand and become a transit hub for energy transportation in the region.

Turkey is also planning to build three nuclear power plants in the next 15 to 20 years.

After Turkey experienced a severe financial crisis in 2001, Ankara adopted financial and fiscal reforms as part of an IMF program. The reforms strengthened the country’s economic fundamentals and ushered in an

UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk British Chamber of Commerce Turkey E: serenay.yilmaz@bcct.org.tr T: +902122 490 420 ext 119 W: www.bcct.org.tr

SELECTED OPPORTUNITIES

A 25-year leased Build, Operate, Transfer (BOT) contract was awarded in May 2013 to the Istanbul Grand Airport (IGA) consortium; Cengiz, Mapa, Limak, Kolin, Kalyon. Once complete, the new airport will have a 150 million passenger capacity and will be one of the world’s biggest airports. Ground work is ongoing. Opportunities for UK companies: • planning and master planning • airport design and architecture • professional and legal services • airport management • airport security • luggage handling systems • airfield lighting • fire fighting equipment • other equipment and procurement

The government has set a target for the share of renewable energy to reach 30 per cent of total energy consumption by 2023. Turkey’s renewable energy resource potential is estimated at around 136,600 MW (excluding hydropower and geothermal). It is supporting major solar energy projects such as a £3bn project providing 4,000 MW of solar energy to power over one million homes. The energy ministry has set a target of generating 20 GW of onshore wind by 2023. The government is working on amendments to regulations to enable offshore wind development. An offshore wind map is expected to be announced in 2015.

Major opportunities are in: • • • •

legal and regulatory advice human resources training local capacity building supply chain

Infrastructure, construction and design The yearly need for domestic housing is about 400,000. The sector creates seven per cent of all employment. Along with that, Turkish contractors are active in 96 countries and are known for being successful especially in volatile environments. There are opportunities for UK companies in: • Public Private Partnership (PPP) projects • motorways, airports, railways projects • creative and technical services

EUROPE | FEATURE

Managing FX volatility as Brexit negotiations get underway Philippe Gelis CEO and co-founder of Kantox

We’ve just witnessed Members of Parliament vote by a majority of 384 to allow Prime Minister Theresa May to begin Brexit negotiations. It seems that despite much media speculation and uncertainty, the decision the UK made back in June to leave the European Union will finally become a reality. Already, various currencies have fallen victim to these uncertain times, with volatility affecting both the pound and the dollar, amongst others. With March 31st set as the date that May will invoke Article 50, FX volatility is only set to continue. With this in mind, businesses need to ensure that they have solid FX risk strategies in place so that they do not fall victim of sudden, currency swings. We’ve already seen well-known brands, such as EasyJet, experience a profit drop as a result of a slump in the pound, so it’s time for all companies to be making sure that they aren’t equally affected.

The state of play Since June, the pound has been moving according to general sentiment on the UK economic outlook outside of the EU. The main driver behind the devaluation of sterling has been the fear of a ‘hard’ Brexit, whereby UK companies would be deprived of their access to EU markets. In fact, the pound was the worst performing G10 currency last year, plunging approximately 20% against the dollar and the euro. Concern over the nature of Brexit has also overshadowed macroeconomic figures as investors were previously apprehensive as to whether the UK would experience a ‘soft’ or ‘hard’ Brexit. Until the specific terms of Brexit are clearer, the pound is likely to remain weak whilst experiencing spikes of volatility as the negotiations develop.

Only when the basics of the relationship between the UK and the EU start to be defined, will investors shift their focus back to macroeconomic indicators, and the Bank of England might begin to consider monetary tightening action which could result in some relief on the pound. Furthermore, we should bear in mind that currency markets move both ways and that the challenges in the euro area, such as elections in key member countries and Greek bailout negotiations, could trigger sharp movements in the euro too.

What next? With discussions underway, businesses that are exposed to FX rates absolutely need to be taking measures if they want to keep their bottom line steady. The pound is now relatively close to a 30-year low – this is a sweet spot for exporters, who are experiencing high demand for goods from overseas customers, but they’ll need to cover themselves against a GBP appreciation. Even still, importers need to be extremely vigilant and monitor the markets continuously so that they are able to operate at the most convenient of opportunities. In order for both exporters and importers to manage the FX risk they are exposed to, they first need to quantify it. This means measuring the volume of exposure and determining which percentage of the company’s profit margins depend on foreign currency – its likely more than you think. This then allows the enterprise to evaluate the price of hedging against the dangers of exposure.

Once this is identified, businesses must create a currency sensitivity scheme, which means scoping out the currencies that pose real danger for the company, and which do not. This exercise will help the risk team to define the company’s risk profile and decide key issues, such as the percentage of the exposure the company wishes to hedge, and the amount of risk they are able to assume in order to be able to profit from favourable market movements. Choosing the most appropriate hedging tools is also a crucial step – this will depend on the company’s unique needs. Managing each currency individually is a drain on the finance team’s time and resource and doesn’t allow for the all currencies to be managed as one entity, which is required to manage a payment flow. Automation is vital to efficiently manage currency risk and volatility in real time and avoid wasting valuable resource on incremental manual inputs. Brexit conversations should most definitely be on the radar of businesses with exposure to exchange rates. Whilst there will most certainly be volatility and uncertainty, this can be managed with an effective risk management strategy in place. Rather than panicking about the unexpected, organisations must set strong FX strategies now to ride the Brexit wave over the coming months, and even years.

In order for both exporters and importers to manage the FX risk they are exposed to, they first need to quantify it

NORTH AMERICA | FEATURE

Trading with the US: the key factors Many business people contemplating doing business in the US make a fatal lazy assumption. They think, because the UK and US share a language – more or less – and watch the same films, that there is a common culture and fewer barriers to doing business. All too often, this proves to be their undoing in the US marketplace. Allyson Stewart-Allen is a Californian who has been based in Europe for more than 25 years and is founder of the company International Marketing Partners. She is a marketing expert, brand internationalisation advisor and the author of Working with Americans. Of UK companies approaching the US market, she says: “They need to immerse themselves and make sure they don’t make the assumption that undermines so many – that the US is the UK with a different accent. I’m sorry to say that very often that’s their undoing. They make assumptions that the

Allyson Stewart-Allen

Elizabeth Ward

MARK LANE seeks expert opinion on how best to tackle exporting to, and doing business in, the US

language is the same, which it’s not, they make assumptions that there’s still British DNA left, which there’s not.’’ She has top tips for UK businesses trying to do business on the other side of the Atlantic. Remember, the clock is king: be on time for meetings and treat deadlines seriously. For Americans, neatness and attention to detail are important, so make sure you dress appropriately and, if necessary, ask what the dress code for the day is. She points out that Americans develop relationships through business, but the business comes first. However, that doesn’t mean that relationships aren’t important. You

should treat everyone – whatever their rank or age – as an equal and you shouldn’t be surprised if, after only a brief introduction, you are addressed by your first name. Don’t be fooled, however, into thinking that everything is informal. Americans use outside advisers as a regular part of their business lives, so, if lawyers or consultants are included in a meeting, don’t be offended or anxious. Nor should you be surprised if you are asked to describe your market entry plan, your training plan, your plan to increase revenue, or even where you plan to go on holiday. The assumption is always that you will have a plan. However, despite this emphasis on planning, Americans can often seem to make decisions on impulse and, in their rush to get things done, will decide quickly and worry about the consequences later. Stewart-Allen adds: “Americans are low context and want numbers. They don’t necessarily want the back story and the high context, they want the facts and they want to transact, so they’re in a hurry generally.’’ It’s also worth bearing in mind that the US is a big country with regional differences, and, of course, different sectors. Don’t approach them all in the same way. Dealing with a banker in New York is not the same as doing business with someone in the music industry in New Orleans. “The differences are stylistic. There aren’t profound differences in business culture but they are around style, so the formality of dress, maybe the speed and pace and speed of response. The North East is definitely faster than the South East in terms of business transactions,’’ says Stewart-Allen.

NORTH AMERICA | FEATURE

“Check your assumptions is the bottom line, check that what you sell and market in Britain and Europe is a template you can export wholesale. You need to understand what localisations you need to do for the US market.’’

of US law, particularly as it can be a good idea to set up a company over there. While a lot of contracts can be conducted under English law, setting up a company entails a need to abide by local legislation, certainly employment legislation.

Apart from questions of culture and style, there are practical and concrete elements of business that are different in the US and which anyone seeking to do business over there must take into account.

“One of the first things we tell clients is: if they are going to set up in the USA, they need to get legal advice from a US attorney,’’ says Ward.

Elizabeth Ward is the founder of Leeds and London-based intellectual property law firm, Virtuoso Legal and she has advised a number of clients who do business in the States. She warns that many Americans like to create legal obligations under US laws which are not necessarily in the interests of UK businesses. She says: “Contractually, try to make sure the jurisdiction clauses are covered by the laws of England and Wales, so that disputes are adjudicated over here.’’ But, in doing business in the States, it’s obviously impossible to avoid the demands

She also advises paying particular attention to intellectual property. “US markets are extremely keen on intellectual property, far more than they are over here and you will find a lot of people who you are going to do business with will ask much more searching questions about people’s trademarks, patents and design rights than they would over here. It’s much larger on their radar screen.’’ Be aware of local regulation in relation to areas such as safety and be aware that in the US they pay little regard to other countries’ standards but insist on compliance with their own, which can be significantly different.

Apart from questions of culture and style, there are practical and concrete elements of business that are different in the US and which anyone seeking to do business over there must take into account

For anyone exporting manufactured goods to the US, it is worth considering exporting the components and having them assembled over there. This not only makes people more inclined to buy goods ‘made in the USA’, but could also attract grants and other job creation incentives and mean reduced tariffs on imported components. A final piece of advice is to go for the US market wholeheartedly. The Americans are passionate and enthusiastic about business and expect the same from people they are dealing with. Allyson Stewart-Allen has seen too many businesses fail in the US through not committing. “They approach the US as an experiment, rather than as part of their business strategy with a proper budget and as a proper part of their trajectory, so they are tentative and try to manage the risk, rather than think about the upside and the fact that it’s going to succeed. So their mindset is not about success, it’s about managing failure.’’

NORTH AMERICA | FEATURE

TTIP: a complicated task MARK LANE checks on the progress of the proposed Transatlantic Trade and Investment Partnership Barack Obama had a number of ambitions for his presidency of the USA. Historians will argue over the extent to which he achieved these, but there is likely to be little debate over one – the Transatlantic Trade and Investment Partnership, or TTIP. He had hoped that this proposed trade agreement between the US and the EU, aimed at promoting trade and economic growth, would have been signed before he left office in January. But, not only did he depart the White House without a treaty, it was estimated that negotiations could take another three to four years. In fact, Obama would doubtless be delighted if, even in 2020 or 2021, a treaty was signed which he could point to as his legacy. But, it doesn’t look as though that is going to happen either, as his successor Donald Trump withdrew the US from TTIP within days of taking office. The most optimistic view on this was the European Commission’s: that the deal is ‘in the freezer’. Others think it’s dead in the water. It wasn’t meant to be like this. When negotiations began in 2013 there was a fair wind for such deals. The World Trade Organisation, WTO, had – inevitably – struggled to get a global free trade agreement among the world’s nearly 200 countries. But, in place of this, considerable progress has been made in forging bilateral, multinational and regional trade agreements.

Dominic Watkins

The EU is also currently working on trade agreements with China, India, NZ and Australia and other places.

emotive, but hugely detailed, were the thousands and different standards which must be harmonised.

This was the background to TTIP and these agreements provided a template for the negotiations.

“The negotiators are tasked with this balancing act to try to find a way of reaching an agreement but that doesn’t lower standards on either side, yet reduces barriers to trade and access to markets,’’ explains Watkins.

In the words of Dominic Watkins, head of law firm DWF’s Food Group: “These are useful comparators and reference points for anyone asking what TTIP might look like.’’ The goal is the removal of unnecessary barriers to trade, whether fiscal barriers such as import duties or taxation, or rules, requirements and other administrative burdens. However, the bruising effects of the global downturn and some of the perceived negative effects of globalisation prompted a growing scepticism about free trade in some quarters on both sides of the Atlantic. Opposition has been strong in Germany and has also been growing in France and interests in the US felt the strain of overseas competition. All this meant the negotiators had to be more aware of these domestic concerns and this, in turn, made agreement more difficult. It was already an immensely complicated task. The projected agreement had 24 chapters, dealing with areas such as: services, food, and technology. There were contentious questions such as trading in genetically modified products and, less

All of this has to be achieved across the differing political and electoral cycles of each of the European member states and the US, where the election result – coupled with Brexit – has thrown doubt on the future of multi-lateral trade deals. Even without a Trump victory, hurdles would have remained, as a deal would have to be ratified at EU member state level and by the US Congress. The prize was a big one. Watkins cites the example of nutrition labels on breakfast cereals where fundamentally the same information is provided in the US and Europe, but in different formats. Harmonising those regulations would lower costs and barriers to trade. Studies suggest that a simple removal of tariffs can bring a five per cent to 10 per cent increase in access to markets, but the removal of such administrative burdens can lead to a 40 per cent increase. This would have meant a significant economic stimulus for two continents.

The goal is the removal of unnecessary barriers to trade, whether fiscal barriers such as import duties or taxation, or rules, requirements and other administrative burdens

NORTHAMERICA AMERICA| |OVERVIEW FEATURE NORTH

The currency implications of exporting to the USA When exploring new markets overseas the currency aspect can work both against and for you. Successful business relationships rely on certainty and understanding so planning the currency aspect is vital for exporters to ensuring a healthy long-term relationship overseas. After the referendum, the pound was trading at a two and a half year low against the euro and a 31-year low against the US dollar and it has slipped further since. This will make it very costly for clients buying USD but make it very good for any UK-based exporters bringing back profits from the US. GBPUSD has moved 64 per cent in the last 10 years. Back in 2007 1 GBP bought over 2 USD, today 1 GBP buys 1.25 USD. Being on the wrong end of such currency fluctuations can prove very costly and highlights the importance to have plans in place.

The US dollar also supports the world’s largest economy – America – and so will rise and fall in accordance with estimations of how good or bad the US economy is faring

Termed a safe haven currency, investors seek to hold the US dollar in times of uncertainty. The US dollar acts as a safeguard against risk elsewhere because investors believe that whatever happens holding the US dollar is a safe bet against uncertainty elsewhere. The US dollar also supports the world’s largest economy – America – and so will rise and fall in accordance with estimations of how good or bad the US economy is faring. Understanding this doesn’t allow you to accurately predict its movements, but if you are making plans and tracking USD movements it is important to understand. Pricing in a foreign currency is a key component of managing any work or exporting overseas. Essentially there are two options pricing in the local currency, i.e. the currency local to where the business takes place (in this case USD) or pricing in your cost currency (GBP). Local pricing makes sense as it won’t complicate matters for your end customer but can leave you the exporter exposed if exchange rates change. If you have a profit margin of five per cent and the dollar weakens by seven per cent you have lost two per cent.

