ADAPTING TO DISRUPTIVE CHANGE

PRODUCED BY THE WORLDFOLIO FOR THE 13TH WORLD ISLAMIC ECONOMIC FORUM, KUCHING, MALAYSIA

ADAPTING TO

DISRUPTIVE CHANGE

SARAWAK I GLOBAL ISLAMIC ECONOMY I DISRUPTIVE TECH I IOT & AI I DIGITAL MANUFACTURING

WWW.THEWORLDFOLIO.COM

NOVEMBER 21-23, 2017

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STAFF

ÁLVARO LLARYORA Chairman, The Worldfolio

GEMMA GUTIÉRREZ Regional Director

JONATHAN MEANEY Chief Editor

Art Direction & Graphic Design:

EDUARDO BERTONE & IGNACIO PLASENCIA All Articles Written By:

JONATHAN MEANEY

CONTENTS:

10 Sarawak looks to take a brave leapfrog into the future

32 Adapting to Disruptive Change

88 Kuwait, building a knowledge-based economy

20 The remarkable growth of the global Islamic economy

54 Io and AI define the future of apan

92 Saudi Arabia: Revamp of a Nation

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DISRUPTIVE CHANGE: IMPACT AND CHALLENGES Since the 2008 financial crisis, income inequality across the globe has risen sharply, the global economy is moving significantly from asset-based economic transactions to an increasingly speculative financial one, resulting in weaker domestic economies and a fragile financial system.

While economists and decision makers search for solutions to the current problem, disruptive technological advancements are increasingly transforming our daily lives, creating new opportunities and reshaping traditional industries. Disruptive changes in the form of artificial intelligence (AI), blockchain, Internet of Things (IoT), and other medical and manufacturing technologies, continue to radically alter how we do things, how leadership is perceived, how businesses are run, and how manpower is organized.

What do we need to do to adapt to disruptive changes? Is it the answer to our global structural problems? The 13th WIEF that will be held at the Borneo Convention Centre in Kuching, Sarawak, creates a platform for us to discuss these burning issues, find solutions and develop initiatives that can better prepare us for the technological revolution that is going to change our lives.

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WIEF:

Its History of Building Bridges Through Business •

2005 •

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2006 • • •

2008

The 1st World Islamic Economic Forum was held in Kuala Lumpur.

This was an important shift that allowed the WIEF to fully focus on promoting business collaborations, building bridges between the Muslim and non-Muslim worlds, and steering the world towards peace and prosperity.

The WIEF Businesswomen Network was established.

The World Islamic Economic Forum (WIEF) Foundation was established on 6 March to institutionalise the WIEF. A permanent secretariat, led by the Hon. Tun Musa Hitam, the Former Deputy Prime Minister of Malaysia, was set up in Kuala Lumpur.

The 2nd WIEF was held in Islamabad, Pakistan.

The WIEF Education Trust was launched.

The WIEF Young Leaders Network was established.

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The WIEF marked its first forum in the Middle East. The 4th WIEF was held in Kuwait.

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The WIEF Roundtable Series was established as an extension of the annual WIEF and held in between the annual Fora to help markets address their unique economic challenges and explore new opportunities. The first WIEF Roundtable was held in Bahrain.

Subsequently, three more WIEF Roundtables were held in three more cities within the same year — Istanbul, Moscow and Johannesburg.

The WIEF marked its first forum in Central Asia. The 7th WIEF was held in Astana, Kazakhstan.

2011

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2013

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The WIEF marked its first forum outside of the Muslim world. The 9th WIEF was held in London, the United Kingdom.

2014

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The 10th WIEF was held in Dubai with new additions to the Forum with IdeaPad, and Business Exchange.

2016

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The 12th WIEF was held in Jakarta.

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Sarawak looks to take a brave leap-frog into the future The State of Sarawak is on course to building a modern and diversified economy, driven by technology, innovation and industry Located in northwest Borneo, the State of Sarawak is Malaysia’s largest state and the third largest contributor to the country’s economy, thanks to its wealth of natural resources. Oil, gas and palm oil make up around a third of the state’s GDP, while manufacturing – mainly the production of liquefied natural gas (LNG) – accounts for another quarter.

Sarawak derives up to 70 percent of its budgetary revenues from oil and gas excise taxes and dividends, and therefore weaker oil prices will continue to dampen revenues. Lower oil prices however have not completely halted economic growth.

In 2016 Sarawak’s economy grew by 3.2 percent, and is expected to expand by 3.5-4.0 percent this year.

While Sarawak remains an important contributor to Malaysia’s GDP, its heavy dependence on oil and gas exports means it is one of country’s least diversified states. That is why the state government, under Chief Minister Datuk Amar Abang Johari Tun Openg, aims to create a diversified and sustainable economy, something which is now all the more pertinent in an era of lower oil prices.

To achieve this goal, Mr. Openg, in 2015, launched the Sarawak Socio-Economic Transformation Plan (SETP), 2016-2030.

The main objectives of SETP are to accelerate income growth, reduce income disparity and build a non-oil-dependent economy. The Plan covers all sectors of Sarawak’s economy and outlines various strategies, action plans and budgets to enable the state to catch up with the rest of the states in Malaysia to achieve a high-income and developed-state status by the year 2030.

The state government is looking to attract private investment to fund a large portion of the RM 180 billion ($42 billion) required for SETP. “Private investments will be the main driver of the new sources of growth leveraging on the non-oil industries with the government acting as facilitator to explore these potentials,” Mr. Openg stated earlier this year.

These investments will be used for infrastructure development, industrialization, and to fund the state’s transformation to a ‘Digital Economy’, which is one of the key pillars of the plan to achieve sustainable and inclusive growth.

Digital Sarawak The term ‘Digital Economy’ was coined in Don Tapscott’s 1995 best-seller The Digital Economy: Promise and Peril in the Age of Networked Intelligence, one of first books to show how the Internet would change the way we did business. Now more than 20 years on, many countries and regions in South East Asia are looking to catch up with the likes of Europe and the U.S., putting enormous emphasis on moving towards a digital economy – and Sarawak is no different.

“The Digital Economy will create an entirely new dimension of development and growth for Sarawak… The Digital Economy will challenge the traditional models of doing business in Sarawak and allow young new entrepreneurs and business people to move forward to the front. I have come to realize that we cannot just carry our development program in an incremental way. We must be brave and leap-frog into the future” Datuk Amar Abang Johari Tun Openg, Chief Minister of Sarawak

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Sarawak’s plan to move to a digital economy was unveiled earlier this year at the International ICT Infrastructure and Digital Economy Conference Sarawak (Idecs) 2017.

At Idecs, Mr. Openg identified “two major prongs” for the state’s economic development strategy. The first focuses on increasing the use of its natural resources for industrialization.

The second is to build “Digital Sarawak”.

The state plans to invest RM 1 billion ($224 million) in improving Sarawak’s ICT infrastructure, increasing the number of communication towers from the current

Plan; and the launch of the ‘Digital Village’ in the Samajaya Industrial Free Trade Zone.

Investing in ICT infrastructure Indeed, the most essential component of Mr. Openg’s plan is building an adequate ICT network that will form the backbone of the digital economy. Currently, Sarawak’s ICT infrastructure is well below par. Broadband coverage is at just over 50 percent, and in rural areas, access is particularly low. The present connectivity of 100 megabytes per second (Mbps) in the capital Kuching and 20 Mbps for rural areas is not sufficient, according to the Chief Minister. Most people are still connected via ADSL and the availability of fiber connectivity is still severely limited.

1,200 to over 5,000, which will significantly increase broadband coverage and boost internet speeds to 2 terabytes per second (Tbps) within the next five years

“The Digital Economy will create an entirely new dimension of development and growth for Sarawak,” said the Chief Minister. “The Digital Economy will create new jobs for the young people in urban centers and rural areas, transforming the way we live and do business. The Digital Economy will challenge the traditional models of doing business in Sarawak and allow young new entrepreneurs and business people to move forward to the front. I have come to realize that we cannot just carry our development program in an incremental way.

We must be brave and leap-frog into the future.”

Mr. Openg’s bold words are backed up by his bold and wide-reaching strategy, which includes: the establishment of the Sarawak Digital Economy Corporation, the Sarawak Multimedia Authority and the Ministry of International Trade and e-commerce; large-scale investments to expand ICT infrastructure throughout the state; the e-commerce Transformation

Earlier this year, Mr. Openg announced that the state plans to invest RM 1 billion ($224 million) in improving Sarawak’s ICT infrastructure, increasing the number of communication towers from the current 1,200 to over 5,000, which will significantly increase broadband coverage and boost internet speeds to 2 terabytes per second (Tbps) within the next five years. The state government also hopes that the federal government will provide an additional RM 1 billion to roll out fiber optic, cloud computing and satellite connectivity to cover the whole of the state.

Sarawak is also looking forward to increased fiber optic connectivity with the establishment of a new submarine cable system. The 3,500-kilometer Sistem Kabel Rakyat 1 Malaysia (SKR1M) will link Peninsular Malaysia with Sabah and Sarawak, using the latest 100 Gbps wavelength technology with an initial capacity of 4 Tbps.

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New bodies to accelerate the Digital Transformation The Sarawak Multimedia Authority (SMA) will be launched in anuary, 2018 to implement the roadmap for Digital Sarawak, setting policies in key areas such as digital infrastructure, cybersecurity, digital government, e-commerce, talent development, research and development, and start-ups in digital technology.

SMA will oversee the Sarawak Digital Economy Corporation (SDEC) and the Centre of Excellence for Digital Economy.

SDEC is charged with implementing the policies and programs in line with the policies of the SMA. The Centre of Excellence, meanwhile, will conduct D activities and advise SMA on developments which require a change in policy or standards.

Also falling under SMA’s remit is the Digital illage’.

Tipped to go online in 2020, the illage’ will create a digital ecosystem for Sarawak’s e-commerce and startup entrepreneurs of the future. In the meantime, a precursor to the Digital illage was launched in August, TEGAS Digital Innovation Hub, a 5,100-square-meter facility comprising of a co-working space, conference room, mixed reality corner’ and 3D printing services. The SMA hopes the success of these initiatives will encourage the private sector to set up similar incubation centers.

Aside from promoting trade and foreign investment in Sarawak, the new Ministry for Trade and e-commerce will also be responsible for the creation of a thriving e-commerce landscape in the state.

“We will align the state economy with the global digital economy and strengthen relevant technologies and infrastructure for e-commerce,” said Datuk Seri Wong Soon Koh, the minister who will head up the new ministry. “E-commerce can greatly facilitate our local companies as it makes their business more competitive and accessible globally”. The ministry will also align itself with several federal initiatives such as the National e-commerce Strategic oadmap, the Digital Free Trade Zone and the Malaysia Digital Economic Corporation.

The minister has also stated that he has been approached by many companies and organi ations to offer their expertise in developing the state’s digital economy.

Investing in Education Aside from the development of infrastructure, another essential element of the digital economy strategy will be education and human capital development.

“The government, through the Sarawak Foundation, has invested immensely in the niversity College of Technology Sarawak ( CTS), Curtin niversity Sarawak, Swinburne niversity Sarawak, Sarawak Skills’ Development Centre (PPKS) and other learning institutions to provide quality education to the young generation. This is also related to the digital economy which I have introduced to spur the growth of our economy,” said Chief Minister Openg in uly.

Mr. Openg also took the decision to appoint the state’s first Minister of Education, Science and Technological esearch in May, in order to improve the quality and standard of education, which had officially previously been the sole mandate of the federal Ministry of Education.

The higher education institutes in Sarawak have also begun to strengthen their engagement with industry to bet-

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ter prepare graduates for the working world. Swinburne Sarawak, for example, is partnering with Microsoft and the Malaysia Digital Economy Corporation (MDEC), enabling its multimedia design students to learn directly from industry practitioners about the latest developments in their field. The university has also launched a business incubator program with its partner Finico Investments, an Australianbased investment company. This new incubator provides financing and expertise for new start-ups looking to reach international markets.

In 2015, CTS signed a Memorandum of nderstanding (Mo ) with the Dr. ohn Tang Ing Ching, founder of Twin Catalyst and inventor of Wondaleaf , the world’s first regional barrier contraception. The Mo aims to expand research and development in the field of mechanical and manufacturing engineering; combining medical experience with technical and engineering expertise. The signing of the Mo also opens up local post-graduate research opportunities in this innovative area of study.

Profits made from the exploitation of Sarawak’s natural resources are being directly used to fund education. In uly, Sarawak raised the premium for hill timber from 80sen to M 50 per cubic meter. This premium, which had not been reviewed for 30 years, goes directly to The Sarawak Foundation, which now expects revenue of M 300 million ( 71 million) annually from this compared to about M 20 million previously. With more income the Foundation will be able to set aside M 100 million annually for education. Some of these funds will be used to finance graduates to study in various new disciplines at masters and Phd levels at reputable research universities in the country and overseas.

SCORE: Energy for Industrialization The Sarawak Corridor of enewable Energy, or SCO E, is one of five regional development corridors being established throughout the country. SCO E is a major initiative to develop the Central egion and transform Sarawak into a fully developed state by the year 2030. Around M 500 billion ( 118 million) has already been committed since the launch of SCO E in February 2008. The Sarawak Government has indicated that it will invest M 334 billion to fully develop the regional economic corridor by 2030. The project is expected to generate over one million jobs (out of which about 52 percent would be for semiskilled workers), double the population of the region and raise Sarawak’s GDP five-fold by 2030.

Efforts to develop Sarawak’s human capital are being stepped up to meet the needs of industrial employers in SCO E. There are now more than 30 technical and vocational education and training institutions in the state, offering 0 degree courses, 1 4 diploma and foundation courses and 202 certificated training programs closely related to the specific skills needed in SCO E’s ten priority industries.

At the core of SCO E is the area’s abundant energy resources, particularly hydro (28,000 MW), coal (1.4 billion tons) and natural gas (40. trillion cubic feet). These resources will be harnessed to provide cheap power to the industries prioriti ed for development around the corridor’s five growth nodes, Tanjung Manis, Mukah, Samalaju, Baram and Tunoh.

Qinvest future A4_20160502.pdf

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The Sarawak Corridor of Renewable Energy (SCORE) Baram

Samalaju

Mukah

Smart city, services hub and R&D centre

With its easy access to all the key SCORE locations, Mukah is destined to be the nerve centre of SCORE and the headquarters of RECODA, the Regional Economic Corridor Development Agency.

Integrated Highland Agriculture Station (IHAS)

Centre for heavy and energyintensive industries

The Baram growth node has high potential to turn the region into a highland economic powerhouse that rivals Kundasang in Sabah or Cameron Highland in Pahang. IHAS is slated to be a centre for large-scale, modern and commercial agriculture. It will be a product collection centre with chilling and packaging facilities for the Long Banga, Long Beruang and Long Peluan area. The area also has great potential for oil palm plantations, forestry (using renewable plantation timber in line with today’s best practices in responsible forest management) and for the development of rainforest eco-tourism.

Samalaju, 60km northeast of Bintulu, is the key location in SCORE for ambitious industrial projects and is already proving to be a magnet for overseas investment.

Samalaju is ideal for heavy industries wishing to take advantage of Sarawak’s attractive energy rates.

BRUNEI

28,000 MW Hydropower The corridor’s Energy Resources

40.9 tcf Gas

NORTH KALIMANTAN

1.46bn tons Coal

(trillion cubic feet)

malaysia region of Sarawak

WEST KALIMANTAN

Tanjung Manis The Halal Hub

Tunoh

Tanjung Manis is on its way to becoming a major industrial port city and a key element in Malaysia’s global Halal Hub strategy. The deep water port will eventually be able to handle 100,000 40-foot containers and 6 million tones of general cargo a year.

A greenfield development location

Tunoh has been identified as the site of a major new town development which will make it an important regional centre for oil palm and forest plantations, rice farming and other agricultural uses. The spectacular mountains and waterfalls nearby will also make Tunoh a key destination for international eco-tourism.

Source: Regional Economic Corridor Development Authority

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Smart City, Heavy Industry and Natural Beauty Serving as the nerve center of the corridor, the Mukah Node will be developed into a Smart City – the digital center and services hub of the region. The city will also be home to a new airport, which will serve as the main airport for the region, and an “education hub”, where human capital and expertise will be developed through education, skills training and R&D activities. The Mukah Science Park project, meanwhile, will be a “world-class center of excellence, with new R&D institutes specializing in meeting the needs of resource-based industries and companies in the agricultural sector,” according to the Regional Economic Corridor Development Authority (RECODA).

The Tanjung Manis Node will become a major industrial port city and a key element in Malaysia’s global Halal Hub strategy. The deep-water port will eventually be able to handle 100,000 40-foot containers and 6 million tons of general cargo a year.

