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D u b l i n U n i v e r s i t y ’ s F i n a n c i a l N e w s pa p e r

EUROZONE

SPECIAL REPORT

Malaysia Airlines Flight MH370 departed from Kuala Lumpur on Saturday 8th March bound for Beijing.

Less than an hour after take-off however, the plane lost contact with air traffic control without any prior indication of danger or a distress signal.

The last known check-in with ground staff was made just before the plane passed into Vietnamese airspace over the South China Sea; Vietnamese air traffic control confirmed that MH370 missed its scheduled checkin with them. About an hour after the plane went radio-silent, Malaysian and Thai military radar scans detected that MH370 went off course due west over the Andaman Sea. Approximately seven hours after the disappearance of MH370, a satellite positioned above the Indian Ocean / Andaman Sea basin picked up data suggesting that the plane was operating in one of two air corridors stretching over this region. The initial flight-plan was to head due northeast over Cambodia and Vietnam heading towards the Chinese capital.

Clearly, there was a divergence in

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navigation at some point however.

The first aspect which was seized upon by the media was an analysis of just who was on board, the natural search for a guilty party being inevitable. The 12 crew members are all reported as being Malaysians, with Captain Zaharie Ahmed Shah, 53, leading the flight. It was reported that there were 227 passengers on board, with the bulk of these counted as being Chinese (153) and Malaysian (38). The remainder of the passenger compliment was made of people from a variety of countries.

An initial line of investigation was the allegation that two Iranian men, Pouria Nour Mohammad Mehrdad and Delavar Seyed Mohammadreza were found to be travelling on false passports. The obvious suggestion to be made was that they were part of a terrorist plot; further investigation however, led to the discovery that the two men were to catch a connecting flight to Europe from Beijing and had no known terrorist affiliations.

Preliminary search patterns to be

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carried out were believed to have to encompass an area taking in roughly three million square miles, a painfully large scope for search and rescue operatives to have to deal with. Such disparity between the chances of finding the plane or not led to many internet users getting involved in the search by scanning digital images of the search zones themselves. Courtney Love famously made headlines on St Patrick’s Day by claiming that she had found what she believed to be a potential crash site; this is perhaps a case of wishful thinking in her eyes seeing what they wanted to see. When such a frightening event as this occurs, it is only natural for helpful members of the public and conspiracy theorists alike to come forward with suggestions; an early, and highly critical, insight from my own grandmother being that a potential landing in North Korea was on the cards.

On the 20th March however, Australian search teams revealed that they were carrying out their operations in an area of the southern Indi-

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an Ocean about 1,500 miles from the Australian coast. This area is unfortunately located in the middle of busy deep-sea shipping lanes making the search increasingly complicated and troublesome, particularly as the days roll on. The Australian defence staff are believed to have spotted a potential crash site via satellite imaging as early on as the 16th, but it took time for these images to be analysed by their operatives. The Defence Imagery and Geospatial Organisation division in Australia, the body which carried out the analysis, has stated that the larger of the objects picked up on the imaging is believed to potentially measure up to 80ft, with the smaller object estimated at 16ft.

John Young, general manager of the emergency response division stated that “The indication to me is of objects that are a reasonable size and probably awash with water, moving up and down over the surface.” This is a clear suggestion that something is there, be it MH370 or not. The Royal Australian Air Force would seem to be relatively confi-

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dent about MH370’s location however, as Hercules C-130 aircraft are being deployed to carry out imaging and searches, with Air Commodore John McGarry justifying the diversion of tactical resources by concluding that this area is a promising lead to finding what may indeed be the wreckage of MH370.

If this location in the Indian Ocean does turn out to be the crash site of MH370, the grisly work of recovering the remains of passengers and crew will begin along with the search for the plane’s flight recorder, or black box. With hundreds of angry and confused family members grieving for their missing relatives, the information contained on MH370’s flight recorder will be of keen interest if it is found. While the information contained on this device cannot bring their lost loved ones back, it is the strongest hope for finding out just what happened to make MH370 disappear.

24th March 2014 Issue 4 Vol 3

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News & current affairs

The Bull 24.03.2014

vital indicators

0.2%

Consumer Price Index

11.9%

Unemployment rate

1.5%

GDP percentage GROWTH (LATEST)

124%

National debt as a percentage of gdp

€3.44bn Trade Surplus

Massacre in Nigeria

Chinese Train Terror

Nigeria has been rocked by a number of terrorist attacks in the NorthEast of the country. Two bombings in the city of Maiduguri left an estimated 50 dead. Hours later the village of Mainok was attacked and destroyed, leaving 39 dead.

Separatists have been blamed for a terrorist attack in the Chinese city of Kunming. The knife attack at a busy railway station left 29 dead and an estimated 130 injured. Local officials have placed the blame on separatists from the Xinjiang region.

Islamic separatists from China’s controversial Xinjiang province have been blamed for the recent terror attack in Kunming, China that left 29 people dead and 130 people injured in a mass With thousands killed, jihadist group Boko Haram stabbing. continues to carry out atrocities in Nigeria.

by Stephen Cook ing of football fans watching a match on TV. The second went off as people tried to help the original victims.

Many of the victims are thought to be children.

It is likely that both incidents were carried out by the Islamic group Boko Haram. The group has been waging a four year campaign to establish Islamic rule in the north of Nigeria. In the past Maiduguri has been a target of the group.

The attacks may come as a response to the Nigerian military stepping up operations against Boko Haram. For the past few weeks government jets have been bombing suspected Islamic strongholds in the area. The airstrikes have proved controversial with allegations of collateral civilian casualties.

Boko Haram’s interpretation of the Koran includes a ban on participating in any form of political or

Religion has often been the source of sectarian conflict in Nigeria. The number of Christians and

An unconfirmed number of black clad attackers wielding knives stormed the station stabbing wildly.

Government controlled media is reporting that police killed at least 4 suspected terrorists. Security forces also captured a female suspect who is now being treated in hospital.

Meanwhile, a massive manhunt is underway to find any remaining attackers.

The attack has been condemned by the Communist party leadership as they prepare for the annual National People’s Congress. It is now expected that domestic security will dominate the agenda with regional problems spilling on to the national level.

social engagement with western society. This includes participating in elections, receiving a secular education or wearing shirts and trousers.

Therefore they oppose the Nigerian government in general, even when the President was a co-religionist.

Loosely translatable as “Western education is forbidden” Boko Haram have been responsible for numerous attacks on critics of their reading of Islamic beliefs.

The attack on Mainok involved small arms and is said to have left no building standing in the village. It is believed that the group left none untouched including women and children.

The earlier attack on Maiduguri saw two bombs explode in a densely populated area of the city. The first explosion took place near a gather-

Muslims is estimated to be very similar. The division is organised largely on geographic lines with Muslims concentrated in the north and Christians in the south. The country which is the largest in Africa also faces divisions within both religions with a diverse range of sects existing in the country.

Islamic extremism in Africa has been on the rise in recent years which has seen an increased emphasis placed on combating it by the Americans. Confrontations between pro-west groups and Islamic extremists have occurred in countries like Somalia, Mali and Nigeria. There has also been concern over immigrants from these areas returning home to be radicalized.

by Chris Davies

Many Uighur separatists claim that Xinjiang is not legally part of the People’s Republic of China, having been under occupation since 1949. They refer to the region as East Turkestan.

This is not the first major incident caused by one of these groups.

In October an SUV carrying three separatists crashed into a crowd and burst into flames in Tiananmen Square. In what appears to have been a suicide attack the three terrorists and two bystanders were killed. The East Turkestan Islamic Movement claimed responsibility for the attack which also left 38 people injured. The Communist Party tried to keep the incident under wraps, even confiscating BBC footage of the incident. However details of the events leaked out over the internet.

The attack in Kunming is similar to an attack in June last year in Shanshan, Xinjiang. Wielding knives a number of separatists attacked and killed two police officers and twentytwo civilians. Eleven of the attackers were also killed. The assault was in response rioting in Bachu, itself triggered by restrictions on the Uighur’s Islamic beliefs. This attack was itself thought to be the actions of the East Turkestan Islamic Movement and this may point who is responsible for this latest attack.

China has blamed veterans of the Syrian Civil War for adding greater extremism and capability to the separatist movement. However, they have not proved any evidence to support this claim. China has supported the Assad regime during the Civil War.

Domestic security and the problem of separatists in Xinjiang have proved to be growing threats for China. The separatists are based around the Uighur ethnic group that once represented a majority in Xinjiang but with increasing internal migration, ethnic Han’s now only make up 45% of the region’s population. The Uighur’s are Muslims who have had their religious beliefs suppressed

by Beijing. This has led to the emergence of a number of Turkic Islamist militant groups and it remains unclear which are behind this attack.

CONTRIBUTORS Editor Edward Teggin Deputy Editor Sean Tong Layout & DESIGN EDITOR Mena Eskander Sch. MANAGEMENT Reuben Whelan

SUB-EDITORS Niall Casey Lara Connaughton Peter Martin Duncan Moss Timothy Munier Eoin O’Drisceoil Callum Trimble-Jenkins Patrick Vaughan

This publication is partly funded by a grant from DU Publications Committee.

This publication claims no special rights or privileges.

For advertising, please contact thebull.tcd@gmail.com.

Serious complaints should be addressed to: The Editor, The Bull, Box 31, Regent House, Trinity College, Dublin 2.

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NEWS & CURRENT AFFAIRS

The Bull 24.03.2014

Unrest in Venezuela Student protests in Venezuela have triggered a wave of unrest across the country as Venezuelans take to the streets to protest. With hundreds of arrests and 28 deaths over the past month, what will be the end result for Venezuela?

by Callum Trimble-Jenkins Protests over the last month in Venezuela have left 28 people dead as pressure mounts on President Nicolas Maduro. The protests originated in the west of the country when students took to the streets to demand better protection after a female colleague was allegedly raped.

The unrest spread after the protests in the state of Tachira was broken up by police, with demonstrations spreading to the capital Caracas.

Protests in Caracas quickly turned violent with 3 people being shot on the first day of protest the 12th February. Students in Caracas have been joined by members of the opposi-

tion grouping, Table for Democratic Unity. After over 500 protesters were arrested in the early stages of the unrest, more moderate members of the opposition joined the demonstrations including Henrique Caprilles. Mr Caprilles is the elected leader of the opposition who lost to incumbent Nicolas Maduro in a tight presidential election last year. This signals that the protests are made up of members of the middle class who tend to be more conservative than President Maduro’s natural supporters who come mainly from the working class.

The demands of the protesters

WARREN BUFFETT’S Berkshire Hathaway announces record annual profits Warren Buffett’s Berkshire Hathaway recently announced record annual profits. The investment firm made profits of $19.5bn in the last fiscal year. This is an increase of $5bn from last year.

The increased profits were put down to the firm’s success in the insurance, rail and energy businesses.

The firm increased its share in Coca-Cola, American Express and IBM, while reducing its share in Tesco. Investment from Berkshire Hathaway is highly sought after as it is taken as a sign of security from the market with many other investors taking their cues from Warren Buffett.

However, Mr Buffett himself admitted to making mistakes in his reading of economic conditions over the last 12 months especially in the manufacturing sector. These may account for Berkshire Hathaway’s dis-

appointing performance in the stock market with it underperforming the S&P 500 share index for a fifth consecutive year. Mr Buffett put this down to the strength of the market in general and said that it was to be expected; perhaps a further sign of the American economy’s recovering.

However he did expect to outperform the index over the long term six year cycle.

Forbes Global 2000 ranks Berkshire Hathaway as the ninth largest publicly traded company in the world while Warren Buffett is considered the fourth richest person also

by Forbes.

The Nebraska based company was particularly happy with its large acquisitions over the last fiscal year including the $28bn takeover of food giant Heinz.

by Cheryl Carter

vary between the groups involved.

Initially the protests began with demands for improvements in public safety and dissatisfaction with record inflation standing at 56.2% p.a.

This has been further supplemented with demands that the estimated 1,000 demonstrators that have been detained since the beginning of the unrest be released. Many more of the protesters are demanding greater freedom of speech and accuse the government of a media blackout over the demonstrations. There are also a hard core involved who have promised not to leave the streets unless President Maduro leaves office.

Nicolas Maduro was previously Vice-President before winning the Presidency after the death of his close political ally, Hugo Chavez. Indeed he is a close follower of ‘Chavismo’ - the mixture of socialism and populism that kept his predecessor in power for so long. Since taking office he has struggled to deal with economic problems that are crippling the country and fuelling dissent. The last year has seen ordinary Venezuelans being forced by shortages to queue for items such as milk and toilet paper. Mr Maduro has followed another favoured tactic of Hugo Chavez in blaming the US for being not just behind the pro-

tests but also causing the violence to further inflame the situation. The government have labelled the opposition as fascists who are trying to overthrow the government.

The government’s response to the protests has drawn criticism from both the UN and the Vatican, however the loudest criticism has come from the US. The US has a history of animosity, particularly with former President Hugo Chavez and has accused the government of using them as a scapegoat for the internal problems that lies behind the strife.

Britain’s newest garden city It was announced by United Kingdom Chancellor George Osborne that Britain is to pursue the construction and development of the first garden city project in about one hundred years; a garden city being self-contained communities to provide housing in the suburbs surrounded by green-belts, or put more simply: zoned land specifically assigned to nature and wildlife.

This garden city is to be located outside of Ebbsfleet in Kent, and will see up to 15,000 new dwellings being constructed in the development.

Estimates for the number of people who will be accommodated by this new development are between 23,000 and 34,000, a comparatively

large increase for the area which was up until now comprised of former industrial brown-field sites.

The Chancellor’s rationale behind this move is that it is a step towards getting Britain building once more, thus acting as a catalyst for employment and economic stability.

Though this planned development has been criticised by Labour’s Shadow-Chancellor, Ed Balls, as being “Too little too late”, it should be noted that planning was given for 6,000 new homes to be built in the Ebbsfleet Valley area in 2007, and as yet only 300 of these have been constructed. There is clearly a planned vision of population development in this direction, as the construction of the garden city demonstrates, yet

criticism is levelled at the government for failing to deliver on housing construction which was only ever in the planning stage during Labour’s tenure.

