Otaviano Canuto, World Bank Group: Commodity Super Cycle to  Stick Around a Bit Longer

Some analysts have predicted that the commodity price boom has played itself out. However, natural resource-based commodity prices (with the exception of shale gas and its downward pressure on US natural gas prices) have remained relatively high over the last few years, despite the feeble global economic recovery (Canuto, 2014). The commodity price spike that started at the end of the 1990s has not been significantly affected by the global downturn, with average prices similar to 2008 levels (Chart 1).

Indeed, commodity prices have occasionally exhibited signs of bouncing back more quickly than the level of global economic output (Chart 2). So the question is: Have we entered a phase of descending commodity prices? Here we argue that it may be too soon to say that we have moved past the commodity super-cycle phenomenon.

Can History Shed Some Light?

Several authors have recently revisited long, historic series of commodity prices - see e.g. Ocampo and Erten (2013), Jacks (2013), and Arezki et al (2013). Their focus has been either on the old Prebisch-Singer hypothesis - according to which the “terms of trade” between primary products and manufactured goods tends to fall in the very long run - and/or on the frequency and shapes of past price cycles.

“Since the late nineteenth century, commodity prices have moved along three long-term general cycles, though a fourth has been recently identified.”

Since the late nineteenth century, commodity prices have moved along three long-term general cycles, though a fourth has been recently identified. The first two cycles spanned roughly four decades, and the third one lasted 28 years. All four upward phases were primarily driven by rising global demand, though the main sources of that demand differed for each. This time, China’s fast economic growth since the beginning of the new millennium has boosted demand, as illustrated by the country’s rising proportion of global natural resource-based commodities use (Canuto, 2008a).

Directions - upward or downward - of long-term price trends vary among different types of commodities and depend on the starting points used as reference. The picture gets blurred in cases where commodities have evolved and are hard to compare over time (e.g., poultry or soybean production today is highly different from what it was several decades ago).

[caption id="attachment_7851" align="aligncenter" width="619"] Chart 1: Commodity Prices. Source: World Bank.[/caption]

Reports on previous cycles and price volatility have been more convergent. These works tend to agree on the localization of at least three super-cycles of commodities since the 19th century, as well as one initiated at the end of the 1990s. Typically 20-year boom periods have reflected strong demand associated with moments of rapid industrialisation and urbanisation - as in the case of the US in the 1890s, or China in the 2000s - in which supply takes a long while before matching that demand. When this happens, periods of much lower commodity prices follow.

Spotting trends or previous cycles is a highly useful exercise. It calls attention to the interplay between demand and supply over time. However, we are unable to use past trends to forecast future paths of specific or general commodity prices at a certain point in time - as illustrated by the non-homogeneity of shapes of previous cycles.

As is clear from Chart 3, commodity prices relative to manufactured goods may move and stay significantly lower or higher for substantial periods regardless of the presence of a long-run trend or drift. It all hinges on the relative strength of forces behind the demand for primary commodities relative to the demand for manufactures, and the supply of commodities relative to the supply of manufactures (Brahmbhatt and Canuto, 2010).

When looking ahead at a certain point in time, it is fundamental to approach the nature, intensity and time length of factors on each side of the equation at that specific moment: One cannot look for any predetermined historic shape of commodity super-cycles.

Whither the Prebisch-Singer Dynamics?

When independently raising their very long-term gloomy prospects regarding commodity prices, Hans Singer and Raul Prebisch in 1949 emphasized the two different sides of the equation. Singer’s price pessimism was based on strong beliefs about the relatively unfavourable price- and income-elasticity of demand for commodities. Prebisch suggested an asymmetry in the appropriation of productivity gains between commodity-dependent and industrialized countries. While eventual productivity gains on the former’s side were automatically transmitted into lower prices, in the latter case they were captured in the form of stable prices and rising wages and profit volumes, given the prevalence of cost-plus pricing and labour unionisation in industry.

[caption id="attachment_7853" align="aligncenter" width="619"] Chart 2: Since 2009, resource prices have rebounded quicker than global economic output (Indexes). Source: McKinsey (2013).[/caption]

This fit well with Prebisch’ critical views about social and political structures inherited by Latin America from its past as a leading commodity producer, as compared with the evolution toward a welfare state in advanced, industrialized US and Europe. From this came his belief that Latin America should diversify towards a manufacturing industry-based society, like other natural resource-rich advanced economies such as Canada, Australia had done.

This is not the time or the place for any evaluation of how dated or incomplete those “structuralist” views are, much less of the policy proposals that came to be associated with them over time. However, in our view, it remains useful to think of the evolution of commodity prices relative to manufactured goods as reflecting the relative paths of demand elasticity, productivity and supply bottlenecks.

Has the Descending Phase of the Super Cycle Begun?

It is worth highlighting two distinctive features of the current commodity super-cycle, the peak of which has supposedly been reached:

First, the correlation between resource prices over the past thirty years has substantially increased (McKinsey, 2013). Beyond the strong demand-pull on all commodities wrought by China’s industrialisation-cum-urbanisation, there is a higher correlation induced by the technological evolution. Natural resource-based products have risen as input and, therefore, as costs to other commodities (e.g., fertilizers in agriculture). Furthermore, substitutability between uses (e.g., sugarcane can either turn into ethanol or sugar) and sources (e.g., alternative fuels and forms of power generation) has increased, making price shock transmission more widespread.