Jonathan Watson looks at the key currency considerations for any business or individual looking to do business in the United States

It will be you the exporter who bears the brunt of the cost or benefit from currency fluctuations. If you price your goods or services in sterling you are guaranteed a return to cover any costs in the UK but by putting the onus on the client to take the hit or benefit of any fluctuations could risk alienating or damaging relations. Each business, product and service will through dialogue and assessment of their own positions be able to work out what will work best. Ultimately in the majority of cases the end user will be buying in USD so the exporter will need a plan on repatriating the currency profits and ensuring any wild swings do not suddenly wipe out or annul all their hard work. When making important currency decisions it is vital to be aware of the various options you have to secure currency in advance to manage your risk that rates might move against you. A forward contract is a tool that allows you to fix an exchange rate for settlement in the future. So if you have priced the product or service you are exporting at current exchange rates but know you won’t be receiving payment for six months you can take out a contract to guarantee your exchange rate now. This means that you will know today exactly the profit you will make in the six months’ time. Pricing agreements and exchange rate clauses in contracts are key concerns to get right from the beginning. Coupled with the use of forward contracts to minimise any losses once the orders come in ensures you remove the risk from the market. Seeking certainty in what is ultimately an uncertain situation is the only way to provide a stable platform to successfully and without risk launch your exporting ventures in the US. Jonathan Watson is associate director and chief analyst at currencies.co.uk

NORTH AMERICA | FEATURE

Cuba: a complex market of potential Cuba continues to feature prominently in trade and investment discussions around the world. Michele Kalloo explores some characteristics of this enigmatic market Government as the major trading partner The first important reality to be faced by companies seeking market entry is that the Cuban government is their customer and not the private sector or the 12 million Cubans that live there. What this means is that unlike the case in capitalist markets; the identification of trading opportunities centres around the Cuban government’s economic priorities and not exclusively on what consumers desire. To achieve this the state has set up a complex procurement apparatus made up of several import and distribution/ retail companies such as TRD Caribe, CARACOL, PALCO, CIMEX or ITH, all authorised to import for specific sectors e.g. hotels, manufacturing etc. Additionally foreign companies must go through a lengthy registration process to become an authorised vendor to be able to participate in government tenders and trade with the state. Payment is another key element geared at achieving the state’s economic goals as requests are made for as much as 180-day payment terms.

Dual currency Another important market characteristic is the fact that Cuba operates a dual currency system issuing both the Cuban Peso or CUP and the Cuban Convertible Peso or CUC. The wide foreign exchange gap of 1 CUC=1 USD versus 1 CUC=26.5 CUP causes distortions in pricing, distribution, product accessibility and purchasing power for Cubans who earn their wages in CUP because most imported products sold in what are known as hard currency stores or on the black market are priced in CUC. However, CUC can only be accessed in exchange for foreign currency that is available to Cubans in disproportionate sums. In 2013 the government announced that it would move to a single currency. However, until this happens there will continue be distortions in the market.

Purchasing power 80 per cent of the workforce is employed by the state and are paid in CUP with a maximum wage ceiling equivalent to between USD20.00–25.00 per month, by the same token the state subsidises their housing, power, basic food staples and education. In contrast Cubans working in the tourist sector, Cubans who receive remittances, expats and new Cuban entrepreneurs that have emerged since the government started to promote microenterprise activity such as cafes, hairdressing etc represent the majority of the consumers with buying power due to their access to CUC.

Cuba will remain a desirable market but successfully entering and navigating it will require a long-term commitment to understanding the market ... and conducting market research to identify market opportunities and how to access them In fact in 2013 some $3.5bn United States dollars in remittances were sent by the over one million Cuban Americans living in the United States. However, in spite of this less than 20 per cent of the total population has the level of disposable income to fuel the widespread demand for discretionary items.

Market forces It is not advisable to approach the market based on a traditional ‘four P’s’ marketing-oriented approach because the government’s economic priorities, the existence of a dual currency system, limited purchasing power and a state controlled procurement apparatus are the main determinants of supply and demand. Advertising is banned in Cuba, the government sets prices and controls distribution channels and product characteristics are specified in tender documents. Cubans therefore have very little chance to develop brand loyalty or preferences for products. Cuba will remain a desirable market but successfully entering and navigating it will require a long-term commitment to understanding the market, wading through the bureaucracy and conducting market research to identify market opportunities and how to access them. Michele Kalloo is the director of the international business development division of MetrIQs Solutions Limited

PANAMA | FOREWORD

Gateway to the Americas HE Mr Daniel E. Fabrega Ambassador of Panama to the UK Panama is strategically located in the centre of the Americas, uniquely linking the Pacific and Atlantic Oceans through the famous Panama Canal. The capital is Panama City, whose metropolitan area is home to nearly half of the country’s population. For more than 500 years Panama has been a meeting point for civilisations, a melting pot of people, and a trading post. Its geographical position in the centre of the Western Hemisphere makes it a natural bridge for trade between the countries of the Americas and the rest of the world. Today, Panama’s robust economy and mature democracy, makes it one of the best Emerging Markets in which to do business. Over the past 10 years, Panama has been Latin America’s fastest growing economy – therefore, it has much to offer investors. Through the expansion of the Canal and Panama City’s international airport, together with the development of a new logistics centre, Panama is now seen as the region’s most dynamic hub, offering extensive transport and logistics infrastructure with the best connectivity. As a consequence, Panama continues to attract multinational companies and international organisations – more than 100 have now established their HQs in Panama.

Panama’s economy is primarily based on providing well-developed international services, accounting for 75 per cent of its GDP. This includes transit access through the Panama Canal, shipping and port services, banking, insurance, real estate, and transshipment of goods through Colón, home to the second largest Free Trade Zone in the world after Hong Kong. Fitch Ratings status for Panama has recently improved to BBB. Moody’s Investors Service also increased its rating to investment grade status to Baa2. Panama’s economy is expected to remain strong over the coming years with the Ministry of Finance and Economy forecasting an annual growth rate of six per cent over the next five years. Panama is Latin America’s leading recipient of Foreign Direct Investment (FDI) as a percentage of GDP. In 2014, total FDI was US$ 4.7bn, which represented nine per cent of the economy

Demographics With its open market, international approach, and full employment, Panama’s demographics are changing rapidly. Visitor numbers to Panama have doubled over the

past 10 years. While tourism is growing, an increasing number of foreigners are choosing to relocate and invest in Panama.

The Government Panama has endured a stable and healthy democracy for over 25 years. Consistently investing in new infrastructure, fast tracking pro-business laws and policies, the government has adopted a friendly approach towards foreign investment, with several incentive schemes depending on the sector and the commercial activity. Significant advances are also being made to enhance transparency and tackle corruption. PROINVEX is the government agency responsible for promoting investment in Panama. PROINVEX provides support and advice to investors in key strategic sectors as set out in the Government’s Strategic Plan. Currently, these sectors are: Transport, Logistics, Education, Healthcare, Energy and Infrastructure. As part the Ministry of Commerce and Industry, PROINVEX works as a one-stop shop where investors get all the necessary help while doing business in the country.

Why Panama? Since 2010, Panama has remained the second most competitive economy in Latin America after Chile, according to the World Economic Forum’s Global Competitiveness Index. Panama comes out top on almost all regional comparisons and stages of development.

Panama’s economy is expected to remain strong over the coming years with the Ministry of Finance and Economy forecasting an annual growth rate of six per cent over the next five years

PANAMA | COUNTRY PROFILE

PANAMA

KEY FACTS Official name: Republic of Panama Capital: Panama City Area: 75,517 sq km Population: 3,657,024 Main language: Spanish, English GDP (current): $52.13bn (2015 est.) GDP growth: 5.8% (2015 est.) GDP per capita: $21,800 (2015 est.) Inflation: 0.1% (2015 est.) Labour force: 1.587 million Unemployment: 4.5% (2015 est.) Monetary Unit: 1 balboa/US dollar = 100 cents

Panama’s newly widened canal opened for larger cargo ships last summer after the testing of new locks following the nine-year construction work.

Growth will be bolstered by the Panama Canal expansion project that began in 2007 and is estimated to be completed by 2016 at a cost of $5.3bn – about 10–15% of current GDP

Work to broaden the century-old canal – originally started by the French and then built by the US – began in 2007. It was originally planned that it should have been completed two years ago, but the project was plagued by cost overruns, labour disputes and lawsuits. The original budget of US$5.25bn is believed to have been exceeded by US$3.4bn. Faults were also found in one of the widened locks last year, requiring further testing.

GDP by sector

% of total

Agriculture �� 3% Industry ��20% Services ��77%

Main industries Construction, brewing, cement and other construction materials, sugar milling.

Main exports Bananas, fish, shrimp, petroleum products.

Main imports Capital goods, foodstuffs, consumer goods, chemicals.

With the inauguration, the 50-mile canal will accommodate a much larger class of cargo ship known as neo-Panamax, or New Panamax, which carries nearly three times as many containers as the Panamax ships currently sent through the passage. That will mean the canal’s annual income from shipping fees will also triple from the current US$1bn. However, weather conditions earlier in the year have reduced rainfall over the watershed area that sustains canal operations and this drought has resulted in a fresh-water draft restriction of 12.8 metres and this would translate to a seawater draft of 12.48 meters that neo-Panamax vessels would probably have to observe.

Any draft restriction on the neo-Panama Canal and low world oil prices would leave ship operators with the choice of sailing a partially laden neo-Panamax ship via the Panama Canal or sail a fully-laden neoPanamax ship from Asian ports to American Atlantic ports via the Suez Canal or via Cape Town.

Overview Panama’s diversified economy offers a wide array of investment opportunities throughout all of its productive sectors. With its dollarbased economy, lack of hurricanes or earthquakes, and its reputation for being the safest country in Latin America, Panama is the perfect destination for UK exporters and investors. Panama, at the crossroads of North and South America and the Atlantic and Pacific oceans, is one of the most strategically important countries in the world. It has the largest rainforest in the western hemisphere outside the Amazon and its jungle is home to an abundance of tropical plants, animals and birds. However, it is for its canal connecting the Atlantic and Pacific oceans that Panama is famous. Every year hundreds of thousands of people make the eight-hour journey through the waterway and it generates a proportion of the country’s GDP. Offshore finance, manufacturing and a shipping registry generate jobs and tax revenues. Panama’s services-based economy

PANAMA | COUNTRY PROFILE

also benefits from the Colón free-trade zone, home to some 2,000 companies and the second largest in the world. A free trade agreement with the US was negotiated in 2006 but its implementation was held up pending approval by the US Congress, which was not granted until 2011.

Economy Panama’s dollar-based economy rests primarily on a well-developed services sector that accounts for more than three-quarters of GDP. Services include operating the Panama Canal, logistics, banking, the Colon Free Trade Zone, insurance, container ports, flagship registry, and tourism. Panama’s transportation and logistics services sectors, along with infrastructure development projects, have boosted economic growth; however, public debt surpassed $32bn in 2015 because of excessive government spending and public works projects. The US-Panama Trade Promotion Agreement was approved by Congress and signed into law in October 2011, and entered into force in October 2012. Growth will be bolstered by the Panama Canal expansion project that began in 2007 and is estimated to be completed by 2016 at a cost of $5.3bn – about 10–15% of current GDP. The expansion project will more than double the Canal’s capacity, enabling it to accommodate ships that are too large to traverse the existing canal. The US and China are the top users of the Canal. In 2014, Panama completed a metro system in Panama City, valued at $1.2bn.

IN FOCUS: THE PANAMA CANAL The Panama Canal is an artificial 48-mile (77 km) waterway in Panama that connects the Atlantic Ocean with the Pacific Ocean. The canal cuts across the Isthmus of Panama and is a key conduit for international maritime trade. There are locks at each end to lift ships up to Gatun Lake, an artificial lake created to reduce the amount of excavation work required for the canal, 26 metres (85 ft) above sea level, and then lower the ships at the other end. The original locks are 33.5 metres (110 ft) wide. A third, wider lane of locks was constructed between September 2007 and May 2016. The expanded canal began commercial operation on June 26, 2016. The new locks allow transit of larger, Post-Panamax ships, capable of handling more cargo. France began work on the canal in 1881 but stopped due to engineering problems and a high worker mortality

and surrounding Panama Canal Zone until the 1977 Torrijos–Carter Treaties provided for handover to Panama. After a period of joint American–Panamanian

The canal is currently handling more vessel traffic than had ever been envisioned by its builders

control, in 1999 the canal was taken over by the Panamanian government and is now managed and operated by the government-owned Panama Canal Authority. Annual traffic has risen from about 1,000 ships in 1914, when the canal opened, to 14,702 vessels in 2008, for a total of 333.7 million Panama Canal/Universal Measurement System (PC/UMS) tons.

Strong economic performance has not translated into broadly-shared prosperity, as Panama has the second worst income distribution in Latin America. About onefourth of the population lives in poverty; however, from 2006 to 2012 poverty was reduced by 10 percentage points.

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk UKTI Panama British Embassy Commercial Section 4th floor Humboldt Tower 53rd Street Marbella Panama City P. O. Box 0816-07946 E: ariel.perez@fco.gov.uk T: +507 297 6580

rate. The United States took over the project in 1904 and opened the canal on August 15, 1914. One of the largest and most difficult engineering projects ever undertaken, the Panama Canal shortcut greatly reduced the time for ships to travel between the Atlantic and Pacific Oceans, enabling them to avoid the lengthy, hazardous Cape Horn route around the southernmost tip of South America via the Drake Passage or Strait of Magellan. Colombia, France, and later the United States controlled the territory surrounding the canal during construction. The US continued to control the canal

By 2012, more than 815,000 vessels had passed through the canal. It takes six to eight hours to pass through the Panama Canal. The American Society of Civil Engineers has called the Panama Canal one of the seven wonders of the modern world. The canal is currently handling more vessel traffic than had ever been envisioned by its builders. In 1934 it was estimated that the maximum capacity of the canal would be around 80 million tons per year; canal traffic in 2015 reached 340.8 million tons of shipping. Source: Wikipedia

PANAMA | COUNTRY PROFILE

SELECTED OPPORTUNITIES Infrastructure

Power and renewable energy

Education

Panama is halfway through implementing a major infrastructure strategy. The government recently announced the plan for an estimated public investment of USD 20 billion from 2015 to 2019. 55 per cent of the investment will be for social infrastructure.