Samalaju will be SCORE’s center for heavy and energyintensive industries. Samalaju Industrial Park is SCORE’s biggest success story to date. It is the key location for ambitious

The $500 million Samalaju Industrial Port is a new world-class port which covers 393 hectares in a 7,000-hectare industrial park dedicated to heavy-industry manufacturers engaged in aluminum smelting, steel, oil refining, and a wide range of industrial and commercial activities

industrial projects and is already proving to be a magnet for foreign and domestic investments. Pioneer investors have already committed $9.5 billion to Samalaju Industrial Park, according to RECODA. The $500 million Samalaju Industrial Port is a new worldclass port which covers 393 hectares in a 7,000-hectare industrial park dedicated to heavy-industry manufacturers engaged in aluminum smelting, steel, oil refining, and a wide range of industrial and commercial activities.

Baram, with its wealth of beauty and natural resources, is slated to be a hub for tourism and agriculture. The area has several natural attractions that can turn it into one of Malaysia’s eco-tourism hotspots. The area also has great potential for oil palm plantations and forestry, using renewable plantation timber in line with today’s best practices in responsible forest management. Tunoh has also been earmarked to become a center of eco-tourism and agriculture, with a focus on forestry, palm oil and rice farming.

From SETP to SCORE and the Digital Economy masterplan, the exciting developments in the Sarawak region are catching the attention of local and international investors alike. With these ambitious plans already in motion, Sarawak is on course to becoming a diversified, industrialized and digital economy, and an economic powerhouse of Southeast Asia.

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THE REMARKABLE GROWTH OF THE

GLOBAL ISLAMIC ECONOMY The global Islamic economy is made up of six industries, all of which have experienced impressive growth due to a growing number of mainly young, middle-class Muslims across the world looking to align their modern consumer habits with their traditional religious beliefs. For investors, multinationals, SMEs and digital startups looking to cater to the rising Muslim market demand, the opportunities are practically endless

From finance to food and fashion, the global Islamic economy constitutes a number of Halal’ industries that adhere to the values of Islam, and is estimated to be worth around 1. trillion in 2015. Driven by a growing population of young Muslims round the world demanding more products and services which align with their faith, the si e of the global Islamic economy is projected to reach 3 trillion dollars by 2021.

Some of the world’s most well-known brands have taken note of the growth potential of the Islamic economy and are offering Halal products and services to meet the growing demand from Muslim consumers.

In the Global Islamic Economy Indicator, 73 countries were surveyed, which included the members of the ooperation

I

rani ation of Islamic and

non- I

mem-

bers. Malaysia, this year’s host nation of the World Islamic Economic Forum, ranks top of the list

In anuary, Bra ilian food multinational B F established a new subsidiary called OneFood, which it claims is the largest halal meat company in the world. French supermarket chains Carrefour and Casino began stocking their shelves with Halal food products in 2011 to cater to French Muslims who spent billion on halal food and beverages in 2014. os Angeles-based Orly, one of the world’s most recogni ed nail polish brands, launched its Halal Paint’ collection in une in collaboration with lifestyle website MuslimGirl; while French cosmetics giant Oreal has a halal-certified factory in Indonesia that supplies the large domestic Muslim market and its South-

east Asian neighbors with its face washes, skin creams and other beauty products. ast year the Marriott became the first premium hotel chain to be rated by Crescent ating the world’s leading authority on halal travel for its Halal friendly-services at the Manila Marriott in the Philippines. After hiring an advisory firm to help them to better serve Muslim guests in 2015, the it -Carlton hotels in Dallas and New ork now serve halal meals upon request, have Middle Eastern chefs on staff, offer rooms with spaces that allow for gender-segregated settings and have trained front-line staff on other Islamic cultural norms.

From innovative start-ups to traditional family businesses, smaller firms have also got in on the act of catering to the growing Muslim market. In the .K., ewis Pies, a family-run food company which has been making British staples such as meat pies, pasties and sausage rolls for more than 80 years, has turned over a third of its business to halal products over the past decade to meet burgeoning demand. Managing Director Wilf ewis told Britain’s The Guardian newspaper that the company’s main business line could become halal meats over the next decade. iPhone app Musallah was launched last year by founders Nushmia Khan and ashid Dar, and crowdsources prayer locations across the globe for Muslims who often have difficulty finding quiet places to pray in non-Muslim majority countries and cities. (A number of other innovative digital companies and startups focused on Muslim consumer demands will also feature throughout this article).

Many Muslim-majority nations themselves have woken up to the potential of the global Islamic economy and are working hard to develop their capacity in Halal industries. To measure the health and development of the six halal industries which make up the global Islamic economy (Islamic Finance, Food, Travel, Fashion, Media and ecreation, and Pharmaceutical and Cosmetics), press agency Zawya, which is part of Thomson euters Asia group, created the Global Islamic Economy Indicator (GIEI).

In the GIEI, 73 countries were surveyed, which included the 57 members of the Orani ation of Islamic Cooperation (OIC) and 1 non-OIC members. Malaysia, this year’s host nation of the

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World Islamic Economic Forum, ranks top of the list, mainly due to its strong performance in Islamic Finance, the only indicator in which it ranks first. Malaysia ranked second in the Halal Travel and Pharmaceuticals and Cosmetics indicators, reflecting a strong tourism sector and advanced certification of Halal products.

The nited Arab Emirates ( AE) ranked second overall in the GIEI. The AE came second in the Islamic Finance indicator behind Malaysia, and first in all other indicators, a result of the healthy, Government-led ecosystem it has developed for Islamic economy companies, similar to the other three other Gulf States that make up the rest of the top five of the GIEI: Bahrain, Saudi Arabia and Oman. Not surprisingly, the Gulf states are leading the way in Islamic Finance one of the fastest growing segments in the global financial industry.

Islamic Finance Islamic finance is defined as the provision of financial services that are compliant with Sharia law. According to the IMF’s definition, Sharia does not allow the payment or receipt of interest (riba), gambling (maysir) or excessive uncertainty (gharar). In practice, this means that common investing techniques such as short-selling (betting against a security) are banned and all transactions must demonstrate a real economic purpose.

Together the Gulf states hold around half of the global share of Sharia-complaint financial assets, which totaled around 2 trillion in 2015. According to a report by Thomson euters, of

this 2 trillion, Islamic banking was responsible for 1.451 trillion, the takaful (insurance) sector for 38 billion, sukuk (bonds) outstanding for 342 billion, Islamic funds for billion, and other financial institutions for 10 billion.

While the 2 trillion in total Islamic financial assets currently accounts for a mere 1 percent of total financial assets worldwide, the Islamic finance sector has grown rapidly, by almost 11.5 percent between 2010 and 2015, while the conventional financial system grew by 3.2 percent between 2010 and 2014. This robust growth of Islamic banking has been fueled by rising economies in Muslim countries, particularly in the oil-rich Gulf region and in South East Asia. By 2021, the value of global Islamic financial assets is projected to hit 3.5 trillion, as the demand for Shariacompliant financial products continues to grow and not just in the Gulf states, but across the world.

A huge development for the Islamic banking industry has been the opening up of Iran following the removal of trade sanctions. Iran has the world’s second largest shariah-compliant financial market, valued at 434 billion. A large number of sukuk and other Islamic securities from Iran are expected over the next few years. Estimations are that over 150 Iranian companies are considering Islamic sukuk sales.

Another factor which will drive the future growth of Islamic banking is the use of financial technology, or fintech, an area in which hitherto Islamic financial institutions have lagged behind their counterparts in conventional finance. The increasing use

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The Global Islamic Economy

1.6 billion Global Muslim population (2010)

2.8 billion

Projected global Muslim population (2050)

$1.9 trillion

Value of global Islamic economic sector (2015)

$3 trillion

Projected value of global Islamic economic sector (2021)

Global Islamic Finance

$2 trillion

Value of global Islamic banking assets (2015)

$3.5 trillion

Projected value of global Islamic banking assets (2021)

11.5%

Average annual growth of Islamic banking assets (2010-2015)

3.2%

Average annual growth of conventional banking assets (2010-2014)

Muslim spend on Islamic economy sectors by 2021 Food

Travel

Pharmaceuticals and Cosmetics

Fashion

Media & Recreation

$1.9trn $243bn $213bn $368bn $262bn Up from $1.2trn (2015)

Up from $151bn (2015)

Up from $134bn (2015) Source: Thomson Reuters

Up from $243bn (2015)

Up from $189bn (2015)

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Discover The World’s most dynamic economies

www.theworlDfolio.com

The Worldfolio provides intelligence about the world´s most dynamic and growing economies, with a focus on understanding them from within.

Growing economies and formerly developing countries play an increasingly important role in the world today. It’s essential that international investors and companies - and indeed, all readers with global interests – hear what the leaders of growing and emerging economies have to say. That means government ministers, business people, economists and experts of all kinds.

Understanding their viewpoints is key, not only to being well-informed, but to doing business in these countries.

We provide that information through our network of correspondents, which each year is present in an average of 80 locations around the globe in more than 50 countries.

Our correspondents conduct an average of 3,000 one-on-one interviews annually with government officials and senior business people. This means an average of six interviews a day with the most influential leaders in the world´s fastest-growing economies.

OUR NEWS, YOUR BUSINESS

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of mobile banking and apps are helping Islamic banks to widen their customer base. But the industry has a long way to go if it is to catch up with conventional financial institutions.

“The industry today is yet to reach 100 million customers.

The potential captive market is six times bigger but requires a different banking model,” states Ernest oung in its World Islamic Banking Competitiveness eport 201 .

“A digital-first strategy has to be the stimulus for participation banks to sign up the next 100 million customers over the next decade. This exciting journey is only just beginning.”

Halal Food & Beverage The Halal food and beverage industry is the largest contributor to the global Islamic economy. In 2015, the global Muslim market spent almost 1.2 trillion dollars on food, with revenues from Halal-certified food and beverage products estimated at 415 billion. By 2021, it is forecasted that Muslims across the world will spend 1. trillion on food and beverages, which will account for 18.3 percent of total global spend.

And it’s not just Muslims that are eating Halal-certified food.

At a time when an increasing number of people are demanding high-quality, organic and ethically produced food, Halal or tayyib (meaning wholesome and pure) are becoming more popular options for non-Muslims also.

With such growth potential, it is easy to see why more multinationals, like those aforementioned at the beginning of this article, are eager to cater to the increasing demand in the Halal food industry. There is also a growing appetite amongst the international investment community for the Halal food market, with a number of private equity firms keen to cash in. ast year ESP Capital and Kingsley Capital Partners invested 30 million in

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anan Meat, a leading K-based Halal lamb and mutton supplier, while Abraaj Capital and Texas Pacific Group invested 400 million In Saudi Arabia-based fast-food chain Kudu.

But one of the key obstacles and deterrents for investors is the lack of uniformity in Halal certification, with each country having different standards and regulations. To address this issue, the International Halal Accreditation Forum (IHAF) was established last year, bringing together accreditation bodies from Islamic and non-Islamic countries to harmoni e standards, practices, and procedures related to Halal accreditation and conformity assessments. IHAF’s founding members include accreditation bodies from the big food exporters to OIC countries .S., Australia, New Zealand as well as smaller but influential OIC trading partners the nited Kingdom and Spain.

Muslim entrepreneurs are also leveraging on the power of e-Commerce to reach the underserved Muslim market. Modelled on takeout websites like ustEat, .K.-based HalalEat allows users to search and order takeout from local Halal food restaurants. Currently the majority of the restaurants on the website are limited to East ondon, with limited coverage in Birmingham, uton, Kingston and Portsmouth. To ensure its users are getting Halal food, HalalEat says its restaurant partners are vetted and their supply chain is vigorously checked, as well as their produce on site. Founder and CEO Abul ob plans to take the online food portal nationwide and is also developing a mobile app.

The brainchild of founder and CEO Syed afri, Halal Plates is a Toronto-based startup offering healthy and organic halal meal options to its 12,000-plus subscribers. sers can choose from a range of new recipes on Halal Plates, which then delivers the meal kit, allowing users to make the recipe themselves at home.

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Millennials, and particularly female millennials, are driving the growth of the Muslim fashion industry, with estimated revenues from modest fashion purchased by Muslim women reaching $44 billion in 2015. The total Muslim market expenditure on clothing is pro ected to reach billion in 2021, up from $243 billion in 2015

Halal Plates says all of its Halal meat and poultry is 100-percent organic and ethically raised.

As the demand for Halal and Tayyib food continues to grow, there is no doubt that a growing number of multinationals, investors, new startups and other stakeholders will look to reap the potential.

Muslim-Friendly Travel Once seen as a niche segment, the fast-growing global Muslim travel market now makes up a significant portion of the global tourism industry. In 2015, the global Muslim tourism market spent 151 billion on outbound travel, representing 11.2 percent of total global expenditure; while revenues from Muslim-friendly travel services are estimated to have reached 24 billion. Muslim travel expenditure is projected to reach 243 billion by 2021, accounting for 12.3 percent of the total global travel expenditure, and 300 billion by 202 double the 2015 figure.

Tourists from the oil-rich Gulf currently make up for 3 percent of the total Muslim travel spend, despite being home to only 3 percent of world’s Muslim population, which is a reflection of their si eable affluent classes in comparison to other Muslim-majority nations. But with their growing population of middle classes, countries in South East Asia and Africa will become more significant drivers of future growth of the Muslim travel industry. So too will Muslim millennials across the world in both OIC and non-OIC nations, who are demanding more authentic, affordable and accessible travel experiences that align with their religious values.

Tech savvy Muslim millennials are also seeking more halal Muslim-specific travel websites to cater to their needs. This

26

demand has opened up a niche for websites such as .K.-based BooKHalalHomes, which is modelled on the AirBnb concept, and Tripfe , an TripAdvisor-like review and booking platform for Muslim-friendly hotels, tours and activities, which last year secured 750,000 in seed funding from investors in China and Malaysia.

Conscious of these trends in the Muslim tourism market, industry players in both Muslim and non-Muslim majority nations are adapting their products and services to cater to the specific faith-based needs of Muslim travelers.

Crescent ating is a website which began rating destinations based on their capacity to cater for Muslim tourists in 2011. In the latest Mastercard-Crescent ating Global Muslim Travel Index 2017, Malaysia tops the ranking for the seventh year in a row, thanks to its high number of Muslim-friendly accommodation options and eateries offering Halal food. The top-ranking nation also scored highly in Muslim traveler safety, access to prayer spaces, connectivity and airport facilities. The AE, Indonesia, Turkey and Saudi Arabia make up the rest of the top five; while the highest placed non-OIC country was Singapore (ranked at 8th overall), followed by Thailand in 2nd (18th overall) and the .K. in 3rd (20th overall).

Modest Fashion Millennials, and particularly female millennials, are driving the growth of the Muslim fashion industry, with estimated revenues from modest fashion purchased by Muslim women reaching 44 billion in 2015. The total Muslim market expenditure on clothing is projected to reach 3 8 billion in 2021, up from 243 billion in 2015, which represented 11 percent of the total global spend. In 2015, OIC countries exported 78 billion worth of apparel, accounting for 15.3 percent of total global exports ( 510 billion).

Modest fashion has truly gone mainstream, with a number of the world’s largest fashion houses and retailers now designing and producing clothing for the modern Muslim woman. DKN launched its amadan collection in 2014. Dolce Gabana followed suit, unveiling their first line designed for Muslim women in 201 . H M enlisted its first hijab-wearing model last year, featuring 23-year-old Mariah Idrissi, discovered via Instragam, in its “Close the oop” video campaign, which taps into a diverse group of models. British retailer Debenhams is collaborating with a Muslim-run company, Aab, to sell kimono wraps, silky jumpsuits and elegant hijabs. ike in the Muslim food and travel industries, e-commerce has also been a game changer, bringing enormous opportunities for online fashion retailers looking to cater to Muslim millennial women looking to combine their faith with modern fashion.

Housing over 200 designers from all over the world, Haute Elan was founded in 2013 and has quickly grown to become the leading online marketplace for modest fashion. The company was also behind ondon’s first ever Modest Fashion Week in February. The event showcased the work of 40 designers from the K to Saudi Arabia to the 3,000 mainly young Muslim women in attendance. In Australia, app Mod Markit is applying the sharing economy concept to the modest fashion industry, allowing users shop, swap and sell modest fashion from their wardrobes.

Controversy over traditional Muslim clothing such as Burkinis and hijabs has been widespread in countries like France, the .S. and the .K. But negative attitudes and perceptions toward

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GLOBAL ISLAMIC ECONOMY INDICATOR To measure the health and development of the six halal industries which make up the global Islamic economy (Islamic Finance, Food, Travel, Fashion, Media and Recreation, Pharmaceutical and Cosmetics), press agency Zawya, which is part of Thomson Reuters Asia group, created the Global Islamic Economy Indicator (GIEI).