Second, volatility has increased and continues to rise in comparison to the past (Arezki et al, 2013). This is often associated with the increased size of commodities as a class of financial assets, even if supply and demand fundamentals ultimately operate as gravity centres (Canuto, 2008). There is also some discussion of the role played by an increasing incidence of natural phenomena (floods and droughts, variable temperatures) on agriculture production, as well as the social and political factors that accompany oil, metal and mineral extraction (conflicts, labour strikes). Nevertheless, these factors are largely associated with short-term volatility.

Beyond short-term supply and price fluctuations, more structural factors seem to be at play behind the persistent volatility:

“Supply appears to be progressively less able to adjust rapidly to changes in demand because new reserves are more challenging and expensive to access. For example, offshore oil requires more sophisticated production techniques. Available arable land is not connected to markets through infrastructure. Mineral resources increasingly need to be developed in regions that have high political risks. Such factors not only increase the risk of disruptions to supply but also make supply even less elastic. As supply becomes increasingly unresponsive to demand, even small changes in that demand can result in significant changes in prices. Investors may be deterred by the volatility in resource prices and become less inclined to invest in new supply or resource productivity initiatives.” (McKinsey, 2013, p.1)

[caption id="attachment_7855" align="aligncenter" width="619"] Chart 3: Commodity Prices in Real Terms (1900-2020). Source: Brahmbhatt and Canuto (2010).[/caption]

At the margin, supply-side costs are still pointing upwards almost everywhere in the commodities universe, with the exception of shale gas. However, the pace of innovation and physical investment are not enough to grant the supply elasticity necessary for the price-descending phase of the super-cycle to unfold. And, as promising as the shale-gas revolution may look to the US economy in the years ahead, it seems a stretch to expect it - through substitution and correlation - to be a fully countervailing factor to rising marginal costs of other natural resource-based products.

On the other side of the equation, the current growth soft patch faced by many emerging markets does not point to any drastic future reversal of the propensity to create demand for commodities. Urbanisation and poverty reduction have remained steady in the developing world, and there is no sign of a major macroeconomic downturn beyond the recent accommodation to lower growth rates (Canuto, 2013a).

There may be different intensities of demand changes per types of commodities. For instance, China’s changing growth pattern - Canuto (2013b) - may lead to a less metal-intensive growth, but this is not necessarily the case for foodstuffs. As depicted in Chart 1, trajectories of commodity prices do not necessarily follow similar paths.

Back in Canuto (2008b), I argued that:
“If one may paraphrase Mark Twain, recent news about the death of the commodity super-cycle and of a ‘commodity bust’ were somewhat exaggerated.”

Six years later, I think this still applies.

About the Author

Otaviano Canuto is Senior Advisor on BRICS Economies in the Development Economics Department, World Bank, a new position established by President Kim to bring a fresh research focus to this increasingly critical area. He previously served as the Bank’s Vice President and Head of the Poverty Reduction Network (PREM), a division of more than 700 economists and other professionals working on economic policy, poverty reduction, gender equality and analytic work for client countries. He also served as an Executive Director of the Board of the World Bank from 2004-2007. Outside of the Bank he has held leadership positions at the Inter-American Development Bank where he was Vice President for Countries, and for the Government of Brazil where he was Secretary for International Affairs at the Ministry of Finance. He also has an extensive academic background, serving as Professor of Economics at the University of São Paulo and University of Campinas (UNICAMP) in Brazil.

References

Arezki, R. et al. (2013). “Testing the Prebisch-Singer Hypothesis since 1650: Evidence from Panel Techniques that Allow for Multiple Breaks”, IMF Working Paper n. 13/180, August
Brahmbhatt, M. and O. Canuto (2010). “Natural Resources and Development Strategy after the Crisis”, World Bank, Economic Premise n. 1, February.
Canuto, O. (2008a). “China as a Bulwark and a Raging Bull”, Economonitor (Roubini Global Economics), February 4th.
Canuto, O. (2008b). “Three tiers of commodity price drivers”, Economonitor (Roubini Global Economics), April 21st.
Canuto, O. (2013a). “Lost in transition”, Project Syndicate, December 2.
Canuto, O. (2014). “Macroeconomics and stagnation: Keynesian-Schumpeterian wars”, Capital Finance International, spring.
Canuto, O. (2013b). “China, Brazil: Two tales of a growth slowdown”, Capital Finance International, summer.
Jacks, D.S. (2013). “From boom to bust: A typology of real commodity prices in the long run”, NBER Working Paper 18874, March.
McKinsey (2013). “Resource revolution: Tracking global commodity markets”, September.
Ocampo, J.A. and B. Erten (2013). “The Global Implications of Falling Commodity Prices”, Project Syndicate, August.


UN Member States Receive Report on Finance for Sustainable Development

[caption id="attachment_7858" align="alignright" width="276"] Under-Secretary-General for Economic and Social Affairs. UN Photo/Rick Bajornas[/caption]

The General Assembly formally received an expert report on August 19, 2014 setting out options that can be weighed by Member States on ways to finance the United Nations-driven sustainable development agenda, which will aim to improve people’s lives and protect the planet for future generations.