Panama was recently ranked third in a study as one of the most attractive countries in which to invest in clean energy.

The government has incentivised learning English through training programmes abroad in English speaking countries.

There are projects underway in: • solar • wind • clean coal • LNG • hydro

The ‘Panama Bilingue’ project started in 2015, where teachers and pupils will be trained to learn English. This has created opportunities for British learning and higher education institutions in language training, curricula and testing.

Electricity

Technical training schools are also being developed to increase the skills of Panama’s workforce.

There are significant rail infrastructure projects underway. The budget for the second and third lines of the metro system is USD 6.4 billion. There are other projects which offer opportunities for UK companies in: • housing (a project for 5000 new houses) • roads and urban planning • technical and vocational schools • hospitals • Liquefied Natural Gas (LNG) terminal • port expansion to support the Panama Canal expansion

Panama is looking to become an energy hub for the Central America region. Panama recently completed the Central American electricity connection, and is pursuing a distribution line from Colombia and Panama’s planned power plants. In August 2012, a new law was established to promote the construction and operation of power plants based on natural gas for the provision of electricity. There are opportunities for UK companies in technologies to diversify energy sources for future electricity generation, transmission and distribution.

Ports and maritime The logistics sector accounts for 35 per cent of GDP. This includes maritime services around extensive port infrastructure and related logistics and distribution services. The Panama Canal and its ports infrastructure is collectively the largest in Latin America. Further expansion of the Canal will be needed to meet the future demand. This will bring with it many opportunities for UK companies.

Making a positive difference in a changing world

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About The Edron Academy, the leading British-Mexican school in Mexico City By Mr Eamonn Mullally, Headteacher The Edron Academy, Mexico City is proud to be the only school in Mexico with full accreditation to The Council of British International Schools, COBIS, following a successful British schools overseas inspection in September 2014. Now entering its fifty fourth year, the school was founded by a Welshman, Edward J. Foulkes, and a Canadian, Ronald Stech, hence the name Edron! The founding principles of the school were to create a place for the education of all students free from the stresses and brutality that Edward J. Foulkes had seen in schools of his youth. Today Edron is proud to carry on that tradition and with time we have become known as a values driven, community based school with happy students who achieve excellent results and are well placed to enter the worldâ&#x20AC;&#x2122;s best universities and become the future leaders of industry, the arts and sciences.

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We are also happy to note that we have second and third generation students studying with us as local families appreciate our holistic approach to education with the children at the heart of everything that we do. The school offers a broad and balanced curriculum, where outstanding scientists also thrive in the creative arts and where talented musicians and actors thrive at mathematics and economics and business. All supported by an extra-curricular programme that allows students to participate in sports, the arts and debate to name but a few. The school follows both the English and Mexican curricular from Early Years, around two years of age, through to the end of Year Eleven, sixteen year olds, when IGCSEs are taken. For the remaining two years of education students study for the International Baccalaureate IB Diploma with the majority being awarded the bilingual diploma. Both IGCSE and IB Diploma pass rates have been

consistently above the world average for many years and continue to show progression year on year. Excellent educational results can only be achieved with the guidance and tutelage of excellent professionals. The academic staff at Edron is committed to life-long learning and seeking the best possible learning opportunities for the students. There is a good balance between both local and internationally trained teachers, many holding masterâ&#x20AC;&#x2122;s degrees in their area of specialism or focusing on successful leadership and management. The school actively promotes further studies for all staff and this creates an environment where everybody is a learner. New teachers to our school often talk about how Edron students are the best that they have ever taught; engaged learners who are bright, respectful with a willingness to question, explore and be the best that they can be.

MEXICO | FOREWORD

A strong bilateral relationship Teresa de Lay Director General, British Chamber of Commerce in Mexico

The UK has enjoyed a strong bilateral relationship with Mexico for centuries. The UK was the first European great power to recognise Mexico’s sovereignty following its War of Independence in 1810. Just 15 years later 130 Cornish miners sailed to Mexico to work the main Hidalgo mines bringing with them the latest technology and British culture. Today, British technology, expertise and culture is still highly valuable in Mexico and the two countries have a strong alliance. Last year was the highly successful Year of the UK in Mexico (and vice versa) – putting British products and culture into the spotlight. Mexico is a great option for British exporters looking to enter the Latin American market. Mexico is an open economy with more free trade agreements than any other country in the world and was the first Latin American country to join the OECD.

Since the famous Tequila Crisis of 1994 the autonomous Bank of Mexico has effectively controlled interest rates and currently holds cash reserves of US$177.3 billion as of 17th June 2016. Strong monetary policy has successfully kept the country’s finances under control with stable inflation and investor confidence – Mexico is the tenth worldwide recipient of foreign direct investment. Mexico is opening up more still, thanks to the current administration’s reform agenda that is unlocking competition in the energy and telecommunications sectors. These changes are allowing foreign private investment to attract the latest technologies in these traditionally monopolistic industries. In terms of manufacturing, Mexico is the fourth largest exporter in the world thanks to a competitive and increasingly sophisticated workforce as well as its proximity to the United States and openness to trade. These factors allow Mexico to produce and export more goods and services than any other economy in Latin America.

there is optimism regarding the potential of Public-Private Partnerships (PPPs) in the development of such projects, as well as capital markets. Pension funds and new investment vehicles could play a crucial role in the current scenario too. The British government is now placing a high priority on trade with Mexico. The country was Lord Price’s very first visit as Minister of State for Trade and Investment to attend a meeting of the Senior Business Leaders Group, established during Mexican President Enrique Peña Nieto’s visit to the UK a year earlier.

British companies are increasingly taking notice of this important market

Mexicans value the quality of British goods and services and total household spend is higher than the UK and the highest in Latin America. However, it is important to remember that Mexico has the worst income equality out of all OECD countries and prices do matter.

British companies are increasingly taking notice of this important market. The British Chamber of Commerce established the British Business Centre just over two years ago and has since helped hundreds of British exporters enter the Mexican market and increase their presence. The Chamber has ten active business sector groups that cover energy, power generation, finance and many more. These groups offer a great opportunity for networking, sharing best practices and forming a united voice to address issues at the highest levels.

For the period 2014 to 2018, the Mexican presidency has established a National Infrastructure Programme to address ailing utilities, healthcare and communications infrastructure with an estimated budget of 7.7 billion pesos (approximately 307 GBP). While the fall in the oil price and other external factors may affect this budget,

Since 2015, we have supported British companies winning millions of pounds of business in security, power generation, oil and gas, amongst others. We can expect to see more business wins in these areas over the next few years in these sectors as well as infrastructure, healthcare, infrastructure, finance and education.

Bilateral trade between the UK is worth $3.8 billion USD and exports from the UK have increased year on year for the past two decades (with the exception of 2009) and there is potential for much more.

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MEXICO | COUNTRY PROFILE

Mexico and the European Union have launched talks to update a free trade agreement that, it is claimed, has already led to a rise of more than 250 per cent in trade in goods.

MEXICO

It is hoped to broaden the pact that came into effect in 2000 and dismantle additional trade barriers to benefit Mexico’s agroindustrial sector and EU financial and service industries.

KEY FACTS

The first round of formal negotiations was scheduled for mid-June.

Official name: United Mexican States Capital: Mexico City

Mexico was the first country in Latin America to sign a free trade agreement with the EU.

Area: 1.96 million sq km Population: 121,736,809 Main language: Spanish GDP (current): $1.144 trillion (2015 est.) GDP growth: 2.5% (2013 est.) GDP per capita: $15,600 (2015 est.) Inflation: 4% (2013 est.) Labour force: 52.81 million (2015 est.) Unemployment: 4.5% (2015 est.) Monetary Unit: 1 peso = 100 centavos

Major oil multinationals are lining up for Phase 4 of the Round 1 bidding contest for exploration and drilling contracts in the Gulf of Mexico, despite low oil prices. In early December 10 deep-water blocks are up for auction in the first round, the fourth phase of Mexico’s oil exploration and drilling bidding contest. Mexican officials are pointing out that as exploration in deep water can take as long as eight years and production up to 10 years the current low oil prices do not have a big effect on such projects. Phase 4 will award access to the most lucrative and highest-yielding exploration,

GDP by sector

development and production opportunities with reserves worth an estimated US$10bn. Round 1 is expected to attract around US$7bn in investment in Mexico, with expectations boosted by the interest in the auction for Phase 3 held last December for onshore contracts, in which 80 companies pre-qualified for the contest, with 51 in total participating.

Overview Mexico is a nation where affluence, poverty, natural splendour and urban blight rub shoulders. Although it boasts staggering growth and arguably the richest man in the world, Carlos Slim, it still has swathes of deprivation. The country’s politics were dominated for 70 years by the Institutional Revolutionary Party, or PRI. But elections in 1997 saw a resurgent opposition break what was in effect a one-party system with a democratic facade. Mexico has the second-largest economy in Latin America and is a major oil producer and exporter. Though production has fallen in the last few years, about one-third of government revenue still comes from the industry. Much of the crude is bought by the US.

% of total

Agriculture ��3.5% Industry ��34.2% Services ��62.4%

Main industries Food and beverages, autos, tobacco, chemicals, iron and steel, petroleum, mining, textiles, clothing, motor vehicles, consumer durables, tourism

Main exports Manufactured goods, oil and oil products, silver, fruits, vegetables, coffee, cotton

Main imports Metalworking machines, steel mill products, agricultural machinery, electrical equipment, car parts for assembly, repair parts for motor vehicles, aircraft, and aircraft parts

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Mexico has the second-largest economy in Latin America and is a major oil producer and exporter. Though production has fallen in the last few years, about one-third of government revenue still comes from the industry

MEXICO | COUNTRY PROFILE

In recent decades many poor Mexicans have sought to cross the 3,000km border with the US in search of a job. At one point more than a million were being arrested every year, but since 2007 there appears to have been a dramatic fall in numbers, mainly attributed to changing demographics in Mexico itself.

Economy Mexico’s $2.2 trillion economy has become increasingly oriented toward manufacturing in the 22 years since the North American Free Trade Agreement (NAFTA) entered into force. Per capita income is roughly one-third that of the US; income distribution remains highly unequal. Mexico has become the US’ second-largest export market and third-largest source of imports. In 2014, two-way trade in goods and services exceeded $590bn. Mexico has free trade agreements with 46 countries, putting more than 90 per cent of trade under free trade agreements. In 2012, Mexico formally joined the Trans-Pacific Partnership negotiations and formed the Pacific Alliance with Peru, Colombia, and Chile. Mexico’s current government, led by President Enrique PENA NIETO, emphasised economic reforms during its first two years in office, passing and implementing sweeping education, energy, financial, fiscal, and telecommunications reform legislation, among others, with the long-term aim to improve competitiveness and economic growth across the Mexican economy. Mexico began holding public auctions of exploration and development rights to select oil and gas resources in 2015 as a part of reforms that allow for private investment in the oil, gas, and electricity sectors. The second and third auctions demonstrated the capacity for the Mexican Government to adapt and improve the terms of the contracts to garner sufficient interest from investors amid low oil prices.

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk British Business Mexico E: laura.atkinson@britishbusiness.mx T: +525552 801 275 W: www.britishbusiness.mx British Chamber of Commerce in Mexico E: tdelay@britchamexico.com T: +52 55 5260901 W: www.britchamexico.com

SELECTED OPPORTUNITIES Advanced engineering Mexico is a manufacturing powerhouse. It has huge annual growth in its vehicle and aerospace manufacturing sectors. Mexico is responsible for more than 60% of Latin America’s manufacturing exports and benefits hugely from its network of free trade agreements especially with the USA and Canada (NAFTA). There are opportunities for British suppliers of: • manufacturing technologies (machinery, tooling, instrumentation and control) • automotive components • aerospace components • specialised alloys • high precision machining • castings, forgings and plastic injection mouldings • high-tech engineering and design services

Healthcare Total healthcare spend in 2014 was USD 90 billion. It’s growing at more than 8% year on year. Healthcare spend is at around 6.5% of GDP and is split 50/50 between the public and private sector. By 2017 it’s expected to reach USD 103.4 billion. Mexico has an increasing elderly population. Government initiatives for the prevention and management of chronic diseases are being implemented. There is an improved and updated regulatory environment. Some of the areas of opportunity for UK companies are: • over the counter drugs

• generic and patented drugs • healthcare equipment

Infrastructure Mexico spends about five per cent of GDP on infrastructure. It ranks 57 out of 140 countries in terms of infrastructure competitiveness according to the Global Competitiveness Report for 2015 to 2016. A National Infrastructure Plan (NIP) has been set up which will invest £65 billion of public and private funding in: • construction and modernisation of highways • supplying new passenger trains • expansion of the port of Veracruz • airport improvements The new Mexico City international airport, worth USD 13 billion, is Mexico’s largest infrastructure project to date. It’s expected that the Mexico City Airports Group will launch 40 public tenders in 2016. There are opportunities in: • alternative financing schemes such as Public Private Partnerships (PPPs) • project and cost management • master planning • feasibility and demand studies • structural design and engineering • architectural design • cargo handling services • security, design and implementation of green/sustainable technologies • specialised tier 2/tier 3 services and equipment

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GCM AND Air & Maritime (GCMAM) is a full service logistic company that provides the logistical support and customs brokerage services to organisations involved in the import, export and general trade in commodities within the region and throughout the globe. With a core team of brokers ,shippers and customs clerks boasting over a century of combined experience, an established presence in the local and regional markets, combined with a growing number of progressive partnerships across governmental and trade-support institutions, we provide the support that your organisation needs to trade locally and internationally - whether its importing containerised cargo from China, moving sensitive equipment from Europe or shipping fragile merchandise to the US. Our logistic services include haulage of containers, oversized and break-bulk cargo both inbound to and outbound to and from the major and minor ports including Point Lisas, Port of Spain and Piarco to all destinations in Trinidad and Tobago.

GCMAM Approach Our approach to the provision of this service serves to realize real rewards for the client organisation – real time. We deliver: • Experienced Representation: we boast of senior customer service representatives with experience and qualifications to enable effective and efficient service delivery at every step of the process. • Global Networks: to ensure a seamless flow of cargo and optimal efficiency when you need it most. 106

• Progressive Partnerships: with governmental and trade-support organisations that work to your benefit – on time, every time.

and are designed specifically for exports), and include Imports of Free-Zone items and Export of commodities to destination markets.

• Cost-Effectiveness: to save you time and money – which could be better utilised in other dimensions of your business and operations.