Ahead of the budget statement scheduled for the nineteenth of March, the Chancellor indicated that the ‘Help to Buy’ scheme would be extended to 2020, allowing for the construction of 120,000 new homes over the coming years. This, it is suggested, is in addition to the planned residences in the garden city at Ebbsfleet.

by Ger Healy

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FEATURES

The Bull 24.03.2014

The ANC’s Subversive Campaign in Apartheid South Africa

T

he world’s media devoted acres of coverage to the legacy of Nelson Mandela in the wake of his death in December 2013. Images of the smiling great statesman were visible across the board. The coverage was so homogenous that the use of a painting of a young Mandela by the New Yorker sparked widespread comment. The painting by Kadir of a defiant young man with a clenched fist was, in the artist’s words, “a simple and bold statement about Mandela and his life as a freedom fighter.” The idea of Mandela and his comrades as freedom fighters has almost completely disappeared from the public discourse, with the image of the peacemaker and statesman reigning supreme. I suggest that there are multiple reasons why this sanitised version of South Africa’s history is that which we have become most familiar.

In 1987, Margaret Thatcher denounced the African National Congress as a “typical terrorist organisation”, comparing it to the IRA and Yasser Arafat’s PLO, both of which it is said to have shared links with.

Were she discussing these groups in a purely academic sense, it would be difficult to argue with Thatcher’s assertion. While terrorism is a contested concept, it can broadly be defined as the use of premeditated, politically motivated violence perpetrated against non-combatant targets by sub-national groups or clandestine agents, usually intended to influence an audience. It is undeniable that the tactics used by Umkhonto we Sizwe (MK), the armed wing of the ANC, fell into this category. The ANC, in 1980, became the first national liberation movement to sign the Geneva Convention, modified three years earlier to include guerrilla wars, yet they continued to target civilians and public places. A bomb in Preto-

Lessons from a troublemaker

I

I do not intend to criticise the ANC for the use of these tactics, I simply wish to figure out why the public discourse about their history finds relatively little room for discussion concerning their use of violence in comparison to the regular referther replied to a summons from the Magistrate Court declaring, “I will not come, I am still girding for battle”.

by Liv Moloney n today’s world the characters of politics have disappeared, there’s no Churchill, Gandhi, Che Guevara, De Valera or Thatcher. For better or worse, these leaders and revolutionaries mobilized masses, encouraged political debate and induced change. Obama has not lived up to expectations, the Middle East is vying for effective governance and western European politicians have become marred by stories of corruption and political stalemate. Therefore, globally, leaders and citizens alike have something they could re-

ria in 1983 killed nineteen people, prompting criticism from the then imprisoned Mandela. Car bombs exploded outside bars in Durban and a court in Johannesburg. In 1985 a bomb placed in a waste paper bin in a shopping centre in Amanzimtoti killed five people, injuring fortyeight others. Mines were placed on white-owned farms, killing numerous black farm labourers. They were also placed along border areas, one such explosion killing six holiday makers in a game reserve, four of whom were children. It is undeniable that these incidents can be classed under the broad umbrella of what is deemed “terrorism.”

ally learn from Nelson Mandela, who was without a doubt one of the most inspiring and effectual leaders of many generations.

Mandela’s birth name was Rolihlahla, a Xhosa word that translates as “troublemaker”; a name he proudly lived up to throughout his life. At an early age Mandela learnt to challenge authority from his own father, who had his privileged chieftainship taken away from him by British colonizers after acting in defiance as a matter of principle. Mandela’s fa-

Make no mistake; breaking the rules should not be done lightly.

Mandela however, was a troublemaker for peace. He utilized his 18 years in prison as an example of precisely what was glaringly wrong with the apartheid system in South Africa, and through this example, tore the very same system apart.

Mandela knew the power of conviction, patience and principle. In jail he did not antagonize jail guards but befriended them. Initially all he demanded was long trousers, so later he could demand much more.

When offered freedom in 1985 by President P.W. Botha, he declined on principle saying, “What freedom am I being offered while the organization of the people remains banned?

ences to the Provisional IRA or the violence of the PLO which are littered throughout discussions of people such as Gerry Adams and Yasser Arafat. One argument concerns the death toll. Between 1976 and 1986 approximately 130 people were killed by MK violence in South Africa.

This number, while relatively small in comparison to the other two cases mentioned, is significant enough to warrant discussion. The argument that the situation in South Africa was such that the ANC were right to choose violence stands on shaky ground. This argument implies that there is a threshold of oppression beyond which violence against civilians is legitimised. There is a gradation of both violence and oppression, with death being legitimised whence the two extremes meet. If this is the case, who decides when murder becomes legitimate?

reasons why the image of the ANC which is placed in front of us is that of a smiling old man, rather than a young defiant figure. Firstly, there is an element of what could be crudely termed “White Guilt.” It is difficult for the Western world to condemn the actions of those whose oppression they did little to end for such a long period of time. Secondly, the difficulty to condemn the use of political violence by the ANC may, in turn, be seen to implicitly legitimise the use of these tactics by other socalled “subversive” groups. Therefore, the decision is made, whether consciously or sub-consciously, to simply ignore the issue at hand. One man’s terrorist is another man’s freedom fighter. It is essential for some that they ensure the line between the two is never blurred.

I argue that there are, in fact, two Only free men can negotiate. A prisoner cannot enter into contracts.” It is through these provoking and inspiring actions that one man was able to seduce an entire state and global politic from a solitary cell. Even after being made free, despite calls from many of his supporters and indeed even his own wife, he turned his back on militancy and violence; choosing to lead rather than be led.

in court wearing full tribal dress, including an animal-hide cloak, a headdress and a wide-bead necklace in the gold, green and black colours of the ANC, just to make a point.

As the new President, he did not just maintain whites’ rights under the constitution, but backed the ‘Springboks’ World Cup bid and used sports to bring the racially divided country together.

But perhaps most significantly of all, Mandela possessed an unparalleled charisma and flare in his actions. He charmed, amused and gained the respect of even his enemies. As a known master of disguise he evaded capture from the police for 18 months with the nickname the ‘Black Pimpernel’. When finally arrested in 1962 he was dressed in a full chauffeur costume. On trial, representing himself, Mandela arrived

If you want to effect change and inspire, you need to be stubborn, defiant and sometimes a bit of a rebel.

Mandela never failed to appreciate the importance of a symbol, and it is these rousing actions that turn a great troublemaker into a legend.

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FEATURES

The Bull 24.03.2014

Neutrality at point of sale

S

o there I was, in JFK’s Terminal 5, queuing up to buy magazines and ‘candy’ for the connection flight home in a small yet bustling newsagents. As I handed over my prospective purchases, the cashier took the items and I readied myself to part with what was left of my dwindling supply of dollars.

“Ma’am, would you like to support our U.S. troops?”

I looked up from the American currency I had been counting, in not so much sheer, but more so groggy disbelief. Convinced I had misheard, any notion of ‘excuse me?’ or even a ‘pardon’ flew out the window as a ‘wha??’ escaped from my befuddled lips.

“Would you like to purchase a gift you think one of our soldiers would appreciate? We have a range of Item Donations, from $1-$5”. Her hand waved over an array of confectionary, books, deodorants and other pieces of miscellaneous merchandise.

I was tired, I was confused, and all of a sudden the twanged and drawling question of ‘Do you support our war effort, ma’am?” was being posed.

For some reason, this proposition differed from a subtle and taciturn charitable donation box at a check-

out, or even a nondescript bag-packer collecting for a local sports team in a supermarket. Not only was this verbal, but this was controversial.

Being Irish, being female and still technically in my teens, I panicked.

My brain had skewed all perception of my apathetic commercial environment, and it genuinely felt as though those behind me in the queue were watching and listening, waiting to judge me on what I did or did not stand for. Slightly irked, a distinct sense of being unfairly ambushed was palpable.

Yes, I had some surplus legal tender belonging to the U.S.A. that I could in theory part with for this cause – but was it a cause I believed in? I was not a citizen of this nation, where militant life is glorified and revered by many – so why was I, the passer-by, being invited to get involved, albeit on a micro scale?

How could I possibly pull an ‘Ireland’ and remain neutral, when I was destined in that moment to be either a scrooge or a supporter - buy or don’t buy, do or die?

This could sound all very dramatic, but it had me considering about the ways in which our political views are pinned onto us, and on what platforms that this matters. Let’s say I was fully behind the endeavours

of U.S. troops, which are ongoing in roughly 74 countries, be they in Afghanistan or Iraq, Kosovo or Kyrgyzstan.

Leaving the supposed or intended minute benefit my small offering would bestow to one side, what impact would this decision have?

Would the other international (or indeed domestic American) customers witness a girl, an Irish person, someone middle class, a European, give the thumbs up to combat and hostility under the euphemism of ‘national defence’?

These observations could add to or detract from existing stereotypes attached to any of these aforementioned demographics. Furthermore, I would be either reaffirming or contradicting my own internal value system, an integral part of what constitutes my personality and identity.

When we choose to make a conscious vote for or against a motion, who notices? Can we take sides in a gentle and retrospective way - not unlike the pinning of poppy badges in November – or are we being pushed into more urgent appeals and current platforms, the slapping of a messaged sticker on the boot of a car?

When we ‘like’ something on a social media site such as Facebook,

does that mean that that opinion is broadcast by us, and thus attached to us? Moreover, if you write a status on a certain issue or topic, or ‘share’ an article relating to it, do these actions bind us to what beliefs we are perceived to hold dear? These cyber occurrences could be viewed as either passing ships, or else they could be received as concrete- more permanent and traceable than a comment made about religion, abortion, gay rights, or even war to a group of one’s peers.

Take the SU elections for example – Trinity’s own battle of political contention. If sets out to student campaign by wearing a t-shirt of a particular candidate, or handing out flyers, does that tie that individual to the cause more so than another who merely ticks the same candidate’s name on the ballot sheet come Election Day? Of course it does. Both may have fought the same fight with the same outcome in mind, but the time, efforts and resources invested by the former far surpassed the latter’s.

Maybe I was putting too much thought into how private or public this random act of kindness would be. Who am I to pass judgement on an anonymous man or woman – who could very well have signed up to the war effort to receive the edu-

cation which would otherwise have been denied to them by the star spangled banner that spends more on guns than on books, on tanks than on teachers.

In Ireland, if you mention the war we only hear buzz words - ‘the war on terror’, ‘Bush administration’ ‘the Taliban’, and see little more than khaki kits in foreign lands. Some nerve had I, the middle class-white Irish girl to feel ambushed, when there were people in actual danger, who were doing their best at what they believed was the best manner to protect their country. Realistically, were a uniformed soldier to walk up to me in that airport (or on any other territory for that matter) and request a commodity as simple as a drink of water or a tissue, I wouldn’t treat them any differently than I would a civilian.

So I raised the white flag of a green dollar in surrender, and decided that nobody would live or die based on the purchase of a packet of sugar-free gum.

by Lara Connaughton

Out of term interns With the academic term nearing an end, Niall Fitzgerald weighs up the pros and cons of summer internships.

A

s we near the end of the academic year and enter into the dreaded exam season the thought of summer holidays often provides students with a temporary moment of relief. When it does eventually arrive the summer break provides many students with a welldeserved period of rest during which they can pursue leisurely activities such as reading, socialising and travelling. However, with the growth in popularity of internships, many students now spend a large part of their summer break completing internships. The value of having completed an internship is clear. Employers have more time to assess whether or not an intern is suitable for a position at the company. Moreover, internships provide a mechanism through which employers can market their company as opposed to a rival company. For students, an internship can provide insight into a company and the industry as a whole. This insight is essential in that it can confirm that this is the industry that they wish to pursue a career in, or that it isn’t the

right career for them. Furthermore, having an internship on a CV can really enhance that said document. If the internship is relevant to the job or masters that you are applying for, this can demonstrate a concrete interest in that line of work or area of study.

However, when talking about internships it is important not to look at internships solely through rosetinted glasses. Although the benefits are many, internships do have their disadvantages. For a start, internships can be stressful and testing on many levels. During that first week, it can be a real challenge to find one’s bearings between trying to remember so many different names and attempting to recall everything you were told on the first day about the computer system and the printers.

In my experience, it is worth getting to know some of the younger, less-senior employees who have been in your position and can empathise with you. In a similar vein, it is worth getting to know your fellow interns. Rather than seeing them as competitors for a limited number of

positions, fellow interns should be viewed as potential new friends. It can be refreshing getting to know students from different universities and courses.

Looking back on previous internships that I completed, I have good memories of socialising with my fellow interns at different events organised by the company or simply meeting up for a morning coffee.

Increasingly, how well you mix with your fellow interns is something that an employer will take into account when deciding which interns to retain and hire. In most cases, when deciding between two equally able candidates, any logical employer would clearly go for the candidate who is able to mix and be polite rather than the candidate who refuses to make any effort to get to know their fellow interns. The ability to mix with fellow interns and to be friendly is therefore essential for any prospective intern. In addition to all of this, it is worth arranging to meet with those who interviewed you for the internship. This will demonstrate that you really appreciate having the

opportunity to complete an internship with the company, and in addition your interviewers will more than likely provide you with some good advice about the internship and the company.

One of the key elements that is often omitted from the debate on the value of internships is the opportunity cost of completing one.

That month or perhaps two or even three that you will spend completing an internship or internships is time that you will never get back. It means less time to travel, less time to relax and reflect and less time to catch up with family and friends. It is important to remember that there is a point at which the law of diminishing marginal returns will set in. There are only so many internships that one can undertake and put on a CV. It is common knowledge that employers seek candidates who have bespoke CVs and applications. The implication being that having numerous internships down on your CV will not automatically entail the offer of a position on a graduate recruitment programme. Instead it is necessary to

have other achievements on your CV and to show that you have other life experience. Consequently, it might be worthwhile to consider spending part of your summer travelling or volunteering, or both, rather than sticking purely to the internship scene.

Furthermore, as I mentioned earlier, internships can be quite stressful.

Therefore it is ill advised to spend the whole summer completing internships especially after an intensive exam season. Consequently, if at all possible, prospective interns should limit the number of internships that they undertake so as to have some time to relax after exams and before starting back in college. In this way the unpleasant consequences of overworking such as burnout can be avoided while interns can achieve their optimal performance in the workplace and at college. Like so many other things in life, moderation is key in this dynamic and growing internship culture.