TOP 1 5 C OU NT RI ES

GIE Indicator Score MALAYSIA

TO P 1 0

121

UAE

86

Bahrain

66

Saudi Arabia

TO P 1 0

Halal Food

63

Oman

48

Pakistan

45

Kuwait

44

Qatar

43

1

1

UAE

2

Australia

3

Pakistan Brazil Malaysia Oman Somalia Saudi Arabia Bahrain Qatar

4 5 6 7 8 9 10

37

Indonesia

36

Singapore

32

Brunei

32

3 4 5

Sudan

28

6

Iran

28

8

Bangladesh

26

Top 15 Countries

GIE Indicator Score

Islamic Finance

7 9 10

Halal Food

Bahrain Saudi Arabia Oman Kuwait Pakistan Qatar Indonesia Jordan

7 8 9 10

1

2

3 4 5 6 7 8 9 10

Malaysia

3

Turkey Singapore Jordan Maldives Iran Lebanon Oman Saudi Arabia

5 6 7 8 9 10

TO P 1 0

Halal Pharmaceuticals and Cosmetics

Halal Media and Recreation

1

UAE

2

4

TO P 1 0

UAE Turkey China India Italy Sri Lanka Bahrain France Singapore Togo

2

3 5

Modest Fashion

1

UAE

6

Halal Travel

MALAYSIA

2

4

TO P 1 0

Jordan

TO P 1 0

Islamic Finance

1

UAE Singapore Bahrain Lebanon United Kingdom Qatar France Germany Kuwait Australia

Halal Travel

Modest Fashion

2

3 4 5 6 7 8 9 10

Halal Media and Recreation

UAE Malaysia Singapore Egypt Pakistan Jordan Saudi Arabia Indonesia Oman Brunei

Halal Pharmaceuticals & Cosmetics

Malaysia

121

189

55

70

25

38

61

United Arab Emirates

86

92

75

81

67

137

78

Bahrain

66

90

45

30

26

58

36

Saudi Arabia

63

83

50

35

17

33

48

Oman

48

51

54

36

16

40

40

Pakistan

45

47

56

11

19

8

52

Kuwait

44

51

43

29

13

45

29

Qatar

43

47

45

35

15

46

32

Jordan

37

35

45

39

19

31

49

Indonesia

36

38

40

35

21

9

41

Singapore

32

22

39

44

26

75

56

Brunei

32

27

45

22

12

30

39

Sudan

28

30

33

23

5

17

23

Iran

28

30

29

36

10

20

27

Bangladesh

26

31

26

10

25

3

25

Source: Zawya

28

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ike in the food industry, leading multinationals in the P C industry are also obtaining Halal certification to meet the swelling demand from Muslims customers worldwide. BASF’s Care Chemical division is now manufacturing 145 Halal-certified ingredients at two if its plants in Germany. FMC Corp.’s health and nutrition division, a global producer of concentrated marine omega-3 fatty acids, had its Norwegian facility Halal-certified in 2015; while the Indonesian subsidiary of South Korea’s Cosmax Inc., an original development manufacturing cosmetics company, was granted Halal certification from Majelis lama Indonesia. The south east Asian nation is the third largest Muslim consumer cosmetics expenditure market, after India and ussia, and ahead of Turkey and Malaysia.

As investment in Halal pharmaceuticals continues to grow, so too will drug innovation in which Islamic cultures have been pioneering since medieval times.

In the GIEI Pharmaceuticals and Cosmetics indicator, the UAE ranks number one, mainly driven by its high level of pharmaceutical e ports to

I

relative to its si e, as well as

its well-developed regulatory and certificatory requirements for pharmaceuticals and cosmetics

Muslim women’s clothing could change as modest fashion continues to go more mainstream and an increasing number of Muslim models feature on catwalks and billboards in cities across the world.

Pharmaceuticals and Cosmetics Indeed Halal-certified ingredients are not limited to the food industry. They are also widely used in pharmaceuticals and cosmetics (P C), on which the global Muslim market spend in 2015 totaled 78 billion and 5 billion, respectively. By 2021, the global Muslim expenditure is projected to reach 132 billion for pharmaceuticals and 81 billion for cosmetics, as the growing middle classes in OIC nations continue to spend more of their expanding disposable incomes on health and beauty products.

In the GIEI P C indicator, the AE ranks number one, mainly driven by its high level of pharmaceutical exports to OIC relative to its si e, as well as its well-developed regulatory and certificatory requirements for pharmaceuticals and cosmetics.

Malaysia which scores highly for governance and awareness, although its export volumes are comparatively low comes in second, and Singapore third.

In non-OIC nations, Halal pharmacies have opened up to supply pharmaceutical and cosmetic products to Muslim consumers. New ork is now home to nine dedicated Halal pharmacies, run by GEO. Halal pharmacies have also opened in Australia’s major cities; while K-based retailer EverydayPharmacy offers Halal pharmaceutical products through its online portal.

Media & Recreation The remarkable growth of the global Islamic media and recreation market in recent years serves as yet another clear testament to the rise of the middle class and consumerism in Muslimmajority countries and amongst the diaspora in the West.

In 2015 the combined spending of Muslims around the globe on media and recreation is estimated at 18 billion, which represents 5.1 percent of total global expenditure. If considered one market, the Muslim entertainment market would be the sixth-largest in the world, behind the nited States, apan, China, the .K. and Germany.

By 2021, global Muslim expenditure on media and recreation is projected to reach 2 2 billion, making up 5. percent of global expenditure. With a growing number of Muslims, particularly millennials, demanding T shows, music, books, films, videogames and mobile apps that reflect and adhere to their cultural and religious values, there are plentiful opportunities for investors in Halal media and entertainment, both in OIC nations and Western countries with large Muslim populations.

Indeed, one of the main goals of modern Muslim culture in Western media is to challenge negative perceptions of Islam in the West. In Australia, the Muslim community invested 1 million in One Path Network a non-profit television studio launched in 2014 to counter the mainstream media’s treatment of Islam in the country. Through its ouTube channel and website, the network offers its own take on major events including the Sydney hostage siege of December, 2014. Aside from inspiring young Muslims, Washington pop trio Native Deen say their music aims to present Islam in a positive light to Western audiences. Meanwhile comic book characters Kamala Khan, Nightrunner and The also help to change perceptions of Islam in the West by redefining the image of Muslims, while also redefining the archetypal image of the blue-eyed, all-American superhero.

Perhaps the common misconception of Halal media itself, from both a consumer and investor perspective, is that it is generally limited to religious education media only. In the past, this indeed may have been true. Nowadays, however, media companies are investing in a diverse and sophisticated range of entertainment products that align with the values and demands of modern, young middle-class Muslims. And as this demand continues to grow, so too will the opportunities for investors in the Muslim media and entertainment market.

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ADAPTING T0

disruptive change Due to rapid technological advancement, disruptive change is happening at a faster rate than ever before. This brings both challenges and opportunities for businesses, organizations and societies across the world

The idea of disruptive technology was first introduced in 1 5

by American scholar Clayton M. Christensen in his article, Disruptive Technologies: Catching the Wave’. This influential article has served as a guiding star for founders of many small, entrepreneurial companies, as well as executives at large, wellestablished organi ations. The concept of disruptive technology continues a long tradition of identifying radical technical change in the study of innovation by economists, and the development of tools for its management at a firm or policy level.

Christensen went on replace the term disruptive technology’ with disruptive innovation’ because he recogni ed that few technologies are intrinsically disruptive, rather the disruptive impact is created by the business model that the technology enables. The invention of the automobile, for example, did not initially disrupt the market for horse-powered transport. It was only later, with the introduction of the cheaper, mass-produced Model T by Henry Ford in 1 08, that the transportation market was completely disrupted. Since then there has not been any major disruption of the fossil fuel-powered car market and its support network, but that could all change in the coming years as the use of electric vehicles continues to grow. Autonomous vehicles could also have a major impact on transportation market, particularly on taxi and truck drivers, many of whom could be put out of a job.

The Internet, similarly, was invented in the 1 0s, but did not become a disruptive innovation until the 1 0s. E-mail completely disrupted communication channels, drastically reducing the use of traditional mail. The generation of free digital news content on websites has had a major impact on the newspaper business, with many newspaper companies having to cut staff numbers, significantly reduce the number of printed copies, or in some cases, close down completely. With the emergence of

companies like Ama on and eBay, online shopping has been a major disruptor of the traditional retail market.

The music industry has been one of the industries most impacted by disruptive innovation brought about by the Internet.

The digital music revolution began in 1 with the introduction of the file-sharing service, Napster. A couple of years later, Apple’s iPod and the introduction of the music downloading service iTunes added further fuel to the fire for those in the record industry who were slow to adapt to the enormous change in music consumption trends which has since led to the closing down of thousands of record stores and a drastic reduction in profits for major record companies.

“There have always been disruptive changes at play brought on by rapid advances in technology. The effects of disruption have rippled through every aspect of modern civili ation just look at how personal computing has fundamentally transformed

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AVERAGE COMPANY LIFESPAN (IN YEARS) ON S&P 500 INDEX 70

60

50

40

PROJECTIONS BASED ON 2013 DATA

30

20

10

0 1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

SOURCE: McKinsey Global Institute analysis everything from the economy to how society functions from the ground up,” said Apple co-founder Steve Wo niak, who will speak at the 13th World Islamic Economic Forum.

Digital video file sharing and the emergence of online video service providers have had a similar disruptive impact on the movie industry. The once ubiquitous video rental store now a very rare sight in many cities and towns has almost been resigned to the past, as the majority of consumers now download or stream movies or T series be it illegally or legally through services such as Netflix and Ama on Prime.

“When the technology that has the potential for revolutioni ing an industry emerges, established companies typically see it as unattractive: it’s not something their mainstream customers want, and its projected profit margins aren’t sufficient to cover big-company cost structure,” says oseph Bower in his 2002 article for Harvard Business eview, Disruptive Change’, which explains quite well what has happened in the media industry.

“As a result, the new technology tends to get ignored in favor of what’s currently popular with the best customers. But then another company steps in to bring the innovation to a new market. Once the disruptive technology becomes established there, smaller-scale innovation rapidly raises the technology’s performance on attributes that mainstream customers value.”

Disruptive innovation has always impacted business throughout modern history, but what has changed is how fast it occurring, and the statistics prove it. ifespans of top companies are shrinking, according to an Innosight study of the S P 500 Stock Market Index. .S. corporations in the S P 500 in 1 58 remained in the index for an average of 1 years. By

1 80, the average tenure of an S P 500 firm was 25 years, and by 2011 that average shortened to 18 years based on seven year rolling averages. In other words, the churn rate of companies in the S P500 has been accelerating over time. At the current rate, 75 percent of the S P 500 will be replaced by 2027, which clearly shows how urgent it is for companies to adapt to disruptive change.

As Christine Heckart, Chief Marketing Officer for American technology company, Brocade, points out in an article for Forbes: “More than 80 percent of the Fortune 500 companies from 20 years ago are no longer on the list. Many failed to make the transition to an Internet-based business in the late 1 0s.

Now, many companies on the list didn’t exist 20 years ago and were born as Internet-based businesses. The same fundamental transformation is happening but it’s a shift to digital business models and modern digital infrastructures. Companies that don’t make these changes will most likely lose relevance and suffer the same fate as those from the 1 0s.”

“The old adage of adapt or die’ that has its roots in Darwinism states that if an organism does not adapt to its environment, it will die,” writes blogger Torben ick, a senior executive with significant board experience through a number of professional board roles. “Only the fittest will survive, and those are the ones that transform themselves to live with a new environment. The same goes for companies and the changing technology environment around them that is now directed at the digital age.

“What companies require today is an organi ation that is agile, that can adapt and evolve on a continual basis; an organi ation that can generate new businesses, that can sprout

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and branch into new categories and new industries, that can recover quickly from failures and move on.”

We are now in an age of ‘Digital Darwinism’, an era where technology and society are evolving faster than businesses or organi ations can naturally adapt. The rest of this article will focus on some of the important technologies which will bring about significant disruptive change to markets over the coming years technologies that many companies across the world must embrace, or risk collapse. ike e-mail, Napster, Netflix and the iPhone, many of these technologies are intrinsically linked to the one of the 20th century’s most disruptive inventions, the Internet.

Smartphones and mobile internet Smartphones have been around for a decade now, but as an increasing number of people around the world connect to the internet via smartphones, how we work and go about our daily lives will continue to be transformed by this disruptive technology. It is expected that within the next 10 years, mobile devices could be the primary or perhaps even the only means of online connectivity for a majority of new internet users.

In the upcoming decade, mobile internet technology will bring huge economic gains through its impact on productivity, delivery of services, and from the addition of new users to the online world. With the technology becoming increasingly affordable, a significant proportion of the economic growth will be attributable to developing countries.

Out of 12 disruptive technologies identified in its report, Disruptive Technologies: Advances that will transform life,

ESTIMATED POTENTIAL ECONOMIC IMPACT OF TECHNOLOGIES ACROSS SIZED APPLICATIONS IN 2025 ($Trillion Annually) 1

2

3

4

MOBILE INTERNET AUTOMATION OF KNOWLEDGE WORK THE INTERNET OF THINGS CLOUD TECHNOLOGY ADVANCED ROBOTICS AUTONOMOUS AND NEAR AUTONOMOUS VEHICLES NEXT-GENERATION GENOMICS ENERGY STORAGE 3D PRINTING ADVANCED MATERIALS ADVANCED OIL AND GAS EXPLORATION AND RECOVERY RENEWABLE ENERGY SOURCE: McKinsey Global Institute analysis

5

6

7

8

9

10

11

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Internet of Things and Big Data

“THE E HA E A WA S BEEN DIS PTI E CHANGES AT P A B O GHT ON B APID AD ANCES IN TECHNO OG .

THE EFFECTS OF DIS PTION HA E IPP ED TH O GH E E ASPECT OF MODE N CI I IZATION ST OOK AT HOW PE SONA COMP TING HAS F NDAMENTA T ANSFO MED E E THING F OM THE ECONOM TO HOW SOCIET F NCTIONS F OM THE G O ND P” Steve Wozniak, Co-Founder of Apple Inc.

business, and the global economy’, consultancy group McKinsey Company predicts that Mobile Internet will have the largest potential economic impact, generating between 3.7 trillion and 10.8 trillion per year by 2025. The potential impact, particularly for developing countries, will be enormous as more companies and citi ens join the digital economy.

“The prospect of up to three billion more consumers joining the digital economy could represent an unprecedented growth opportunity,” states the report. “Entrepreneurs in developing economies might be able to compete globally in online commerce, and global players will have a new channel to reach the fastest-growing markets. Consumers in both advanced and developing economies stand to benefit substantially from mobile Internet usage, as they have from the Internet itself.”

Over the coming years we will enter the age of biquitous Sensing’. Smart sensors will be attached to all sorts of “things”, from buildings, bridges, roads and cars to factory machinery, robots, domestic appliances and even our bodies. These sensors will be connected to computers through the internet, relaying huge amounts of analy able data.

The Internet of Things (IoT) is here. If harnessed to its full potential, IoT will help businesses to improve productivity, efficiency and sales; it will allow cities to reduce traffic congestion, lower crime and cut energy and water consumption; it will enable farmers to improve yields and reduce waste; and it could help many of us to live healthier and perhaps happier lives.

IoT will be the main technology behind our smart cities, smart society and smart economies of the not-too-distant future.

By 2020, it is projected that 20.8 billion “things” will be connected to the internet globally. McKinsey forecasts that applications of IoT could have a direct economic impact of between 2.7 trillion and .2 trillion per year by 2025. The biggest economic impact will be in healthcare (between 1.1 trillion and 2.5 trillion), where adoption of IoT applications could reduce the cost of chronic disease treatment by 10-20 percent, cut drug counterfeiting by 80-100 percent, and save nurses up to one hour of work per day on time used for inpatient monitoring.

The economic impact on manufacturing is projected at 00 billion and 2.3 trillion. McKinsey forecasts that the total operating cost of manufacturing will reach 47 trillion by 2025, and that IoT applications could save between 2.5 and 5 percent on operating costs, including maintenance and input inefficiencies.

By 2025, IoT-enabled traffic monitoring and control could reduce travel time by between 10 and 20 percent; water consumption could be reduced by 10-20 percent with the use of smart meters and demand control; while smart energy management could lead to a reduction of between 2-4 percent in demand peaks on the grid. Sensory technology on vehicles could cut vehicle damage as a result of collisions by 25 percent, not to mention the number of lives that could be saved as a result of fewer road accidents.

There will be two main challenges for businesses and organi ations adopting IoT technologies. The first is related to security. Having more devices connected to the internet naturally increases the risk of cyber threats from hackers. Businesses, governments and utility companies will need to put in place extensive cyber security measures to mitigate the risk of attack.

The other big challenge is related to data management. IoTenabled devices will gather a huge amount of data. It this data is going to have any sort of direct benefit, enterprises will need to have both the human and technology resources in place to analy e it in real time, and then make smart’ decisions based on data analysis.

This is where Big Data can come in. Some of the bestpositioned companies may be suppliers of big data and analytical software that can help extract meaning from the enormous flows of data that the Internet of Things will produce.

The Internet of Things and Big Data are so closely intertwined; and there is no doubt that if used and managed properly the two areas will create new opportunities and solutions that will have a long and lasting impact on society, the environment and the economy.