Transportation Solutions: We provide transportation for items of any size, weight or substance, including:

Our Major Services include Brokerage Services: Preparation and handling of all Customs documentation for various types of imports and exports and the processing and clearing Shipments through Customs and Excise. Shipping Services: We provide and support maritime logistic services catering to all types and classes of vessels entering or calling at ports in Trinidad and Tobago requiring customs brokerage, dry docking, repairs, port agency and husbandry and other maritime service needs.

• Arranging transport of goods from Port of Entry to job sites, as directed • ‘Break bulk’ cargo • Full Container Load (FCL) ‘Containerized’ cargo • ‘Less than container–load’ (LCL) cargo • ‘Hot–shot’ transport (courier service) of small packages and items • Provision of local transportation services on an as-needed basis • Provision of courier relief support services (we can provide drivers and/or transport as-needed)

Freight Services: Ocean and Air Freight Forwarding (door to door) GCM’s Ocean and Air Freight Forwarding (door to door) services includes prompt freight quotations, booking, documentation, scheduling, automated tracking and tracing, customs clearance, delivery door to door and single service invoicing for entire services provided.

Give us a call or send us a note and we will be happy to further discuss your needs.

Free Zone Services: within areas designated by order of the Ministry of Trade & Industry, we develop support and administer the trans-shipment of commodities originating from, or being shipped to Free Zones. Projects span areas of manufacture and/ or assembly and international trading, (which can be accommodated without the payment of government duties and taxes

GCM And Air & Maritime Customs Brokerage Co. Ltd. Lot#12, Exchange Lots #2, Couva Trinidad, West Indies. Tel: (868) 679-3291/7807 Fax: (868) 679-1651 Email: sreginald@gcmam.com www.gcmam.com

TRINIDAD & TOBAGO | FOREWORD

Twin island potential Tim Stew mbe British High Commissioner, Trinidad & Tobago

I am delighted to have been invited to contribute to this issue of Global Trader. Now more than ever, creating the right environment for British business is a core part of the British High Commission’s work. Trinidad and Tobago is of course the Caribbean’s energy giant. The largest exporter of ammonia in the world, the second largest exporter of methanol and the sixth largest LNG exporter. With a GDP per capita of US$17,935 – one of the highest in Latin America and the Caribbean – this twin-island Republic provides access to over one billion nearshore customers through comprehensive trade agreements. So you’ll understand why the High Commission’s UK Trade and Investment Team is pursuing commercial opportunities here with so much energy.

Economic climate Positioned as the Gateway to the Americas, Trinidad and Tobago has enjoyed a stable, growing economy. With oil and gas earnings accounting for 40 per cent of revenue, Trinidad and Tobago has inevitably been rocked by low energy prices. There has been a rise in the country’s debt to GDP ratio and the predicted 80 per cent reduction in revenue brings with it a growth projection of -2.7 per cent for 2016. Despite these challenges, the country has a stable political system and financial buffers in its sovereign fund. The country also has a strong manufacturing sector and a small but expanding eco-tourism sector.

Political At the British High Commission, we have established a close working relationship with the government elected in September 2015 across a range of political interests. In particular we have focused this year on supporting action against corruption, the cancer at the heart of many of the world’s problems. At the Anti-Corruption Summit in London in May 2016, Trinidad and Tobago’s Prime Minister Dr. Keith Rowley made clear his government’s determination to tackle corruption. We have also stepped up our work in recent months on another issue which affects British and Trinbagonian interests, partnering with the government to get to the heart of the weaknesses in Trinidad and Tobago’s criminal justice system. We share the view that reducing serious crime in the country can only help encourage a thriving business environment.

Business climate Following the fall in global energy prices, Dr Rowley’s government has prioritised work to create an enabling business environment through a number of investment projects. There are challenges. In 2016, the country scored 88 out of 189 countries in the World

With a GDP per capita of US$17,935 – one of the highest in Latin America and the Caribbean – this twin-island Republic provides access to over one billion near-shore customers through comprehensive trade agreements

Bank “Doing Business” Rankings, failing three places compared to 2015. A key issue has been the relative inefficiency of port operations. The government is addressing this with a newly implemented Single Electronic Window. This project creates a single platform to synchronise logistical services and information across the value chain for goods originating from or destined for Trinidad and Tobago. Results will no doubt take time, but it’s an important step to support the way business is done and to increase the volume of trade.

Trade We see plenty of export potential to these twin islands. The High Commission’s UK Trade & Investment team is pursuing commercial opportunities focused on four priority sectors: Oil and Gas, Security and Defence, Healthcare and Education. While we can’t predict the future, the potential for British companies is obvious, whether from the nation’s first venture into deepwater energy exploration, a revamp of the country’s national security architecture, or the opportunities to widen tertiary education partnerships and meet healthcare procurement needs. British companies are welcomed and find that business is made easier by a familiar legal system and a well-educated workforce. It also helps that our two countries share a double-taxation agreement. To learn more about exporting to Trinidad and Tobago and how it can offer you access to other regional markets, please get in touch with one of our experienced trade development professionals at commercialenquiries.ptofs@fco.gov.uk today. 107

TRINIDAD & TOBAGO | COUNTRY PROFILE

Trinidad and Tobago businesses have expressed confidence in a US$50m revolving fund which will be used by Venezuela to pay for basic food items and manufactured goods.

TRINIDAD & TOBAGO

KEY FACTS Official name: Republic of Trinidad and Tobago Capital: Port of Spain Area: 5,128 sq km Population: 1,222,363 Main language: English GDP (current): $24.55 billion (2015 est.) GDP growth: -1.8% (2015 est.) GDP per capita: $32,600 (2015 est.) Inflation: 5.4% (2013 est.) Labour force: 626,400 (2015 est.) Unemployment: 4.7% (2015 est.) Monetary Unit: 1 Trinidad & Tobago dollar = 100 cents

The Trinidad and Tobago Chamber of Industry and Commerce said it was confident any agreement the government had entered into would protect the country’s manufacturers. However, while the Trinidad and Tobago Manufacturers’ Association said it welcomed the deal, it expressed concerns about Venezuela’s ability to pay for goods on time and wanted the government to act as guarantor. Many Trinidad and Tobago manufacturers are currently operating with spare capacity and would welcome access to the Venezuelan market. The US$50m fund, which was announced during a visit to Trinidad and Tobago by Venezuelan President Nicolás Maduro, would see items such as chicken, butter, ketchup, rice and black beans being exported by local manufacturers to the South American nation. large reserves of oil and gas, the exploitation of which dominates its economy. Inhabited mostly by people of African and Indian descent, the two-island state enjoys a per capita income well above the average for Latin America. Natural gas – much of it exported to the US – is expected to overtake oil as its main source of revenue.

GDP by sector

% of total

Agriculture �� 0.5% Industry ��14.6% Services ��84.9%

Main industries Petroleum and petroleum products, liquefied natural gas (LNG), methanol, ammonia, urea, steel products, beverages, food processing, cement, cotton textiles

Main exports Petroleum and petroleum products, liquefied natural gas, methanol, ammonia, urea, steel products, beverages, cereal and cereal products, sugar, cocoa, coffee, citrus fruit, vegetables, flowers

Main imports Mineral fuels, lubricants, machinery, transportation equipment, manufactured goods, food, chemicals, live animals

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Meanwhile, oil-rich Trinidad and Tobago is also poised to help with the development of Ghana’s hydrocarbon industry. Prime Minister Dr Keith Rowley said his country was excited to share with Ghana the benefits of its long experience in the oil and gas industry and wanted to offer support in pipeline development, gas processing, electricity generation, and aluminium production. It could also lend the benefits of its expertise in negotiating with multi-national oil giants. Ghana’s premier gas infrastructure development in its Western Region was the result of a multi-national project undertaken by 10 major international companies from at least eight countries.

Overview Trinidad and Tobago is one of the wealthiest countries in the Caribbean, thanks to its

Dependence on oil has made the republic a hostage to world crude prices, whose fall during the 1980s and early 1990s led to the build-up of a large foreign debt, widespread unemployment and labour unrest. As with other nations in the region, Trinidad and Tobago – a major trans-shipment point for cocaine – has become ridden with drug and gang-related violence. This has fuelled a high murder rate and much of the corruption that is reputedly endemic in the police. It also threatens the tourism industry. In response, the government reintroduced capital punishment in 1999, despite strong international pressure not to do so.

Many Trinidad and Tobago manufacturers are currently operating with spare capacity and would welcome access to the Venezuelan market

TRINIDAD & TOBAGO | COUNTRY PROFILE

Trinidad and Tobago hosts the Caribbean Court of Justice, a regional supreme court which aims to replace Britain’s Privy Council as a final court of appeal. The council had been seen as an obstacle to the speedy implementation of death sentences.

Economy Trinidad and Tobago attracts considerable foreign direct investment, particularly in energy, and has one of the highest per capita incomes in Latin America and the Caribbean. Trinidad and Tobago is the leading Caribbean producer of oil and gas, and its economy is heavily dependent upon these resources. It also supplies manufactured goods, notably food products and beverages, as well as cement to the Caribbean region. Oil and gas

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk UKTI Trinidad & Tobago British High Commission 19 St Clair Avenue St Clair Port of Spain, Trinidad Web: http://ukintt.fco.gov.uk/en T: +1 868 350 0444

account for about 40 per cent of GDP and 80 per cent of exports but only five per cent of employment. Growth has been fueled by investments in liquefied natural gas, petrochemicals, and steel with additional upstream and downstream investment planned. Oil production has declined over the last decade as the country focused the majority of its efforts on natural gas. Economic growth between 2000 and 2007 averaged slightly over eight per cent per year, significantly above the regional average of about 3.7 per cent for that same period; however, GDP

slowed down since then and contracted during 2009–12 due to depressed natural gas prices and changing markets. The current administration has been working to arrest this decline by opening bid rounds and providing fiscal incentives for investments in onshore and deep water acreage to boost oil reserves and production.

Growth has been fueled by investments in liquefied natural gas, petrochemicals, and steel

SELECTED OPPORTUNITIES Education For the 2014/15 fiscal year, education was again identified as a primary sector for development. A large budget has been allocated to this sector. This will generate opportunities for UK companies in: • the construction of educational institutions • provision of furniture and equipment • preventative maintenance and repairs • technology training • public sector reform and training

Energy Trinidad and Tobago has sustainable proven energy reserves of petroleum and natural gas. It has a heavy industry of iron, steel, methanol and nitrogenous fertilisers. Trinidad and Tobago has 11 ammonia plants and seven methanol plants and is the world’s first and second largest exporter of each respectively. It is also the sixth largest producer of Liquefied Natural Gas (LNG) in the world. It has well-established international energy

companies operating from its shores, with UK upstream operators leasing the largest acreage under exploration and production. The government is focused on actively increasing the nation’s natural gas output and is encouraging new exploration activity, both onshore and offshore. Several new fiscal incentives were introduced in 2013 in this regard. There are opportunities for UK companies in: • offshore deep-water and onshore exploration • specialist drilling services • drilling equipment • marine inspection and diving vessels • maintenance, integrity and reliability • sector specific training

Infrastructure Infrastructure in Trinidad and Tobago is a very competitive sector. However, there are opportunities for UK companies in several areas including: • a major bridge rehabilitation project • development of port facilities

• water and wastewater treatment plant refurbishments • drilling of water production wells • pipe-laying projects • Public Private sector Partnership projects (PPP)

Security Improving law enforcement, public safety and citizen security is a priority for the government. Trinidad and Tobago’s major security organisations are in need of: • • • • • • • • • • • •

vehicles furniture civil infrastructure and equipment consultancy and training services cell phone jammers uniforms Mobile Adhoc Networking (MAN) technology body-worn and CCTV cameras electronic identification parades automated digital interview recorders GPS3 and GIS4 Geofencing

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UNITED STATES | COUNTRY PROFILE

UNITED STATES

KEY FACTS Official name: United States of America Capital: Washington, D.C. Area: 9,833,517 sq km Population: 321,368,864 Main language: English GDP (current): $17.95trn (2015 est.) GDP growth: 2.4% (2015 est.) GNI per capita: $55,800 (2015 est.) Inflation: 0.1% (2015 est.) Labour force: 156.4m million (2015 est.) Unemployment: 5.2% (2015 est.)

One of newly inaugurated President Donald Trump’s first executive actions was to sign an order to dramatically reduce federal regulations, but the policy will not apply to most of the financial reform rules introduced by the Obama administration.

Somalia, Sudan, Syria and Yemen from travelling to America, which was condemned by several of the world’s leading businesses, including top technology companies with Amazon and Microsoft mounting legal challenges.

The executive action requires that agencies cut two existing regulations for every new rule introduced and it will set an annual cap on the cost of new regulations.

Starbucks said it would hire 10,000 refugees over the next five years in response to Mr Trump’s executive order and also Goldman Sachs expressed its disapproval.

For the rest of fiscal 2017, the cap will require that the cost of any additional regulations be completely offset by undoing existing rules.

Economy

But, the move does not cover independent agencies responsible for many of the rules required by the 2010 Dodd-Frank Wall Street reform law, including the Securities and Exchange Commission and the Commodity Futures Trading Commission. It also will not apply to rules mandated by statutes. Certain categories of regulations will be exempt from this new policy, including those dealing with the military and national security.

Monetary Unit: US Dollar

Consumer groups and environmentalists criticised the order, arguing that it would remove important protections for the public. An even more controversial order of President Trump’s, however, was that which banned people from Iran, Iraq, Libya,

GDP by sector

The US has the most technologically powerful economy in the world, with a per capita GDP of $54,800. US firms are at or near the forefront in technological advances, especially in computers, pharmaceuticals, and medical, aerospace, and military equipment; however, their advantage has narrowed since the end of World War II. Based on a comparison of GDP measured at Purchasing Power Parity conversion rates, the US economy in 2014, having stood as the largest in the world for more than a century, slipped into second place behind China, which has more than tripled the US growth rate for each year of the past four decades. In the US, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy

% of total

Agriculture ��1.6% Industry ��20.8% Services ��77.6%

Main industries Petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, mining

Main exports Agricultural products, industrial supplies, transistors, aircraft, motor vehicle parts, computers, telecommunications equipment, automobiles, medicines

Main imports Agricultural products, industrial supplies, computers, telecommunications equipment, motor vehicle parts, office machines, electric power machinery, consumer goods, automobiles, clothing, medicines, furniture, toys

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In the US, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace

UNITED STATES | COUNTRY PROFILE

greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay off surplus workers, and to develop new products. At the same time, businesses face higher barriers to enter their rivals’ home markets than foreign firms face entering US markets. Long-term problems for the US include stagnation of wages for lower-income families, inadequate investment in deteriorating infrastructure, rapidly rising medical and pension costs of an aging population, energy shortages, and sizable current account and budget deficits. The onrush of technology has been a driving factor in the gradual development of a “two-tier” labour market in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. But the globalization of trade, and especially the rise of low-wage producers such as China, has put additional downward pressure on wages and upward pressure on the return to

capital. Since 1975, practically all the gains in household income have gone to the top 20% of households. Since 1996, dividends and capital gains have grown faster than wages or any other category of after-tax income. Imported oil accounts for nearly 55 per cent of US consumption and oil has a major impact on the overall health of the economy. Crude oil prices doubled between 2001 and 2006, the year home prices peaked; higher gasoline prices ate into consumers’ budgets and many individuals fell behind in their mortgage payments. Oil prices climbed another 50 per cent between 2006 and 2008, and bank foreclosures more than doubled in the same period. Besides dampening the housing market, soaring oil prices caused a drop in the value of the dollar and a deterioration in the US merchandise trade deficit, which peaked at $840 billion in 2008. Because the US economy is energy-intensive, falling oil prices since 2013 have alleviated many of the problems the earlier increases had created.