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Features

The Bull 24.03.2014

Rugby en Refereeing the gentleman’s sport France

W

ith the singing of now former England fly-half Toby Flood from Leicester, Toulouse have edged the financial power struggle in European rugby even further in favour of the French teams and the Top 14.

Though Flood is no longer at the pinnacle of English rugby, his transfer out of the English Premiership is another blow to the more conservative spending patterns of teams in England, Ireland and Wales. Flood is merely the latest in a long line of rugby players who have been lured to France by the promise of a far superior wage. Irish rugby fans know this all too well with the loss of Jonathan Sexton to Racing Metro.

It is not the fault of the clubs that players are leaving however; it simply doesn’t make sense to pay an exorbitant wage for a player who could very easily pick up an injury in what is an increasingly physical sport. Clubs and provinces just don’t have the same kind of resources which the Top 14 teams have been receiving over the past few years.

Even if we take a figure from an earlier stage of Top 14 spending (the 2011 / 2012 season), it can be seen that four clubs in the French league: Clermont-Auvergne, Racing Metro, Stade Francais and Toulouse had budgets in excess of €20m. To the quick glance such spending may appear more likely to be associated with professional soccer rather than rugby, but such figures are here to stay and are only going to rise.

The rising costs of which I speak are primarily to do with the increasing number of foreign players entering the French league, and the wages which they demand. Such an increase in wages being paid is represented by the increase of the Top 14 wage cap from €8m per annum in 2010 / 2011, to €10m per annum for the season just gone (2013 / 2014), continuing until the 2015 / 2016 season when it will more than likely rise once again. That is not to assign any blame to the players who are venturing abroad in search of a better living, it would be most unfair to criticise these men for taking a golden opportunity which is offered to them; the average rugby player’s career does after all only last until his early thirties.

Such an influx of foreign players into the French Top 14 has, inevitably, led to an increase in the competitiveness of French teams, the 2012 / 2013 final being an all-French affair between Clermont-Auvergne and Toulon. What French Top 14 teams seem to have gained from this defined influx of foreign players over the past few seasons, the French national team would appear to have

lost out on. More and more Top 14 teams are fielding squads which only feature a smattering of French players, the rest being made up by foreign imports. What such a club policy has done is lead to a weakening of the national team due to the stagnation of youth development through the professional clubs.

Whereas France were by no means pushovers in the championshipdeciding fixture a couple of weeks ago, their form over the past couple of seasons has been decidedly mixed: a wooden spoon last season being a particularly galling prize to have won for so great a rugby nation.

Closer to home, the English Premiership would appear to be thriving,

R

efereeing is often regarded as one of the most thankless jobs there is. After all, only one team can win and the players and fans on the losing side will seek a scapegoat for their team’s failure. The targeting of the referee is a no brainer in

and abuse to be directed at referees officiating at junior level matches. At these levels the coaches and referees are often ordinary club members who are giving up their time to contribute to the development of the next generation of rugby players at their clubs.

For

them to be treated in such a manner is, at best, disrespectful.

with o n l y a couple of clubs such as Saracens receiving additional investment. The plight of Welsh clubs is well documented, with many of their best and brightest leaving, the latest being the mercurial Leigh Halfpenny; just how much further the WRU can fall is unclear at this point. And of course the Irish provinces appear to be in rude health, with a continued policy on youth development serving to keep us competitive and the source of much envy. It would be a shame at this point if home nations rugby was further eroded by tempting offers from France; a journey in the direction of professional soccer is not one which this fan wishes to see rugby take.

by Michael Alexander

this regard; it is his/her interpretation of the situations occurring in a match which will dictate the flow of the game and potentially, its result. Considering this, the referee is surely the most vulnerable person on the pitch, particularly at the lower levels where there is no security detail to ensure hecklers do not interfere with him/her.

Whilst any true supporter of the game will agree that the referee must be respected at all times, there is it would seem, a growing tendency within the rugby community to openly criticise and intimidate referees. As has been said, it is inevitable that a given set of fans will disagree with refereeing decisions, but the startling new trend is for criticism

Whilst some may defend their actions by stating that they were frustrated by the way in which a referee was managing the flow of a game, or even question a referee’s understanding of the rules, it must be remembered that all who are involved in youth rugby are bound by the IRFU child protection guidelines. That is, that: “verbal abuse of players or referees cannot be accepted in any shape or form.” Worryingly though, this most basic of instructions is commonly flouted. One of the more high profile incidents to have occurred was in the Auckland suburb of Papatoetoe last year. The incident in question involved a parent rushing onto the pitch and grabbing the referee by the throat; this occurred at an under10s match. Apart from the obvious legal implications involved with assault, the individual in question not only set a terrible example for young rugby players, but also made a mockery of the club’s child welfare policy.

How then do we attempt to tackle the issue of side-line interference at youth level? The first course of action to be looked at is the uniform training of coaches and referees so that they have both the knowledge and confidence to effectively referee a match. This could easily be done at one’s own club using training materials recommended by the IRFU with an experienced referee in attendance - most clubs have at least one.

The training of our youth referees would go some distance to preventing conflict situations ever arising, whilst also providing a better rugby experience for young players.

The centre of the issue however, does rest in the crowd. Very often the troublemakers are parents and club members known to club officials and coaches. With this in mind, it is easy to see how a club official may be tempted to either avoid confrontation with a club member, or simply laugh it off as an old-boy taking the game too seriously. Both actions are quite simply not good enough. Before a club season starts, all members need to be made aware of the IRFU guidelines which outline the various roles and responsibilities associated with youth rugby. Those who ignore or bring these guidelines into disrepute should be reprimanded and possibly banned from attending matches.

This is the only way in which any real control can be exerted over ignorant behaviour in the crowd.

It is, however, unlikely that many club committees will be willing to ascribe to such a plan. Measures such as the above would be seen as laughable and over the top by many club members, both old and young; the fact that these guidelines come from the IRFU itself seems not to matter. In this way, it could be said that those ignorant people who verbally assault referees are being failed as badly in terms of the example being set by their clubs as they are failing to set examples for their children.

by Edward Teggin Editor

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8

FEATURES

The Bull 24.03.2014

The Lion of the East

A

Trinity’s Indian Society

s many of the readers will be aware; Trinity College celebrated the Holi Festival two weeks ago in Front Square. Four hundred students gathered to dance and celebrate the coming of Spring, with the university Ents Officer, Sean Reynolds, on the decks blasting out some Bollywood tunes. The society decided to use the event to host its annual fundraiser; this year’s chosen charity being Suas. The participants managed to raise 800 euro, which was presented to Suas by the Indian Ambssador, Radhika Lokesh. The event received widespread media coverage, appearing on the front page of the Irish Times the following day. It has become one of the must see events of the year in the Trinity Calendar.

Trinity Indian Society. Initially envisioned as a method of building an Indian community within the college; the society secured a loyal membership base of foreign students from India who were looking for their “home away from home”. As such, the society provided some cultural entertainment through movie and food nights over the course of the year. As the students settled in Ireland, their need for this external support dwindled, and thus the demand for additional events never existed. As the initial excitement of a new society passed, the society experienced little growth over the coming years, attracting the same veteran members at Freshers Week and poaching the young foreign Indian students who eagerly entered the college gates in September.

Thus, as the end of the academic year approaches, I wanted to take this opportunity to look back at how the Trinity Indian Society has made itself a household name within the university. With over 700 “likes” of its Facebook page, over 250 members, and a Holi event that sold out in 3 hours; the Trinity Indian Society has finally arrived in Trinity College.

Five years on the society today represents so much more. The Constitution of the society, enacted last November, sets out the aim of the society to “carry out the role of developing cultural, social and educational links between India and Indian culture, and the students and staff of Trinity College Dublin.” While those objectives may seem rather vague and broad, the fundamental essence captured by those words is that of “interculturalism”. As globalization continues to restructure our

In 2009, several Indian students who had come to Ireland to study in Trinity College decided to set up the

societies, the mere passive acceptance of diverse cultures has had to evolve. Cross-cultural interaction and dialogue have become essential in maintaining both our personal and business relationships. This new proactive movement towards building cross-cultural relations has been integral to the transformation of the Trinity Indian Society.

The question beckons: what does the Trinity Indian Society do? Lead by Servesh Muralidharan, chairperson, a PhD student in Computer Sciences; he recently stated “I wanted to bring the Indian culture and festivities to Trinity, and act as a platform for Indian Students to interact with Europeans.” To this end, it was a year where they kept many old traditions and created some new exciting ones.

The events this academic year can be classified into two categories as per the constitution; (a) cultural and social functions and (b) educational endeavours. The cultural activities have been achieved through hosting several festivals (Holi and Diwali Festival), introducing Indian sports and recreational activities (Kabbadi and Bollywood Dancing), and exposing students to Indian food (several events with Indian food).

While the society’s primary purpose is an exposition of Indian culture, the recent influx of Indian students and the building of relationships with Indian institutions by the college have resulted in the creation of this second limb “educational endeavours”. The committee members this year were tasked by the university as being ambassadors of the university; as such they were involved in receptions in the Provost’s House and Indian Embassy, and in discussion panels such as the Trinity Long Room Consultation Series.

With over 250 members (almost double what the society had last year), the expansion of the society has had its hurdles. Of particular hardship was the task of diffusing any perception of exclusivity or racial requirements in becoming a member of the society. While it is an issue that Servesh feels will continue, he states that the society has made several progressive steps in removing that stigma. One successful technique has been the increase in collaborations with other societies.

Whether it was Bollywood Dancing with DU Dance, or a debate on the British with the Historical Society; the exposure and perceived eagerness to collaborate has helped attract a diverse range of students.

While the society remains within the category of a “small” society in the university, the achievements and improvements in the society did not go unnoticed. Nominated for the first time in the CSC Society of the Year Awards, the Trinity Indian Society was shortlisted for; Best Small, Best Improved, Best Societies Choice, and Best Individual (Raaj Zutshi, Public Relations Officer). While the society narrowly missed out on obtaining one of the awards on offer, Servesh, is very optimistic about their prospects next year. When asked about his hopes for next year, he responded, “I obviously want us to continue to grow our membership base, but I also look forward to us developing our other events apart from the festivals. I particularly enjoyed the collaboration with the Hist this year and would love to see if we can do something similar next year”.

The Trinity Indian Society may have celebrated its 5th birthday this past January, but it feels like something new and exciting. We can only hope that it continues to expand and surprise us next year.

by Raaj Zutshi

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FEATURES

The Bull 24.03.2014

What you’re doing?

I have been working as a ski instructor in Ischgl (Austria). Ischgl is a very large ski resort (238km of piste), right on the border of Switzerland, voted in the top three party resorts in Austria. I have taught people of all ages and abilities, from beginner adults and three year old children to more experienced skiers. My day typically would consist of going for a ski in the morning, till work started, around 09:00, then I would work till about 15:30, before going for another ski until the lifts closed.

This usually included a run through the fun park (jumps & the likes!) and then the notoriously hectic valley run, with hundreds of tourists racing down to the valley for the famous Aprés Ski. Once down, we would also partake in the Aprés Ski, drinking beers at ski instructor prices and listening to cheesy Austrian Aprés Ski music. Quite a nice way to end a day picking up overweight adults or trying to stop three year old kids who didn’t want to be in the snow from crying their eyes out.

How you did it?

Well I had been studying Structural Engineering with Architecture in UCD for 5 years, got my masters and quite frankly did not want to head into a job sitting in an office for the next 30 odd years of my working life. I am more of a hands-on person and have a real passion for skiing. I have been on skiing holidays with my family since I was about 3 years old, so I guess you could say it was

in my blood! For a number of years before I’d finished my studying I had wanted to become a ski instructor, however, I ended up taking my parents advice and finished my studies first. (At the time this seemed like a bad idea, though I am very glad I finished my education first because now I am free to spend as long as I want out here and to travel the world being a ski instructor). You may be wondering how I actually became a ski instructor, from being an average Irish college student. Well, I found an English company on the Internet who specialized in preparing instructors for the Austrian instructing exams, so I bwooked a place with them on their course. From then it was all pretty easy really – ski every day, learn a little bit of German, a little bit of ski theory and before I knew it I was a ski instructor! (I did have a minor setback in that I broke the 5th metatarsal bone in my foot when I stumbled off a pavement in November – two days before the start of my exams – however I recovered from this injury over the Christmas and was back to re-take my exam in January). As soon as I had passed the exams I was on my way to Ischgl and I have been there for the rest of the season.

Spending patterns in Ischgl

selling €500 bottles of champagne.

Spending obviously increases during the peak season – around Christmas time, February and over Easter – coinciding with holidays in Europe.

As regards economic classes in Ischgl, there is quite a large split. On one end of the scale there are millionaires buying new €1000 ski suits each day of the week (because obviously you can’t be seen on the slopes in the same clothes twice in one week!) and on the other end there are the ski instructors, whose staple dinner are 65c pizzas from the local supermarket. Granted, a reasonable percentage of our wage packet does go on alcoholic beverages, however, there is not much there to start off with. As regards tourists, there are also those who come on a budget, chasing the fantastic off-piste possibilities Ischgl has to offer, or the extensive skiing area. This breed of visitor tends to live in one of the small rural villages up or down the valley from Ischgl, which are a lot cheaper, and are linked to Ischgl by a ski bus.

The more affluent guests tend to be more favored among instructors due to their generous tips (up to €200 for an afternoon teaching) or generous purchases during Aprés Ski sessions.

The skiing industry in resorts like Ischgl is of particular importance to

Ski industry insight Ischgl is quite an expensive resort and as such attracts many very wealthy people from around the world – in particular Russians. As a result, spending tends to be reasonably high at all times of the week, in all areas of the resort – from sport shops selling €1000 ski suits, to nightclubs

the local economies. The areas in which ski resorts are located are very rural, and as a result, the only source of income is from farming – this income coming predominantly in the summer season. Comparably however, the tourism created by the ski-

ing industry brings huge amounts of income to the area during the winter.

The small villages up and down the valley from Ischgl that I mentioned for example provide accommodation in the form of guesthouses for tourists and indeed ski instructors.