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Speed, scope, and economic value at stake of 12 potentially economically disruptive technologies

Mobile Internet

Automation of knowledge work

The Internet of Things

Cloud technology

Advanced robotics Autonomous and near autonomous vehicles

Illustrative groups, products, and resources that could be impacted1

Illustrative pools of economic value that could be impacted1

4.3 billion People remaining to be connected to the Internet, potentially through mobile Internet

$1.7 trillion GDP related to the Internet

1 billion Transaction and interaction workers, nearly 40% of global workforce 230+ million Knowledge workers, 9% of global workforce 1.1 billion Smartphone users, with potential to use automated digital assistance apps 1 trillion Things that could be connected to the Internet across industries such as manufacturing, health care, and mining 100 million Global machine to machine (M2M) device connections across sectors like transportation, security, health care, and utilities 2 billion Global users of cloud-based email services like Gmail, Yahoo, and Hotmail 80% North American institutions hosting or planning to host critical applications on the cloud

320 million Manufacturing workers, 12% of global workforce 250 million Annual major surgeries

$25 trillion Interaction and transaction worker employment costs, 70% of global employment costs

$9+ trillion Knowledge worker employment costs, 27% of global employment costs

$36 trillion Operating costs of key affected industries (manufacturing, health care, and mining)

$1.7 trillion GDP related to the Internet $3 trillion Enterprise IT spend

$6 trillion Manufacturing worker employment costs, 19% of global employment costs $2–3 trillion Cost of major surgeries

1 billion Cars and trucks globally

$4 trillion Automobile industry revenue

450,000 Civilian, military, and general aviation aircraft in the world

$155 billion Revenue from sales of civilian, military, and general aviation aircraft

Nextgeneration genomics

26 million Annual deaths from cancer, cardiovascular disease, or type 2 diabetes

$6.5 trillion Global health-care costs

Energy storage

1 billion Cars and trucks globally

3D printing

Advanced materials Advanced oil and gas exploration and recovery Renewable energy

2.5 billion People employed in agriculture

$1.1 trillion Global value of wheat, rice, maize, soy, and barley

$2.5 trillion Revenue from global consumption of gasoline and diesel

1.2 billion People without access to electricity

$100 billion Estimated value of electricity for households currently without access

320 million Manufacturing workers, 12% of global workforce

$11 trillion Global manufacturing GDP

8 billion Annual number of toys manufactured globally

$85 billion Revenue from global toy sales

7.6 million tons Annual global silicon consumption

$1.2 trillion Revenue from global semiconductor sales

45,000 metric tons Annual global carbon fiber consumption

$4 billion Revenue from global carbon fiber sales

22 billion Barrels of oil equivalent in natural gas produced globally

$800 billion Revenue from global sales of natural gas

30 billion Barrels of crude oil produced globally

21,000 TWh Annual global electricity consumption 13 billion tons Annual CO2 emissions from electricity generation, more than from all cars, trucks, and planes

1 Not comprehensive; indicative groups, products, and resources only.

$3.4 trillion Revenue from global sales of crude oil

$3.5 trillion Value of global electricity consumption $80 billion Value of global carbon market transactions

SOURCE: McKinsey Global Institute analysis

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“AD ANCED OBOTICS A SO HO DS A G EAT DEA OF P OMISE FO B SINESSES AND ECONOMIES EA ADOPTE S CO D GAIN IMPO TANT A IT , COST, AND SPEED AD ANTAGES O E COMPETITO S, WHI E SOME COMPANIES CO D FIND THAT AD ANCED OBOTICS OWE S THE BA IE S FO NEW COMPETITO S” McKinsey & Company

Advanced Robotics, Artificial Intelligence and Automation Industrial robots have been used on assembly lines for decades now, but technological advances have enabled them to take on more complex work, with more speed and accuracy then human workers. Today Asia is witnessing the strongest growth in the use of industrial robots. China is the largest market in the world, with sales of 87,000 units in 201 ; South Korea was second with 41,400 units, and apan third with 38, 00 units.

The International Federation of obotics (IF ) predicts that 1.7 million industrial robots will be installed in factories worldwide by 2020.

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The Internet of Things, Big Data and cloud computing will also have a major impact on the evolution of industrial robotics. “ obot manufacturers are already developing and commerciali ing new service models: these are based on real-time data collected by sensors which are attached to robots. Analysts predict a rapidly growing market for cloud robotics in which data from one robot is compared to data from other robots in the same or different locations,” says the IF .

“The cloud network allows these connected robots to perform the same activities. This will be used to optimi e parameters of the robot’s movement such as speed, angle or force. ltimately, the advent of big data in manufacturing could redefine the industry boundaries between equipment makers and manufacturers.”

With advances in artificial intelligence, machine vision, motions sensors and hydraulics, robots are now capable of more intricate and delicate tasks, from picking and packing small electronic parts and preparing food in fast-food restaurants, to performing robotic surgery and allowing the disabled to regain movement with the use of robotic prosthetics. At the same time, the cost of robotics is declining, which will lead to the rapid increase of robotics applications in the manufacturing, services and healthcare industries over the coming years.

McKinsey predicts that the application of robotics across these industries could generate a potential economic impact of 1.7 trillion to 4. trillion per year by 2025, including between 800 billion to 2. trillion in value from healthcare issues.

“Advanced robotics also holds a great deal of promise for businesses and economies,” the McKinsey report states. “Early adopters could gain important quality, cost, and speed advan-

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THE INTE NET OF THINGS (IOT) IS HE E. IF HA NESSED TO ITS F POTENTIA , IOT WI HE P B SINESSES TO IMP O E P OD CTI IT , EFFICIENC AND SA ES; IT WI A OW CITIES TO ED CE T AFFIC CONGESTION, OWE C IME AND C T ENE G AND WATE CONS MPTION; IT WI ENAB E FA ME S TO IMP O E IE DS AND ED CE WASTE; AND IT CO D HE P MAN OF S TO I E HEA THIE AND PE HAPS HAPPIE I ES

tages over competitors, while some companies could find that advanced robotics lowers the barriers for new competitors.”

It also says that businesses in developing countries could be the biggest buyers of robotics. However, at the same time these economies will have to face impact from the lower demand for low-skilled manual labor.

Indeed, for both developed and developing countries, the biggest challenge will be finding new roles for workers in the services and manufacturing industries, whose tasks will be fulfilled by robots or automated processes. The World Economic

Forum predicts that robotic automation will result in the net loss of more than 5 million jobs across 15 developed nations by 2020. With robots and computers performing much of the lower-skilled jobs, more emphasis must be put on education and retraining workers for higher-skilled roles.

But it’s not just lower-skilled workers who need to worry about machines fulfilling their tasks. The automation of knowledge work is also expanding as a result of advances in computational speed, machine learning and natural user interfaces.

Over the coming years, computers will take on more of the tasks currently performed by knowledge workers.

McKinsey estimates that by 2025, automation tools and systems could take on tasks that would equal the output of between 110 million and 140 million full time equivalents. The economic impact of this is estimated at between 5.2 trillion and .7 trillion per year by 2025.

“As with advanced robotics, automation of knowledge work could bring great societal benefits such as improved quality of health care and faster drug discovery but may also spark complex societal challenges, particularly in employment and the education and retraining of workers,” says McKinsey. “This technology could change the nature of work for many people, requiring innovation to fully reali e its potential while managing its risks.”

Disruptive change is occurring at an increasingly faster pace. It poses both challenges and opportunities for business, organi ations and societies across the world. In line with Darwin’s theory, it will not be strongest businesses that will survive as evident from the number of companies that have been wiped off the S P 500 Index but the ones most responsive to this change.

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What has established our global reputation in the gaming industry?

At the Malta Gaming Authority, our regulatory philosophy, organisational principles and culture are focused on player protection. Malta’s transparent legal framework and experience in regulating gaming has developed into a world class eco-system providing effective, innovative and efficient regulation.

Our regulatory framework provides assurances both locally and internationally that fairness and transparency are at the core of everything that we do.

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INFRASTRUCTURE AND CONSTRUCTION EXPANSION PAVE

THE WAY FOR STEEL INDUSTRY BOOM A country that only six years ago was in the midst of experiencing political turmoil and revolution, Egypt has come a long way in the last half of the decade. ast year, the Minister of Trade and Industry approved an 820 million EGP ( 4 million) plan to establish an industrial one in South Sinai that will create jobs and attract foreign investment to the Peninsula. A vocational school will be set up as well as low-cost housing units that will be made available for workers.

The Ministry of International Cooperation also announced last year that with the almost billion in aid accumulated from the Arab entities, major efforts in urbani ation of almost 20,000 acres is planned to link Sinai with the Delta area, concentrating on infrastructure, roads, water and sewage plants. These developments coincide with the boom of the Sue Canal Zone project that has the potential to double revenues in the next ten years.

The Sue Canal has long been the prominent economic stream for Egypt and is expected to represent 30-35 percent of the country’s improving economy. What the one also does is create an opportunity for even more industriali ation to develop the surrounding areas and to draw in attention from investors from across the globe to the potential of this region.

The rise in construction and focus on infrastructure is bringing into existence a higher demand for the production of steel, an industry in Egypt that has been expanding since the 1 50s.

In the brief period of time between 2004 and 2010, steel consumption in the country rose from 3.4 to 8.5 million tons due to the rising population and the need for rapid urbani ation as a result.

The construction sector continues to be affected positively by the growth of government projects and private expenditures. And though the unrest in 2011 did cause some stagnation within the industry, production has been steadily increasing and is expected to continue to do so with the recent sanctions announced by the Ministry of Industry.

In March last year, the government reduced the price of natural gas to steel and iron factories from 7 to 4.50 per million thermal units. By doing so, the government has given companies within Egypt a much-needed break on domestic production since the conversion of raw material into steel plates is a high gasconsuming process.

Egyptian Steel Group was one of the first to invest in gypt after the revolution, a bet that has clearly paid off as the company now looks to increase its market share to 20 percent and achieve a production capacity of 2.3 million tons per year by to meet the rising demand for steel in the country The reduction of the price of natural gas for steel producers will cost the state an estimated EGP 1.2 billion ( 8 million), but is expected to increase the export of steel to 00 million. The current price of steel ranges between EGP 4,500-4,800 per ton and will be carefully watched as the dollar is revaluated.

As the industry continues to evolve, companies like Egyptian Steel Group are focusing on ecofriendly technology and the long-term conservation of resources.

Egyptian Steel Group was established in 2010 and despite the turmoil in 2011, has in a few short years become a leader in the steel industry and corporation with a social responsibility program that is improving the lives of the Egyptian population as well. As Chief Executive Officer Ahmed Abou Hashima puts it, “We decided to go in and bet on the country on the hardest times, just after the big turmoil. We invested on this market after the revolution, when everything was on standby, and now the results are there.”

And indeed, like Mr. Abou Hashima says, this investment has given the company room to grow and to support the community where he believes it matters most. “Egypt has high percentage of poverty, and I can’t see myself not supporting my community and my people, as we try to improve lives by helping address the problems they face from the position we are. I think it’s all about sustainable growth, generating profits but also caring about the environment and the next generations.”

Egypt looks to the future as it recovers from the unrest of 2011 but if many of the people involved with the private sector adopt the same attitude as Mr. Abou Hashima, the country will be propelled forward in a way that builds confidence from local investors first, and then engages the global economy to further participate.

When asked why the Egyptian economy and people are so resilient, Mr. Abou Hashima says, “Because we are the largest population

of the region. There’s no room for failure, as the 0 million we represent, it’s on us to push together during hard times and build a straightforward and strong mentality.”

And that is what the company intends to do. evitali ing the economy is based on their will to work and produce, and combined with the corporate social responsibility program; Egyptian Steel will pursue planned expansion projects that play a vital role in the success of their industry in the country.

Part of what makes Egyptian Steel a leader in this sector of the economy is the focus on meeting domestic and international needs.

They have contracted the Italian Group Danieli to operate production plants that reduce waste of rolling mill lines. The introduction of new technologies like the preheated scrap charging systems are energy saving, optimi e scrap utili ation and have ultimately increased productivity in factories all over the world.

Egyptian Steel is developing a world-class business model and corporate governance structure that hopes to achieve a production capacity of 2.3 million tons per year by 2018.

Reaching 20 percent of market share in the steel market will position the company as one of the leading rebar manufacturers in the country with the ability to export quality products to other markets around the globe. As the group expands and as a step towards reali ing his dream to transform Egyptian Steel into a full-fledged building materials group, Abou Hashima has established Egyptian Cement in 2017, which will also adopt eco-friendly technologies like its sister company Egyptian Steel.

The company will initially produce 2 million tons of cement per year, with a potential to reach a 4-million-ton capacity in the future.

The cooperation between the public and private sector is vital to the future expansion of the Egyptian economy and it’s clear through the visions of groups like Egyptian Steel that the industrial sector is on the right path to stimulating growth. As Mr. Abou Hashima sees it, “We have an absolute role in this campaign. The Government organi es things, but it is our responsibility to take the bet on the country. The private sector is the engine that portrays the economic wellbeing of Egypt. If we do manage to invest at the right moment, at the right time, our returns and profits will convince everyone else that this market is solid.”

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REVOLUTIONARY SOSEI WATER

COULD REDUCE CO2 EMISSIONS AND USE OF HARMFUL POLLUTANTS An innovative apanese company has developed a type of water with uni ue natural properties that enable it to be used to run engines and as a powerful household cleaner to replace detergents and shampoo At the COP21 climate summit in Paris in December 2015, a landmark agreement was signed by 1 nations, including the .S. and China, which obliges countries to reduce their carbon emissions dramatically over the coming years, in order to keep global warming under the important 2-degree Celsius threshold. But of course achieving this goal requires much more than just the political will demonstrated at the summit, it will require colossal imagination and innovation to develop and implement renewable energy and CO2-reducing technologies.

In apan, where the previous milestone climate change agreement was signed in Kyoto in 1 7, there is a large number of companies working to develop new technologies that could help nations across the globe to significantly reduce their carbon emissions.

Perhaps the first that springs to mind is Toyota, which introduced the first mass-produced hybrid car to the world back in 2000. Since then it has gone on to become the world’s top selling hybrid car, and is ranked among the cleanest vehicles sold in the nited States based on smog-forming emissions.

But it isn’t just household names like Toyota that are driving innovation to lower emissions. ess is known about the groundbreaking work of smaller apanese companies like Sosei World Co., which has developed a way to turn water into a powerful energy source, by emulsifying it with fossil fuels, like heavy oil and kerosene, without the use of chemical emulsifying agents. This “burnable water” can produce as much energy as conventional fossil fuel, but CO2 emissions are sharply reduced as the emulsion is made up of 50-percent water 50-percent fossil fuel.

While emulsion fuels have been developed before, inefficiencies in combustion

Toshiharu Fukai, President of Sosei World Co. and the use of chemical emulsifying agents meant there was practically no energy saving or reduction in CO2. Sosei says the difference with its Fukai Green Emulsion’ is that its uses a specially conditioned water developed by the company, known as Sosei Water, which contains an “abundance of dissolved oxygen and active hydrogen” that “highly increases the efficiency of combustion.”

In 2015 Sosei’s water-based fuel emulsion was put into a diesel engine, which powered a fishing boat for 24 straight hours.

Sosei’s breakthrough can be attributed to the vision and philosophy of President, Toshiharu Fukai, who speaks passionately about how water could replace fossil fuels in combustible engines.

“I’m a Buddhist, and that’s how I came up with this idea. I’m not a scientist. It always starts with how to protect this planet,” he says. “My belief is that water can become energy. Everybody thinks that water cannot be burned. However, in terms of the law of energy conservation, I really think we can

overturn this belief. ain, snow and water that’s surrounding us can be turned into a substitution for gas.

“My goal is to run the engine with water and contribute to the reduction of CO2 and global warming, and also eventually to be able to run the engine solely by water.”

But Sosei Water is not only used to run engines. Its unique natural properties allow it to mix with oil and dirt easily, meaning it can be used to clean dishes, laundry, hair and skin, without the need for environmentally harmful detergents, shampoos and other cleaning products. Amongst Sosei Water’s biggest users are ordinary households, where a special water generator is installed which transforms regular tap water into Sosei Water.

This remarkable water is also drinkable, and in fact tastes better than regular tap water. It can also be used in food preparation, enhancing the flavor of food and eliminating or reducing the use of harmful preservatives, and in food cultivation, limiting the need for pesticides.

“Aside from ordinary homes, there are many food service establishments, as well as dry cleaners and beauty salons, that use this water,” says Mr. Fukai. “Now they can remove oil stains without using any kind of detergent whatsoever. In beauty salons, they can wash a client’s hair with this water without using any shampoo or conditioner.

Also, at drycleaners, they don’t use any detergents or dry cleaning solvents.”

In our environmentally conscious world, a revolutionary product like Sosei Water, which can reduce CO2 emissions and our use of harmful pollutants such as cleaning detergents and pesticides, could help to build a cleaner, greener and healthier future.

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Revamp of

a Nation

The Kingdom of Saudi Arabia, the world’s largest oil producer, is building a modern and diversified economy in line with its Vision 2030 The post-oil era is fast approaching and Saudi Arabia, the world’s largest oil producer, is ready for the challenge. At the “Saudi Arabia Path to 2030” panel during the 2017 World Economic Forum in Davos, the Kingdom’s delegation projected confidence and positivity as it announced its plans to transform and modernize the economy.