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk UK Trade & Investment USA British Consulate General New York 845 Third Avenue New York NY 10022 USA E: ResearchUSA@mobile.ukti.gov.uk

SELECTED OPPORTUNITIES

Aerospace Commercial aviation in the US is growing rapidly due to the need to upgrade the fleets used by US airlines. The US is the number one country for Aerospace. Boeing has an order backlog of over 5,000 aircraft, creating opportunities for UK companies. Other engine manufacturers also have large backlogs and are investing in technology. There are opportunities for UK companies with products or technologies in: • advanced manufacturing • automation • composites materials and structures • aircraft interiors • the airline passenger experience

Automotive The US is home to 16 car manufacturers including GM, Ford and Chrysler. US car sales reached 15.6m last year and forecasts for 2014 are for over 16m vehicles.

The US is investing in new technologies to meet its fuel efficiency targets for the 21st century. This will generate many new opportunities.

• • • •

Other opportunities are available in: • low carbon vehicle technology • motorsport • construction equipment • the aftermarket industry

Consumer goods

Clean technology The US has experienced significant growth in the clean technology sector. The US water sector represents $154bn in revenue. Water utilities and wastewater treatment each account for 35 per cent of that. The American Water Works Association estimates that the upgrades and expansions required over the next 20 to 25 years will total $35bn. There are opportunities available for UK companies in areas such as: • solid waste management

air pollution reduction water quality resource management infrastructure

The US accounts for almost 30 per cent of the world’s consumer market and has an expenditure of $10trn (71 per ent of GDP). The US market is extremely competitive and you should carry out research to find out exactly where your product or service fits. The US is the number one market for households with annual disposable income of over $300,000. This makes it the top destination in the world for luxury goods. There are opportunities for UK companies in food and drink, with a particular interest in: • alcoholic and non-alcoholic beverages • organic, natural and gluten-free food

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CAYMAN ISLANDS | COUNTRY PROFILE

CAYMAN ISLANDS

A centre for world class financial services The Cayman Islands is a three-island group (Grand Cayman, Cayman Brac, Little Cayman) in the Caribbean Sea, 240km south of Cuba and 268km northwest of Jamaica. The islands were colonised from Jamaica by the British during the 18th and 19th centuries and were administered by Jamaica after 1863. In 1959, the islands became a territory within the Federation of the West Indies. When the Federation dissolved in 1962, the Cayman Islands chose to remain a British dependency. The territory has transformed itself into a significant offshore financial centre.

The islands were colonised from Jamaica by the British during the 18th and 19th centuries and were administered by Jamaica after 1863

With no direct taxation, the islands are a thriving offshore financial centre. More than 93,000 companies were registered in the Cayman Islands as of 2008, including almost 300 banks, 800 insurers, and 10,000 mutual funds. A stock exchange was opened in 1997. Nearly 90% of the islands’ food and consumer goods must be imported. The Caymanians enjoy a standard

of living comparable to that of Switzerland. Tourism is also a mainstay, accounting for about 70% of GDP and 75% of foreign currency earnings. The tourist industry is aimed at the luxury market and caters mainly to visitors from North America. Total tourist arrivals exceeded 1.9 million in 2008, with about half from the US. With an average income of around KYD$47,000, Caymanians have the highest standard of living in the Caribbean. According to the CIA World Factbook, the Cayman Islands GDP per capita is the 14th highest in the world. The islands print their own currency, the Cayman Islands dollar (KYD). There is marked poverty among native people of the islands, as well as pressure to maintain a standard of living inconsistent with their means. The government has established a Needs Assessment Unit to relieve poverty in the islands. The government’s primary source of income is indirect taxation: there is no income tax, capital gains tax, or corporation tax. An import duty of 5% to 22% (automobiles 29.5% to 100%) is levied against goods imported into the islands. Few goods are exempt; notable exemptions include books, cameras, and infant formula.

SECTOR FOCUS: Financial Services The Cayman Islands are a major international financial centre. The largest sectors are banking, hedge fund formation and investment, structured finance and securitisation, captive insurance, and general corporate activities. Regulation and supervision of the financial services industry is the responsibility of the Cayman Islands Monetary Authority (CIMA). The Cayman Islands are the fifth-largest banking centre in the world, with $1.5trn in banking liabilities. Over 270 banks are based there, 19 of which were licensed to conduct banking activities with domestic (Cayman-based) and international clients, and the remainder were licensed to operate

on an international basis with only limited domestic activity. Financial services generated CI$1.2bn of GDP in 2007 (55% of the total economy), 36% of all employment and 40% of all government revenue. In 2010, the country ranked fifth internationally in terms of value of liabilities booked and sixth in terms of assets booked. It has branches of 40 of the world’s 50 largest banks. The Cayman Islands are the second largest captive domicile (Bermuda is largest) in the world with more than 700 captives, writing more than US$7.7 billion of premiums and with US$36.8bn of assets under management.

There are a number of service providers. These include global financial institutions including HSBC, Deutsche Bank, UBS, and Goldman Sachs; over 80 administrators, leading accountancy practices and offshore law practices. They also include wealth management such as Rothschilds private banking and financial advice. Since the introduction of the Mutual Funds Law in 1993, which has been copied by jurisdictions around the world, the Cayman Islands have grown to be the world’s leading offshore hedge fund jurisdiction. In June 2008, it passed 10,000 hedge fund registrations, and over the year ending June 2008 CIMA reported a net growth rate of 12% for hedge funds.

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OCEANIA | FEATURE

How a British crisps brand cracked the Australian market MARK LANE talks to Tyrells chief executive David Milner, and finds out how a British brand became big in Australia

Seven years ago, Tyrrells Potato Crisps didn’t export, but now overseas sales account for about 40% of the Herefordshire based business’ £240m of retail sales.

“It’s great to be unique and we are unique in that market,’’ says Milner.

And a key market for Tyrrells, which won a coveted Queen’s Award for Enterprise for International Trade in 2013, is Australia.

Initially Tyrrells was exclusively available in the Coles supermarket chain which served as a good route to testing the Australian market.

It began to target Australia two years ago, after it had established itself in more than 30 countries worldwide, which made up a quarter of turnover. These markets included France, Germany, the Netherlands and North America, with France being the biggest market outside of the UK. This export drive helped the business double in size in just three years. Tyrrells annual net sales growth has averaged 30 per cent over the last three years.

“I’m quite a cautious person, I’ve never believed in saying, `this looks like a good market, let’s build a factory and see how it goes. I think it’s always better if you can export to a market to start with, see if the consumers like what you’re selling and then, when you’re confident that they’re into it, then build your factory,’’ says Milner.

“We were surprised how something that we thought was quintessentially English could work outside the UK,’’ recalls chief executive David Milner. “Encouraged by that, we tried a few more countries and now we ship to 37 different countries around the world.’’ Milner had lived and worked for six years in Sydney and had long wanted to do business there again. “First and foremost, I really understand the market,’’ he says. “One of the challenges of international trade is that you can’t know everywhere in great detail unless you’re a large company and we’re not, so a large part of our international expansion has been based on where I know a little bit about what to do in that particular country. After the UK, Australia is the market I know the best.’’ A further attraction was that Australians share a similar taste in snacks to the British. “I think they are the foodiest country in the world. They are incredibly knowledgeable and passionate about what they eat and drink,’’ he says. Also, there were no hand cooked crisps available in Australia.

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Things went well and Tyrrells were soon also on the shelves in Australia’s other main supermarket chain, Woolworths. Milner adds: “We soon realised we had a winner and manufacturing in the UK and shipping to Australia, when your product is as bulky and as full or air as ours is, is never going to be a good idea and it was only a short-term measure.’’ The choice then was between building a factory in Australia or acquiring an Australian company. So, in August last year, Tyrrells acquired its first international business when it bought Australia’s leading organic snacks company, Yarra Valley Snack Foods. “They weren’t for sale but I really got on well with the entrepreneur that owned it, we bought 100 per cent of it and he stayed on and is running the whole of my business in Australia and Asia Pacific,’’ says Milner. “We’ve built a Tyrrells factory within his site and we make hand-cooked Tyrrells crisps in the Yarra Valley now and we are now in every supermarket in Australia.’’ Australia is now Tyrrells’ largest export market measured in value of sales and accounts for 17 per cent of the company’s total sales.

OCEANIA | FEATURE

This acquisition also increased the number of Tyrrells manufacturing sites to five globally, making hand-cooked potato crisps, vegetable crisps, premium popcorn and organic crisps and snacks across the world.

Also in Germany the social costs of hiring someone are about equal to their salary.

Now that Tyrrells is so well established in Australia, what are the chief characteristics of the market?

But Australia is different.

“They are like the UK, their consumers are similar to our own and they snack similarly to the way we do,’’ he explains. “From a trade point of view, there are only two retail chains there, which is very different. There’s Coles and Woolworths. You can look at that as a bad thing, or a good thing. It’s a good thing because you’ve only got to talk to two people, but it’s a bad thing, because of one of them doesn’t like you, you are out of half the market. “I think that out of all the countries I operate in, Australia is a great place to work. It’s very straightforward, there are no strange sorts of laws there, generally, if people say they are going to do something, they do it.’’

“It’s phenomenally expensive to hire someone in Germany,’’ he says. “Australia is a very business friendly environment,’’ he says. “The business is in Victoria and the Victorian government have been incredibly helpful. They were so delighted that we have invested in Australia that I’ve been invited to meet everybody in the Victorian government, right up to the premier. They are really helpful: ‘What can we do to help you? Can we help you with your planning permission? Is it all moving forward satisfactorily? Is there anything more we can do to help your business be a success?’ ‘’ “I’ve been doing this for a very long time and that has never happened to me before. They could not be more business friendly.’’

He points out that Australia is not bedevilled by the kind of bureaucratic and regulatory pitfalls that affect European markets. “In France, if you want to get your crisps into new stores, the law is you can only negotiate between October and the last day of February,’’ says Milner. In Germany, Tyrrells have a distributor and Milner wanted his head of sales to accompany the distributor to the retailer head offices and help with presentations and lend the benefit of his indepth knowledge of the product, but Milner has been informed that this would be illegal.

“We were surprised how something that we thought was quintessentially English could work outside the UK ... we tried a few more countries and now we ship to 37 different countries around the world

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Managing currency issues ‘Down Under’ Alex Edwards, head of the dealing desk at UKForex, offers advice on currency strategy when trading and investing in Australia and New Zealand

International trade may be lucrative, but it also carries significant challenges. One of the biggest of these is currency risk. You only need to glance at current headlines to see the effects of currency risk – Brexit

linked, primarily to agricultural exports such as milk powder. However, it’s also used to carry trade – currency traders will sell a low interest currency in order to fund the purchase or a higher interest rate currency like the yen, and NZD accounts for roughly two per cent of daily turnover in the global foreign exchange market.

Benefits to trade

has caused massive shockwaves across currency markets, affecting the pound, the euro, and in turn businesses across the globe. Understanding what affects exchange rates, and how this can affect your business, is key to putting together a strategy to protect your business. An adverse movement in rates can quite easily wipe out a company’s bottom line – equally, a smart currency strategy can help you take advantage of better rates, boosting profits.

What affects currency? With currency markets, it doesn’t matter what you’re trading, but rather what Australia or New Zealand is trading. As Australia’s main export market is raw materials, like iron ore, it is known as a commodity currency. This means that changes in commodity prices and economic data from China (its main export partner) will impact the Australian dollar. Recently the AUD has also been bolstered by comparatively high interest rates and a stronger economy. The New Zealand dollar is also commodity116

When doing business, Australia’s geography poses both a challenge and an opportunity. The distance from the UK can cause issues, but internal distance is also important; major cities can be a few hours’ flight apart. The geographical benefit, however, is that Australia and New Zealand are close to Asia – a great base for further expansion if you have your eyes set on other markets. One benefit of the Australian system is the high level of financial regulation. Despite this, it’s key to use a specialist provider if you’re making regular payments. Banks can levy hidden charges and less-than-stellar exchange rates, and this can quickly stack up across transfers. Seek out a transparent provider that can give you a clear idea of their rates and charges. Their network of global bank accounts will provide quicker and more affordable transfers.

company’s appetite for risk, but often using a mixture of tools is a sound approach. The simplest is the ‘on the day trade’, or single payment. If you’re watching the markets and see a good rate, you can use this option to make an immediate transfer. In the wake of Brexit, the pound dropped and Australians and New Zealanders rushed to take advantage of a favourable rate. Forward contracts can make it easier for businesses to plan ahead – these contracts lock in today’s rate for a later payment. If you can predict how much you’ll transfer in a year, you can lock in a rate for the full amount, protecting your profit against any recovery in the pound. With limit orders, you can make the market come to you – you choose an ideal exchange rate, and your transaction is only completed once the market hits that rate. This is useful in combination with other tools, so that you have flexibility with your funds but still get the best rate.