These houses would previously have remained empty during the winter, providing no source of income.

Most of the money generated by the skiing industry is foreign money – predominantly from European tourists, though also from others as far away as South Africa. Ischgl is also a very popular resort among Austrians due to its vast off-piste possibilities, however many of these visitors would tend to make the trip on a budget and not spend excessively on luxury items, whereas the higher spending tourists tend to come from outside Austria.

As regards employment, I have found the Austrian market quite easy to break into, primarily because of my Austrian qualifications. There were however other instructors with British and Dutch qualifications who also worked there during the season so it’s not impossible to get in without an Austrian qualification. There are also plenty of other employment opportunities besides teaching people to ski in a ski resort – I met a number of seasonal workers from the UK engaged in various different jobs, such as chefs, chalet hosts, bar staff, etc.

As work in a ski resort is obviously very seasonal, it is also quite easy to get work because each season people come and go – the majority of

workers in the resort are just there for the season. So if living in the mountains, skiing or snowboarding every day, meeting new people and generally having a ball tickles your fancy, even slightly, I would really recommend this as a career choice, even if only temporarily. Despite the pay not being particularly good (or downright rubbish!) you are getting a fantastic way of life! As a wise man once said, “do what you love and the money will follow”. The money hasn’t caught up with me yet though I’m extremely happy here, and that’s what is important in life!

During my time in Austria, between training to be an instructor and working in Ischgl, I have been very fortunate to meet countless fantastic people – people who have encouraged me, people who have frustrated me, people who have coached me, people who have knocked me down and people who have inspired me – and it is these people, along with this fantastic way of life that has made this career choice so perfect for me. I am lucky to be one of those people who can say, “there’s nothing I’d rather be doing right now”, and for me, that’s what life is about – go out there & do what you want to do; we only get one shot at it! It may seem like a big leap, coming from college in Ireland to becoming a ski instructor in the Alps, but trust me, if any part of you wants to do it, you won’t regret it. As they say in the mountains “Schi Heil!” (basically meaning “Happy Skiing!”).

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features - special report

The Bull 24.03.2014

Russia in Crimea Altruism or strategic manoeuvring?

F

orces aligned with the Russian Federation have taken control of the Ukrainian province of Crimea amongst international outcry. The move follows the ousting of Ukrainian President Viktor Yanukovych following months of protesting in the capital Kiev. Mr Yanukovych was forced from office for wanting to strengthen links with Russia over a deal that would have seen the former member of the USSR move closer to the EU. Crimea is ethnically Russian and a key stronghold of the former President who has since fled the country following a warrant for his arrest being issued. On the same day, proRussian gunmen seized the Crimean capital Simferopol, claiming that they were seeking to protect their civil rights and devolved par under the new administration led by former Parliamentary Speaker Olexander Turchynov.

Crimea has been under Russian influence for nearly 200 years, with ethnic Russians making up 58% of the population. They claim that they would be threatened under the new pro-Europe government that has now taken power in the country, a charge Kiev denies.

The gunmen themselves have not been officially identified, with the Russian´s claiming them to be Crimean self-defence forces, while the government in Kiev argue that they are Russian forces. What is known is that they are well equipped and heavily armed, with many wearing Russian uniforms. First seen outside of the province´s main airport, they have now led siege to Ukrainian bases and appear to have effective control of Crimea.

The Russian Parliament have overwhelmingly accepted Russian President Vladimir Putin´s request that Russian forces be used for what he describes as support for the ethnic Russian´s now under threat in Crimea. They have also refused to recognise the new government.

Russia already has military bases in the area including the strategically significant Sevastopol Naval base which is home to their Black Sea Fleet. This has led many to question whether it is these strategic concerns that are the true motivation for Russia´s intervention, rather than any humanitarian mission.

Russia have justified any actions taken in Crimea by refusing to recognise the legitimacy of Nr Turchynov´s new government and providing written approval of inter-

vention from ousted leader Viktor Yanukovych.

The international community has been divided in its response to the crisis. Talks between Russia and the West led by Russian Foreign Minister Sergei Lavrov and US Secretary of State John Kerry have broken down in Paris. Mr Kerry has promised “very serious repercussions” if Russian activities continue. There has also been the threat of economic sanctions.

The G8 which was scheduled to be held in Sochi this summer now appears to be on hold with the other 7 countries refusing to attend if Russia does not relinquish effective control of the Crimean peninsula. This could prove embarrassing for Vladimir Putin but is unlikely to produce the desired effect on its own.

is opposing such sanctions despite supporting Ukrainian territorial integrity. This could be down to the important economic links between the two countries, with Germany importing almost a quarter of Russian gas exports.

ment who branded the move “illegal”.

by Callum Trimble-Jenkins

On Thursday the regional Crimean Assembly voted to join Russia.

If Russia accepts the proposal, they promise a referendum on the issue. However the move has been condemned internationally as well as by the central Uk rainian govern-

A major motivation in the Ukrainian overthrow of the previous regime was the hope of closer ties with the EU; however, the EU is divided on how strongly to respond to the crisis.

Crisis talks are ongoing in Brussels.

There is division between those who want strong economic sanctions and those who don´t. The UK and many eastern European countries are supportive of strong economic sanctions on Russian exports and freedom of movement privileges.

It appears however that Germany

On Reflection

L

ast week the people of Ukraine toppled a dictator.

We are used to seeing the machinations of violent authoritarianism. The bloodshed and repression concomitant with the exercise of power without due regard to the will of the people is no alien to our newspapers and our television screens. Those of us privileged to live in the cosy confines of Western Europe are, however, used to the comfort that such tragedies are the, unfortunate, lot of those that live in lands far removed from our own. We derive comfort from the belief that the tragedies suffered daily by peoples in Syria, in Burma or Uzbekistan will never threaten our own thresholds. The poignancy of recent tragedy in Ukraine lies in its sheer geographical proximity.

The chaos and bloodshed witnessed in Ukraine serves as a stark reminder that the peace and political stability we too often take for granted is a fragile luxury afforded only to the few. We citizens of the European Union who are so insulated from

such turmoil that we can barely comprehend the ramifications are deeply privileged. It is something that we seem to forget too often. Ukraine offers a cautionary tale to remedy such complacency.

An ethno-linguistic East-West divide permeates politics in Ukraine, a country that straddles both the European Union and Russia. Much of the East of the country once formed the heartland of Tsarist Russia, while the West was never part of the Russian empire. While the West is dominated by Ukrainian speakers, Russian is the first language of many in the East. The 2004 Presidential elections largely conformed to these traditional political divisions.

Viktor Yushchenko was the proEuropean candidate whose voters were based largely in the West. His opponent was Viktor Yanukovych who was pro-Russian and whose support was largely in the East of the country. However, there was one further fundamental difference between these two Presidential contenders. Yushchenko, for all his flaws,

was inherently democratic. Yushchenko was not.

After widespread ballot box stuffing, fraud and bribery, Yanukovych declared victory and pronounced himself President. But in late 2004 the Ukrainian people were not willing to accept a stolen election. They took to the streets in great multitudes and demanded Yanukovych step down. For two months and one day the people of Ukraine stood firm on the streets of Kiev. Yanukovych tried to unleash the army on the gathered crowds, but thankfully the order was refused and Yanukovych was ousted from power.

This “Orange Revolution” which removed a dictator purely through peaceful protest must surely rank amongst the most powerful expressions of people power in human history. The jubilation of the “Orange Revolution” was, however, sadly not to last. It is unlikely that any government could have lived up to the lofty expectations raised by the victory of the “Orange Revolution”. Even taking such unavoidable disappointment

a s i n evitable the government led

by President Yushchenko and fellow leader of the “Orange Revolution” Prime Minister Yulia Tymoshenko was characterised by few successes. Tensions between Yushchenko and Tymoshenko produced stagnated, ineffective leadership resulting in a poor handling of the 2008 economic crisis and widespread public discontent.

It must be noted at this point that, as with so many tragedies in recent years, Vladimir Putin played a significant role in the unfolding crisis.

Obsessed with maintaining jealous control over Russia’s “near abroad”, the fall of Moscow’s ally Yanukovych in 2005 was the cause for much concern especially with the avowed proEuropean stance of the Yushchenko/ Tymoshenko administration. 2005-

2006, 2 0 0 7 2008 and 20082009 saw Moscow cut off Ukrainian gas supplies, which continue to flow through Russian territory, whenever it felt that Ukraine was moving too close to Europe.

This resulted in massive increases in gas prices for Ukrainian citizens and greatly exacerbated discontent the country.

In any case and regardless of the role played by Putin, by the time the 2010 Presidential Election

11

Features - special report

The Bull 24.03.2014

Vladimir Putin I came, I saw, I conquered took place Ukrainians were largely dissatisfied with the Yushchenko/ Tymoshenko administration. A change of government was always likely. What was not so easily foreseen was the man chosen to lead this new government. Dissatisfied with the democratic government the Ukrainian people jettisoned democracy and

elected the very dictator they had so proudly ousted in 2005, Viktor Yanukovych. For all their faults, Yushchenko and Tymoshenko were democratic leaders. Their government upheld the democratic institutions of Ukraine. Yanukovych would not. The ill effects of this would be all too readily apparent.

Upon gaining the power of the Ukrainian Presidency Yanukovych

immediately set about accumulating more. He deprived the House of Parliament and the Prime Ministry of much of their power and undermined the independence of the judiciary. He clamped down on political dissent and jailed his erstwhile opponent Yulia Tymoshenko, who he had only narrowly beaten for the Presidency in 2010, on trumped up political charges widely condemned internationally as a gross violation of human rights and as contradictory to any legitimate conception of the rule of law.

For all its faults, Ukraine under Yushchenko and Tymoshenko was democratic. Within months of Yushchenko’s ascent to power, it was a de-

mocrac y n o longer.

Though it has its critics, the European Union has never lost sight of a fundamental truth witnessed tragically in Ukraine over recent months. Only a firm commitment to democracy will ensure our continued enjoyment of peace and political stability.

Despite its flaws, democracy is our only shield against the turmoil that so long engulfed our continent before the European Union. Long may the spirit of Euromaidan live on. Government of, by and for the people above all else.

by Eoin O’Driscoll

I

van Ilyin, a Russian émigré philosopher of the first half of the 20th century whom Vladimir Putin often cites in public speeches, once stated that “We trust and are confident that the hour will come when Russia will rise from disintegration and humiliation and begin an epoch of new development and greatness”.

It is easy to fathom that Putin imagines himself at the helm of Russia’s return to Greatness.

When he first came to power in 2000 he was guided by the postSoviet idea of convergence with the West; membership of the big clubs such as the G8 mattered to him.

Now it seems as though this has changed; driven by notions of Russian supremacy and moral superiority, he sees himself as defender of all Russians and as the sole figure who can reverse the course of history that brought the USSR to the brink.

Under his watch, Russia has broken international law and order and undermined the territorial sovereignty of Ukraine through a military occupation of Crimea. It need not have been this way. In 1954 Nikita Khrushchev, then president of the USSR, put Crimea under the auspices of Ukraine. The decision appeared insignificant at the time; few ripples of objection stirred amongst Russia’s elite. Now however, that decision has brought Europe the closest it has come to a full-scale war since the break-up of the former USSR in Eastern and Central Europe.

Crimea has always been an area of great importance to Russia; it was here that Vladimir I converted to Christianity and made it the state religion of the ancient kingdom of Rus. Due to its geographical proximity, close historical ties, and the location of Russia’s main naval base for the Black Sea at Sevastopol, Russia cares more about Crimea than the West does, and Putin has so far out-manoeuvred the entire legion of Western governments who oppose him so he can get it. He made no public comments after the revolution that saw the legitimate (if corrupt and ineffectual) Ukrainian President Viktor Yanukovych depart Ukraine on February 22nd until the occupation of Crimea was in effect over, without a shot being fired, and Russia in a position of power. Had Putin’s aim been merely to make Ukraine’s economic independence impossible then Putin would have been instantly more vocal, but instead he bided his time.

Furthermore, Mr Sergei Aksenov, rumoured ex-gangster and head of a party that received just 4% of the last electoral vote in Crimea, was appointed as the new prime minister of the semi-autonomous region of Crimea, and immediately called upon Moscow for help as well as setting the date for a referendum on Crimea’s accession into Russia.

After the revolution in Kiev which replaced Mr Yanukovych, the Ukrainian government passed a bill (later

dropped) which repealed the status of Russian as an official language on a par with Ukrainian. The Parliament also failed to bring in politicians from Eastern Ukraine into the new government, fuelling the desires for dissent and feelings of aggravation among the Russian populace in Ukraine. Crucially, Putin has stated that the Kremlin have a duty to protect Russians and Russian-speakers everywhere, allowing Moscow to proclaim, however audaciously, that Russians were at risk in the Crimean peninsula, and hence this was a justifiable and legitimate casus belli. Allowing this to go unpunished would give pretext for intervention across the former Soviet Union, from Central Asia to the Baltic.

On March 1st, Mr Putin asked his upper house in a parliament full of Soviet rhetoric to grant him right to use military force in Ukraine. On the same day he hastily passed a bill through Russian parliament allowing for the integration of new territories if they vote to join Russia in a referendum and if they have an illegitimate government. As of last weekend, the Crimean people have voted in a referendum which has made a sham of democracy. In the referendum there were two options: further unity with Russia or Ukraine. There was no option to retain the status quo. The results were announced on the 18th March with a 97% majority in favour of joining Russia, which allows Crimea to be annexed, becoming the 84th region of the Russian federation. These numbers are impossibly high. A poll held in the region merely a month ago, even after the riots across Ukraine, showed that just 41% of people wanted unity with Russia.

This makes it impossible to assume that a majority – let alone 97% of the population – wanted to join Russia, especially when an estimated 99% of the Crimean Tartars, which constitute 12% of the Crimean population, abstained from the referendum. It is also worth remembering that after the breakup of the USSR, a majority in Crimea endorsed Ukrainian independence.