The delegation emphasized the measures the country is taking to create a more market-driven, privatized economy. “Large jumbo jets don’t fly with one engine,” Saudi Energy Minister Khalid Al-Falih told the panel, alluding to the Kingdom’s firm commitment to move beyond its dependence on oil.

Saudi Arabia has the largest economy in the Middle East and it is already rolling out various projects and initiatives in line with Vision 2030, the ambitious plan that was announced by the Crown Prince Mohammed bin Salman. The wide-reaching development plan – to build up the private sector and create a thriving economy and vibrant society – will have a profound effect on the region and the global market.

With the diversification from oil production to mining, tech start-ups and entertainment offerings, Saudi is going above and beyond to move the country forward, leaving virtually no sector untouched. Investors at Davos indicated their enthusiasm and optimism about the government’s progress as it works to make Saudi Arabia a more attractive place for investment and innovation.

Privatization and investment Attracting investment – both domestic and foreign – is key to Saudi’s plan, along with the privatization of government-held sectors. In a strategic move to facilitate foreign investment, Saudi Arabia has adopted new measures that will allow foreign investors to obtain business visas within 24 hours from the Saudi Arabian General Investment Authority (SAGIA). Requests for foreign business delegations will take two days instead of the previous three days, a move aimed to streamline the process and encourage investors to visit the Kingdom.

Privatization in the energy sector is set to make an even bigger impact in the coming years. Aramco, the national oil company, is preparing to go public, with the Kingdom intending to sell up to 5 percent of the company. Not only will the listing advance Saudi’s goal of privatization, a large portion of the initial public offering (IPO) will go to fund the Saudi Public Investment Fund (PIF), a key vehicle to stimulating the Saudi economy.

The privatization and strengthening of other sectors such as healthcare and aviation is also a priority. By 2030, 295 hospitals and 2,259 health centers will be privatized. Saudi plans to privatize 27 of its airports by the middle of 2018, as well as sectors of air

navigation and IT services, with the airports to become operating companies. Foreign investments are intended to exceed 75 percent in some airports in order to guarantee a sufficient proportion of foreign operators in the privatization process.

Tech Kingdom The PIF is set to be the biggest sovereign wealth fund in the world, with $2 trillion worth of assets. The world’s number-one oil producer can now add another distinction to its name: Saudi Arabia is now the number-one technology investor in the world, thanks to the PIF’s contribution to Japanese firm SoftBank’s Vision Fund.

Over the next five years, $45 billion will be invested in SoftBank, which aims to push the Vision Fund to $100 billion,

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in order to invest in emerging technologies such as artificial intelligence and the Internet of Things (IoT). Tech giants Apple, ualcomm Inc. and Oracle have confirmed that each of them will invest 1 billion in the Fund. In addition to the SoftBank investment, the PIF has already invested 3.5 billion in car-hailing app ber, the largest-ever single investment in the company. Car-hailing apps are a popular investment in the Kingdom: in December, the Saudi Telecom Company (STC) announced it had acquired a 10 percent stake ( 100 million) in Careem, ber’s local rival app that is present in 11 countries. Kingdom Holding Company has invested 105 million in the .S.based yft. Mobily entures, meanwhile, has invested in Easy Taxi.

Small and Medium Enterprises The Government established the General Authority for Small and Medium Enterprises with a 1.1 billion fund to boost the

contribution of the private sector to the economy and help create jobs for young Saudis, as well as facilitate funding for small businesses. SMEs are the backbone of economic growth; in Saudi Arabia, they make up percent of all businesses, with 8 percent of them owned by foreigners.

The General Authority aims to increase Saudi ownership of SMEs while attracting foreign investment.

In a strategic move by the government, new incentives were initiated for SMEs to establish themselves in the King Abdullah Economic City. Designed to increase economic growth, create new jobs and enhance the country’s competitiveness, King Abdullah Economic City is rapidly expanding. King Abdullah port is the Kingdom’s first privately owned port, and is ranked the fastest-growing in the world. Once fully developed, it will be able to handle 20 million shipping containers and 15 million tons of bulk cargo per year.

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IoT and AI DEFINE THE FUTURE

OF JAPAN As can be expected, hyper high-tech Japan is firmly embracing this fourth revolution of the so-called Internet of Things (IoT), and Artificial Intelligence (AI), not only for consumer use but also in a wide variety of industrial applications across the economy and U.S. companies are invited to come along for the ride Refrigerators that keep track of when you’re running out of milk, implants that monitor the rhythms of your heart, clothes with built-in navigational tools to help you find your way in an unfamiliar city and hundreds of other everyday “wired” objects are part of a what economists are calling Industry.4, the fourth industrial revolution following those which changed the world forever: steam and water power, mass production using electric power and, most recently, the digital revolution of electronics and IT. Strictly defined, IoT, (also sometimes referred to as embedded technology), is a range of varied technical elements that include robots, appliances and other items with user interfaces, microcontrollers and sensors guided by software which experts say will fast change the way we live, play and work and is already evident in daily life.

Japan’s current IoT market is valued at $103 billion, a number that accounts for approximately 23% of all IoT market revenue in the Asia-Pacific region. This figure is expected to increase by nearly 70% over the next five years thanks to recent government incentive programs, consumer demand, and the fast-approaching 2020 Tokyo Olympics.

Consumer interest in IoT is helped

by Japan’s mature ICT market, solid broadband infrastructure, and consumer familiarity with cloud service prod-

“WE’RE NOW UTILIZING IOT TO DEVELOP OUR SMART CONNECTED PRODUCTS. FOR INSTANCE, WE HAVE STARTED SELLING VERY WELL IN THE UNITED STATES OUR SMART BREAST PUMP WHICH CAN BE CONNECTED TO SMARTPHONES TO COLLECT AND STORE DATA ON THE QUANTITY OF MILK OR THE PUMP’S PRESSURE” SHIGERU YAMASHITA, President, Pigeon Corporation

ucts. However, some barriers do remain to successful market entry.

On a product level, IoT products often suffer from weak value proposition, present new security and privacy risks to users, and are not intuitively easy to understand with some consumers reporting confusion about which product works with which electronic device.

In addition, IoT companies struggle against herding behavior exhibited by consumers. Studies have shown Japanese consumers tend to wait for the approval of their colleagues and peers regarding a new technology before embracing it themselves. Although this can help companies establish a dedicated buyer base once a product begins to trend, it makes early market entry especially difficult.

In a bid to overcome these obstacles and keen to see their country in the forefront of this fourth industrial revolution, Japanese officials have announced plans to collaborate with U.S. companies and the German government to set out international standards for IoT, paving the way for the three countries to cooperate in advancing the new technology to the benefit of all.

Leading the Japanese effort is the IoT Acceleration Consortium, bringing together the government, industry and academia to establish a structure for developing and demonstrating technologies related to the promotion of IoT

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Revenue of IoT in Japan $103bn (2015) Revenue of IoT in Japan

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as well as creating and facilitating new business models.

According to its brief, the consortium promotes the development, demonstration, and standardization for IoT-related technologies and the creation of various IoT-related projects and recommendations such as the necessary regulatory reform. Overseeing the consortium is the Ministry of Economy, Trade and Industry and the Ministry of Communications.

A list of the private sector players involved in the consortium reads like a roll call of the leading Nikkei Index companies with such corporate household names as Toyota and Hitachi along with some 2,000 other firms, while the U.S. contingent includes Intel, General Electric and America’s Industrial Internet Consortium.

Establishing common platforms, setting standards, exchanging ideas and encouraging dialogue are the three main aims of the consortium to which each of the three countries brings specialized skills with the Germans’ expertise in hardware, the United States contributing its software knowledge and Japan with its overall tech prowess.

Already, the German and the Americans are sharing information on production, offering suggestions for drawing up shared standards and overseeing efforts at making sure everything is compatible among the partners’ industries.

Once the consortium’s policies, rules and regulations are in place, technology networks in offices and factories in the three countries will allow data collection and sharing.

Running parallel to this program is a scheme by the Japan External Trade Organization (JETRO) to subsidize the cost of companies from overseas to set up innovation centers, experimental studies and feasibility studies in collaboration with Japanese companies and other organizations.

Its aim, according to JETRO, is to draw investments and management resources from the foreign companies by promoting the location of high valueadded sections of overseas companies such as R&D facilities, and making Japan a high value-added hub and innovation base for global value chains in IoT and, in a country with a rapidly-aging population, in regenerative medicine.

A number of U.S. companies in the automotive, biotech, medical equipment, manufacturing, retail, ICT and food processing sectors have applied for and received approval to take part in the subsidy program or other incentive schemes sponsored by JETRO. In a separate effort, the Ministry of Communications is embarking on an ambitious training program to accelerate the development of specialists capable of improving and managing IoT, reflecting growing demand in both the

“TALKING ABOUT INNOVATION, AT YOKOGAWA ELECTRIC WE RECOGNIZE THAT WE CANNOT DEVELOP ALL THE TECHNOLOGIES THAT WE NEED ON OUR OWN. FOR EXAMPLE, ARTIFICIAL INTELLIGENCE (AI).

IN THE FUTURE, WE WILL USE AI LIKE THE INTERNET, AS AN INFRASTRUCTURE PLATFORM. YOKOGAWA ELECTRIC WILL NOT DEVELOP ITS OWN AI SYSTEMS, BUT WE WILL USE SUCH TOOLS TO CREATE VALUE FOR OUR CUSTOMERS”

TAKASHI NISHIJIMA, President and CEO, Yokogawa Electric Corp.

private and public sectors for staff who can easily operate the increasingly complicated networks and handle the expected surge in data volumes from IoT. According to ministry officials, the number of linked IoT devices will almost double to 30 billion around the world by 2020, from the current estimated 16 million. Also, key to Japan’s IoT future is establishing a 5G next generation wireless system so the country can take full advantage of that IoT revolution just over the horizon.

A 5G system is 100 times faster than the current technology and allows multiple devices to connect to networks simultaneously. It is therefore expected to serve as the core technology in selfdriving vehicles and all other IoT devices.

In the private sector, Japanese companies are working on IoT solutions in

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such areas as health, connectivity for heavy machinery through improved data delivery systems, data signage, voice command interface systems and cyber security.

“What many refer to as the fourth industrial revolution is actually more related to the automation of factories in the production process,” explains Nobushige Kondo, President of Nittoku Engineering.

“We have a $1 million research program supported by the local government and universities to find ways to integrate IoT and M2M (machine to machine) by creating a platform where all the different machines can communicate and then connect the data to the sensors and software.”

Once operational, Nittoku’s system will allow the machines to better handle all the data and information so as to better standardize the various production processes and upload data to cloud applications, acting as a bridge between automated factories and IoT for “smart” manufacturers which are increasing worldwide.

“The global manufacturing industry is going through a progressive transition in which IoT plays an important role,” notes Fumito Shinkawa, President of

Shinkawa Electric. “As far as our business is concerned, we create integrated systems whereby our sensors monitor the machine conditions and then send the information to the network that ultimately filters down the line.

Shinkawa specializes in sensors that monitor vibration in rotating machinery, whether in manufacturing plants or on transport systems. Its sensors are used widely, for example, on Japan’s state-of-the-art, high-speed bullet train network where they continuously monitor track conditions to ensure passenger safety.

“The United States is particularly focused on this type of development so we are concentrating on America first in our cooperation efforts with companies in other countries.”

Yokogawa Electric Corporation, an electrical engineering and software company, is working with several U.S. companies, including Microsoft on what President and CEO Takashi Nishijima describes as “industrial IoT architecture.”

“We have an optical fiber sensing solution that improves the detection of temperature variations over long distances. By detecting these variations, our fiber optic sensors can detect liq-

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uid and gas leaks. Using this solution, for example, our customers can detect problems occurring anywhere along a pipeline and take action before the situation escalates.

“Talking about innovation, at Yokogawa Electric we recognize that we cannot develop all the technologies that we need on our own. For example, artificial intelligence (AI). In the future, we will use AI like the Internet, as an infrastructure platform. Yokogawa Electric will not develop its own AI systems, but we will use such tools to create value for our customers.

“One example that we recently presented in public is the use of an augmented reality (AR) technology to aid in the maintenance of all kinds of complex equipment that our customers have at their facilities. To improve the efficiency of these maintenance activities, we are planning to introduce these AR systems”.

Solid IoT security will become increasingly important in this age of widespread hacking as the technology spreads to even the smallest appliances and other wired items. Protecting vulnerable systems is the core business of Trend Micro with CEO Eva Chen saying IoT has long been a dream of mankind.

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“Think about all those cartoons and movies showing self-driving automobiles, doors opening automatically when the character arrives home where the wired-up kitchen is already preparing dinner because it received the order when the character got in his car to return home from work.”

Trend Micro has been investing in IoT security for the past three years, targeting three vulnerable points in the system: the cloud, the network and the endpoint that can be anything such as a car, a refrigerator or a phone.

“These three layers need dedicated protection so that hackers cannot access the servers and either steal information or alter the commands they are sending out,” Ms. Chen explains.

“The U.S. market is very important for us and now accounts for around 26% of our revenue as it is the biggest IoT market hands down and that is why we have a research center and a sales force in the United States and are working with Cisco, HP and Amazon Web Services,” she adds.

LINE Corp., the world’s highestearning app publisher that produces and markets a free app for real-time communications on smartphones, tablets and personal computers, is heavily involved in improving IoT connectivity issues, notes CEO Takeshi Idezawa.

“We have to think about how people are going to use and connect with the different ‘things’ over the Internet, what they will use as the controller of the IoT products and services,” he says. “Going forward the interface of the future is more about voice commands and one day you will be able to open your emails and browse the Internet with just one word.”

Another important application of IoT is in the realm of health and wellbeing. Baby product manufacturer Pigeon Corporation, which is branded as Lansinoh in the United States, uses IoT to help breast feeding mothers.

“We’re now utilizing IoT to develop our smart connected products,” explains President Shigeru Yamashita.

“For instance, we have started selling very well in the United States our smart breast pump which can be connected to smartphones to collect and store data on the quantity of milk or the pump’s pressure.

“It can be difficult to develop such smart connected products in Japan and so in the future we would like to build synergies with companies in the Silicon Valley and introduce these new products to the rest of the world.”

With its own technical know-how and a strong focus on developing new innovative solutions, major sports and health club operator Renaissance uses IoT to maintain and improve its clients’ wellbeing, according to President Masaaki Yoshida.

“We have the technical know-how and a strong focus on developing new innovative solutions. We are leveraging IoT to have our own application to track people’s fitness,” he says.

“What we are ultimately aiming for is using IoT to customize a healthy lifestyle for each of our clients.”

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What do investors see in the ‘Lombardy model’?

Let’s begin our conversation with the potential effects of Brexit. Some observers say Italy may benefit out of it. When it comes to the Lombardy Region, what role can it play in the high-growth corridor linking Africa and the Middle East to northern European countries?

Brexit is the start of a new process. I don’t look at Brexit as a problem, but rather as an opportunity for Italy and Europe, for the new Europe.

Something has to change if Europe wants to survive Brexit. Otherwise, we will go back to the individual member states, and that would be a disaster for everybody.

We are working to get all the opportunities connected with Brexit. Italy has a great role to play and naturally Lombardy is at the forefront of these new opportunities. Lombardy is the most important region in Italy. 10 million people live in Lombardy out of 60 million in Italy. Lombardy has one-fourth of the Italian GDP with 800,000 companies. In Lombardy, we have all the most important international multinational companies from Europe and the world. Milan is the number one city in the world in terms of number of consulates. The number two is New York City, so just imagine!

Lombardy is not only the engine of Italy, but also of Europe. The region has been part of an association for 26 years, which is called the “Four Motors for Europe” – along with Catalonia, Rhône-Alpes and Baden-Württemberg.

Last year, The Wall Street Journal said that in Lombardy was the number one region within the Four Motors in attracting cross-border investments.

What would you say are the key drivers attracting international investors?

We are the center of innovation. The vocation of Lombardy is research and innovation in healthcare, welfare, and manufacturing. We have 13 universities, both private and public.

We have more than 40 hospitals, both private and public. We have 500 research centers in Lombardy, private and public. We have eight technology parks that are fundamental incubators where young people can develop their ideas into projects and create start-ups.

The key to the success of Lombardy lies in our capability to strongly integrate the public with the private sector. We work together and we create fruitful synergies.

All these conditions are unique to Lombardy; you will not find the same ecosystem in other regions. We are the number one region

for manufacturing. We are the number one region for innovation. Lombardy’s GDP is €300 billion (approx. $328 billion), and we invest 1.8 percent in innovation and research, which is twice as much as the Italian average. We want to reach 3 percent in a couple of years.

Even when I talk about investment in research and innovation, I mean both public and private resources. This strong integration is what we call the “Lombardy model.”

We put public money to finance applied research. I don’t want to finance researchers, but a project. To do this, we have to involve the private sector. We have to involve international companies, for instance. And I can tell you that thanks to our model, many of them decided to relocate their R&D centers to Lombardy.

Consider Whirlpool, for instance. They picked Lombardy despite the fact that labor cost and the level of taxation in Italy is higher than in other countries.

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The Italian region of Lombardy is the number one region within Europe’s “Four Motors” in attracting cross-border investments.