Currency strategy In setting up a currency strategy, there are a range of currency hedging tools available to you. Your approach depends on your

With currency markets, it doesn’t matter what you’re trading, but rather what Australia or New Zealand is trading

No matter your appetite for risk, it’s best to seek out expert advice. A specialist will help you to assess this, and help you understand how to maximise your profits and reduce your risk when doing business across currencies. Alex Edwards is head of the dealing desk at UKForex

OCEANIA | FEATURE

Australia: after 25 years growth, what next? Oliver Dowson looks at how best to trade and invest with Australia and New Zealand Although it’s one of the most attractive international investment destinations for UK companies and investors, Australia is always a difficult market to read. It’s not just the distance and time zone. Perhaps the conflict comes from the fact that it feels so ‘British’ in so many ways, but is economically so different. The heavy dependence on mining and a services sector focused on Asia-Pacific tends to mean that economic cycles are almost the inverse of those in the UK and USA. So back in 2008–2011, when doom and gloom hit the West, Australia powered ahead, with rapidly improving GDP and strengthening exchange rates – almost solely built on Chinese demand for raw materials. Over the past two years, however, the economy has retracted as mining has suffered. That’s not to say that the economy has not been resilient. Despite negative factors, the end of the last financial year (June 30 2016) brought with it official confirmation of 25 years of uninterrupted growth. In the last year, though, whilst GDP grew by 3.1 per cent, net disposable incomes actually fell by 1.3 per cent. So the country is producing more but earning less. Average salaries have fallen as high-paying manufacturing and mining jobs have been replaced by low-paying service sector jobs, many of which are part-time. Now economists are worrying about what will happen in this new financial year, with uncertainties around Brexit (despite the distance!), the Chinese economy and many other international factors which have significant effects on Australia. A new

government and new budget may mean increased taxes. As a result, Australians are spending less, and companies have drastically cut back on investment. So is this a crazy time to consider trading with Australia? Not at all, if the focus is right. The Australian dollar continues to trade at around 20 per cent less than in 2013–14 and is around 30 per cent less than its peak in 2012, when its value made it basically impossible for any business to sell anything in to or out of the country. The costs for visitors, whether on business or tourists, were painful. Now costs seem more reasonable and the country is once again viable for visitors and investors.

Key reasons for foreign direct investment into Australia are the high skill levels, geographical positioning to act as a base for the whole APAC region and, of course, the ease of doing business and easy cultural fit. Although salaries are still relatively high compared to most other developed countries, Australia is definitely viable as a base for R&D and other skilled activity in sectors such

back in 2008–2011, when doom and gloom hit the West, Australia powered ahead, with rapidly improving GDP and strengthening exchange rates – almost solely built on Chinese demand for raw materials

as Healthcare and IT. Tourism also presents good guarantees of investment return. Since the exchange rate is only likely to reverse in the future – albeit it’s unlikely that will happen very soon – it could be a wise moment to make long-term investments in Australian companies. The ones that dominate their part of the world stage, and demonstrate great long-term potential, are property investment companies such as Macquarie, AMP, LendLease and Westfield. Their well-diversified portfolios mean that A$ growth should be reliable, and future exchange rate changes are likely only to improve the valuation. From the exporter’s perspective, the opportunities for selling goods seem poor. On the other hand, it could be a better time to be selling services, especially those that can be delivered into Australia from lower cost economies. For example, ‘in time zone’ outsourcing to Philippines has been undersold in the past, but must now be increasingly attractive as businesses seek to control costs. More cost-effectively, Australian companies could be encouraged to invest in setting up their own offshore Shared Service Centres for even greater economic benefit. Oliver Dowson is CEO of International Corporate Creations Ltd, a business specialising in helping others expand internationally 117

AUSTRALIA | COUNTRY PROFILE

Australia is by no means wholly reliant on commodities, it is also enjoying a boom in services exports to China, including education and tourism

AUSTRALIA

KEY FACTS Official name: Commonwealth of Australia Capital: Canberra Area: 7.7 million sq km Population: 22,751,014 million (2015 est.) Main language: English GDP (current): $1.224 trillion (2015 est.) GDP growth: 2.5% (2015 est.) GDP per capita: US $65,400 (2015 est.) Inflation: 1.5% (2015 est.) Labour force: 12.5 million (2015 est.) Unemployment: 6.2% (2015 est.) Monetary Unit: 1 Australian dollar = 100 cents

GDP by sector

% of total

Agriculture ��3.7% Industry ��28.9% Services ��67.4%

Main industries Mining, industrial and transportation equipment, food processing, chemicals, steel

Main exports Ores and metals; wool, food and live animals; fuels, transport machinery and equipment

Main imports Machinery and transport equipment, computers and office machines, telecommunication equipment and parts; crude oil and petroleum products

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2016 saw Australia achieve 25 years without recession, a record that has pushed its citizens’ living standards to among the highest in the world.

increased demand and driven house prices higher, which in turn has encouraged people to take on more debt. Australia now has net foreign debt of AUS$1trn.

Economists attribute much of the success to the reforms of the 1980s and 1990s which reduced tariffs, deregulated the labour market and financial system and floated the Australian dollar.

Overview

Australia also maintained fiscal discipline in the late 1990s and early 2000s, with budget surpluses in 10 of the 11 years up to and including 2007–8.

Australia also enjoys rich resources and its proximity to Asia, the world’s fastest-growing region, has meant surging demand for iron ore, coal and other minerals. High immigration and rapid population growth have also helped Australia escape recession. This, in turn, has helped fuel a housing boom over the past three years, which has supported the economy during the prolonged commodities slump. But Australia is by no means wholly reliant on commodities, it is also enjoying a boom in services exports to China, including education and tourism. The collapse in commodities prices did prompt a sharp depreciation in the Australian dollar but this has helped exports and the first quarter of 2016 saw annual economic growth of 3.1 per cent. Some observers, however, point to clouds on the horizon. The housing boom has

The British founded the first European settlement in Australia in 1788 and named it Sydney. Many of the first settlers were convicts, but free settlers started to arrive in increasing numbers, particularly after the discovery of gold in the mid-19th century. Today, just over 90 per cent of the population are of European descent, with

less than three per cent descended from the indigenous Aboriginal population. The commercial environment in Australia is regarded as exceptionally friendly and attractive to business, with room for growth. Australian willingness to give new products and ideas a try recommends the country as a good market to test the international appeal of a product or service. Geography is an important factor too. Australia’s proximity to the Asia-Pacific market can offer a secure place to be based, with expansion into other regional markets. Urban areas are mainly confined to the east, south and south-west coastlines.

Economy Following two decades of continuous growth, low unemployment, contained inflation, very low public debt, and a strong and stable financial system, Australia enters 2016 facing a range of growth constraints,

AUSTRALIA | COUNTRY PROFILE

exporter of natural resources, energy, and food. Australia’s abundant and diverse natural resources attract high levels of foreign investment and include extensive reserves of coal, iron, copper, gold, natural gas, uranium, and renewable energy sources. A series of major investments, such as the US$40bn Gorgon Liquid Natural Gas project, will significantly expand the resources sector. Australia is an open market with minimal restrictions on imports of goods and services. The process of opening up has increased productivity, stimulated growth, and made the economy more flexible and dynamic.

Contacts

principally driven by a sharp fall in global prices of key export commodities. Demand for resources and energy from Asia and especially China has stalled and sharp drops in current prices have impacted growth. The services sector is the largest part of the Australian economy, accounting for about 70 per cent of GDP and 75 per cent of jobs.

Australia was comparatively unaffected by the global financial crisis as the banking system has remained strong and inflation is under control. Australia benefited from a dramatic surge in its terms of trade in recent years, although this trend has reversed due to falling global commodity prices. Australia is a significant

UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk Australian British Chamber of Commerce T: +61 02 9247 6271 E: abcc@britishchamber.com W : www.britishchamber.com

SELECTED OPPORTUNITIES Rail infrastructure Australia’s rail industry has been changing rapidly as a result of numerous reform initiatives. British companies are already enjoying success in the Australian rail sector, but there are still significant opportunities available, including: • service and operations • design and engineering consulting • training and education • environmental planning and geotechnical consulting • supply chain materials • remote monitoring and braking systems • signalling and telecommunications • maintenance – rolling stock and infrastructure • tunnelling and drilling specialists • ventilation • fire and safety technologies • financing and PPP Opportunities • logistics

Road infrastructure The states of Victoria, Queensland and New South Wales are investing more than £16.5bn on highways projects over the next eight years.

There will be major opportunities for UK businesses in: • consultancy • construction • supply • operation • maintenance

these areas and opportunities will continue with the ongoing expansion of premium and specialty food offerings. There are also considerable opportunities for British companies within the Australian drink market.

Sports stadia and urban renewal

Opportunities in the non-alcoholic market exist for:

The 2018 Commonwealth Games will be held in the Gold Coast, Queensland.

• tea and coffee (successful UK imports but the market is crowded)

It will provide opportunities for games infrastructure including: • stadium • passenger rail • sports village facilities

• specialty retailers presenting providing non-mainstream offerings with a demonstrable USP

Food and drink There is an increasing appetite in Australia for a range of international, gourmet and specialty food and confectionery products. Thriving ‘international’ sections can be found in the dominant super market chains. Specialty retailers are also prospering. Upmarket retailers and distributors have exploited a demand for traditional, ethnic and innovative offers across the whole food spectrum. There is already a strong UK offering across

A segment of the alcoholic beverage market is migrating from quantity to quality and is becoming enthusiastic about premium products. Australians appreciate British alcohol products and there is considerable potential for growth in interesting beverages. These include: • premium and craft ales and ciders • unique malts, vodkas, gins and other spirits Distribution is usually via a specialist importer/ distributor rather than direct with the major supermarket groups.

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NEW ZEALAND | COUNTY PROFILE

NEW ZEALAND KEY FACTS Official name: New Zealand Capital: Wellington Area: 264,537 sq km Population: 4.438 million (2015 est.) Main languages: English, Maori GDP (current): $168.2bn (2015 est.) GDP growth: 3.4% (2015 est.) GNI per capita: $36,200 (2015 est.) Inflation: 0.3% (2015 est.) Labour force: 2.522 million (2015 est.) Unemployment: 5.8% (2015 est.) Monetary Unit: 1 New Zealand dollar = 100 cents

New Zealand has radically deregulated its economy over the past 30 years and is now ranked by the World Bank as the easiest place to start a business.

Between 2000 and 2007, the New Zealand economy expanded by an average of 3.5 per cent annually as private consumption and residential investment grew strongly

GDP by sector

% of total

Agriculture ��4.1% Industry ��26.8% Services ��69%

Main industries Agriculture, forestry, fishing, logs and wood articles, manufacturing, mining, construction, financial services, real estate services, tourism

Main exports Dairy products, meat, wood and wood products, fish, machinery

Main imports Petroleum and products, mechanical machinery, vehicles and parts, electrical machinery, textiles

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Sophisticated farming methods and advanced agricultural technology have exploited fertile soil and excellent growing conditions to create a strong agricultural sector with vibrant pastoral, forestry and horticulture sectors. Various primary commodities account for around half of all goods exports and New Zealand is one of the top five dairy exporters in the world. New Zealand is a highly export driven economy with overseas sales accounting for about 30 per cent of GDP. Between 2000 and 2007, the New Zealand economy expanded by an average of 3.5 per cent annually as private consumption and residential investment grew strongly. Annual inflation averaged 2.6 per cent. New Zealand’s economy did not escape the effects of the global post-Lehmans recession in 2008 and it experienced an economic slow-down. As in other advanced economies, business and consumer confidence declined but, after a two per cent decline in 2009, the economy pulled out of recession to achieve 1.7 per cent growth in 2010, two per cent in 2011 and three per cent in 2012, a recovery led mainly by exports. By December 2014, annual growth had risen to 3.3 per cent, the fastest rate of expansion in six years but it is expected to fall back for 2016 and 2017, largely due to deteriorating terms of trade, particularly for dairy exports. However, this should be partly offset by falling oil prices and a

lower exchange rate. From 2018, growth is forecast to pick up again.

Overview New Zealand is a wealthy Pacific nation dominated by two cultural groups: New Zealanders of European descent; and the Maori, the descendants of Polynesian settlers. It is made up of two main islands and numerous smaller ones: the North Island (known as Te Ika-a-Maui in Maori) is the more populous of the two, and is separated by the Cook Strait from the somewhat larger but much less populated South Island (or Te Waipounamu). Agriculture is the economic mainstay, but manufacturing and tourism are important and there is a world-class film industry. New Zealand has diversified its export markets and has developed strong trade links with Australia, the US, and Japan. In April 2008 it became the first Western country to sign a free trade deal with China. Maori New Zealanders make up 15.4 per cent of the current population.

Economy Over the past 30 years, the government has transformed New Zealand from an agrarian economy, dependent on concessionary British market access, to a more industrialised, free market economy that can compete globally. This dynamic growth has boosted real incomes – but left behind some at the bottom of the ladder – and broadened and deepened the technological capabilities of the industrial sector. Per capita income rose for ten consecutive

NEW ZEALAND | COUNTRY PROFILE

SELECTED OPPORTUNITIES Construction and infrastructure

quality dairy and meat products.

Education and training

The construction sector is one of the largest sectors in New Zealand, generating around £15bn of gross revenue per year.

The government wants to increase investment in R&D in this sector which will also involve the food technology sector.

The most significant opportunities for UK firms are in the £20bn post-earthquake rebuild of Christchurch. There are also exciting opportunities around Auckland’s ambitious infrastructure plans (a rail loop and new waterfront).

There are opportunities for UK companies in: • Research and Development (R&D) • technology • biotechnology • genetics • farm machinery

Development of New Zealand’s ICT infrastructure in education continues to be a priority for the government. The sector is seeing a noticeable shift in procurement from physical to digital/online resources.

There are opportunities for UK expertise for: • designers • consulting engineers • building materials suppliers Opportunities for UK companies include: • rebuild of Christchurch city • housing and infrastructure projects in Auckland • rail and road projects

Agri-technology Despite weakening commodity prices, agriculture dominates exports from New Zealand. New Zealand has a worldrenowned reputation for producing high

Health New Zealand has one of the best-funded public health sectors in the world. The market has a turnover of approximately £7.9bn. New Zealand has a growing aged population which will result in increased demand for healthcare and medical devices. Opportunities for UK companies include: • medical devices • educational resources • safety devices • health technology

Teachers of religious studies and special needs report a lack of engaging resources. Opportunities for UK companies include: • engaging resources • early childhood resources to support curriculum

Creative industries Creative industries are recognised as an important contributor to the economy. New Zealand companies have established international reputations, particularly in the screen industry, while UK film and television has a loyal following. Opportunity exists for exports and joint ventures. Opportunities for UK companies include: • film production • music • design

Maori New Zealanders make up 15.4 per cent of the current population

The economy pulled out of recession in 2009. Nevertheless, key trade sectors remain vulnerable to weak external demand and lower commodity prices. In the aftermath of the 2010 Canterbury earthquakes, the government has continued programs to expand export markets, develop capital markets, invest in innovation, raise productivity growth, and develop infrastructure, while easing its fiscal austerity.