The report, Forwarded to the Assembly by the Intergovernmental Committee of Experts on Sustainable Development Financing, established that, with appropriate reallocation, a robust $22 trillion in annual global savings could meet the financing needs for sustainable development in the future.

Asserting that most resources were not allocated to where they are most needed, the Committee noted that even a small shift in appropriations would have an enormous impact – improving people’s lives and protecting the planet for future generations.

At the conclusion of the Committee’s fifth and final session at UN Headquarters, Under-Secretary-General for Economic and Social Affairs Wu Hongbo praised the body’s work and the leadership of its two co-chairs, Pertti Majanen of Finland and Mansur Muhtar of Nigeria, in guiding its efforts.

“I have not the slightest doubt that the report you have adopted will provide a significant contribution to the post-2015 development agenda,” he said.

The report outlines an analytical framework for financing sustainable development; proposes various policy options at the country level; and suggests advancing global partnerships for sustainable development.

World leaders have called for an ambitious long-term sustainability agenda to succeed and address the unfinished business of the Millennium Development Goals (MDGs), which are to be achieved by 2015 – beginning with the eradication of extreme poverty.

Building on MDG successes, in addition to promoting sustained and inclusive economic growth in poor countries to permanently wipe out poverty, the new agenda will also need to encompass sustainable development challenges, such as environmental degradation.

As part of the broader post¬-2015 development agenda, the Expert Committee’s report provides a foundation for continued intergovernmental discussions leading up to the third International Conference on Financing for Development – in Addis Ababa, Ethiopia in July 2015 – and the Summit – in New York, September 2015 – where world leaders are expected to adopt the post-2015 development agenda.

To best meet diverse financial needs, the Committee suggests an approach built on key principles, such as: country ownership of sustainable development financing strategies; the public sector’s central role and the importance of official development assistance; efficiently blending domestic, international, public and private financing sources; and mainstreaming sustainable development criteria in financing and implementing strategies.

Based on these principles, the Committee suggests “a toolkit of policy options and financial instruments to be used within a cohesive national sustainable development strategy.” With a wide range of options proposed, the report says, “the choice of specific policy measures should be determined by domestic political considerations and other country-specific circumstances.”

The Committee also considered the most recent proposal of the UN General Assembly's Open Working Group on Sustainable Development Goals for a set of goals on economic, social and environmental dimensions to improve people’s lives and protect the planet for future generations.

Source


Ghana: Crisis as a Hallmark of Enduring Success

[caption id="attachment_7863" align="alignright" width="170"] President John Dramani Mahama[/caption]

A solid mechanism has been put in place with Norwegian assistance to ensure that the proceeds from Ghana’s newly found offshore oilfields are spent wisely and to the benefit of the entire nation. A sovereign wealth fund is to receive 30% of the takings while the remainder will underwrite economic development. Transparency and democratic oversight are ensured through the Public Interest and Accountability Committee which will also liaise with civil society and local communities.

However, technical challenges hamper the performance of the offshore fields with current production levels barely half of the anticipated 225,000 barrels per day. As a result, revenues have been disappointing with shortfalls exceeding $400m annually.

Yet again, Ghana has proven itself equal to the task. The country and its government take the nation’s development serious and unfailingly answer the knock of opportunity. Sensible policies are adopted – and robust legal frameworks erected – so that no resource is wasted. Whereas elsewhere in the region all too often politics get in the way of development, Ghana historically has seen, and used, politics as the driving force of the nation’s advancement.

President John Dramani Mahama, in office since mid-2012, is committed to both his party’s Better Ghana Agenda and the ambitious Vision 2020 development plan. The latter plan, essentially a continuation of the development agenda outlined by the country’s first post-independence president Dr Kwame Nkrumah, aims to transform Ghana into an economic power house through accelerated industrialisation.

"However, technical challenges hamper the performance of the offshore fields with current production levels barely half of the anticipated 225,000 barrels per day. As a result, revenues have been disappointing with shortfalls exceeding $400m annually."

President Mahama expects to need two terms in office for Vision 2020 to become reality. In contrast to previous administrations, the Mahama Government has invited the private sector to partner up in a joint sustained effort to boost growth and development. Agriculture and rural development have now been chosen to spearhead the drive. This way, President Mahama hopes to bridge the income disparity between rural areas and cities.

The current administration is also committed to stemming the ongoing brain drain by embracing new technologies to tackle new challenges. President Mahama is the first Ghanaian leader to put the environment on the national agenda and has unveiled a number of initiatives to engage young professionals and entrepreneurs in innovative projects.

The government is determined to offer small and medium-sized businesses increased opportunities in an attempt to unlock their development and job-generation potential. Policies have also been adopted to engage the Ghanaian diaspora and to attract higher levels of foreign direct investment.

While the frameworks and policies are firmly in place, unforeseen setbacks such as disappointing oil revenues are now threatening to derail part of the development agenda. The country has now appealed to the International Monetary Fund (IMF) for assistance. While inflation and budget deficits are all too real, the economic crisis Ghana is currently suffering also offers proof of its enduring success as a nation. Ghana’s issues pale in comparison to the goings-on elsewhere on the continent where civil strife, religious fanaticism, and other contemporary plagues are rife.