Geographically on the principal eastwest axis of Europe and at the heart of its most economically advanced area, the region is not only the engine of Italy, but also the continent.

Major internationals have already established long-term investments in Lombardy and interest from Chinese firms in setting up here is rising substantially – and for multiple good reasons. So, what exactly is its appeal and future potential?

Governor Roberto Maroni explains what makes it so unique

What would you identify as the main economic sectors with the highest growth potential for FDI in Lombardy?

One is healthcare innovation, namely the future of the human care and medicine. We are making very important investments in the Expo area and creating a tax-free zone. The Italian government decided to invest €1.5 billion in 10 years in order to create the so-called Human Technopole, which will be the most important and innovative research center on genomics worldwide. It will be a point of reference for scientists from all over the world.

Lombardy will be one of the most important global centers for healthcare and medicine.

The second sector is manufacturing, all kinds of manufacturing. Digitalization and high-tech sectors create opportunities for us, as devices must be manufactured by someone.

We are investing in this direction and we are getting more and more under the international spotlight. From next year, Lombardy will permanently host the World Manufacturing Forum, which is currently hosted in different countries all over Europe.

The third sector is infrastructure, both material and immaterial. Lombardy is 99 percent covered by broadband, 20 percent of which is ultra-broadband, with investment of $500 million to extend the ultra-broadband to the rest of Lombardy. This is something useful for industry of course, especially for young people who live in villages, small towns, or even in the

“Lombardy is the real land for tourism. Italy is the county with the highest number of UNESCO World Heritage Sites in the world, 51. Lombardy has 10 of these 51 UNESCO sites” Roberto Maroni, Governor of Lombardy Region

mountains. I want everyone in Lombardy to be able to fulfill their dreams from where they are.

They don’t have to come to Milan to do what they want to do.

We have 1,500 cities and villages. The largest city, which is the metropolitan city of Milan, has 2.5 million people. The smallest village, which is Pedesina in the Sondrio province, has 32 inhabitants. Even these 32 have equal rights to enjoy the same level of services as the rest of the population and we, as the regional government, have the obligation to reach out to them as well.

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What about in terms of transport infrastructure? How is Lombardy positioned in the strategic European trans-national network of the TEN-T corridors?

In terms of transport infrastructure, consider that 90 percent of the goods distributed in Italy come from Rotterdam, not from Genoa. It’s unbelievable.

We are at the center of all the most important European corridors. Here, we are taking advantage of European funds but also other long-term strategic investors such as sovereign wealth funds that are allocating important resources into these projects.

Not to mention the growing appetite of Chinese investors we are registering. This is a very important and very new trend.

Almost every week I meet people coming from China saying they want to invest. They don’t want to buy companies and move them to China. They want to invest here and leave the company in Italy and be led

by Italian management. This is something exciting and new for me. It’s fantastic.

When we look at Expo Milan 2015, was a global event that put Italy back on the global map. What is your personal perspective about the legacy of Expo Milan in shaping a new image of Italy?

I believe Expo Milan contributed to shaping a new image of Italy internationally, as the “Wellness Nation”. ‘Made in Italy’ is fashion, food, but we also want ‘Made in Italy’ to be wellness. There is a strong interlink between the theme of Expo and the planet, energy for life, and wellness.

The Italian style, the Italian way of living – which means you eat something good, you eat something that makes you happy and it’s healthy for you – it’s unique. That’s why the legacy of Expo will be devoted to wellness generally speaking with a particular focus on what I said before, namely the creation of the Human Technopole. Here you will find everything that is necessary to help us to live longer and happier. The region already put €150 million into that project.

I also see an opportunity coming from Brexit in this context, as I strongly believe that it is thanks to visions like these that we will be able to shape a ‘brain gain’ of many researchers and young scientists that have gone to London to seek fortune years ago. We allocated €50 million to create a program to attract the best human capital for the Human Technopole.

Let’s talk about Lombardy from a cultural or touristic point of view. What makes Lombardy unique?

The striking city of Bergamo

You talk of Tuscany and you immediately think of tourism. It is perceived as the natural region of tourism. Is it true? Yes, but also only in part.

Lombardy is the real land for tourism.

Italy is the county with the highest number of UNESCO World Heritage Sites in the world, 51.

Lombardy has 10 of these 51 UNESCO sites.

What we need to do in this area is invest more in marketing and to raise awareness about the richness we have in our region.

Therefore, we launched the Lombardy Year of Tourism from May , 2016 to May, 2017.

We put €60 million on the table to promote the territory. For instance, not many people know that we have 50 golf courses. Most of them are located in unique places in the world.

So, for instance, American tourists can come to enjoy playing golf in gorgeous places and then visit incredible UNESCO sites.

Ten days in Lombardy, every day a different UNESCO site and a different golf course. This is something that only Lombardy and a few other regions in the world can offer. Add on top of that Italian food, fashion, and the beauty of our lakes and mountains, and it becomes an experience like no other.

Lombardy is the land to visit. In Milan, you can see one of the most famous paintings in history, “The Last Supper” by Leonardo da Vinci. We have the rock inscriptions in Val Camonica dating back 7,000 years, which is something unique in the world. We have a huge heritage that deserves more global attention. In the south of Lombardy there is Mantua that this year is Italy’s capital of culture: definitely another historical town worth visiting.

Moreover, in terms of gastronomy, every small village has something peculiar to offer.

But to highlight our flagship dish, we have “Risotto alla Milanese”, a yellow risotto with saffron, which is now cultivated in Lombardy.

Valtellina is a valley famous for wine. We have different kinds of wines. For instance, we produce Franciacorta – our sparkling wine that is experiencing tremendous success. And allow me to say, much better than champagne!

So, as a final tip for our visitors, I’d suggest trying a Risotto alla Milanese with some great Grana Padano and a good glass of Franciacorta.

When it comes to the relations between the Region of Lombardy and the American market, what is the role of the U.S. for Lombardy’s export and tourism?

I think that we are now at no more than 20 percent of the overall potential we can unleash with the U.S. in terms of commercial and investment interests, but also in tourism. We can do much better and create more synergy in all segments.

It has been enough that George Clooney went to live on Lake Como for it to become a major tourism destination. Lake Como is beautiful of course, but Lake Garda is nothing less, and Lake Maggiore is the same. The valleys all around are beautiful. We have to promote Lombardy more so that more people from the U.S. come and start a snowball effect on our tourism sector.

I also see major opportunities in the agrifood sector. We are fighting against counterfeiting and “Italian-sounding” products that because of the packaging make people believe they are made in Italy, but they have nothing to do with Italy and the quality of our products.

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CAN MANUFACTURINg go DIGITAL IN AFRICA? Africa could potentially skip the second industrial revolution – traditional manufacturing – and leapfrog straight into digital manufacturing (or 3D printing as it is commonly known)

In 2013, a young entrepreneur and inventor from the small West African nation of Togo made history by creating the first ever 3D printer assembled from e-waste. At a scrap yard in Lomé, Togo’s capital, Kodjo Afate Gnikou spent weeks foraging for leftover computer, scanner and engine parts to construct his DIY 3D-printing machine. Costing just $100 to build, this innovative machine can be used to manufacture simple plastic objects such as food containers and other household wares, while also tackling the growing problem of e-waste.

This is merely one example of the ever increasing level of technological innovation happening on the continent. Africa has already shown its incredible ability to leapfrog older forms of technology in favor of the latest. It skipped the traditional landline, first and second generation mobile phones, and dialup and

ADSL internet, moving straight to third and fourth generation mobile broadband technology. Could Africa now leapfrog traditional manufacturing and move straight to digital manufacturing?

Digital manufacturing, or 3D printing as it is more commonly known today, has been around since the 1980s, yet it has only gone mainstream in the last few years thanks to technological advances. It involves the “printing” of three-dimensional objects by a special printer which constructs objects layer by layer. Up to recently, the machines were only able to print parts made out of a special compound material, but now 3D printers can produce objects in plastic and a wide range of metals . They are now even being used to “print” clothing and food.

Digital manufacturing could potentially revolutionize the manufacturing industry in Africa in a way that smartphones and mobile broadband are transforming the services, trade and agriculture sectors. Mobile broadband technology is giving millions of Africans access to vital services that were never before available to them, particularly health, education, banking, and government services. It is being used to improve efficiency and service in trade, commerce, and even agriculture (iCow for example, an innovative app created in Kenya for Kenyan farmers, maximizes breeding potential by tracking the fertility cycle of their animals).

The lack of an established manufacturing industry in Africa means most states rely on costly imports of items such as building materials, machine parts, tools and household objects. As 3D printing technology becomes more versatile, advanced and accessible, African nations could digitally manufacture such objects domestically, thus reducing dependence on costly imports and bringing major benefits to their economies. This would also create a thriving new industry that doesn’t require the factories, machinery, labor and capital that traditional manufacturing does.

Enterprising inventors like Kodjo Afate Gnikou could purchase or build their own 3D printing machines, set up local 3D printing shops where they could sell objects made to order to household customers (thus reducing waste and eradicating the problem of unused inventory). Construction companies could use 3D printers to produce the materials they needed to build and fit houses; technicians and mechanics could digitally manufacture car parts, machine parts and tools, using raw materials mined locally. The level of innovation could skyrocket as carbon copies of scientific equipment could be “printed” for a fraction of the

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cost, giving labs and research centres on the continent access to technological instruments that they could only dream of affording in the past. The possibilities truly are endless.

Digital manufacturing already has benefits outside the economic realm. Considering the large number of amputees that have been victims of brutality, war, and disease on the continent, perhaps the most important use of digital manufacturing

THE LACK OF AN ESTABLISHED MANUFACTURING INDUSTRY IN AFRICA MEANS MOST STATES RELY ON COSTLY IMPORTS OF ITEMS SUCH AS BUILDING MATERIALS, MACHINE PARTS, TOOLS AND HOUSEHOLD OBJECTS. AS 3D PRINTING TECHNOLOGY BECOMES MORE VERSATILE, ADVANCED AND ACCESSIBLE, AFRICAN NATIONS COULD DIGITALLY MANUFACTURE SUCH OBJECTS DOMESTICALLY, THUS REDUCING DEPENDENCE ON COSTLY IMPORTS AND BRINGING MAJOR BENEFITS TO THEIR ECONOMIES.

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in Africa will be to create fast custom-made, yet inexpensive, prosthetic limbs.

This process is already underway: in 2014, Critical Making Lab owner and Toronto University professor, Matt Rotto, began working with CBM Canada (an NGO), Autodesk Research, and CoRSU (a rehabilitation hospital located in Entebbe, Uganda) to supply cheap digitally-manufactured limbs for child amputees in Uganda. In 2015, Mick Ebeling, an American entrepreneur and philanthropist, set up the world’s first 3D-printing prosthetic lab and training facility in Sudan. The lab’s first success was the construction of a prosthetic arm for a teenager who had lost his arms two years earlier. This is really just the beginning of how digital manufacturing could transform healthcare in Africa.

Kodjo Afate Gnikou’s $100 homemade 3D printer assembled from e-waste is a successful demonstration of how this process can increase economic development in the developing world.

However the Togolese inventor, who won the NASA International Space Apps Challenge in 2013, has a much more ambitious project: sending e-waste to Mars to construct habitats for humans.

“My dream is to give young people hope and to show that Africa too has its place on the global market when it comes to technology,” he said. “We are able to create things, why is Africa always lagging behind when it comes to technology?” With the number of innovative creators like Kodjo on the rise on the continent, and the further adoption of technologies such as 4G mobile broadband and digital manufacturing, Africa may not be lagging behind for long.

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NURTURING A CULTURE OF INNOVATION AND BUILDING

AKEYDIGITAL ECONOMY TO VISION 2035 GOALS Leading Kuwaiti telecoms firm Zain Group is supporting the development of a knowledge-based, digital economy and investing in Kuwaiti youth, in a bid to find the entrepreneurially minded leaders that will take the company forward in the future One of the main goals of the ‘New Kuwait Vision 2035’ is to create a sustainable, diversified and non-oil-dependent economy driven by the private sector.

Currently, the private sector contributes around 26 percent of GDP, and the government aims to increase that figure to 40 percent by 2020. This will entail creating a more favorable environment for private businesses to thrive, boosting foreign direct investment, encouraging risk-averse Kuwaitis to take up positions in the private sector or set up their own companies, and fostering a culture of entrepreneurship and innovation among its young people.

The government has established a number of institutions to support development of the private sector, including the Public Private Partnership Authority, the Direct Investment Promotion Authority, the Capital Markets Authority, and the National Fund for Small and Medium-Sized Enterprise Development. Privatization of state-owned enterprises also forms a major part of the government’s agenda, with Kuwaiti media reporting that around 60 percent of public companies will be sold off to private investors over the coming years.

Many of Kuwait’s leading private multinational companies are supporting the government in its ‘Vision 2035’ goals for the private sector – one of which is Zain Group, a leading telecoms operator with a commercial footprint in eight countries in the Middle East and Africa and a workforce of over 7,000. As an ICT firm, Zain is a strong advocate for the establishment of a knowledge-based, digital economy and a prime example of a Kuwaiti company investing in youth development, innovation and entrepreneurialism.

“I believe that to diversify the economy and strengthen the role of the private sector, three urgent reforms are required: policy formulation; modernization of the ICT Regulatory Framework to encourage broadband investments and to stimulate the digital economy; and talent development,” says Zain Group’s Vice-Chairman and CEO, Bader Nasser Al-Kharafi.

“Typically, most of the countries in the Gulf Cooperation Council have put in place a National Broadband Plan, a National

Bader Nasser Al-Kharafi, Vice-Chairman and CEO, Zain Group

Digital Economy Policy, a national cyber-security strategy, an e-Government policy and a national smart cities policy – all designed to set out very clear strategic directions to foster the development of a knowledge-based, digital economy.”

In terms of talent development, Mr. Al-Kharafi says there are two areas which would need to be developed further to realize the full potential of a digital economy.

“Firstly, entrepreneurship development through the encouragement of venture capital investment, establishment of

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“THE MAIN AMBITIONS I WISH TO ACCOMPLISH REGARDING THE NEW KUWAIT VISION 2035 IS TO CHANGE THE SUPPRESSING CULTURE ITSELF. WE HAVE A RIGID CULTURE THAT WE NEED TO COME OUT OF IN ORDER TO BREED INNOVATION, CREATIVITY AND AUTONOMY. BY FOCUSING ON DEVELOPING AND EMPOWERING OUR YOUTH, WHICH WE HAVE ACCOMPLISHED THROUGH SEVERAL INITIATIVES, WE ARE PAVING THE WAY FOR A BRIGHTER, MORE SECURE AND HEAVILY DIVERSIFIED KUWAIT OF THE FUTURE” Bader Nasser Al-Kharafi, Vice-Chairman & Group CEO, Zain Group

accelerators and incubators, deployment of smart capital and an acceleration of the process of company formation. And secondly, educational reforms to address deficits in digital skills and knowledge – to ensure that graduates and others entering into the workforce are very well equipped to meet the challenges brought about by the significant transformational changes prevalent today.”

Zain has introduced a number of initiatives aimed at developing young talent within the organization. By investing

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in the potential of Kuwaiti youth, Zain hopes to find the entrepreneurially minded leaders that will drive the company forward in the future, both at home and abroad.

“Utilizing the youth of our country will inject a fresh approach into how we conduct business,” says Mr. Al-Kharafi.

“We have introduced a graduate scheme with a focus on high GPAs to support delivery of our strategic direction. We have also enhanced our graduate program to identify students with an entrepreneurial mindset – creativity and risk takers who will work on producing commercially viable value propositions for Zain.

“Understanding that fear and risk aversion is rife within the organization, we accept the root cause stems from a younger age before university and so we are working towards establishing a program which focuses on creativity, collaboration, critical thinking and communication for children aged between 6—11.

This is a long-term vision which, once realized, will be visible through the workforce. The aim is to create future leaders who possess these traits to lead our organizations with mindsets akin to those entrepreneurs whom we hear and read about.

“The main ambitions I wish to accomplish regarding the New Kuwait Vision 2035 is to change the suppressing culture itself. We have a rigid culture that we need to come out of in order to breed innovation, creativity and autonomy. By focusing on developing and empowering our youth, which we have accomplished through several initiatives, we are paving the way for a brighter, more secure and heavily diversified Kuwait of the future.”

It is not just domestic firms like Zain that are investing in innovation and youth development and supporting the development of a digital economy. IBM and Huawei are worldclass organizations who have been able to bring expertise in the areas of enterprise cloud solutions, big data analytics and cybersecurity to the state of Kuwait. Several strategic collaborations are already in place with the mobile network operators, internet service providers and systems integrators in the market.

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AN EMPOWERED PRIVATE SECTOR THRIVING ON INNOVATION SUSTAINS GROWTH

As the economy diversifies and becomes more sophisticated, businesses such as Ali Bin Ali Group are prime examples of the strategic planning that has been done in Qatar to ensure long-lasting success

ADEL ALI bIN ALI AL MUSLIMANI, Chairman, Ali Bin Ali Group One of the Middle East’s most attractive retail markets, Qatar continues to grow and expand in multiple arenas in preparation for the 2022 FIFA World Cup and beyond.