Furthermore, the absurdity with which Putin claimed that the armed and uniformed militia who seized key strategic locations across the Crimean peninsula weren’t Russian undermined the founding pillars of international order. The occupation of Crimea, a region of 2 million people with a 54% ethnic Russian majority, is of far greater international significance than the incursion into Georgia in 2008 where Russia sought to obtain the separatist regions of Abkhazia and South Ossetia. Russia has just torn apart the Budapest Memorandum, which it signed in 1994, that promised Ukraine territorial integrity and safety in exchange for giving up its nuclear weapons on the grounds that the new government in Ukraine has made the treaty defunct. Had the Crimean

by Duncan Moss

people voted democratically and legitimately of their own accord to become integrated into the Russian federation then the international response should be different however, in Crimea, we have seen a military invasion of Ukraine, a country the size of France with a population of 45 million, and a mock referendum held at the point of a Kalashnikov.

Allowing Putin to act with impunity would set dangerous precedents that go far beyond the reach of Ukraine. Putin expects a stern word of warning but the sanctions must exceed his expectations to prevent him acting in a like manner again. While Russia is not the first country to break international law and invade the sovereign territory of another (need we remind ourselves of the West’s forage into Iraq), the absurd tit-for-tat notion that ‘one good invasion deserves another’ is ludicrous – quite simply, he must be served his due comeuppance. Despite this, the West cannot formulate a unified response in retaliation to Russia’s aggressive and unlawful military occupation of Crimea. So far the sanctions have fallen short of what is needed to perturb Putin; this is reflected in the fact that action is being taken against fewer than two dozen from an original proposed list of 120 people. In addition, the kind of sanctions that would hurt Russia, such as hitting Russian oligarchs or even there companies, particularly the energy firms, are notably absent. The US has called for an economic isolation of Russia, aiming to quarantine the gas sector and the world’s largest gas producer, Gazprom. However, while the US would be virtually unaffected by such sanctions, Gazprom is Europe’s biggest gas supplier and would cripple Europe, and hence Europe has objected strongly.

For as long as all the Western parties maintain their own interests there shall be little appetite in the West beyond diplomacy. No country would be foolhardy enough to risk jeopardising its economy in the name of diplomatic sanctions aimed at perturbing Russia from an ‘Anschluss’ with Crimea; governments desire self-preservation. The West is not about to go to war over Ukraine – not enough of its interests are at stake to risk a nuclear war – and Putin knows this, thus allowing him to act with impunity. However, the possibility of all-out war between Ukraine and Russia still hasn’t been ruled out. Let us only hope that this is not the calm before the storm.

In 2009, after personally aiding to get Ilyin’s remains re-buried back in Russian soul, Putin went to consecrate the grave himself. During the event, full of nationalist fervour, he stated that “It’s a crime when someone only begins talking about the separation of Russia and the Ukraine”; in Putin’s eyes, perhaps Great and Little Russia need not be divided for much longer.

12

ECONOMY

The Bull 24.03.2014

Privatisation of Ireland’s ports As an island nation with a small open economy it is essential that our transport infrastructure is of the highest possible standard. It goes without saying that if any solid economic recovery is to be built on exports, then we must have a network of ports that can facilitate both current and future commercial needs. One part of this is to ensure that businesses have easy access to ports. Ireland has 19 commercial ports spread out across the country.

However, with the top five ports accounting for 92% of all trade; it is only right that the commercial viability of many of our smaller ports is questioned. This is all the more pertinent given that most of our ports are in receipt of state subventions. Furthermore, in 2013 only Dublin, Cork and Galway ports paid a dividend, the rest are by and large loss-making entities. It is clear that radical change is needed if we are to ensure that our ports are to remain as viable entities. Otherwise, a future government may be left with the task of having to close many of our ports. If this were to be done it would be a major blow for any hope of ensuring a balanced regional economic recovery.

One alternative solution which could prove to be successful would be to increase the role of the private sector in the management of

our ports. The involvement of the private sector in the port management can vary. This is because the management of ports entails many important managerial functions such as regulatory functions, operational functions and land functions.

The land in Dublin port for example is owned by the state while the operational functions have been privatised. The benefits of increasing the role of the private sector in port management include a more stream-lined managerial structure, faster decision-making and greater access to capital. Moreover, the funds from any privatisation could be used to fund further infrastructure development or help to reduce our towering national debt.

In Greece as part of its privatisation programme agreed with the Troika, the Greek government have been working towards selling off its stake in many of the country’s ports. In 2013 plans were announced to fast track the sale of the Piraeus Port Authority following the announcement of a significant investment by Cosco Pacific, a Chinese shipping company.

As part of the investment plan, an expansion of container terminal facilities at the port will be financed by Cosco Pacific. If any privatisation of our port assets is to take place then regard should be had to Australia.

Three to buy O2?

Three Ireland’s proposed acquisition of O2 Ireland The European Commission is in the midst of an investigation into the proposed €850mn takeover of O2 Ireland by rival mobile network, Three Ireland. Last June, Three agreed to buy O2 for €780m in cash, with a further €70m on condition that it reaches certain financial targets.

Three Ireland is a subsidiary of Hutchison Whampoa Ltd, an investment holding company based in Hong Kong, whilst O2 is owned by the Spanish group Telefonica, who say they are selling O2 Ireland to reduce their debt and concentrate its operations in larger European markets. The size of both these parent companies means the deal must get the approval of the EU’s competition directorate before it can get the go ahead. The deal will increase Hutch-

ison’s customer numbers in Ireland to 2 million and its wireless market share to 37.5 per cent.

The Irish market The Irish telecoms market is made up of four players; Vodafone (38.1%), O2 (27.1%), Meteor and emobile (19%), and 3 (9.7%). The Irish market, with a population of just over 5 million people, has the same number of operators as Germany with a population of 80 million people. Hutchison Whampoa entered the Irish market in 2005 through its subsidiary, Three Ireland. In just under a decade it has spent over €1.1bn on running the network for a small segment of only 8% market share, and continuing losses of €50mn per annum. This is an unsustainable business position by anyone’s calculations. As margins tighten, profits contract, and average revenues per user (ARPU) continue

The Australians have significant experience in this field. Last year the government of New South Wales announced plans to privatise the Port of Newcastle. Many of the ports in Australia have been privatised with the result that the Port of Melbourne is the only remaining state capital port in eastern Australia still under public ownership. In Australia, it is often the case that the port land is leased out to a private entity which then manages and develops the infrastructure of the port. In addition, private entities have also taken over the operational functions such as providing cargo-handling services and storage. However, the state still maintains a role by overseeing the regulatory functions such as customs control and safety and security within the port. This model is applied in several Australian ports such as the port of Brisbane.

Last year, the minister of Transport, Tourism and Sport, Leo Var-

adkar launched plans to radically change the state’s approach to the management of its port assets. As part of the plan, private investment in ports will be encouraged. In addition, ports are to be designated in terms of their importance. Furthermore, ports will be expected to turn a profit and will not receive subventions from the Exchequer. This plan is to be welcomed, just as the state has to apply economic rigour and try and live within its means so too should our state-owned commercial port companies. In addition, it was unrealistic to try and apply a single approach towards the management of our ports given that many of them have different needs and face different challenges. Any attempt to apply the same policy towards the management of Dublin port and New Ross port would be unlikely to succeed. However, a bigger role for the private sector is needed if the government hope to maintain 19 ports.

In particular, questions need to be asked about the viability of some these ports. If any privatisations were to take place, it is unlikely that private investors would be willing to invest in small and remote ports with limited catchment areas. Instead, it is probable that private investors would be enticed by larger ports with greater prospects for growth and development such as the ports in Dublin, Cork and Shannon Foynes.

In order to attract investment into our smaller ports, the government could perhaps look at merging some of the smaller ports, although this would invariably mean that certain ports would be closed, something that is likely to be politically unpalatable. In any case it is clear that the government will need to give greater consideration to private sector involvement if it is succeed in its plans to wean our commercial ports off state subventions.

by Niall Fitzgerald

to decline at 10 per cent per annum, it’s becoming increasingly difficult to foresee a situation where four operators will continue investing in the way they have been. This could result in a pernicious effect on the marketplace in the form of weaker mobile services and, possibly a cap on the emergence of 4G mobile communication standards to only a few cities.

Another burgeoning trend which has disseminated across the industry is the rise of the social network applications such as Whatsapp, Viber and Snapchat. Prior to the proliferation of these applications, more mobile operators generally meant more competition and lower consumer prices without any operator staring into the abyss. However, with 450 million people switching from SMS to one outfit (Whatsapp) messaging service, the pendulum has swung in the opposite direction. What may have been initially viewed as a new ‘fad’ is now an entire new industry in and of itself.

According to the EU merger guidelines it is not the purpose of merger review to protect competitors from the effect of a merger.

Rather, it is to ensure that mergers which would result in a substantial,

lessening of competition are not permitted. The EU Competition Authority has raised a number of concerns about potential anti-competitive effects resulting from the proposed merger. In a statement issued last week, the commission’s competition VP Joaquin Almunia said that “creating large players in national markets just reinforces market power at this level.” One of their main concerns is that shrinking the number of operators from four to three may increase the likelihood that the companies would behave in a co-ordinated manner and increase prices. Other concerns include fears of exclusionary access to the market for new entrants, and an over concentration of 4G spectrum between Three Ireland and O2 given they jointly spent €175 million on new spectrum in an auction last year.

On the other hand, Three Ireland has argued that the acquisition will provide them with the scale and financial strength to compete aggressively in the market to the benefit of Irish consumers. They believe that the only way for them to expand their operations is through acquisition given that the small size of the Irish market has meant that they

have reached the limit of what is possible through organic growth.

As with all merger cases it is important to examine the ‘counterfactual’ – this refers to the state of competition without the merger or acquisition.

Given the contracting state of play in the Irish telecoms market and the rise of revenue-eroding applications such as Whatsapp, there is a danger that if the Commission does block the deal, Hutchison may decide to leave the Irish market. That may lead to another player, UPC, buying Three Ireland’s network, although it is unlikely they will be willing to invest to the same extent as Hutchison has in the operator.

Given the Commission’s objections, Three Ireland will most likely have to offer some concessions for the deal to pass, such as providing assurances on existing network-sharing arrangements, and a reduction in their own and O2’s combined group share of the 4G spectrum. The case rumbles on, with the Commission expected to rule on the deal by the 24th March.

by Daniel McCarthy

13

ECONOMY

The Bull 24.03.2014

I

n 2008 Fidel Castro handed power over the Cuban government to his brother Raul. Since then, Raul has set Cuba on a slow transition to a form of semimarket economy, albeit the role of the market remains very slight. For a long time, since the collapse of the Soviet Union, Cuba has been the last bastion of true Marxist communism worldwide; Vietnam and China are communist in name only, having embraced the markets long ago.

Until recently, private businesses and private transactions of any sort remained illegal, along with private property. The state controlled it all.

For half a century, Cuba was steadfast in its commitment to Communism, heavily facilitated by generous subsidies from the Soviet Union.

When the Cold War ended, Cuba’s economy collapsed, but communism was retained. Thus, rations had to be cut, production was cut, and harsh austerity was implemented.

Castro named it Cuba’s “special period”. Without the Soviets, new revenue was needed. The economic priority shifted to tourism, and over time Cuba has reaped the benefits of much needed foreign currency, now hosting more than 3 million tourists every year. Meanwhile, Cuba’s economy has been heavily constrained by the longstanding, much ma-

ligned (and illegal) US embargo on Cuba, which has now been in place for more than half a century.

The virtues of Cuba’s communism should not be understated. It is deeply flawed, but when one compares the services available to the average Cuban citizen with those of a country of similar GDP per capita, the differences are stark. The quality of healthcare and education for a developing country are staggering.

Cuba’s universal healthcare system is renowned, and all levels of education are free. The literacy rate in Cuba is effectively 100%.

ciency has been sacrificed in order to keep the employment rate artificially high. Almost all businesses, except the small, private ones, are grossly overstaffed. And do not imagine a better service because of this. Communism has nurtured a relaxed attitude towards work since the incentives to do any hard work are minimal.

However, the flaws of communism are deep and quickly become apparent to any passing observer.

Democracy and communism do not make a compatible pairing; it is a one party state and dissent is not well received. There is no free press; the main newspaper is state owned and packed with propaganda. Cubans are patriotic and there is genuine pride in their socialist values, but most Cubans strive for more economic freedom and the ability to make a profit.

In recent years, under Raul Castro, the shift towards a more market orientated economy has begun, and it does not appear to be a path along which anyone in Cuba is eager to go back the way they came. The capacity to start a business and make a profit is like a second revolution for the country with private enterprises popping up nationwide. More reform is needed in order to bring more life to the economy, and the permitting of a far larger private sector is crucial, but the tipping point has been passed – Cuba has been energized by entrepreneurs. More Cubans have more money to spend which has created a growth cycle. As long as the reforms remain in place and more reforms are implemented, Cuba will continue to grow.

With the virtues of communism come many burdens for those trying to make a profit; any notion of effi-

However, one of the more bizarre features of Cuban government policy, which will not be remaining,

is the dual currency system – due to be abolished in the coming years.

Cuba operates under two different national currencies. In theory one is for tourists and one is for locals.

However, this is rarely the case in practice. An overwhelming majority of the workforce in Cuba works for the state in one form or another, since most businesses and all public services are state-owned. They are paid in the local currency, the Cuban peso. Even doctors, of which there are many – Cuba famously has more doctors than all of Africa has – are paid in pesos, the equivalent of a meagre €20 per month.

The dual currency system has led to growing inequality between those with access to the valuable tourist currency, through opening any number of different means. Having a tourist rent a room for one night in a registered casa particular (the equivalent of a B&B here) can double a person’s income. But some of these casas operate like small hotels and host hundreds of tourists per year.

The income tax for running one of these casas is generally small, and consequently the profits of a successful owner will be vastly greater than the average Cuban’s income.

So although Cuba is nominally – and practically, most of the time – communist, there is rapidly growing lev-

els of income inequality. Perhaps by raising the often incredibly low tax, the government could afford to pay doctors and university lectures more so that they would not have to take a second job.

It is unlikely that the state will vacate its role in the economy to the extent it has in the West for some time.