“It is a mark of Ghana’s success that an IMF deal looks like a crisis, compared with a crisis like an Islamist insurgency or a sci-fi style plague,” says Antony Goldman, director of Promedia Consulting in the UK. Analysts widely expect the crisis to be but a cautionary experience which the country should be able to overcome without too much trouble. IMF assistance does not supply a quick fix, but will help put a floor on the crisis. This will in turn enable the Mahama Administration to engineer an economic turnaround and resume its development agenda.


PwC Nigeria: Does Size Really Matter? Economic and Fiscal Implications of Nigeria’s Rebased GDP

Gross Domestic Product (GDP) is an internationally recognised measure of economy size and strength. It is importance to have up-to-date data so the rebasing is a step in the right direction. It is expected to make planning and investment decisions more robust and informed. For example, the performance of the government in revenue collection, capital spending, external debt and budgeting can be benchmarked against similar economies.

Nigeria’s GDP was recently rebased from about USD 270 billion to USD 510 billion for 2013. This increase of about 90% was attributed to new sectors of the economy such as telecommunications, movies, and retail which were previously not captured or underreported. As a result of the rebasing, Nigeria is now the largest country in Africa and 26 largest in the world.

However, Nigeria needs more than GDP rebasing to stimulate the economy. While it is important to have up-to-date statistics, this will not of its own lead to economic prosperity or change the reality on the ground. It is like a farmer who breeds animals but has not properly counted his animals in the past. He has just discovered that he has more than he thought because he previously left out some new species that have now fully developed. Feeling richer than his neighbours, he wants to throw a party to celebrate his new status but a wise man reminds him that he still lives in poverty, unable to pay his children’s school fees and so on. The statistics may have changed but the reality remains the same.

“The general awareness and tax education amongst the populace is also a very important factor that has the potential of shaping the attitude of the public to voluntary tax compliance.”

One obvious arae of underperformance is taxation which is immensely important to national development as a key source of sustainable revenue and an indicator of economic wellbeing. Compared to other sources of revenue, tax revenues can be relatively predictable and governments are able to plan with a greater amount of certainty than when relying majorly on natural resources.

Verifiable Evidence & Undisputed Facts

While some may have doubts about the veracity of the rebased GDP figure, tax revenue offers verifiable evidence and indisputable facts. The tax-to-GDP ratio compares the amount of tax collected to the nominal GDP. Generally the ratio in poor countries is around half of what is obtained in developed nations. According to the Heritage Foundation 2012 data, France had a tax to GDP ratio of 44.6%, Sweden 45.6%, UK 39%, US 27%, Tanzania 12%, Burkina Faso 11.5%, and Nigeria 6.1%.

If we consider all levels of government (federal, states and local councils), Nigeria had about 14.6% for 2013 before the rebasing which is now about 7.8% for the same year. This is based on about NGN 4.8 trillion (about USD 30 billion) collected by the Federal Inland Revenue Service (FIRS), NGN 833.4 billion (about USD 5.2 billion) by the Nigeria Customs Service, and about NGN 648 billion (USD 4 billion) by the states and local councils compared to the rebased GDP of USD 510 billion.

If we isolate the tax revenue from oil, then the tax-to-GDP ratio for the sector will be about 27% while for the non-oil sectors it comes to about 4.6% which is one of the lowest in the world. This is notwithstanding that the tax collection figures above include tax refunds and credits due to taxpayers which should really not be reported as revenue. In addition, there is tax revenue collected from sectors which are not officially included in the GDP calculation such as religious activities and the informal sector.

According to the National Bureau of Statistics (Nigeria), GDP is the market value of all officially recognized final goods and services produced within a country in a given period. With appropriate adjustments therefore, the ratio will fall even further. Perhaps Nigeria needs to rebase her tax revenue generation model.

If Nigeria uses the “output” approach in calculating the GDP, then VAT on goods and services would be the appropriate tax indicator. In the case of “expenditure” approach, the tax indicator should be VAT and import duties while in the case of “income” approach for GDP calculation, personal income tax on wages and withholding tax on rent, interest and dividend should be the corresponding tax indicator. These will help complement the GDP figures for a more informed economic planning.

It is now very clear that the tax revenue generating capacity of the Nigerian economy is yet to be harnessed and that the current tax system is ineffective in many ways. The Minister of Finance, Dr Ngozi Okonjo-Iweala in reaction to the rebased GDP, has given the FIRS a charge to raise collection from taxes. The aim is to get the ratio to at least 20%. This implies a revenue target of about NGN 14 trillion (USD 87.5 billion) up from the current NGN 6 trillion (about USD 37.5 billion) for the FIRS alone. It is important to note that the rebased GDP growth rates for 2011, 2012 and 2013 were 17%, 13% and 13% respectively. To improve the tax revenue to GDP ratio, tax collection must grow faster than GDP.

Resisting the Easy Way

The manner in which the tax authorities will go about this revenue drive will have its effect, positive or negative, on the economy. For instance, it will be counterproductive for the FIRS to focus its revenue drive on the few, easy targets, already compliant group of taxpayers rather than seeking to expand the tax base especially to bring tax evaders into the tax net. The practice of subjecting already compliant taxpayers to unproductive and time consuming audits, which drain resources of both the taxpayers and the tax authorities alike, will not achieve the desired results.