Contacts years until 2007 in purchasing power parity terms, but fell in 2008–09. Debt-driven consumer spending drove robust growth in the first half of the decade, fueling a large balance of payments deficit that posed a challenge for policymakers. Inflationary pressures caused the central bank to raise its key rate steadily from January 2004 until it was among the highest in the OECD in 2007–08. The higher rate attracted international capital inflows, which

strengthened the currency and housing market while aggravating the current account deficit. The economy fell into recession before the start of the global financial crisis and contracted for five consecutive quarters in 2008–09. In line with global peers, the central bank cut interest rates aggressively and the government developed fiscal stimulus measures.

UK Trade & Investment Auckland British Consulate-General Level 17  151 Queen Street Auckland 1010 New Zealand UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk

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SOUTH AMERICA | FEATURE

The trials of South America GLOBAL TRADER’s Latin America correspondent Gabriela Castro-Fontoura analyses current opportunities for UK businesses in the economically troubled continent of South America

South America is no stranger to the global economic downturn British exporters are currently battling against. What makes the downturn even harder to come to terms with in Latin America is that the region experienced over ten years of sustained economic growth, where regional growth reached nearly six per cent and where individual country growth reached impressive double-digit figures. British companies exporting to South America will now face a very different continent from the buoyant one they heard about, or exported to, not that long ago. Countries like Brazil, Venezuela and Argentina are even in recession and former “miracle” stories like those of Colombia and Chile look a lot less exciting right now. The continent is also experiencing political instability, particularly in Brazil, and the zika virus scare hasn’t helped its global positioning as a region.

Brazil isn’t easy to deal with at best of times, so you can imagine it’s rather tricky there right now. Those already in the market for many years will know that they’ll have to navigate the choppy waters but they’ll also know Brazil is too big to ignore. You just need to resources to sustain an expansion into this country that opens and shuts to the world, and to individual businesses, in some cyclical and sometimes inexplicable ways. While the country steals all the regional headlines, remember that people still consume, roads are still being built and money is still being invested. There’s a lot of uncertainty, but if you can handle the uncertainty, if you have the cash and the team to back your perseverance, this is probably not the time to quit Brazil. There’s light at the end of the tunnel, with the IMF expecting the country to be out of recession next year. One not for the faint hearted, definitely. Not for the fainthearted either is Venezuela, but let’s not compare it with Brazil. Venezuela is a different country and its current political situation is much more delicate. While Brazilians are feeling the pinch, Venezuelans are going through the unimaginable to even find the most basic goods every day, from toilet paper to life-saving medicines. Except for some notable exceptions, I would not advise companies to look at doing business with Venezuela right now, because risk is just too high. Argentina is a different story altogether. Ten years of “Kirchnerism” (the period where Néstor Kirchner and his wife Cristina Fernández occupied the country’s Presidency, which lasted from 2003 to 2015) have now come to an end. During those years, Argentina became a very difficult country for UK exporters for many reasons ranging from protectionism (huge import duties and all sorts of hidden barriers including import licenses and bureaucratic delays) to a re-ignition of the Falklands debate.

Caracas

So should British exporters be concerned? Are there still opportunities in South America? How should British companies go about exporting to a region that seems to keep promising but not always delivering? The first thing we must take into account is that Latin America is far from homogeneous. It’s a region of twenty countries that can’t necessarily be lumped all together. Even the three countries in recession I mentioned before, need to be treated differently. Take Brazil, for example. Bigger than the whole of Europe and now in the middle of a political upheaval that has severely affected businesses, Brazil is the country we’re all talking about just now. 122

Now we have Mauricio Macri, a pro-business leader, as the new President, and things are looking much brighter. The change was evident within weeks, and this is the time to look at Argentina again with different eyes. Don’t expect change to happen overnight, but Argentina is re-emerging as a key global player again. Watch out for those Argentine competitors than now are freer to look for export opportunities, though! Remember that Argentina, even with

British companies exporting to South America will now face a very different continent from the buoyant one they heard about, or exported to, not that long ago

SOUTH AMERICA | FEATURE

its terrible weaknesses, has the size, the history, the potential, the resources and – above all – the attitude, to be a regional and worldclass powerhouse. The IMF is predicting its GDP will grow at about three per cent in 2017. Keep an eye on it. So those were the three largest countries in South America that are currently in recession. How about the rest? Colombia has been hit by the current global slowdown, as an exporter of oil and many commodities. However, its open economy (with plenty of free trade agreements) and its careful macroeconomic management, together with betting heavily on a continued peace process, are great positives of a country that can offer so much to UK exporters. The IMF forecasts a GDP growth of 2.5 per cent for 2016 and 3 per cent in 2017, which aren’t as good as the figures we saw in the last five years, but are still respectable. Peru was Latin America’s recent “economic miracle”. With a new government now in place, continuity seems guaranteed, and the IMF predicts GDP growth in 2916 of 3.7 per cent and 4.1 per cent for 2017, some of the highest figures in the region. Peru is definitely a country to consider in any export strategy. A member of the Pacific Alliance (with Colombia, Mexico and Chile), its openness makes it attractive, and its growth has fuelled demand for consumer goods

What matters overall is that there are opportunities right here right now in South America for UK exporters. And other opportunities are just round the corner but also for products and services relating to infrastructure, energy, mining, transport, tourism and much more. Lima will soon have a new airport and public investment in general is set to grow 10 per cent this year. Travelling South down the Andes we find Chile, South America’s “wonder kid”. A country that stands out for its transparency, ease of doing business and economic openness, it might have had it a bit harder over the last few months particularly because of the price of copper going down (there was also some political unrest surrounding corruption at high levels), but it’s a country forecast to grow slowly but steadily over the next five years, and one that British exporters (whom I see often in shows like Expomin) understandably target and will continue to target as a market itself, as a test market for the region and as a platform for other regional markets. Walking around Costanera Mall, for example, you’ll find the like of Clarks Shoes, Miss Selfridge, Whittards of Chelsea, Top Shop, Lush and so many other British retailers. If the situation in Argentina, Brazil and Venezuela, the three largest Mercosur members, is unstable, things are a bit brighter for the smaller Mercosur members, Uruguay and Paraguay. Feeling the pressure of the situation in Brazil (in which they rely for their exports) and carefully observing the situation in Argentina (in which they relied for investors that might now invest at home), these countries can be targeted simultaneously, but bearing in mind some differences. While Paraguay is forecast to grow more than Uruguay, and many Uruguayan businesses are rushing to export to or invest in Paraguay, Uruguay has some distinct advantages. Transparency, a sound legal framework, respect for the law, an excellent logistics platform, highly qualified resources, a strategic location between Argentina and Brazil with a natural port, and

Santiago

free-trade zone legislation, are some of the advantages of Uruguay as a hub from where to tackle Argentina and Brazil. Uruguay is an interesting market in itself, with the highest per capita income of the whole continent (together with Chile). Paraguay, on the other hand, offers for example cheaper electricity, and a much weaker trade union movement that partly explains the lower labour costs. Real estate growth in Paraguay and investment in agriculture are stunning. There are other countries to consider, too, of course. Such as Bolivia, forecast to grow an impressive 3.8 per cent in 2016, and Ecuador, currently also in recession but trying, sometimes halfheartedly, to open up to attract investment. What matters overall is that there are opportunities right here right now in South America for UK exporters. And other opportunities are just round the corner. In a continent where business is slow, where decisions are made through personal connections, there is not time to waste. The time to sow is now. Gabriela Castro-Fontoura specialises in supporting UK businesses across Latin America. She is director of Uruguay-based consultancy, see www.sunnyskysolutions.co.uk 123

SOUTH AMERICA | FEATURE

The impact of collapsing oil prices on Venezuela and Brazil Isabelle Chaboud discusses how a global drop in oil prices has impacted Brazil and Venezuela, pushing them to the brink Between July 2014 and February 2016, the price of crude oil dropped by more than 65 per cent. As a result, Venezuela has been pushed to the edge of a precipice since its oil revenues account for 95 per cent of exports.

including the retirement system. While Brazil’s debt continues to worsen, the Petrobras scandal has grown to add new accusations against president Temers. The scandal now involves more than twenty politicians from all parties.

By issuing currency, the country’s central bank has caused the Bolivar to devaluate. The country can no longer buy imported goods, which include 80 per cent of its food products. In addition, drought has limited the supply of water and there is a shortage of basic products such as sugar, flour, oil and milk.

Following Standard & Poor’s footsteps, Moody also lowered Brazil’s credit rating to junk bond level in February 2016. The credit rating agency believes that the government’s debt could reach 80 per cent of GDP within three years. The country’s unemployment rate increased by 10 per cent in the first quarter. Rio de Janeiro has delayed paying its workers since the beginning of the year. Health and security budgets have also suffered cuts.

Looting and violence have continued to escalate as the country’s population is unable to feed itself. Venezuelans are in the streets crying out: “We want food!” There is no more medicine. Electricity is cut on a daily basis. The president, Nicolas Maduro, is criticized by his citizens. Almost two million signatures have been collected for a recall referendum, though for the moment, the president has refused to call a vote. Venezuela is facing its worst political, economic and social crisis. It has become one of the most violent in the world. Its inflation skyrocketed to reach 180.9 per cent in 2015. The IMF predicts inflation will reach 700 per cent in 2016. Brazil was the world’s seventh economy in 2014 and Latin America’s leading economy. Yet the country is now facing its worst political, economic and financial crisis. While Brazil is ranked second after Venezuela in terms of Latin American oil production (US Energy Information Administration), more than 91 per cent of its production is offshore in deep waters, which makes extraction more expensive. The impeachment process launched against president Dilma Rousseff for manipulating the government’s accounts to hide the country’s deficit ended in August 2016. She was then removed from office and replaced by Michel Temer, Brazil’s interim president since May 2016. He declared that “Brazil is submerged in one of the biggest crises of its history.” The minister of finance, Henrique Meirelles, is tasked with carrying out important structural reforms,

The Olympic games were not enough to turn the tide. According to the article Temer and Brazilians put faith in economic revival (Financial Times, January 11, 2017), the situation has worsened: “Expected growth this year has fallen from 1.4 per cent in September to 0.5 per cent early January 2017, according to a central bank survey. The latest data show 116,000 jobs were lost in November, many more than expected”. In January 2017, 97 inmates died in overcrowded prisons in Northern Brazil and confirms an alarming situation commented by Leonardo Espinola, chief of staff to Rio’s governor who told the Supreme Court in Aprim “that the state is on the verge of ‘social collapse’.” (Bloomberg, June 13, 2016). These examples highlight the fact both countries cannot guarantee crucial health or police services (or even basic food products in Venezuela). On May 23, 2016, Coca-Cola’s Venezuelan bottling partner had to stop the production of sugar-sweetened products due to a lack of sugar. The country is ready to implode. And it is clear Brazil can no longer act as a catalyst for growth in Latin America. It remains to be seen whether or not Shell will continue to invest in the country’s deep water crude oil extraction. Isabelle Chaboud is an Associate professor in the Department of Accounting, Law and Finance at Grenoble Ecole de Management

Brazil was the world’s seventh-largest economy in 2014 and Latin America’s leading economy. Yet the country is now facing its worst political, economic and financial crisis

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BRAZIL | COUNTRY PROFILE

BRAZIL KEY FACTS Official name: Federative Republic of Brazil Capital: Brasilia Area: 8.55 million sq km Population: 204,259,812 (2015 est.) Main language: Portuguese GDP (current): $1.773 trillion (2015 est.) GDP growth: -3.8% (2015 est.) GDP per capita: $15,600 (2015 est.) Inflation: 9% (2015 est.) Labour force: 109.2 million (2015 est.) Unemployment: 6.4% (2014 est.) Monetary Unit: 1 real = 100 centavos

The discovery of major offshore oil reserves could propel the country into the top league of oil-exporting nations

GDP by sector

% of total

Agriculture ��5.9% Industry ��22.2% Services ��71.9%

Main industries Textiles, shoes, chemicals, cement, lumber, iron ore, tin, steel, aircraft, motor vehicles and parts, other machinery and equipment

Main exports Transport equipment, iron ore, soybeans, footwear, coffee, autos

Main imports Machinery, electrical and transport equipment, chemical products, oil, automotive parts, electronics

Brazil, which has South America’s largest population and economy is struggling with a political and economic crisis. Former president Dilma Rousseff was implicated in a far-reaching corruption scandal involving her own Workers’ Party and other political parties. After eight months of wrangling the senate finally voted in August 2016 to impeach Rousseff for breaking budgetary rules. Now, a close ally of her successor President Michel Temer has been accused of attempting to obstruct corruption investigations and six ministers from the Temer administration have resigned amid corruption charges, and investigations have implicated other major figures in the president’s Brazilian Democratic Party Movement. Temer’s government has slumped in opinion poll ratings and it is estimated that Brazil’s economy contracted by 3.2% in 2016, following a 3.8% fall in 2015. Last year unemployment rose from 8.8 million to 12 million and the rate has hit 12%. Despite its unpopularity, congress mustered the required three-fifths majority to approve a series of fiscal reforms. In December it passed what has been described as possibly the harshest austerity measure in the world, freezing the federal

budget at its 2016 level for the next 20 years. The cap means that funding for education, health care, pensions, infrastructure and other government programmes will remain relatively constant (except for inflation), in real terms, until 2036. The central bank predicts a return to economic growth of 0.8% next year after two years of deep recession -- although the International Monetary Fund foresees growth of just 0.2%.

Overview Brazil is South America’s most influential country, an economic giant and one of the world’s biggest democracies. The discovery of major offshore oil reserves could propel the country into the top league of oil-exporting nations. The exploitation of the Amazon rainforest, much of which is in Brazil, has been a major international worry, since the wilderness is a vital regulator of the climate. It is also an important reservoir of plant and animal life. A drive to move settlers to the Amazon region during military rule in the 1970s caused considerable damage to vast areas of rainforest. Deforestation by loggers and cattle ranchers remains controversial, but governmentsponsored migration programmes have been halted. 127

BRAZIL | COUNTRY PROFILE

In 2005 the government reported that one fifth of the Amazon forests had been cleared by deforestation, which has been slowed down by extra policing and pressure from environmental and consumer groups. The government has fined illegal cattle ranchers and loggers, while the food industries have banned products from illegally deforested areas, such as soya beans and beef. Brazilâ&#x20AC;&#x2122;s natural resources, particularly iron ore, are highly prized by major manufacturing nations, including China. Thanks to the development of offshore fields, the nation has become self-sufficient in oil, ending decades of dependence on foreign producers. There is a wide gap between rich and poor, but the World Bank has praised the country for progress in reducing social and economic inequality.