Though the massive sporting event seems far away, Qatar is already working towards a future that will enhance the economy and culture long after FIFA and football fans from around the world have piled into the host country for one of the most anticipated sports events in the world.

It may come as a surprise that this market has been named one of the top zones to watch in the region. With competitors like the United Arab Emirates and Saudi Arabia nearby, the estimated figure of over $12 billion in retail sales in Qatar is attractive to high-end merchants both domestically and abroad.

The introduction of luxury department store names like Galeries Lafayette and Harvey Nichols to the capital city of Doha paves the way for luxury goods providers to take advantage of their opportunity to acquire a position within the one million

square meters of new retail space currently being developed and encourages more international investment in a market that is poised for success.

The diversification of Qatar’s economy presents an opportunity for both private and public sectors to benefit and create progress that secures long-term stability. Local businesses with diverse revenue streams such as those involved with the Ali Bin Ali Group are prime examples of the strategic planning that has been done in Qatar to ensure long-lasting success. ABA is a well-known leader in FMCG & Distribution businesses like: P&G, Philip Morris, BAT, Reckitt Benckiser, Mars and Kraft Foods. They’re also recognized for several luxury and fashion retail brands such as Cartier, Mont Blanc, Van Cleef & Arpels, Audemars Piguet, Philipp Plein and Ermano Scervino.

Chairman Adel Ali bin Ali Al Muslimani has an almost allencompassing view of the progress in Qatar and in private sector companies as he builds upon the business his father started over seven decades ago. As he says, “This isn’t a country that is depending solely on oil and gas. With an eye on the future, the nation has branched into multiple fields of investment and expansion, education and innovation.

“Taking that approach is not only wise but it creates an extremely resilient business environment leading to dynamism in the market. Finally, Qatar has pursued visibility, on a global scale.

Through many initiatives, including the hosting of the World Cup in 2022, which is fully on course to positively impact the entire region, Qatar has placed itself in the forefront of global awareness. These factors all work together, galvanize the market, uplift and position Qatar as one of the most attractive business destinations.”

Mr. Al Muslimani’s outlook on the cooperative efforts of both sides has already created leaders in the private sector such as Ali Bin Ali Beverages, which distributes global brands like Pepsi, Tropicana, Aquafina and Gatorade.

Looking to the future and the National Vision 2030, a governmental plan that strives to continue development in the coming decades, Mr. Al Muslimani says, “I see the role of the private sector as one of partnership. It is incumbent upon us private sector organizations, like the Ali Bin Ali Group, to work in synchronization with our national ambitions and plans. We must take the initiative to calibrate our own growth plans with those of the country. That will create an unbeatable synergy.”

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“THIS ISN’T A COUNTRY THAT IS DEPENDING SOLELY ON OIL AND GAS. WITH AN EYE ON THE FUTURE, THE NATION HAS BRANCHED INTO MULTIPLE FIELDS OF INVESTMENT AND EXPANSION, EDUCATION AND INNOVATION” ADEL ALI BIN ALI AL MUSLIMANI, Chairman, Ali Bin Ali Group

Within the Ali Bin Ali Group alone there are companies that range from contracting and property management to medical supplies, printing, travel and supermarkets. The ABA portfolio holds around 400 international brands across 14 diversified line of businesses. The conglomerate has a special focus now on their hospitality division, which currently manages restaurant concepts ranging from casual to fine dining and already supports brands like Fauchon, Nestle Toll House Café, Wagamama, Cioccolati Italiani, Crepaway and Umm Sherif. And, with two new luxury hotels set to open before 2022, the hospitality branch is well on the way to preparing for the 7 million tourists expected by 2030 and the needs of a growing population. ABA has also recently partnered in working with Italian fitness and wellness provider, Technogym, and is inspiring active lifestyles of more than 35 million people in over 100 countries.

The many business streams supported by the Ali Bin Ali Group may perhaps be the reason this conglomerate is one of the top choices in partnering with government improvements for the future development of the country. They are one of the four companies that have been selected to work on The Warehousing Project in conjunction with Manateq, the leading provider of special economic zones in Qatar.

Mr. Al Muslimani and the Ali Bin Ali Group have been chosen to operate the Katara Plaza in the Katara Cultural Village, which promises to be a large task, and an even greater responsibility to the country, as it is one of the most important brands in Qatar. The popular tourist destination features exhibition galleries, concert halls and theatres that host multi-cultural activities from around the world. On display at Katara are the heritage and traditions of Qatar, but many have hope that this haven for history will continue to become increasingly important as it hosts international workshops, festivals and performances. The plaza will also feature innovative technology that will allow tourists to enjoy dining year round with an outdoor environment that is climate

controlled. The cold air breeze is designed to flow up from the floor, keeping the temperature in the seating area at a cool 22-25 degrees centigrade. The Katara project is an opportunity to blend a place of luxury with culture and provides a connection for visitors to experience a unique human interaction with the exchange between culture and art, building on the efforts of those who have come before. This seems to be a technique the many Qataris have mastered, including Mr. Al Muslimani.

“That ability to build on what has already been achieved, to not lose momentum nor discard the accumulated success of the past, to not permit the creation of a vacuum, especially during transition – Qatar is a country that has shown the world how it can be done,” he says.

“It is a magnificent example of wisdom and true leadership. That capacity to plan ahead for the future, to transition from one phase to another seamlessly and without interruption, is a very special attribute. ‘Succession planning’ is what it is called in the business world, and it is the key to continued success, be it a country, a family, a company or a conglomerate like Ali Bin Ali Group.”

With the expansion that is occurring, such an approach seems to be helping in the expedition of rapid transformation and growth. Mr. Al-Muslimani expects to see “state-of-the-art infrastructure, smart buildings and green solutions, educational, cultural and social growth, cutting-edge innovation in healthcare, technology-driven solutions in every industry, flourishing entrepreneurship, a robust business landscape and an even greater preservation of our heritage.”

The Ali Bin Ali Group, which is spread across Saudi Arabia and is now expanding into Kuwait and the UAE, will contribute to these aims and if Qatar persists in its already accelerated advancement, the cooperation between private and public sectors will continue to propel the country forward, making room for long-standing success in a promising region.

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Brunei’s blueprint for the future of banking

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Mr. Yusof bin Hj Abd Rahman, Managing Director of the Monetary Authority of Brunei Darussalam’s discusses the roadmap for the

Domestic services and financial sector in Bahrain grew by 8.8 percent in FY2016 amid a challenging global environment. What are your expectations on the growth of the financial sector in the years to come?

With the launch of The Financial Sector Blueprint, the financial industry is expected to grow by an average of 7 percent annually. We are expecting bigger growth in the capital market with the increasing activities in fund management, the establishment of a stock exchange as well as expansion of the back-office services. We are also working towards participating in the ASEAN Collective Investment Scheme and Asian Region Fund Passporting where we need to first address some legal and regulatory issues.

On the insurance and takaful side, as mentioned in the blueprint, we have room to expand in the life and investment-linked insurance as well as encouraging industries to adopt technology to increase the insurance/takaful penetration rate. The banking industry will still be the biggest segment of the financial industry and their focus in the next five years will be to increase corporate lending, FDI loans and loans for micro, small and medium enterprises.

The AMBD launched The Financial Sector Blueprint (2016-2025) to guide the development of Brunei Darussalam’s financial sector during the next decade and sets out the strategic framework within which Autoriti Monetari Brunei Darussalam will be working with other ministries and stakeholders to reach the objectives of Wawasan 2035, the nation’s development plan. What are the main pillars under the economic blueprint that intend to transform Brunei Darussalam into a diversified, sustainable and dynamic economy? How does the Financial Sector Blueprint fit in Wawasan 2035?

Wawasan 2035 aspires that by 2035, Brunei Darussalam develops into a nation with a dynamic and sustainable economy with income per capita within the top ten countries in the world. In order to achieve this objective, ten development clusters have been identified in a bid to diversify away

from the oil and gas sector, including financial services.

The Brunei Darussalam Financial Sector Blueprint 2016-2025 (FSBP) outlines the framework and measures to develop the financial services sector to enable the fulfilment of Wawasan 2035. The goal is to successfully develop the country’s financial services sector and compete with developed regional competitors. By 2035, we would like to see the financial sector contribute to at least 8 percent of the national GDP. The FSBP identifies five key pillars that form critical components of a sustainable financial ecosystem, namely: Monetary and Financial Stability; Competitive and Innovative Financial Institutions and Services; Robust and Modern Infrastructure; Enhanced International Integration; and Human Capital Development.

Monetary and financial stability (Pillar 1) is a prerequisite for strong economic and financial development. Without such stability, there cannot be the confidence needed to sustain new investment and business ventures, and the opportunities needed to sustainably grow the financial sector. Plans include developing an efficient interbank money market that will be securitised by highly rated bonds or sukuk; continuously reviewing and developing the legal and regulatory framework to ensure they are on par with international standards; moving towards risk-based supervision; and putting an increased focus on credit and underwriting risk management.

To grow in an intensely competitive environment, Brunei Darussalam’s financial institutions and services must be innovative and responsive to the changing trends in the financial sector (Pillar 2).

For example, AMBD is working with the industry to grow life insurance and family Takaful, taking into account technological innovation and its potential to shape the future of insurance. The establishment of a securities exchange is also expected to catalyse economic growth and business expansion through enabling Bruneian businesses alternative funding routes. Another

financial sector, which will be key to the success of the Brunei’s Wawasan 2035 development plan, as well as growth of Islamic finance

“Over the past couple of years, the Islamic Finance sector in Brunei Darussalam has flourished. In the banking sector, Islamic banking assets account for 61.9 percent of the total market share while in the capital market sector, the share of the Islamic fund market in Brunei Darussalam has expanded from 31 percent in 2015 to 54 percent in 2017. Having said that, AMBD intends to further facilitate the development of Islamic Finance in Brunei Darussalam” Mr. Yusof bin Hj Abd Rahman, Managing Director of the Monetary Authority of Brunei Darussalam’s

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area that has potential for growth is Islamic fund management and the enhanced provision of Syariah-compliant products. AMBD is keen to promote investing along a Sustainable, Responsible and Impactful (SRI) criteria, which shares many similarities with Syariah-compliant investments.

The existence of a robust and modern infrastructure is an integral part of a financial ecosystem (Pillar 3). To that end, as part of the National Payment and Settlement Systems Project, AMBD implemented the Real Time Gross Settlement (RTGS) system for high-valued electronic transfers between banks in November 2014, Automated Clearing House (ACH) system for automated cheque processing in May 2016 and the introduction of the Direct Credit in the ACH system in March 2017 to allow electronic transfer of multiple low-value payments. In May this year, AMBD implemented the Central Securities Depository (CSD) system to automate securities and depository for Government Sukuk and other potential securities that are registered in Brunei Darussalam. The next innovative phase is developing plans and policies for an interoperable market infrastructure for retail payments. This may include payment cards, internet banking, mobile phone payments and other new technology payment instruments, in line with AMBD’s initiative to promote the e-payment economy.

In achieving outward international integration of its financial sector, Brunei Darussalam will continue to participate in ASEAN integration initiatives and to contribute towards the successful implementation of the ASEAN Economic Community (AEC), which will enhance intra-regional trade through the freer movement of goods, services and skilled labour (Pillar 4). Additionally, Brunei Darussalam will participate in trans-border initiatives that will enable the growth of the financial sector such as the ASEAN Trading Link and the ASEAN Framework for Cross-Border Offerings of Collective Investment Schemes.

Being an information processing and knowledge-based industry, the success of the financial sector is underpinned by a skilled workforce, able regulators and knowledgeable financial consumers (Pillar 5). As such, our strategy includes aligning the national curriculum to the future economy, raising financial industry standards, and developing Syariah experts through collaboration with the Ministry of Educa-

Currently, Brunei Darussalam ranked 14th out of 124 countries that practice Islamic Finance on the ICD Thomson Reuters Islamic Finance Development Indicator 2016, which we believe is a strong competitive position” Mr. Yusof bin Hj Abd Rahman, Managing Director of the Monetary Authority of Brunei Darussalam’s

tion, higher learning institutions, training institutes and the financial industry.

With a strong Islamic banking sector, a growing Islamic insurance (takaful) industry and an expanding market for Islamic bonds (sukuk), Brunei Darussalam has recently been drawing much attention internationally as a center for Islamic financial services (IFS).

Indeed, Brunei Darussalam is now amongst the nine countries worldwide where Islamic finance has reached systemic importance — places where more than 15 percent of total domestic banking assets belong to the sector. How do you assess Brunei’s performance in terms of Islamic Finance?

Currently, Brunei Darussalam ranked 14th out of 124 countries that practice Islamic Finance on the ICD Thomson Reuters Islamic Finance Development Indicator 2016, which we believe is a strong competitive position.

Over the past couple of years, the Islamic Finance sector in Brunei Darussalam has flourished. In the banking sector, Islamic banking assets account for 61.9 percent of the total market share while in the capital market sector, the share of the Islamic fund market in Brunei Darussalam has expanded from 31 percent in 2015 to 54 percent in 2017. Having said that, AMBD intends to further facilitate the development of Islamic Finance in Brunei Darussalam.

Islamic Fintech has garnered more and more interest in the global market.

We have seen significant developments in a number of jurisdictions with regards to this. It provides a new gateway for new

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participants in the financial market, allowing them to tap the economic opportunities in the region. In line with this, AMBD has recently introduced the FinTech Regulatory Sandbox Guidelines. The Regulatory Sandbox compliments existing frameworks in AMBD’s efforts to encourage innovation in the Financial Industry, by allowing companies to experiment with innovative products and services.

What are Brunei’s competitive advantages to position itself as the Islamic finance hub in the region?

Brunei Darussalam’s political, social and economic framework aligns to Islamic teachings and principles, providing the country with a competitive edge. This is exemplified by the national commitment to the Melayu Islam Beraja (MIB) ideology which has been in practice for 600 years, contributing to political and social stability.

Brunei Darussalam has a strong legal infrastructure for Islamic Finance. Legislations that are currently in place are Syariah Financial Supervisory Board Order, 2006; Islamic Banking Order, 2008; Perbadanan Tabung Amanah Islam Brunei Act, Chapter 163; Takaful Order, 2008; International Insurance and Takaful Order, 2002; Securities Markets Order, 2013; Finance Companies Act (Chap. 89); and Pawnbrokers Order, 2002.

We also have a strong Syariah governance framework with a two-tier Syariah governance structure comprising of a centralized Syariah Financial Supervisory Board (SFSB) and an internal Syariah Advisory Body within each Islamic Financial Institution.

The Islamic Finance industry in Brunei Darussalam has also been very active, with conferences such as the Brunei Darussalam Islamic Investment Summit 2017, as well as the recently launched Islamic Finance website and app. As demand for Islamic finance continues to grow, Brunei Darussalam aims to further leverage on its existing strengths to evolve into an Islamic finance hub to serve the fast-growing ASEAN region. The FSBP sets out strategies that will elevate the reputation and quality of Islamic finance in Brunei Darussalam.

AMBD actively conducts stakeholder engagements to promote these aspirations, as well as work visits to build and enhance strategic partnership.

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Kuwait, building a knowledge-based economy through Vision 2035 One of the targets of New Kuwait Vision 2035 is to increase the GDP share of the private sector that now represents only 30 percent of the Kuwaiti GDP. What are the most urgent reforms, in your opinion, required to diversify the Kuwaiti economy and put the private sector as leader of the process?

The most urgent and important issue in this regard is shrinking the public sector in order to allow for the private sector to have better access to the labor market. Currently, the public sector in Kuwait acts as a competitor for the private sector in the labor market. The plan is to work towards shrinking the public sector and allow more labor flow from the public to the private sector.

This is done through several mechanisms: Firstly, through small and medium enterprises (SMEs). We have introduced commercial sabbatical for public employees.

Their job is secured for three years while they are allowed to establish, lead or work for an SME. Secondly, through privatization. We have started a 25-year plan where several state-owned enterprises are being corporatized to entice the private sector to step in and look for profits and value. This privatization will place a maximum Government ownership limit of 24 percent of the shares.

IPOs will be issued where 50 percent of the shares will be in the hands of Kuwaiti citizens. Finally, a minimum of 26 percent of the shares of the privatized companies will be in the hands of the private sector in general (both Kuwaiti and foreign companies). One of the first successful examples of this plan is the Shamal Al-Zour One, a power station, where through a unique “PPPP” model, the “Public-Private-People Partnership”, where Kuwaiti citizens are involved and have a stake and shares in companies’ direction and important energy infrastructure.

And thirdly, through the expansion of the PPPP (the fourth being P for People) model together with a quota of Kuwaiti citizens that must be employed: the so-called ‘Kuwaitization’. This quota varies through the different sectors. It also affects new foreign direct investment (FDI) that arrived through

the Kuwait Direct Investment Promotion Authority, as one of the requirements for the support of the agency is the employment of a quota of Kuwaitis and the creation of new employment for our citizens.