What this will do in effect is to impose unnecessary burdens on the larger and more visible taxpayers while tax evasion particularly in the informal economy continues unabated. This can compromise the competitiveness of tax compliant entities and individuals by overburdening them with never ending audits which in turn discourages potential investors and stifles economic growth.

A pragmatic way to boost the tax-to-GDP ratio is through improvements in the fiscal system. Nigeria’s tax regime is unnecessarily cumbersome and notoriously unfriendly to taxpayers. In the report Paying Taxes 2014 – the latest iteration of an annual study by the World Bank and PwC that compares the ease of paying taxes globally – Nigeria ranks 170 out of 189 economies. Clearly a lot needs to be done to make tax compliance less onerous for the average taxpayer.

In addition, a systematic approach should be adopted in identifying the tax gap and devising a means of bridging it. For instance, a study of the economic activity reported per sector of the rebased GDP in comparison to the amount of tax revenue generated from that sector should be undertaken to determine areas of primary focus for revenue drive. The logic behind this is that with the rebasing of the GDP, the tax authorities also need to consider rebasing their tax net. You may be surprised to see a couple of sectors with negative ratios which is possible if they have been granted more in tax incentives than their contribution by way of tax payment.

With the increase in the automation of processes, increased online transactions leaving electronic trails, the tax authorities have more information to work with which can be used to achieve other objectives of curbing corruption and money laundry.

Measuring Success

Success should not be measured only in terms of more tax revenue generated but also in terms of the ease of compliance, the number of new taxpayers that are brought into the tax net, cost of collection, tax refunds processed, speed of tax audit completion, improvement in voluntary compliance, number of prosecuted tax fraud cases, opportunity cost of waivers/incentives and so on. The general awareness and tax education amongst the populace is also a very important factor that has the potential of shaping the attitude of the public to voluntary tax compliance. Simple rate cards and tax calculation templates as well as a bouquet of all the applicable taxes levied by governments at all levels should also be readily available and accessible to all.

As taxation issues become more prominent in public discussion, companies doing business in Nigeria must be prepared to pay their taxes correctly and on time. Any failing in this regard could have significant reputational damage in addition to the financial penalties.

To increase public confidence and promote a positive taxpaying culture, Nigerian leaders and politicians must lead by example. Relevant agencies must scrutinize the tax records of current and aspiring political office holders in order to break the vicious cycle of tax conspiracy.

About the Author

Mr Taiwo Oyedele is the Head of Tax and Regulatory Services at PwC Nigeria. He is an ardent advocate of tax reforms with particular emphasis on tax simplification and transparency. He runs a blog on tax matters (www.pwc.com/nigeriataxblog).

About PwC

PwC firms help organisations and individuals create the value they’re looking for. PwC is a network of firms in 157 countries employing more than 184,000 people who are committed to delivering quality in assurance, tax and advisory services.


From Lebanon to Brazil - Joseph Safra

A Global Presence

The Safra family fortune – today expressed in billions of dollars – originated on the dusty tracks of the well-trodden camel route between Aleppo, Syria and Istanbul. At the dawn of the 20th century, Jacob E. Safra, a successful gold trader, opened a bank in Beirut to help finance the burgeoning trade between the far-flung provinces of the Ottoman Empire and its capital city Istanbul. Soon, Safra Bank was entrusted with the wealth of rich Sephardic Jewish families from Syria and Lebanon who keenly appreciated his care and discretion in financial matters.

Scion of a prominent Jewish / Lebanese family of traders, Jacob E. Safra did well and saw his family’s fortune blossom. However, the turmoil that followed the collapse of Ottoman rule and, later, the regional tensions and strife arising in the post-war years, caused the Safras to make a bold move. The family pulled up its stakes and in 1952 left Lebanon to cross the ocean to a new life in Brazil – then, as now, seen as a land of opportunity.

Three years later in São Paulo, a new Safra Bank was founded. Jacob Safra was joined in the venture by three of his four sons: Edmond, Moise and Joseph. Though their father passed away in 1963, the three brothers continued to expand the business. Indeed, they made it into a global corporate behemoth spanning five continents with interests in banking, agribusiness, telecom, real estate and manufacturing.

“If you choose to sail upon the seas of banking, build your bank as you would your boat, with the strength to sail safely through any storm.”

- Jacob E. Safra

Currently headed by Joseph Safra (75), the Safra Group employs over 8,500 people worldwide and continues to have a strong presence in the Middle East.

According to Forbes, Joseph Safra’s personal net worth currently hovers around $16bn. This lands him on the 52nd spot of the magazine’s famed billionaire’s list. Today, the Safra Group controls an estimated $200bn in assets and follows a conservative and carefully laid out track to future growth. Rather than jump into market bubbles or onto bandwagons, the group keeps its focus on sustainable lines of business that assure stable and sustainable growth. It’s the family secret.


World Bank Report: Digital Payments Vital To Economic Growth

Gates Foundation and Better Than Cash Alliance urge governments to embrace digital financial services, offers concrete action steps.

Integrating digital payments into the economies of emerging and developing nations addresses crucial issues of broad economic growth and individual financial empowerment, according to a new report by the World Bank Development Research Group.