Most Cubans believe that health, education, and welfare will forever be solely the responsibility of the state. They take great pride in their adherence to socialist values. But the wheels of capitalism have been set turning by Raul Castro’s economic reforms in recent years. These reforms are small in nature but vast in their symbolism. They have energized a nation eager to step away from the traditional micromanaging role of the state. Through small, privately run enterprises, Cubans are working for themselves and generating money they can then spend as they please. More money then gets moved around the economy to other private enterprises, and the foundations of a market economy are built. With Cuba’s growing popularity as a tourist destination, the growth will be sustainable and long term. One hopes the government’s commitment to reform is as well.

14

OPINION

The Bull 24.03.2014

Islamic finance in Ireland Cristina Suzanu

A

s one of the areas of the financial sector to have emerged relatively unscathed from the economic turmoil in the last few years, the Islamic finance industry continues to grow form strength to strength with total assets expected to reach $2.1 trillion by the end of 2014. One of the government’s main strategies in getting the economy back on track has been the promotion of foreign direct investment into Ireland. Faced with such appetising figures, it is unsurprising that it has stepped up its game in recent years in enticing Middle Eastern investments to Irish shores hoping to make Ireland a gateway to Islamic finance in the Eurozone.

The rules laid down in Sharia govern every aspect of a Muslim’s life, extending beyond the strictly spiritual and into the sphere of banking and finance, articulating key principles which underpin such activities. Whereas wealth generation is encouraged, transactions are guided by ethical, moral, and social considerations and the belief that money should be used to create social value. Islamic scholars have extracted four principal concepts from the Qur’an and Sunnah which are applicable to financial transactions. These are the prohibition of riba (interest), the avoidance of maysir (gambling and speculation), the need to limit gharar, (uncertainty in a contract) and the unlawfulness of certain haram (forbidden activities) such as the making or selling of alcohol, pork products and pornography. As a result of these prohibitions, transactions and services designed to observe Islamic law differ in structure from conventional practices. Rather than lending money on interest, Islamic banks operate on the basis of a profit and loss sharing concept and by taking ownership of the underlying asset.

The particular structure of such Sharia compliant transactions inhibits them from being easily transferable into a system developed for interest based financing.

Hence the need to address the inconsistencies between Islamic law and the established legal framework in order to ensure a level playing field between conventional and economically comparable Islamic finance. The Irish government has exhibited much enthusiasm in this regard. In recent years, numerous tax treaties have been signed with Islamic states. The Finance Act 2010 equated the treatment between traditional financial products and those which are compliant with Sharia law by taxing them on the same basis. The Irish Stock Exchange listed its first sukuk (Islamic bond) in 2005, opening the financial market to Sharia-compliant products. These

Constitutionalised Discrimination Aislinn Killian

measures have been largely successful with Ireland already being a base for 20 % of Islamic compliant funds outside of the Middle East.

The developments thus far are clearly geared at positioning Ireland as a destination for Sharia-compliant investment from abroad, attracting much needed capital to the Irish economy. However, they do little in terms of catering for the financial needs of Muslims living in Ireland who wish to abide by Islamic law in their financial dealings.

Population statistics compiled by the Central Statistics Office confirmed that Islam is now Ireland’s fastest-growing religion with the number of Muslims recorded in the 2011 Census – 48,130 – expected to reach 100,000 by 2020. Furthermore, an estimated 500 Irish people are converting to Islam every year.

But despite this demand it remains difficult for Ireland’s growing Muslim population to access financial services here. The community requires tailor-made banking to be provided, yet not one of the 10 financial institutions listed on the Muslim Survival Guide for Northern Ireland and the Republic of Ireland website is based in the island of Ireland.

Those who wish to bank according to their religious beliefs cannot avail of basic services such as taking out loans, mortgages or open up current accounts in Ireland. This impacts their way of life, with many opting to rent rather than to buy cars or houses. Furthermore, it stifles enterprise as Muslim entrepreneurs are reluctant to approach financial institutions for access to non-Sharia compliant finance and rely on personal savings or loans from family and friends.

Faced with this lack of accommodation for their needs, it is no wonder that they look for alternatives which can be found just over the border. The UK has three licensed Islamic banks, and 22 traditional banks now offer Islamic banking services. Notable market participants include HSBC, Royal Bank of Scotland and Barclays, as well as the London arm of Citigroup.

Customers with a Sharia compliant bank account are not paid interest on their deposit nor do borrowers with a mortgage pay interest on their debts. Instead buyers have the option of an ijara scheme where the bank buys the property and leases it to the customer. Alternatively they can opt for a murabaha scheme where the bank buys the property and sells it to the customer for a profit leaving the borrower to pay off the debt in fixed repayments.

As to deposits, Islamic banks use the money from saving accounts to invest in trading activities that generate a target profit, with the saver

D

ominating Kuala Lumpur’s skyline, standing at over 1400 feet, the glistening stainless steel of The Petronas towers serves as symbol of Malaysia’s success story.

In 1960, three years after independence from British rule, Malaysia’s GDP per capita was $299, only just ahead of Zimbabwe’s $281.

Since then Malaysia has achieved an average GDP growth rate of 6.5% annually and has diversified into a multi-sector economy with strong performances in the services and manufacturing industries. Happiness, however, has not come in the shape of a shiny skyscraper. Ethnic tension between Malaysia’s minority groups continues to simmer under the surface, and has been compounded by the ‘temporary’ “New Economic Policy”, which, 43 years on, is neither new nor temporary.

During British rule a Chinese presence was encouraged resulting in large sections of the economy being in Chinese hands after independence in 1957.

A growing state of dissidence emerged from the Malay majority, ultimately culminating in the riots of 1969 where the rivers of Kuala Lumpur were said to have run red with Chinese blood. Hundreds died and parliament was suspended for two years. From the ruins of Chinese shops and mob warfare emerged the New Economic Policy (NEP), aimed at giving preference to the

being offered this profit rather than a rate of interest.

There is a growing need for Sharia-compliant finance in Ireland.

However, this demand is not solely attributable to catering to the needs of the Muslim population. Islamic financing is becoming increasingly appealing to non-Muslims as well as it is promoted as bringing a moral and equitable character to economic activity – something which is absent from secular finance which is driven by debt, speculation and materialism. Instead of allowing potential customers to conduct their business outside of Ireland, Irish financial institutions should respond to this growing demand and seize the opportunity to make Shariacompliant banking services accessible to the general population.

Malay majority, known as Bumiputra, or “sons of the soil”.

The NEP calls for preference be given to Malays in terms of university applications, civil service jobs and in the distribution of social welfare and scholarships. Looking past the red tape of the NEP, ambiguous wording in the constitution has left the question open as to whether a nonMalay can be elected Prime Minister.

The raging debate on the legality of electing non-Malays sheds a disconcerting light on Malaysia’s democratic process with Chinese and Indian Malaysians feeling increasingly marginalized in their own country. More worrying still is that though the NEP has undoubtedly enriched a small group of well-placed Malays, there has been limited trickledown effect.

Bumiputra households are still on average much poorer than their Chinese and Indian counterparts.

Impressive growth figures have previously helped ease ethnic tensions, but as growth stagnated in the last few quarters the detrimental effects of the NEP is gaining attention once more. Highly educated and skilled workers of Chinese and Indian background have left Malaysia in droves to head to Australia and other South-East Asian countries.

Roughly 60% of the emigrants cited social injustice as one of the main reasons for leaving. For those who stay, entrepreneurship is disincentivized by regulations requiring a 30% Malay ownership in all publicly quoted companies. This is further

aggravated by the discriminatory allocation of government funding and supports in favor of Malays, leaving hopeful Chinese and Indian business owners out in the cold.

In order for Malaysia to move forward, they need to present a stable and united front to encourage foreign investors in what is an extremely competitive region. Domestically, the Government needs to foster small and medium enterprises regardless of the owners’ ethnicity, and they need to stem the brain drain by leveling the playing field once more and re-introducing a meritocracy.

The NEP is not compatible with sustained future growth and although the ruling Barisan Nasional coalition have agreed that it needs to be dissolved, it fears losing its core Malay vote. The opposition made recent gains in an election in May 2013 by targeting the NEP while calling for affirmative action policies favouring the poor regardless of ethnicity.

Replacing one set of affirmative action policies with another may not be the way forward but developing a well-structured welfare system to support those who are weakest in society could work. Such a system will require a lot of work by whichever party introduces it, yet this work cannot start without first dissolving the NEP. Malaysian politicians must now look to convincing the Malay population to take the plunge before they lose out in the economic race.

15

ECONOMY

The Bull 24.03.2014

Puerto Rico

Puerto Rico went to market this week with a general obligation bond offering, raising $3.5 billion - $500 million more than originally planned.

Demand was higher than expected, led by hedge funds and wealthy individuals. Yields were around 8.73%.

The US territory’s bonds were last month downgraded to junk status by the three largest ratings agencies (Standard & Poor’s, Moody’s, and Fitch), amid concerns about liquidity and ability to access long-term funding in the market. It had turned to short-term borrowing recently. This week’s deal is the largest ever offering of sub-investment grade debt in the US municipal bond market.

Puerto Rico’s status as an unincorporated territory of the United States affords its bonds a unique triple tax exemption. All US investors in Puerto Rican debt are exempt from local, state, and federal taxes - usually, US investors can only avoid state taxes on municipal bonds issued within their own state. This tax status, along with comparatively high yields, has made Puerto Rican bonds a popular choice amongst investors in the $3.7 trillion US municipal debt market. It is estimated that approximately 70% of US municipal mutual funds hold

Puerto Rican debt.

operations in Puerto Rico while not paying taxes on profits made there.

The expiration of this incentive made Puerto Rico less competitive, leading some companies to leave and others to scale back their operations.

The high demand for Puerto Rican debt amongst investors seeking tax advantages and high yields has allowed the island territory to leverage itself to the point where it is the third largest issuer in the municipal bond market, behind only California and New York. It lags far behind both in terms of population and income per capita. Prior to this week’s deal, it had $70 billion in debt outstanding, approximately 80% of GDP. Mutual funds and individuals hold most of this debt, although recent uncertainty has led some to offload their holdings to distressed debt specialists.

The territory recently saw record high bond yields – surpassing 10% - and lost its investment grade status. Alejandro Garcia Padilla, Puerto Rico’s governor, is overseeing a series of austerity measures aimed at reining in the deficit and restoring market confidence. Spending cuts and tax increases have led to concerns about a potential shrinking effect on output. The European crisis should act as a cautionary tale with regard to the limitations of austerity measures in economic recovery. Ireland is a prime example of a country that has met its deficit targets, but at the cost of a ballooning debt-to-GDP ratio.

The territory compares unfavourably with the rest of the United States in terms of median household income, unemployment, income inequality, and state debt per capita.

Puerto Rico’s government has run a budget deficit for the past decade, and its economy has been in recession since 2006. It was then that a federal tax break for corporate income expired. The tax break, introduced in the 1970s, allowed American companies to expand manufacturing

The high demand for this week’s new issue of bonds sends a strong signal to those concerned about Puerto Rico’s creditworthiness. There have been concerns that a default or restructuring in Puerto Rico could have knock-on effects for highly indebted state and local governments elsewhere in the US, and for the US municipal bond market as a whole.

There hasn’t been a default on stateissued municipal debt since Arkansas defaulted in 1933. Given that

this is the most recent precedent for a state defaulting on its debt, a default on Puerto Rican bonds would likely send shockwaves throughout the market, making market access more difficult for other American issuers. This in turn could slow growth by prompting other state and local governments to rein in spending.

Because Puerto Rico’s bonds are so widely held, losses from a default or restructuring would have an impact far beyond its shores, and the extent of this impact would be difficult to predict.

It is the risk of contagion that has led some commentators to label Puerto Rico “America’s Greece”. Comparisons with Greece don’t end there.

Puerto Rico’s underground economy is worth an estimated 25% of Gross National Product. This is comprised primarily of unreported income and remittances from Puerto Ricans living elsewhere. A possible source of reassurance for bondholders is that there is a constitutional requirement for Puerto Rico to honour its general obligation bonds. This legal protection means the government must pay bondholders before it meets other obligations such as paying government employee wages. However, political will alone won’t suffice in convincing investors of Puerto Rico’s creditworthiness, and its yields will likely remain comparatively high for the foreseeable future.

Puerto Rico has been an American territory since 1898, and its unusual political status places strictures on how it can attempt to remedy its current situation. It has no control over monetary policy – responsibility for interest rates and currency value lies with the US Federal Reserve. Unlike other local governments, it cannot file for Chapter 9 bankruptcy protection, like the city of Detroit did last year. The government has asserted that it will close the budget deficit by the fiscal year 2015. This week’s successful bond offering was crucial, as Puerto Rico needs to refinance existing debt and cover its budget deficit.

It also sends a strong signal of its ability to access long-term funding in the markets, which ratings agencies had cited as a concern around the time of the downgrades.

The Puerto Rican economy hasn’t yet recovered from the knock it received in 2006 when the tax break on corporate income expired. In the long-term, Puerto Rico will need to find a way to boost competitiveness if it is to emerge from the cycle of high debt, low growth, and budget deficits it currently finds itself in.

There are no easy solutions to the problems it faces, but a continued overreliance on bond investors seeking tax exemptions will lead it further down the same path and the real economy will continue to suffer.

by Sean Shorten

Agricultural subsidies & the welfare of developing economies The agriculture industry is widely regarded as the most distorted sector in the world economy, given the prevalence of subsidies, tariffs and other restrictions (direct and indirect) that are imposed by governments in order to protect domestic farmers. Developed economies have been accused of perpetuating this state of affairs for their own gain, and have shouldered most of the blame in this regard. Many consider the protectionist policies of these countries to be detrimental to the development of less advanced economies, and argue that liberalisation would result in a substantial welfare gain for those in need.

For example, the Declaration by the Heads of the IMF, OECD and World Bank issued in September 2003 states that “donors cannot provide aid to create development opportunities with one hand and then use trade restrictions to take these opportunities away with the other”.

They then suggest that the use of export subsidies serves to “drive down world prices and take markets away from farmers in poorer countries”.

Similarly, Oxfam have criticised the agricultural policies of OECD countries for hurting developing economies exactly where their comparative advantage lies.

It is true that agricultural support is quite significant in developed economies. Under the Common Agricultural Policy (CAP), approximately 38% of the European Union budget for the period 2014 to 2020 is com-

prised of farm subsidies. Similarly, the United States distributes approximately $20 billion in farm subsidies every year.