Economy Characterised by large and well-developed agricultural, mining, manufacturing, and service sectors, and a rapidly expanding middle class, Brazilâ&#x20AC;&#x2122;s economy outweighs

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BRAZIL | COUNTRY PROFILE

SELECTED OPPORTUNITIES Aerospace The Brazilian Aerospace Industry is the largest in the Southern Hemisphere. There are opportunities for UK companies in the following areas: • Supply chain and partnerships • composites and metallic structures • automation technology • connectivity • maintenance, repair and operations

Automotive Brazil is the seventh largest producer of vehicles in the world. Brazilian manufacturers invested USD 11.2 billion in the market between 2010 and 2012. The automotive sector also attracts massive overseas investments. The main opportunities in the sector are: • low carbon technologies • engineering services, such as software and consultancy • lightweight components and advanced materials

Energy Brazil is the largest energy market in South America and has the second largest oil reserves in Latin America. Petrobras plans to invest USD 220.6 billion by 2018. The International Oil Companies (IOC) is investing an extra USD 50 billion over the next two years. Brazil is particularly interested in the UK’s expertise in the following areas: • bringing challenging oil and gas projects to completion • offshore equipment and services • pipeline and seabed surveys • inspection, repair and maintenance

Healthcare Brazil is the major Life Sciences and healthcare hub in Latin America. It has grown by 35% over the past 3 years. It is the largest pharmaceutical market in Latin American, worth £13.8 billion. £20 billion will be invested in programmes and the Unified Health System (SUS), Brazil’s equivalent of the NHS. There are opportunities for UK companies in: • research and design • pharmaceuticals • designing, building and managing hospitals

Sports Infrastructure Brazil is hosting of the 2014 World Cup and Rio 2016 Olympic and Paralympic Games. UKTI Brazil aims to support UK companies for at least £250 million worth of contracts. Companies with experience in the 2012 Games have a unique selling point in the Brazilian market.

that of all other South American countries, and Brazil is expanding its presence in world markets. Since 2003, Brazil has steadily improved its macroeconomic stability, building up foreign reserves, and reducing its debt profile by shifting its debt burden toward real denominated and domestically held instruments. Since 2008, Brazil became a net external creditor and all three of the major ratings agencies awarded investment grade status to its debt. After strong growth in 2007 and 2008, the onset of the global financial crisis hit Brazil in 2008. Brazil experienced two quarters of recession, as global demand for Brazil’s commodity-based exports dwindled and external credit dried up. However, Brazil was one of the first emerging markets to begin a recovery. In 2010, consumer and investor confidence revived and GDP growth reached 7.5%, the highest growth rate in the past 25 years. GDP growth has slowed since 2011, due to several factors, including overdependence on exports of raw commodities, low productivity, high operational costs, persistently high inflation, and low levels of investment. After reaching historic lows of 4.8% in 2014, the unemployment rate remains low, but is rising. Brazil’s traditionally

In 2010, consumer and investor confidence revived and GDP growth reached 7.5%, the highest growth rate in the past 25 years high level of income inequality has declined for the last 15 years. Brazil’s fiscal and current account balances have eroded during the past four years as the government attempted to boost economic growth through targeted tax cuts for industry and incentives to spur household consumption.

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk Britcham Brazil E: britcham@britcham.com.br T: + 551138 190 265 (São Paulo) T: + 552122 625 926 (Rio de Janeiro) W: www.britcham.com.br

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COLUMBIA | FOREWORD

Colombia: a destination for business and tourism Maria Claudia Lacouture President, ProColombia

With our highly-skilled workforce, vast natural resources and two coastlines fronting the Pacific and Atlantic, Colombia enjoys both a privileged strategic and economic position in Latin America. The country’s reputation as the ideal place for doing business in the region is further backed by our sound and transparent tax regime, established trade agreements that grant access to 1.5 billion consumers and a comprehensive national plan of infrastructure development. We are living through a golden age. A recent report by Moody cited Colombia’s economy as one of the most resilient in the region and forecast the country’s economy would enjoy higher growth than neighbouring countries next year. The International Monetary Fund (IMF) meanwhile has forecast Colombia’s GDP to grow by 3.4% in 2015, with per capita GDP having tripled in the 10 years to 2014, reaching USD $8,076. Colombia’s citizens are also enjoying increasing prosperity with the growing middle class set to increase from 30% to 46% of the population by 2025. The IMD World Competitiveness Report consistently ranks Colombia as the regional leader in terms of its qualified and skilled work force – a position it retained in the last report in 2014 which also heralded Colombia as the region’s most businessfriendly country, ranked first in Latin America and tenth in the world in terms of investor protection. This favourable business landscape has helped attract major investment from international companies such as Holcim, Pelikan, Gasco, Glencore, Cencosud, Telefónica, Fiat, Amrop, Cirsa, Protex, HydroChina, Avon, Citibank, BBVA, IBM, Citigroup, and Grupo Casino. The national Government remains committed to providing a stable operating environment for such companies. ProColombia, the government office in charge of promoting investment, tourism and exports, offers invaluable support and management

services, nurturing businesses and fostering growth while highlighting the many strategic benefits of investing in and doing trade with Colombia. ProColombia also actively works with Colombian entrepreneurs as they look to enter new markets and expand overseas, providing support services such as custom consulting and export training. The excellent potential for growing Colombian exports is illustrated by examples such as the market for non-mining products, foreign sales of which grew by 19% between 2010 and 2014. Small and medium-sized businesses (SMEs) are key players in the country’s success. In the last five years they have sold 1,193 more product types abroad than large companies, accounting for two thirds (66%) of the total export market for products and services and reaching clients from 170 markets. In addition to being a great place for doing business Colombia is currently enjoying a tourism boom on the back of the raft of unique experiences on offer, from exploring colonial gems such as Cartagena and natural wonders such as the Amazon to cultural centres such as the Coffee Triangle and ancient civilisations such as the ‘Lost City’ in Tayrona National Park. With 59 protected areas Colombia is also one of the most bio-diverse countries on earth with more varieties of birdlife and orchids than any other country and ranking second in terms

of species of amphibians, fresh water fish, butterflies and plant life. The upturn in leisure and business travellers, with the number of UK visitors for example growing by a quarter (24%) in the first five months of 2015, is being further fuelled by the ongoing boom in airlift and hotel development, which saw 7,000 new rooms added across the country in 2014. Major investment in new venues and facilities is also benefitting the MICE market, helping attract more major international events to the country such as the World Tourism Organisation’s General Assembly, which was held in Medellin from September 12–17, 2015. So if you are looking for an investment destination that will help you grow, a unique tourism destination or simply a supplier of value-added, quality goods and services, the answer is…Colombia. Follow Maria on Twitter @mclacouture

The IMD World Competitiveness Report consistently ranks Colombia as ... the region’s most business-friendly country, ranked first in Latin America and tenth in the world in terms of investor protection

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COLOMBIA | COUNTRY PROFILE

Colombia’s government signed a new peace agreement in November and, to avoid another major political defeat, did not hold a referendum to ratify it, as it had with the original agreement, which was rejected in October.

COLOMBIA

In accordance with the new agreement, Colombia’s insurgent Marxist FARC rebels have begun to demobilize under United Nations supervision.

KEY FACTS Official name: Republic of Colombia

UN officials are also assisting Colombian authorities with special justice proceedings against rebels accused of crimes against humanity, as well as reintegration and victim reparation efforts.

Capital: Bogota Area: 1.14 million sq km Population: 46.2 million Main language: Spanish GDP (current): $400.1 billion (2014 est.) GDP growth: 5% (2014 est.) GNI per capita: $13,500 (2014 est.) Inflation: 2.9% (2014 est.) Labour force: 23.67 million (2014 est.) Unemployment: 9.2% 2014 est.) Monetary Unit: 1 peso = 100 centavos Exports to UK: £646,322,016 (2014) Imports from UK: £333,867,993 (2014)

The group’s demobilization marks an end to more than 52 years of bloodshed in the Andean nation by the FARC. Founded in 1964 to fight for rural reform and income equality, the rebels once had a presence in nearly half of Colombia’s territory. The conflict between the government troops, rebel groups and paramilitaries has killed more than 220,000 people. The end of the civil war opens up many economic opportunities, such as the agreement signed between PharmaCielo Colombia Holdings and Cooperativa Caucannabis to develop medical marijuana

products from cannabis cultivated in the Colombian department of Cauca, an area devastated by more than half a century of conflict with FARC. It is also hoped that peace will bring a revival of tourism. Foreign visit to Colombia dropped almost 8% last year compared to 2015, the first fall in a decade. Against this backdrop, Hyatt Hotels Corporation has opened its first hotel in Colombia with the launch of a US$200m luxury hotel in Cartagena de Indias’.

Overview Once an investment pariah as drug-funded rebels kidnapped and killed oil workers and seeded rural areas with bombs, Colombia has seen a dramatic turnaround, attracting

SELECTED OPPORTUNITIES

Colombia has substantial oil reserves and is a major producer of gold, silver, emeralds, platinum and coal

Oil and gas

Colombia is currently undergoing a construction boom in the urban regeneration sector.

The economic contribution of the oil sector is about 31 per cent of national revenue. With less than eight years of reserve life, the Colombian government is committed to helping companies make new discoveries. There is particular focus in the offshore sector, where the UK has a significant expertise. Ecopetrol, the national oil company, plans to invest USD 85 billion over the next five years. This will create opportunities for UK companies in developing offshore oil and gas operations, and enhanced oil recovery.

There are opportunities for companies with expertise in design, project management and PPP schemes for many projects. These include:

Industry ��37.3%

• construction of a national administrative centre, valued at approximately £4.5bn • housing and urban regeneration project, valued at £1.22m • 4G road concession, valued at USD 25 million

Services ��56.6%

Education

Main industries

Colombia is looking for collaborations between government bodies, public and private institutions and high quality education entities in the UK. There are opportunities in areas such as:

GDP by sector

% of total

Agriculture �� 6.1%

Textiles, food processing, oil, clothing and footwear, beverages, chemicals, cement, gold, coal, emeralds

Main exports Petroleum, coal, emeralds, coffee, nickel, cut flowers, bananas, apparel

Main imports Industrial equipment, transportation equipment, consumer goods, chemicals, paper products, fuels, electricity

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Construction

• vocational training • content in English Language, Mathematics and Science • design of international curriculum • English language training • consultancy in projects, such as developing student-friendly cities • education technology • design of assessment activities

Science and innovation Colombia is investing USD 500 million per annum in science and innovation. There are opportunities for UK companies in all areas, particularly in biotechnology.

Mining By 2012, the mining sector represented 2.4 per cent of the Colombian GDP. Coal, gold and nickel have made the largest contribution. In addition, Colombia produces a number of other minerals in modest amounts including: • iron • ore • lead • manganese • zinc

COLOMBIA | COUNTRY PROFILE

record foreign investment that has fuelled the economy and bolstered its capital markets. It has been able to become Latin America’s fourth biggest oil producer over the last decade in great part because of a US-backed military offensive that halved the numbers of Revolutionary Armed Forces of Colombia, or FARC, guerrillas. Colombia, with approaching 47 million people, is the third largest country in Latin America, but it is the positive business environment and strong growth prospects that mark it out as a potential market of interest for UK companies. Colombia was included in the group of new emerging markets (or CIVETS) alongside Indonesia, Vietnam, Egypt, Turkey and South Africa, while it regained investment grade status in March 2011, a move that was an endorsement of its the positive outlook, both economically and politically. Colombia offers a range of opportunities in a variety of sectors. Historically, Colombia has looked primarily to the United States for new products and technology, but Europe is increasingly seen as an interesting alternative. The country has significant natural

resources, but it has also been ravaged by a decades-long violent conflict involving outlawed armed groups and drug cartels. Colombia has substantial oil reserves and is a major producer of gold, silver, emeralds, platinum and coal.

Economy Colombia’s consistently sound economic policies and aggressive promotion of free trade agreements in recent years have bolstered its ability to weather external shocks. Colombia depends heavily on energy and mining exports, making it vulnerable to a drop in commodity prices. Colombia is the world’s fourth largest coal exporter and Latin America’s fourth largest oil producer. Economic development is stymied by inadequate infrastructure, inequality, poverty, narcotrafficking and an uncertain security situation. Declining oil prices have resulted in a drop in government revenues. In 2014, Colombia passed a tax reform bill to offset the lost revenue from the global drop in oil prices. The SANTOS administration is also using tax reform to help finance implementation of a peace deal between FARC and the government. Colombian officials estimate a

peace deal may bolster economic growth by up to 2 per cent. Real GDP growth averaged 4.8 per cent per year from 2010–2014, continuing a decade of strong economic performance, before dropping in 2015. All three major ratings agencies upgraded Colombia’s government debt to investment grade in 2013 and 2014, which helped to attract record levels of investment, mostly in the hydrocarbons sector. However, Standard & Poor’s downgraded its long-term outlook from stable to negative in early 2016. The change, due largely to falling government revenues, could cause Colombia to lose its investment-grade bond status.

Contacts UK Trade & Investment 1 Victoria Street London SW1H 0ET T: 020 7215 5000 E: enquiries@ukti.gsi.gov.uk W: www.ukti.gov.uk UK Colombia Trade E: info@ukcolombiatrade.com T: +57 1 3268237 W: www.ukcolombiatrade.com

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ADVERTISERS INDEX

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Holland & Knight ��130

Abou Jaoude & Associates �� 66–67

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Intertek ��4

Akwaaba Assist Limited ��22

InventMedia Ltd ��39

ArrowClass Insurance Limited ��22

Jitesh Naik Advocate ��46

Ashungchong & Partners ��31

KEK Insurance Group ��26

Avery Scott �� Inside back cover

Knightsbridge Schools International ��98

Bakhnug Law Firm ��28

KPMG Zambia �� Inside front cover

BDO Semaan, Gholam & Co ��64

Latin America Translations ��124

BK & Associés ��43

Mineral Services Ltd ��17

Bakouchi & Habachi Law Firm ��44

Nimba Conseil ��12

Bolero International �� 10–11

NIST International School ��74

Cayman International School ��112

Nyaho Medical Centre �� Back cover

CFY Partners ��24

Origin Group ��56

Coface ��6

The Oxford School ��100

CurrencyFair �� 14–15

Rickey Tarfa & Co ��35

DFDS ��82

Salman Abdullah Sahwan ��58

Day Waterman College ��34

Slot Engineering Nigeria Limited ��32

Edron Academy ��102

Sri KDU International School ��8

Europe Arab Bank ��84

Tai E International Patent & Law Office ��70

Evolve Real Estate ��57

Total Business Administration ��133

Franco Advogados ��126/128

Tshibangu Ilunga & Partners Law Firm ��16

GCM and Air & Maritime ��106

UHY-AMO Certified Public Accountants ��46

Harrow School ��72

Zappex International ��40

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