The report examines, for the first time, growing evidence from around the world about how digital payments offer immediate benefits for both senders and receivers in developing economies, as well as the ability of such payments to increase citizen access to affordable financial tools.

The report also highlights how digital payments help increase the financial independence of women by moving them from the limitations of a cash-only economy and connecting them with the financial mainstream.

Furthermore, the report concludes that the establishment of digital payments for remittances instead of cash is of enormous benefit to poor people in emerging markets and also contributes to financial development.  This could also help address concerns about the transparency and traceability of remittances.

“Digital financial services lower the cost and increase the security of sending, paying and receiving money. The resulting increase in financial inclusion is also vital to women’s empowerment.”

“The benefits of digital payments go well beyond the convenience many people in developed economies associate with the technology,” said Dr. Leora Klapper, Lead Economist at the World Bank Development Research Group. “Digital financial services lower the cost and increase the security of sending, paying and receiving money. The resulting increase in financial inclusion is also vital to women’s empowerment.”

The Better than Cash Alliance and the Bill & Melinda Gates Foundation—which funded the study in support of the G20 Global Partnership for Financial Inclusion—emphasized the clear link between digital payments and the goals of G20 governments means that action should be swift and purposeful. The two organizations are urging governments, when they meet in November 2014 at the G20 Brisbane Summit, to discuss how they can embrace a broad-based digital financial system as a path to growth, greater participation of women in the economy, and greater access to payments, including remittances.

"Governments have to take the lead and drive digital financial development forward,” said Geoffrey Lamb, Chief Economic and Policy Advisor to the Co-Chairs and CEO of the Bill & Melinda Gates Foundation. “The evidence shows that private sector firms will innovate and citizens will quickly learn to use and appreciate digital payments.  But we need governments to establish the vision, the digital platforms and the regulatory assurance to pull the hundreds of millions of currently excluded people into full participation in the modern economy."

“Governments have the authority to be prime movers on so much of what is needed to advance digital financial development,” “With the private sector as a valuable partner, governments must lead to encourage progress in areas such as regulatory reform, driving electronic payroll payments and digitizing social benefit disbursements.”

The report presents an action plan for governments to adopt to realize the benefits of digital payments. Specific calls to action include:

Digitize government payments and receipts, including social transfers. This creates a foundation upon which the private sector can build, including for person-to-person payments, such as international and domestic remittances.

Engage actively on the regulatory agenda. Governments need to encourage regulators to enable digital financial services by fostering competition, ensuring consumer education and fostering business model innovation.

Convene public and private sectors to create a basic technical payment platform infrastructure, across which providers can compete on product development. Public and private sectors can converge around a payments platform, and enable innovation and competition in additional financial services.

Create an enabling environment that fosters private-sector innovation. Governments need to offer a clear vision and tangible incentives in order to ensure that the private sector is an effective, competitive, transparent, and efficient partner.

Recognize the role of remittance providers in offering a digital entry point to formal financial services for senders and receivers. Instead of remittances being cashed out, remittances sent to a bank account, e-wallet, or smart card, for example, can go into accounts that support safe saving and also increase transparency and traceability.

“We recognize that while the opportunities of digital payments abound, getting there takes work,” said Dr. Ruth Goodwin-Groen, Managing Director of the Better Than Cash Alliance. “Yet digitizing payments is achievable when a government articulates a clear vision, leads by example and provides the right incentives for the private sector to do what they do best: innovate, develop infrastructure and create products designed to succeed in the marketplace.”

The report and its implications will be discussed at the G20 Global Partnership for Financial Inclusion forum on September 1 in Perth, Australia.

The full World Bank study as well as the key findings and recommendations by the Gates Foundation and Better Than Cash Alliance can be found here. Source


Demand for Sustainable Developments Rises as UAE Residents Vote for a Greener Lifestyle

Emaar Community Management showcases latest initiatives at Cityscape Global

[caption id="attachment_7947" align="alignright" width="251"] The Middle East’s largest and most influential show, Cityscape Global will welcome more than 250 exhibitors on the 21-23 September to the Dubai World Trade Centre.[/caption]

Dubai, UAE, 1 September 2014: Emaar’s Community Management programme will be at the forefront of sustainable developments on show at Cityscape Global this month, as UAE residents reveal their desire to adopt a greener lifestyle, both at work and at home.

A recent poll conducted by Bayt.com showed that 72.5 percent of respondents considered going green as something very important to their lifestyle, with 80 percent also stating that environmental issues and conservation of natural resources concerned them “to a large extent”.

Honoured with the first Green Facility Management Organisation of the Year award by The Emirates Green Building Council, Emaar Community Management will be echoing their sustainability working patterns at the three-day event, which takes place from 21 – 23 September at the Dubai World Trade Centre.

Jeevan D’Mello, Senior Director of Emaar Community Management said: “We are handling budgets of more than AED750 million and the numbers are only growing with the addition of new communities, such as the expansion of Arabian Ranches including Alma 2, La Avenida 2 to name a few, The Opera District, Reem, Dubai Hills Estate and many more.