Though the value of these subsidies has been declining somewhat in recent years, they still represent a disproportionate percentage of farming incomes. In 2012, US subsidies accounted for 7.1% of farm receipts.

This figure was even higher in the EU, at 19%. Producers clearly derive benefit from this support, and are consequently advantaged relative to their international competitors.

Classically, economists believe that liberalisation maximises utility, and that extending this to the agricultural sector is necessary if developing economies are to achieve their potential. The supposed benefits of liberalisation are of two distinct types: efficiency gains and terms-oftrade gains.

Efficiency gains come about internally when a country implements trade reforms, as consumer welfare improves and productive factors are allocated more efficiently. It is often noted that subsidies are a particularly inefficient means of supporting the domestic industry. A large fraction of EU expenditure on export subsidies, for example, simply serves to benefit foreign consumers of domestic exports by artificially depressing the prices that they face.

Terms-of-trade gains, on the other hand, come about when import prices fall relative to export prices.

Subsidies act to increase import

prices, so the overall terms-of-trade change can be negative. This means that liberalisation may be welfarereducing in net food-importing countries, even if it serves to improve domestic agriculture. This effect is particularly likely in the case of subsidies, which act almost exclusively to lower prices.

Indeed, Panagariya (2005) suggests that many of the commonlyheld beliefs about agricultural intervention are false. For instance, it is suggested that subsidies used by developed economies ultimately hurt the poorest least developed countries (LDCs) the most. The argument is that LDC exporters must compete against artificially low prices, and that the removal of these subsidies would spur exports and improve welfare.

This assumes, of course, that these countries are net exporters of agricultural products. In fact, 48 or the 63 countries that the World Bank classifies as being low-income are actually net importers of food. At the same time, exporters in these countries typically benefit from preferential treatment by developed economies.

For example, the EU’s Everything But Arms (EBA) initiative gives LDCs quota- and duty-free access to their market. This gives them an advantage against competitor exporters, while still allowing importers to benefit from depressed world prices on account of agricultural subsidies.

Even in those net-exporting countries that would benefit from a

reduction in subsidies by developed economies, empirical studies suggest that this positive effect is likely to be quite small. For instance, it is thought that a curtailment of subsidies would have less than one-tenth of the potential impact of a corresponding reduction in agricultural tariffs on imports. Empirically, while about 75% of total producer distortions can be attributed to market access barriers, just 19% are thought to be due to domestic farm subsidies.

In short, it seems that the role of subsidies in distorting global agricultural markets and subjecting developing economies to unfair competition is far less significant than many would lead us to believe. On the contrary, their aggregate effect is likely to be marginally positive given

the predominance of net agricultural importers amongst less developed economies. If market liberalisation is to be pursued, it would be better to first tackle tariffs and assist developing countries in implementing the initiatives and policies required to wean them from dependence on subsidised imports and achieve a greater degree of self-sufficiency and competitiveness.

by Sean Tong Deputy Editor

16

ECONOMY

The Bull 24.03.2014

Loan-to-Value limits as a tool for economic stability The Irish property crash of 2008 was one of the most devastating crises in the history of the Irish state.

Families’ financial futures were devastated and thousands of Irishmen and women were once again forced to emigrate. Significant time has been spent in the five years casting blame on various actors and studying the causes but questions remain as to whether the lessons of the crash have been effectively learned by policy makers. It remains unclear whether concrete policy action has been taken to ensure that no repeat of the crash is possible.

The regulation is aimed at addressing speculative behaviour in the market by reasserting the link between property prices and mortgage size. In the period from 2002, Ireland saw property price growth far above the rate of inflation, GDP growth or income growth. It was clear growth rate at that pace was unsustainable. It’s hope the introduction of statutory limits on the Loan to Value ratio (LTV) would ensure the avoidance of the huge disparities that precipitates the boom/ bust cycle.

In searching for policy solutions to deal with the systemic risk of property bubbles, politicians, regulators and policy makers across the globe are looking more and more towards various types of macroprudential options that would target the underlying risk factors associated with the inflation of property bubbles - above all, the loan to value and debt to income ratios which it is hoped will set statutory limits on the maximum liquidity a financial institution can offer a mortgage applicant.

The thrust of these macroprudential options is an effort to stem a surge in house prices and re-establish the link between property price growth and wider economic growth by limiting the maximum credit financial institutions can legally offer mortgage holders. A key feature of property bubbles across the work is the sudden and sustained increase in the ratio of house prices to average earnings. It should be axiomatic that to support increasing property prices, you need increasing incomes to carry the burden of higher mortgage payments. A snap shot of mar-

TAPERING Colm Manning

The monetary expansion undertaken by developed countries in recent years has no parallel in history. Recently however, the financial boom emerging markets enjoyed has been displaced with tighter financial conditions and heightened uncertainty. This is in no small part due to the Federal Reserve winding down its asset purchase programme.

The Federal Reserve’s quantitative easing was vital in preventing another great depression in America and the world. But its implementation meant that there was an increase in demand for MBS’s and government debt. This extra demand drove prices up and yields down for these assets. Thus it contributed to an excess global demand for all assets. When this extra demand was coupled with the record low rates of return in the developed markets, money found alternative, higher yielding locations to be invested. Excessively low interest rates canspark eoff perverse risk-taking phenomena often referred to as ‘search for yield’. This was a factor in causing capital to flow to EM’s in increased volumes. Investors and institutions moved capital to emerging markets in search of higher returns. This compressed yields globally, well below their long run averages.

When international liquidity is

abundant, capital flows to emerging markets are massive and can be subject to sharp reversions. Such influxes of ‘hot money’ are capable of generating financial and macroeconomic instability. It is these capital flow reversals that are so dangerous to EM’s, especially if most of inflows come through the credit channel.

Also, massive flows of capital can lead to an excessive appreciation in the currencies of emerging economies. This dynamic reduces the competitiveness of the tradable sector.

If this capital is withdrawn quickly it can lead to sudden depreciations of

“against the BACKdrop of weak global growth since 2009”

ket prices at any given time does not give a fair representation of the degree in which property prices are over or undervalued at that moment. It is necessary to benchmark property prices against a more longterm metric of economic performance.

nomic performance and has a severe pro-cyclical nature; accelerating an expanding economy while further depressing a downturn.

Empirical data in country after country shows that sudden spikes in the house price-to-earnings ratio invariably lead to boom-bust in the property market. It’s clear then that a policy that limits this growth and ensures more sensible lending practices needs to be implemented.

It can be seen in each of the US, Europe and Ireland how the collateral leverages of property amplifies economic fluctuations, pushing vacillation to extremes, overheating an expansionary climate while depressing a bearish market. Ireland faces particular difficulties in addressing these fluctuations in the property market going forward.

The presence of a house price bust during a recession and the growth of house prices prior to a recession are both significantly and positively associated with the severity of the recession. Increases in property prices, like asset prices in general, improves the owner’s net worth, further improving the owner’s ability to leverage invest and spend. This process can in itself push up housing prices further, and in turn encourage more invest and property buying. As such, the residential property market can be seen as a stimulant to wider eco-

One of the traditional methods of heading off the threat is the strategic use on monetary policy, and in particular raising benchmark interest rates in order to slow down the supply of credit in the market.

Monetary policy remains, however, a blunt instrument, and inflicts severe costs to the broader economy and as a limited impact on speculative behaviour. Secondly, as members of the Eurozone, Ireland’s ability to affect monetary policy is severely restricted. This means that in order to address housing bubbles on a

a country’s currency. This can pose severe problems for a country’s debt repayments.

Credit issues have also become an issue for several emerging markets.

The external positions of emerging markets have deteriorated since 2009, partly because of economic weakness in advanced economies.

This change in external positions has arguably supported global rebalancing, but has left some economies in a weaker external position. Against the backdrop of weak global growth since 2009, many emerging markets pursued countercyclical policies that expanded domestic credit.

Currently yield-sensitive investors have much larger positions in emerging markets today than in 2009. Creditors such as bondholders, banks and short-term debt holders have increased their exposure to emerging markets since 2009. This is

worrisome. If global financial conditions tighten these investors can sell or withdraws their funding relatively quickly putting stress on emerging market financial institutions, companies and governments. This could happen as tapering progresses.

Further difficulties will occur if the domestic investor base in emerging countries is unwilling or unable to increase its holdings of fixed-income assets to provide adequate buffers against volatility during protracted sell-offs.

Tapering will cause U.S yields to rise. It will remove some of the demand for U.S. treasuries and mortgage-back securities. This financial tightening in the U.S will have knock-on effects throughout emerging markets. Capital flows will be affected as investors readjust their portfolio allocations. Risks will be most pronounced among devel-

national level, other more tailored policy options should be considered.

The limits have been effectively introduced in many countries in response to sudden property price inflation or as a precautionary measure. In response to a surging property market, South Korea introduced a LTV limit in 2002. The results were immediate: month-to-month property price growth fell from 3.2% to 0.3% consistent with the more sustainable growth rate that policy makers hoped the policy would usher in.

Following the crisis, the widelyaccepted tenet was one of ‘benign neglect’; namely, to wait for the bust and pick up the pieces. This has been proven to be defunct. It is now recognised that pre-emptive steps must be taken to avoid the devastation caused by the 2008 property crash and subsequent recession. The introduction of statutory LTV/DTI limits would be strong tool to try to head off any future property bubbles in the Irish market and ensure sensible, sustainable and prudent lending is maintained into the future.

by Emma Sutton oping economies where short-term or foreign debt represents a large proportion of overall debt, or where credit has been expanding rapidly in recent years. Countries that allowed their currencies to appreciate since the crisis may face sudden depreciations as capital flows quickly reverse, as observed in Turkey and India.

In the future, globally-enforced financial regulation together with global monetary policy coordination can reduce distortions sufficiently to allow countries to reap the benefits of capital flows while limiting risks to stability. In practice, though, political realities are likely to complicate multilateral discussions of banking regulation, while monetary policy tends to be conducted with domestic rather than global imperatives in mind.

17

FEATURES

The Bull 24.03.2014

Women in business Clara Duggan discusses the increasing presence of women in senior management. The dominoes have started to fall but is there enough momentum to see through a lasting and meaningful change?

O

n the 3rd of February the topic on the tip of everyone’s tongues was discussed and debated by a prestigious panel in our very own Trinity College. The topic under discussion was ‘Leading Women: Building Presence at the Top’. A variety of perspectives came to light in the course of the discussion, along with a number of different approaches how the presence of women at the top could and ought to be increased in the coming years.

The panel was chaired by Mary Harney and was made up by Julie Sinnamon, CEO of Enterprise Ireland; Dame Alison Carnwath, the only female Chairman of a FTSE 100 company; Eileen Fitzpatrick, Director of NewEra; Louise Phelan, VicePresident of Global Operations EMEA for Paypal; and Anthony Hucker, Chief Operating Officer of Schnuck Markets. To say the panel had plenty of experience working in the world of business and finance would be a gross understatement.

The room was packed out for the event, with people even standing at the back for the duration of the discussion. More importantly though was that the audience, aside from the many women of all ages in attendance, featured a number of

boys and men. Considering the topic under discussion, their attendance begs the question of whether their interest indicates the possibility of a brighter future and a more welcoming environment for women of our generation?

For anyone who attended the talk expecting to hear that the glass ceiling had been cracked and smashed – they were in for a harsh awakening.

All the panelists agreed that progress had been made, but that progress was slow and that women were far from being employed, paid and promoted in the same numbers as likequalified men. The reality that none of the women said out loud, but that was blaringly obvious, was that they were the minority. Each of the panelists though have in their own way sought to change their employment environment and the numbers of women working not only on Boards, but across all levels of management.

The importance of this – building presence not only at the top, but at all levels – was emphasised. It makes sense. This, they believed was key to the future of what is now a “movement”, but what will hopefully soon be a reality.

With regard to building presence across all levels of the business it was also noted that there is no one

path to success. The background of the panelists was interesting and varied. The importance of having a diverse Board, and people from a variety of different backgrounds within management positions, was really brought home by - in particular Louise and Eileen. With Louise starting off with a degree in Nursing and Eileen a degree in Chemistry, their undergraduate studies hardly indicated they would end up as successful as they have been in business and finance. They believed their value, and the value of people who want to get into business and finance who haven’t studied economics and finance modules, is that they come with a different perspective.

The importance of having people with different perspectives on Boards was emphasised by Anthony as well.

He was adamant that the practice of men hiring like-minded men was what led to bad management, and at times management failure. He heralded the end of the easy era for the “middle-aged white guy”. He emphasised the need for diversity, and believed that having more women on Boards is one of the key ways of ensuring Boards remain diverse and enabling members of the Board to be independent. For me, that begged the question: how do we get more middle-aged white guys on Board to

think like Anthony? Change can be difficult and people fear it, but interestingly Alison mentioned that some of her biggest supporters were men.

She believed that men’s perspectives and openness to having women at the table was changing, and for the better. However, she did say that this was just something she had noticed of late - five years ago she said it was a different story. This revelation gave me hope – hope that by the time I am looking to move up the ranks I will not be kept down merely because of my sex.

While men may be changing their tune and beginning to be more accustomed to having women at the table, it seems that the women already at the table may have issues with other women pulling up a chair.

Both Alison and Louise believed that other women can be a woman’s worst enemy. From what they said it appears that because the women at the table have worked so hard to get their place there that they see any other woman who makes their way up the ranks as a threat. Obviously this is not always the case, but the fact that this is an issue at all is frustrating and demoralizing. In her book, Sheryll Sandberg stated that “there’s a special place is hell for women who don’t help other women” – I couldn’t agree more. Why on

earth should we make it harder for ourselves? We ought to be working together and promoting each other.

I’m not stupid; obviously the corporate world is a competitive place and no one is advocating that one woman leave her job for another woman, but, we need to work together. We are each other’s allies, not enemies.

Accomplishing female support for other women could be key over the coming years, and could determine when Sheryll Sandberg’s hypothesis will come true – that one day we won’t speak of female leaders, but leaders.