As you have just mentioned, SMEs are a key part of the Government strategy to place the private sector as the leader of the Kuwaiti economy. In addition to the time-off allowed to civil servants to work in SMEs, how is the Government boosting SMEs in Kuwait, especially those within the knowledge-based economy?

The Supreme Council for Planning and Development has assumed the leading role to promote the knowledge-based economy in Kuwait, with the objective of creating an eco-system for it. We started by establishing the National Knowledge Economy Center which is running several projects. One of the most important is the Knowledge Economy Forum, that was celebrated for the first time in 2016 and that will have a second edition on February 7-8, 2018.

We have also proposed a new law: the Economic Activity Law, that if approved will boost the application of the knowledgebased economy in Kuwait, focusing on public entities and allowing the private sector to increase the revenue.

With the support of international investors, we founded the Kuwait Knowledge Economy Chair, which is responsible for sending Kuwaitis abroad to obtain their Masters or PHDs on matters regarding the knowledge-based economy. This is a key measure to enhance our human capital in this area.

We are exploring further partnerships with regional and international organizations on the matter of the knowledge-based economy. We have also set up a “knowledge center”, which is a free-of-charge virtual library with books, articles and documents on the knowledge-based economy.

Finally, we created the national and regional knowledge-based economy report with knowledge economy KPIs in order to measure the position of Kuwait within the different indicators and help policy-makers to make better decisions on this regard.

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In January, the Kuwaiti government unveiled its blueprint for the future, New Kuwait Vision 2035, which aims to build a sustainable, knowledge-based economy driven by the private sector. Dr. Khaled A. Mahdi, Secretary General of the Supreme Council for Planning and Development, sat down with The Worldfolio to discuss the Vision 2035 plan and government measures to support the growth of the private sector, and particularly SMEs

“The Kuwait Expo 2018 that we are organizing will act as a platform to connect between Kuwaiti entrepreneurs, the National Fund for SMEs and a global community of start-ups.

It will take place between 6th and 10th of February, 2018.

We are offering a platform to share knowledge across borders providing the required funds to start new projects or partnerships based in Kuwait.

The areas that Expo 2018 is focusing on are energy, ICT, public health, cosmetics and manufacturing” Dr. Khaled A. Mahdi, Secretary General of the Supreme Council for Planning and Development

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“In the long term, my ambition is to see Kuwait in the top 35 countries in the world regarding all important international KPIs and to see my country sustaining this position on the top. I want Kuwait to be a global player with a diversified economy, strong human capital and an environment that promotes wealth creation to ensure Kuwait’s sustainable future” Dr. Khaled A. Mahdi, Secretary General of the Supreme Council for Planning and Development

How is the New Kuwait Vision 2035 supporting Kuwaiti SMEs in their internationalization efforts to further diversify your national economy?

The Kuwait Expo 2018 that we are organizing will act as a platform to connect between Kuwaiti entrepreneurs, the National Fund for SMEs and a global community of start-ups. It will take place between 6th and 10th of February, 2018. We are offering a

platform to share knowledge across borders providing the required funds to start new projects or partnerships based in Kuwait.

The areas that Expo 2018 is focusing on are energy, ICT, public health, cosmetics and manufacturing.

Kuwait’s geographical location is a natural connecting point between the maritime Silk road and the land Silk road, being the only country in Asia connecting this corridor from the sea and the land at the same time. The Kuwait Expo 2018 is another step towards our goal of becoming a knowledgebased economy hub.

As the Emir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah has said, the Vision 2035 plan aims to “transform Kuwait into a financial and trade center, attractive to investors, where the private sector leads the economy, creating competition and promoting production efficiency, under the umbrella of enabling government institutions, which accentuates values, safeguards social identity, and achieves human resource development as well as balanced development, providing adequate infrastructure, advanced legislation, and an inspiring business environment.”

What are the main challenges that Kuwait faces as a country, in your opinion, to achieve the goals of Vision 2035?

Our main challenges are on capacities.

Vision 2035 is very ambitious so we need to build increased human, knowledge and

infrastructure capacities in the country.

From my point of view, the most urgent is to increase our current human capacity by reforming the education system to satisfy the needs of the jobs market associated with the Fourth Industrial Revolution and allow Kuwait to become a global player.

Coming back to my first point in this interview, we have to re-structure our labor market and visa regime by easing the hiring of highly-qualified expatriate professionals and investors to add value to our economy.

Dr. Khaled, you have authored or co-authored more than 65 journals, articles, papers and books; you are a senior member of several professional association; you are associate professor at the Kuwait University. As Secretary-General of the Supreme Council, what are your biggest ambitions, regarding the New Kuwait Vision 2035?

My biggest ambition in the short term is to help and support the required reform on the education system that Kuwait needs.

This is crucial to achieve the Vision 2035.

In the long term, my ambition is to see Kuwait in the top 35 countries in the world regarding all important international KPIs and to see my country sustaining this position on the top. I want Kuwait to be a global player with a diversified economy, strong human capital and an environment that promotes wealth creation to ensure Kuwait’s sustainable future.

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A THREE-POINT PLAN FOR ICT Secretary Rodolfo A. Salalima of the Department of ICT of the Philippines says the government has three priority areas for ICT: expanding the broadband network with public free Wi-Fi; E-Government, with the introduction of the integrated online government portal; and moving the BPO services to the countryside Could you please share your views on the impact that the government’s 10-point economic plan and the National broadband Plan are producing in the ICT sector?

All the government plans on the ICT sector are managed by our Department and we have focused them on creating an easy business environment in the country. Access to communications is a human right and we see it as an essential service for our people.

We are looking forward to fulfilling our objective of building the necessary infrastructure in the Philippines. The president has ordered us to achieve three things: the broadband network with free public Wi-Fi; e-Government, with the integrated online government portal; and moving the BPO services to the countryside since they are too concentrated in metro Manila.

I want to create a BPO summit to be prepared for this evolution of the sector.

This will include all the stakeholders in the BPO services and related business because they are also important. For example, I was talking recently to an American company that wants to localize its BPO services here and we agreed that before they settle we will have to inform technical schools in the area so that they can prepare the workforce for them.

We are also implementing the project ‘Tech4ed’, which is designed to support empowerment through educational technology. We have 8 offices around the country and we want to expand that to 17 to reach all the regions. We conduct seminars for people within the government and outside so they can learn how to implement IT solutions in their day-to-day.

This is also intended to reach the unemployed so they can get the skills to finally find a job.

The government is making efforts to facilitate money inflow to the country, with initiatives like the economic zones or bilateral agreements to attract overseas development aid.

What is the significance of regional integration when talking about ICT? Regional integration is very important be-

BPO services”. BPO generated revenues of around $22 billion in 2015 in the Philippines, creating 1.3 million jobs. We plan to double the number of BPO by 2022 so that the revenues from this sector will be higher than the revenues sent by the overseas Filipino workers.

Secretary Rodolfo A. Salalima, department of ICT cause of the globalized economy that we are already living in. Our country alone might not be able to compete in the international arena as strongly as we can as part of the ASEAN so I see this regionalization as a very positive measure. This is our chance to be really competitive.

In this regionalization, the country has established a long-lasting relationship with Japan. What are the synergies between both countries that you would highlight?

It is clear that countries like India, China, and of course Japan, are seeing the potential of the ASEAN. I would like to highlight the funding, which is very important, but also the knowledge that Japan brings since it is more advanced technologically and we can learn from them.

For example, recently we welcomed the Japanese Minister of ICT because we were doing the transition from analogue to digital TV using the Japanese standard.

being at the forefront of the Fourth Industrial Revolution and investing in broadband infrastructure could benefit the Philippines greatly, considering that each 10-percent increase in digitalization and broadband penetration increases GDP growth by 1.38 percent, according to World bank data. How can the Philippines be a leading country in terms of ICT? Nowadays India is the number one in global BPO with the Philippines in second place, but we are already leading in “voice

Japanese companies are very keen to expand their business in the Philippines. What is the trigger for that; why do you think Japanese companies have such an interest in this country?

I think it is a mixture of different factors: we have a strategic location; our population speaks English and we can boast of having good engineers. In some other countries, this might also be true, however, we are close to our client markets which makes it easier to adapt to the strict working requirements that Japanese companies usually have.

I would like to get a bit deeper into the national broadband project because it is a very ambitious project. How is the Government going to finance it? Is there room for publicprivate partnerships (PPPs) in it?

Yes, there are PPPs – funding from other countries and the World Bank and some private companies that want to be partners in the management of the broadband. There are tenders from Europe, China, and others.

We are not starting from scratch because we are connected to the national power grid that has a telecommunications network which is not fully utilized. We will be able to use around 10,500 fiber-optic cables.

You have been in the ICT sector a long time and representing the country all over the world. With this experience in mind, what is the legacy that you would like to leave as Secretary of ICT? I would like to leave a good digital infrastructure for my country and train and create a citizenry to be functional and digitally literate. Because as I said before, everyone has the right to communicate and have access to information.

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PLDT SME NATIoN SUPPoRTS DIgITALIzATIoN oF MSMEs Mitch Locsin, Vice President PLDT SME Nation, discusses the growing ICT landscape in the Philippines and how his company is helping Filipino MSMEs to get online and embrace e-commerce What are your expectations regarding the new administration goals, such as the 10-point socioeconomic agenda, particularly in the ICT and Telecom Sector?

broadband and mobility solutions to more sophisticated enterprise-level ICT and Cloud services etc. As such, where did the idea of establishing a specialized SME arm in PLDT’s operations originate?

In relation to the SME industry, these initiatives are a big help since they focus on inclusive growth. The administration’s programs are devoted to ensure that the rest of the country benefits, not just Metro Manila or Cebu City for example.

I believe that these initiatives of the current government are poised to spur a lot of growth. Among its other benefits are increasing awareness on MSMEs and providing help in fueling this industry. In most of the programs, whether it be in agriculture or SMEs, one can observe that everybody is really working together.

One of the main goals of the government is actually to stimulate development through regional integration. What benefits does it bring to the SME and ICT sectors?

mitch locsin, Vice president of pldT SmE Nation

Investment in broadband and telecommunication infrastructure could benefit the Philippines greatly. How do you see the Philippines evolving in this context and how can the Philippines become a major business enabler through increased broadband penetration and digitalization?

ing more than 7,000 islands. Compared to our neighboring countries like Thailand, Vietnam, or Singapore, it is different. From an infrastructure perspective, it is difficult.

As a result, telecommunications companies need to lay down fiber that cuts across the country with multiple rings of redundancy. For example, for PLDT alone, we have more than 3 million kilometers of fiber optic cable in our domestic network, with a capacity of 7.42 Tbps.

Just recently we were dubbed as the “texting capital of the world”. But this has changed completely. From being a ‘calland-text’ country, we transformed into a data-driven country. Thus, telecommunication companies have had to completely change their network infrastructure from being previously designed for voice and text into a data-driven network. With the technologies changing rapidly, from 2G to 3G to 4G – and we are talking about 5G already – our investment in network expansion is massive and unprecedented.

In relation to the telecommunications and ICT industry in the country, the Philippines is one of those unique countries that has a big challenge given its geography of hav-

PLDT SME Nation has been providing entrepreneurs with technologies suited for their needs – from business-enabling voice,

The government’s current approach is very effective. Measuring the Philippines in a per-area basis, whether it is the market share or adaptability to the Internet, there has been a growth spike, especially in the Visayas and Mindanao regions, in the past year and a half.

Businesses from those regions are not only competing with those from Luzon, they are surpassing them. This is a very good example of inclusive growth. It shows that these regions are getting more equipped to spur growth for the SME industries.

PLDT SME Nation began nine years ago.

We were just referred to as the Corporate Business Group (CBG) of the company.

This CBG has always been the dominant enterprise group carrying our PLDT Fixed, Smart Wireless, ePLDT ICT services and solutions to the enterprises in the country.

Thus, there was a conscious effort that if we were to give more attention to the domestic market, we really need to focus on the MSMEs as well. Since then, PLDT SME Nation has been growing by double digits every year.

Our growth may be attributed to the large customer base. Micro enterprises alone average 500,000, the small players around 90,000, and the medium players are close to 5,000. As a result, PLDT SME Nation is organized per geography.

The corporate relationships management group is the one enabling the SMEs to adapt more to ICT and digital solutions.

PLDT Alpha, handles the top 5,000 corporations and conglomerates in the country.

SMEs adapting more to the cloud. This is more agile, flexible, and affordable, thus, making it possible to compete with bigger companies. The SMEs are more inclined to acquire machine-to-machine (M2M) solutions. These are the asset-management tracker solutions. These players adapt more quickly to these solutions.

The second team is the acquisitions team. We continuously have to acquire new customers because year after year there are new companies popping up. There is a community engagement group. They are the ones who put the word out, promote ecommerce or cloud solutions, and organize around a hundred events a month. These are the mind-shaping and brand-improving events in where we include our big players to become our ambassadors and mentors.

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BRUNEI’S TAKAFUL INSURANCE PIONEER Osman Jair, Managing Director of Insurans Islam TAIB in Brunei, discusses the potential opportunities for the insurance industry as a result of further ASEAN economic integration, and the characteristics of Takaful insurance, which is a type of Islamic insurance, where members contribute money into a pooling system in order to guarantee each other against loss or damage The integration of ASEAN members, through the ASEAN Economic Community, potentially represents a huge opportunity of growth for many sectors of the economy. In the insurance side, an effort to standardize is being made by the ASEAN Insurance Council, which has produced a master plan to spur industry growth, along with the ASEAN Insurance Integration Framework. As Chairman of the brunei Insurance Takaful Association (bITA), what potential opportunities do you see for Brunei Darussalam insurers?

The insurance industry in the region has been talking about it, and they felt uncertain because major players were coming into the market. I saw this as an opportunity, for the Brunei Insurance market to have the same global standard as other international players.

With the support of the Autoriti Monetari Brunei Darussalam (AMBD) and the implementation of new legislation, we managed to par with other markets. The ASEAN Insurance Council (AIC) meeting and the ASEAN Insurance Regulators Meeting (AIRM), has always been at the same time and venue. At the end of the meeting or the program, there would be a joint plenary meeting with the regulator, representing the members of the ASEAN Insurance Regulators Meeting (AIRM) on one side and AIC members on the other side.

That’s the opportunity that we hear among other markets. For Brunei, since the market is small, to have certain legislation or certain standards enforced on it may take a lot of time, however, time will not wait for us to be in the international market. We have to strive to be there. We cannot be complacent, sitting here, whereas, the rest of the world is catching up with the global standard. So, it’s an opportunity for us to be there in the international arena.

brunei’s Takaful insurance sector has seen steady growth over recent years, grabbing market share of mass-market products, and steadily gaining share over conventional insurance providers. Can you explain some of the characteristics of Takaful insurance?

We will issue Mudharabah percentages that we can share – that depends very much on the amount of contributions that we have for that product, the number of claims for that product, and also the investment, a profit that we had from the pool of funds of that product. So, you will get something.

It’s like a form of community spirit. You won’t ask the manager, “Why would I have to pay for him?” Because you already sort of donated that money in order to help each other.

There’s really some beauty inside it in terms of social responsibility, helping one another.

Insurans Islam TAIb was established in 1993 and was the first financial institution in the country to offer “takaful”. Can you share some of the major milestones of Insurans Islam TAIB and how it has contributed to the development of the Brunei Darussalam insurance sector?

Osman Jair, managing director of Insurans Islam TAIB in Brunei We were the disruptor when Takaful came into place back in 1993 in Brunei. Conventional insurance had already been there for more than 50 years, and it was the first time that local Bruneians worked for and engaged with the Takaful insurance industry.

Takaful offers different things from conventional insurance but if you look at the front you won’t see the difference. It’s more of a mutual or joint agreement between us, the company, and the participants. There’s a clause between us that we will provide compensation or assistance in case of any mishap that may happen to the participant.

The participant also makes declaration what we call “akad”, to us as the manager of the fund, that he is willing to donate the contribution to help others as well. So it’s more of a mutual concept.

For Insurans Islam TAIB, we have been using the Mudharabah concept, which is a profit-sharing concept. The concept that we have been using since the beginning is giving back something, if there’s no claim being made by the participant. So, it’s a profit-sharing business.

Insurans Islam TAIB is such an evolving organization. Around two years after the formation, Insurans Islam TAIB opened its door to the retail public so they accepted the participation from others especially motor vehicles coverage and then went for fire and housing Takaful. After that, we ventured into commercial.

We moved further in 2005 when we started to have special risk coverage; special risk and mega risk. By 2006, we were glad that we had worked with the Japanese companies; Mitsubishi, Itochu, and Petroleum Brunei with Brunei Methanol.

Even though our capital is not huge, we wanted to tap into the mega risk business to take an opportunity on that so that we can keep a very small percentage of that risk, so that we can learn. We are also listed by the brokers, the insurance brokers who handle a lot of business and had reinsurance with foreign countries. We ventured into that and there was a need for us to be rated.

We wanted to rate ourselves; we wanted to know how strong we were financially so we had the top rating agency rating us.

We were rated ‘BBB+ ‘by the year 2008 by Fitch Ratings so that we could accept more businesses.

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