“Sustainable principles, strategies and practices are fundamental to how we maintain our communities. Some of our initiatives include a drive to remove invasive Damas trees, an edutainment event for younger residents, as well as campaigns and community projects to conserve water and energy. These efforts are complemented by our focus on renewable energy initiatives, recycling and waste management.”

"Sustainable principles, strategies and practices are fundamental to how we maintain our communities."

Organised by Informa Exhibitions and supported by the Dubai Land Department, Cityscape Global is the annual meeting point for key real estate investors, developers, investment promotion authorities, architects, designers and real estate professionals, to drive growth in real estate investment and development across emerging markets globally.

Continuing the environmentally friendly theme at the 13th edition of Cityscape Global, Union Properties PJSC, the first company to introduce the concept of community into the UAE, will be launching an AED800 million high-rise residential development in Motor City.

Ahmad Khalaf Al Marri, General Manager of Union Properties PJSC, said: “We are constructing developments that are in line with people’s demand for change. Residents are looking for a greener lifestyle, therefore we need to focus on sustainable retail and residential projects to ensure we generate investors and satisfy clients’ needs, with a focused eye on quality.

“Sustainability is gaining momentum globally and areas such as the UAE have the opportunity to be the flagship of sustainable development. The region is at the forefront of environmental policies, procedures and regulations and each developer has to now take responsibility of going that extra mile and pushing the boundaries of sustainable development,” Al Marri added.

Damac Properties, Meydan Group, Nakheel, Dubai Properties Group and TDIC are among the 250 exhibitors at Cityscape Global this year, showcasing their latest developments and environmentally friendly concepts.

The Middle East’s largest and most influential property show is co-located with three dedicated and expert-led conferences, the Global Real Estate Summit, Future Cities and the Real Estate Brokers Summit, which are expected to bring together more than 1000 senior real estate professionals.

Also featuring alongside the exhibition is the Cityscape Awards for Emerging Markets, which has attracted hundreds of entries from developers and architects across the world. A short list of nominees has now been drawn up and winners will announced at an elaborate ceremony taking place at the Armani Hotel, Burj Khalifa on 22 September in Dubai.

Cityscape Global 2014 returns with support from Foundation Sponsors Emaar, Dubai Properties and Nakheel; International Strategic Partner, Property Solutions; Gold Sponsor Tourism Development and Investment Company (TDIC); Project Marketing Sponsor Aqua Properties; Official Architect Architecture & Planning Group (APG); Official Broker Trisl Real Estate; Official Mortgage Provider Abu Dhabi Finance; Silver Sponsors Apex Real Estate Development L.L.C. and Tecom Investments; and Property Registration Trustee Partner Tamleek Property Transfer.

For more information, visit www.cityscapeglobal.com or call +971 4 407 2557.

For further press information please contact:

 Sarah Brook / Lindsay Johnston

Total Communications

Tel: +971 (0) 4 428 1502 Mob: +971 55 394 6865

Email: sarahb@totalcompr.ae / lindsay@totalcompr.ae


From Haiti to Canada – Michaëlle Jean: A Viceroy from the Caribbean

The world over, Canada enjoys a reputation as a country most welcoming to immigrants. Newcomers are not just welcomed with open arms; they are also cordially invited to actively participate in the life of the nation. Canadians thoroughly enjoy welcoming immigrants to their vast and often frozen land. Their warmth knows no equal.

Fully 20% of Canada’s population – or some 6.8 million new or aspiring Canadians – is foreign-born. That, however, does not keep them from claiming the highest offices in the land. It was thus that between 2005 and 2010, Haiti-born Michaëlle Jean served as Canada’s 27th governor general – the federal vice-regal representative serving at Her Majesty’s pleasure, the majesty in this case being the Canadian monarch Queen Elizabeth II residing in Buckingham Palace, London.

Michaëlle Jean was born in Port-au-Prince, Haiti in 1957 to a school teacher and his wife. In order to avoid her having to swear allegiance to then-dictator François Duvalier, as all Haitian school children at the time were expected to do, Michaëlle’s parents opted to home school their daughter. After Jean’s father was arrested and tortured by the dreaded Tonton Macoute secret police, the family decided to flee the country arriving in Canada in 1967 as political refugees.

In her new country, Michaëlle Jean grew up to become a journalist, television presenter, and filmmaker. She made news as the first person of Caribbean descent to present a newscast on French-Canadian television. Before long, Michaëlle Jean had become a fixture on national TV and an accomplished filmmaker. Her 2004 documentary film Haiti in All Our Dreams received wide acclaim and a number of prestigious awards.

In August 2005 it pleased the Queen, and most Canadians as well, to appoint Michaëlle Jean as governor general of Canada upon the recommendation of Prime-Minister Paul Martin who said of her: “She is a woman of talent and achievement. Her personal story is nothing short of extraordinary. And extraordinary is precisely what we seek in a governor general who, after all, must represent all of Canada to all Canadians and to the rest of the world as well.”

Michaëlle Jean was an instant hit with the public. She toured the country extensively and, more surprisingly, took a keen interest in her military duties as acting commander-in-chief of Canadian forces. She visited France for the 90th anniversary of the Battle of Vimy Ridge and insisted with the prime-minister on being allowed to visit the Canadian troops in Afghanistan brushing aside security concerns.