With regard to the future in relation to women at the top I think you could sum up the panel’s collective feeling as one of conservative optimism. I don’t have rose-tinted glasses after the talk, but nor am I completely demoralized. I believe the first few dominoes have fallen slowly, but that the momentum is gathering. Will I be Chairman of a Fortune 500 company one day? Who knows, but the hope must be that as many women as men in that room rise up the ladder of success in whatever career they pursue.

“In the future, there will be no female leaders. There will just be leaders.”

- Sheryl Sandberg, Lean In: Women, Work, and the Will to Lead

18

OPINION

The Bull 24.03.2014

Taking free as a given

In a world of social media and widespread online piracy, software developers have turned to the ‘freemium’ model to try and turn a profit. But does it work? Niamh Teeling reports what the model has done for and to the industry

“

Freemium” is a pricing model used by many modern digital companies where they provide free technological services to consumers. We’ve all experienced a free service like this at some stage e.g. Spotify, WhatsApp or Adobe Flash Player. So the question arises, how could they ever make a profit by providing a free, or zero price service?

The model of Freemium has worked for several companies so far in that they make a “free sample” available at first to consumers; this can be Feature-Limited (only certain aspects of the service is available) or Time-Limited (such as a 30 day free trial). Companies hope that after a certain period of time, consumers who have enjoyed the service will either want to extend their time limit, or gain access to a wider range of features.

Consumers cannot be “lockedin” as such by this model but they would face switching costs by moving to a different service and losing out on the knowledge and time they have already invested. Extending the use of the service comes at a cost to consumers, thus providing profit for the company. If they target the right users they will attract a sufficient number who will want to pay for the premium version e.g. Adobe Flash

Player generates revenue from using the Freemium pricing model, as many consumers update after their the 30 day trial.

A firm’s users not only benefit from a free service, they can experience network effects by becoming part of a larger community of users.

Their utility rises with the more people they know using the application e.g. WhatsApp. This benefits firms in turn as they have an increasing likelihood of attracting paying consumers. However, there are fears that this model can backfire in that some consumers may be content with the limited access model, which then becomes the standard. From a consumer’s point of view, it is hard to fault the idea of accessing a service for free and aren’t likely to upgrade to the paid version if they can freeload instead.

as Moore’s law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero.”

Spotify is a Freemium company offering consumers free access to millions of songs, albums, and playlists. It has been reported as not being profitable. Low-income consumers such as students endure the “revenue-generating” advertisements every 6-8 songs so as not to pay the premium. Perhaps it depends on the service that is being provided; a more niche service such as Dropbox has proved to be profitable, as there is not as much compe-

tition in the market. It is an online file sharing, storage and synchronisation application with over 200 million users. Freemium is given as the main reason for their profitability, proving that this model is successful.

such as the “Hadopi 2” law in France.

In fact, the Freemium model is not bound to disappear any time soon, and content products such as sound and data - Spotify and Dropbox - will remain very cheap (if not free).

Perhaps it is possible to maintain this model in the short term, but the question still remains as to how sustainable it is in the long term.

Where lies the future of Freemium?

Online firms can only plan to lower their prices to zero (free) so that this equals their marginal cost of provision, which on the Internet is zero too. Otherwise they are vulnerable volatile competition from other companies offering compatible services for free, or illegally i.e. piracy. Associations can work towards taking a tougher stance on piracy,

Firms will of course rely on their premium paying consumers to generate a revenue, but non-pecuniary methods of advertising such as Word of Mouth and social trends can be a huge payoff for a firm, even though these consumers pay zero price. The consumer will inevitably pay for the use of the service in one way or another through these methods - as economists say, “there’s no such thing as a free lunch”. Free is not the future of our economies!

The more Freemium services available, however, the less likely consumers will be willing to pay for digital applications. In reality, a regular consumer is a rational, optimising agent, and thus will want to pay as little as possible for the service they want, which is zero price.

As Chris Anderson from Wired.com stated; “The rise of ‘freeconomics’ is being driven by the underlying technologies that power the Web. Just

Emerging markets stumble, echoes of 1997?

A

nalysts are bracing themselves for another volatile year in emerging markets.

In the three months to date, global investors have already pulled more money out of emerging market stock than throughout all of 2013. On the back of last year’s growth shudders as the tailwinds of low global interest rates and a commodity boom began to fade, 2014 is set to be a pivotal year for these vulnerable economies.

Monetary policy in the developed world is likely to have a significant impact on the economic fortunes on emerging markets bonds and stocks.

The Federal Reserve’s extraordinary monetary stimulus has placed upward pressure on many emerging market currencies which by turns fuelled already strong domestic demand. As the Fed, the Bank of England and others begin tapering back QE, the resulting decrease in liquidity will likely weigh on equities and may cause foreign capital outflows.

Last summer’s announcement that the Fed would begin to taper bond purchased caused chaos in the

emerging markets. Shares in developing economies fell by 17% on the news and currencies depreciated sharply. 10-year government bond yields spiked and risk premiums on credit default swaps soared. Central banks from Ankara to Pretoria raised rates in an effort to stabilise the market. There was even talk of intervention by the International Monetary Fund. Markets have stabilized since, though the volatility exposed some of the underlying vulnerabilities of these economies.

There has been much hand wringing in recent times over China’s slowing growth rates. China’s Finance Minister Lou Jiwei announced a growth target of 7.5% for the coming year. However, unlike the focus on top-line GDP targets of recent times, he declared that the government’s main priorities going forward will be employment targets. China is beginning the process of moving away from rapacious growth seen in the last three decades to more moderate but better quality growth. They aim to move away from the rapid exportand investment-driven expansion to more domestic demand led growth,

which they hope will translate more effectively into higher living standards. This could however, have a negative impact on global growth if this shift translates into waning Chinese external investment.

Concerns in the emerging markets centre on the large ‘Fragile Five’ economies of Brazil, Turkey, South Africa, Indonesia and India. These economies sustain large current account deficits and are susceptible to a capital flight as the quantative easing in western economies dries up.

Investors fear a repeat of the 1997 Asian financial crisis, which suddenly destabilized what were considered fast growing economies, causing a series of currency collapses which resulted in the IMF intervening to contain the situation.

As these economies remain so heavily reliant on foreign capital, they are particularly vulnerable to receding liquidity, investor confidence and most recently the Fed’s tapering of bond purchases. The economist Nourie Roubini sumerized the difficult challenge these economies face going forward: “The short-run

policy tradeoffs that many of these countries face - damned if they tighten monetary and fiscal policy fast enough, and damned if they do not - remain ugly”. Many of these countries sought to raise their benchmark interest rates in order to stave off a collapse in their domestic currencies. However, although mitigating potential currency crises, the sharp rise will have consequences on the domestic economic performance of these countries.

Most of the so called ‘Fragile Five’ nations face elections this year which could seriously impact their future performance. India, the world’s largest democracy is gearing up for elections that will likely see the ruling Indian National congress lose to a coalition led by Hindu nationalists led by the controversial leader Narendra Modi. In South Africa, the hegemonic ANC faces its most competitive election since 1994 and a threat from the populist Left may cause the ruling party to eschew much needed economic reform. Indonesia’s presidential race is wide open with dynastic politicians duking it out with former special-forces commanders and busi-

ness tycoons, each with different visions for their country’s future. These elections are a source of instability.

Another factor is also a dampening effect on emerging economic growth. The 2014 outlook for earnings growth across the G7 developed economies remains relatively buoyant. Strong 2014 growth in the US and a strengthening of the dollar may prove a strong headwind for developing economics stock. Expectations of continued structural reform and strong earnings in Japan, as well as a now more stabilised European periphery means developing economies will face stiffer competition for investment.

Many now worry that the robust growth rates of recent times may simply be a product of the loose monetary policy in the west rather than real growth in capital and productivity. Emerging markets will have to prove through serious structural reforms that their economies can sustain the high level growth of recent times.

by Niall Casey

19

ECONOMY

The Bull 24.03.2014

EDITORIAL Scottish Independence - Will + and x make

By Edward Teggin Editor

I

t was at the 2013 Wimbledon men’s tennis final that we witnessed the first British man to win the men’s title since Fred Perry way back in 1936. This was naturally a jubilant day for those who had for so long pinned their hopes on frequent semi-finalist Tim Henman. Just as it seemed that we could safely move on to the presentation of the trophy and renaming of Henman Hill, we were to be greeted with an unlikely sight: a West Lothian photo-bomber.

This was of course the image of Scottish First Minister Alex Salmond producing a Scottish flag from his wife’s handbag and proceeding to ruffle it around a bit. Rather unfortunately for PM David Cameron, Mr Salmond was seated behind him; that is to say nothing about the annoyance of the flag. Seeing Mr Salmond and his rather poor attempt at a publicity stunt, Ed. was drawn to think about all of the people he had met last summer who were so very excited about Murray’s chances, and were thoroughly getting into the ‘bunting’ mood. Union flags and talk of the impact Ivan Lendl would have on Murray’s game abounded; this was the south of England however, not Scotland. Andy Murray, it seemed, had become a British hero. In witnessing such national pride Ed. couldn’t for the life of him understand it, but he is a miserable git after all.

Reflecting on Mr Salmond’s actions, the prospect of a Scottish referendum on independence the following year dawned on me. At the time, and to this day he might add, Ed. viewed Mr Salmond’s flag shenanigans and wider political policies as nothing more than a circus sideshow. Could Salmond really be serious? Could the Scottish people really be willing to make a complete break? Recent developments would seem to suggest not – a certain slice of common sense would appear to have been found, with the realisation that things may actually be better as they are. Ed. has no doubt that after witnessing the catastrophic ballsup with the Irish property market, realistic Scots are increasingly wary of placing their trust in the centralScottish one.

Perhaps the most inhibiting stumbling block to a viable Scottish state is just how Salmond and co are intending to structure the economy.

EU Commission President Jose Manuel Barroso has already put the mockers on Scottish participation in the Euro, stating that it would be “extremely difficult, if not impossible” for an independent Scotland to join the common currency. Then we have the unfortunate stance taken

by UK Chancellor George Osborne: Currency union with the pound is simply not an option. ‘Uh-oh’ just about sums it up in this regard. Why indeed should Britain tie herself to a currency union with Scotland when she would have been so painfully spurned by what many would deem to be an integral component of the kingdom? The answer is of course so the Scottish government could hide behind the skirts of Westminster if the financial proverbial hit the fan once again.

Ed. can already hear the cries of defiance at his tone, the slogans about North Sea oil ringing in his ears. The sad fact, for every Briton, is that North Sea oil revenues are falling and are no longer the safe bulwark to hide behind as they had previously been thought. Citi Bank recently reported that the fallout from these declining revenues, those same revenues which an independent Scotland would be almost solely reliant on, has already increased Scotland’s

fiscal deficit to approximately 8.3% of GDP. As revenues continue to fall, this will of course only serve to increase pressure on the exchequer. If there is indeed to be any chance of a viable Scottish state, and not just an SNP play-thing, then Scottish politicians and civil servants need to seriously start looking at just where the basis for industry will come from.

Former Labour Chancellor Alistair Darling was sufficiently cutting when remarking about the declining oil revenues and Scottish independence: “If Scotland was independent today we would have no option but to cut spending on services like schools and hospitals or put up taxes – or probably both. Today as part of the UK we don’t have to do that,” Darling said. “The drop in oil revenue is so big that it is the equivalent of the entire budget for Scottish schools.”

Alex Salmond seemed to be prepared for such a statement in casually rebuffing such concerns by suggesting that the decline in revenues last year was nothing more than a short-term bump. Ed. considers this to be an absolute peach of a statement given that oil tax revenue fell from £4.8bn to £3.7bn last year and would seem to be a result of a defined trend pointing downward.

With Scottish politicians verbal-

izing about an expected increase in revenues, the Institute for Fiscal Studies has expressed the concern that an independent Scotland would be extremely volatile in the financial sphere if oil revenues were relied upon too heavily. Ed. sadly believes that arrogance and political showmanship will lead to a severe problem with Scottish finances – We have already received the data suggesting that Scottish public spending increased by 0.5% for 2012/2013, despite an oil revenue decrease of 5.6%. If there is indeed a mid-long term trend associated with the decline in oil revenues, it is clear that Scottish public services will have to be slashed most harshly, causing much suffering in the personal and financial spheres.

Oil revenues are not the only key source of income which are set to take a tumble however; should Scotland vote for independence the great numbers of British military personnel stationed north of the border will more than likely be recalled and re-posted to other British garrisons.

Though there is the obvious argument about the great numbers of Scottish men and women finding employment in the British armed forces, what is to become of the local villages, towns and cities located

? nearby to British garrisons? Many of these settlements have sprung up around garrisons over the centuries and as such are utterly dependent on the continued presence of military personnel to fund their very existence. Put simply: shops, bars, cafés and associated trades would all lose custom as a result of such redeployment. The natural spin-off of such a decline in income would of course be the loss of jobs; the more rural the settlement, the greater impact such layoffs would have. Though some may talk of a ‘special understanding’ which would be reached between the two governments, Ed. finds it incredibly difficult to believe that the Ministry of Defence would continue to station the same number of personnel in Scotland simply to benefit local economies. That is to say nothing about the need for a re-examination of the strategic placement of the United Kingdom’s nuclear deterrent.

Though Ed. is clearly sceptical about the viability of an independent Scotland, he is however cheered by the announcement made by David Cameron that in the event of a no-vote, Scotland would be granted further devolved powers regarding income tax rates regardless. This could be said to be a blatant attempt at bribing Scottish voters, but Ed. believes it to be a happy medium between the two polemic opinions which rage on about the issue. It is fitting that Scotland should have a greater degree of autonomy over their own affairs; otherwise, are they nothing more than a glorified borough council with a Wimbledon champion? If Ed. is being cynical of course, he would say that this is a rather clever move by David Cameron to pressure Scotland into looking after their own affairs and take far greater responsibility for their spending – ‘twould seem Tory politics are alive and well despite the Liberal dilution.

Though the potential result of the referendum is not yet completely clear and there is still much time for bickering and back-room deals, there is one hope which Ed. has for the government of Scotland should independence be declined. That is that Mr Salmond would have the integrity to resign in recognition of the fact that he, his policy and his party, would have been utterly rejected by the people of Scotland.

“...nothing more than a circus sideshow. Could Salmond really be serious? Could the Scottish people really be willing to make a complete break?”