Michaëlle Jean stepped down after five years as tradition demanded, notwithstanding calls by both the public and politicians for an extension of her unofficial term. At the time of her departure from office, Michaëlle Jean enjoyed an approval rating of well over 60%. During her time as governor general, she showed by doing and being that all newcomers to Canada are free to dream and work towards the highest goals attainable.


World Water Week Seeks Solutions to Water and Energy Challenges

Water is needed in almost all energy generation processes. At the same time, the water sector needs energy to extract, treat and transport water.

These inextricable connections between water and energy – and how best to manage them for the benefit of the poor – will be the focus of this year’s World Water Week.

Cross-cutting solutions are critical for developing innovative technical tools, approaches, and policy-oriented guidance to help countries develop and manage their energy and water resources in a sustainable way.

Water is needed in almost all energy generation processes, from hydropower production and energy extraction, to cooling in thermal power plants. At the same time, the water sector needs energy to extract, treat and transport water.

These inextricable connections between water and energy – and how best to manage them for the benefit of the poor – will be the focus of this year’s World Water Week, the annual focal point for the globe’s water issues.

“Today the process of urbanization, decentralization of the nation state, addressing the challenge of fragility of nations, linkages into challenges of energy for all or food security - all of these development challenges will require us to understand how to manage water in global and inter-sectoral contexts,” said Junaid Ahmad, Senior Director, Water, World Bank Group, who will address World Water Week participants during the Opening Plenary, along with Anita George, Senior Director, Energy & Extractives, World Bank Group.

More than 748 million people lack access to potable water, 2.5 billion lack access to sanitation, and over 1.2 billion people lack access to electricity. Geographically, most of those living in water poverty are the same people who live in energy poverty. They are among the world’s poorest people and the most underserved in basic services.

“Today the process of urbanization, decentralization of the nation state, addressing the challenge of fragility of nations, linkages into challenges of energy for all or food security –all of these development challenges will require us to understand how to manage water in global and inter-sectoral contexts.”

- Junaid Ahmad, Senior Director, Water, World Bank Group

“One statistic that challenges me every day in my job is the fact that, with business as usual, the number of Africans without access to electricity will grow,” said Anita George, Senior Director, Energy & Extractives, World Bank Group. “With the scale of unmet need for electricity and the mounting water scarcity facing countries, we need to focus on areas where water and energy meet –ensuring sustainable hydropower, reducing harmful energy subsidies, and improving wastewater treatment and management.”

Water constraints have already adversely impacted the energy sector in many parts of the world. In the United States and Europe, power plants have had to temporarily shut down or reduce electricity generation due to low water flows or high water temperatures.

Despite these concerns, current energy planning and production is often made without taking into account existing and future water constraints.

Earlier this year, the water and energy units of the World Bank jointly launched the Thirsty Energy Initiative to promote more sustainable management of water and energy resources in our work with governments throughout the world. With the energy sector as an entry point, Thirsty Energy quantifies tradeoffs and identifies synergies between water and energy resource management.

It is these types of cross-cutting solutions that are critical for developing innovative technical tools and approaches and policy-oriented guidance to help countries develop and manage their energy and water resources in a sustainable way. Source

Join the World Water Week

The water and energy challenges will impact the entire development community. We encourage you to follow us on Twitter @WorldBankWater to join the discussion in Stockholm at World Water Week (#wwweek). Share your ideas, ask the hard questions, tell us how your work is affected by these issues, and work with us toward the solutions.


FACRA: How Investors Can Help Build SMEs in Angola - The Missing Middle

By any measure, small and medium sized enterprises (SME’s) form a crucial part of any nation’s economic success. Typically, SME’s range from sole proprietorships to mid-sized companies and ordinary partnerships. These businesses rarely make the headlines but they form the backbone of most of the world’s major industrialised nations.

There are millions of these small enterprises and they are the unsung heroes of economic growth. They create jobs and wealth, leading to a healthy competitive market. Crucially, SMEs drive innovation and provide opportunities for investors and venture capital firms. Figures from the Department for Business Innovation and Skills in the United Kingdom show that there were 4.9 million private sector businesses at the start of 2013, employing 24.3 million people with an annual turnover of £3,300 billion. These figures demonstrate the sheer scale and importance of the SME sector, without which no mature free market economy could survive. How then can a rich nation such as Angola continue to grow when it has almost no SME segment in its economy?

Fascinating

Angola is a fascinating case study. It is not only a fledgling free market but also a fledgling democracy. It has large reserves of oil and it has made enormous progress since 2002 in building infrastructure and educating its people. Major global organisations are turning Angola in to an exciting place to do business and the government is highly cognisant of the need for economic diversification. This drive has led to a significant injection of capital to support micro, small and medium sized enterprises with more than $600 million provided so far as part of the Angola Investe program, which was launched in 2012 by the Angolan government.

“Angola is arguably the most promising nation for investment in sub-Saharan Africa.”

The level of interest and investment in Angola has led to a great deal of positive sentiment from external bodies. The World Bank’s June 2013 Angola Economic Update states that, “Angola’s economy is now gathering momentum with robust GDP growth supported by strong fiscal and external balances, a stable exchange rate and moderate inflation.”

However, despite the positive story and strategic investments, the SME market has so far failed to materialise in a significant way. This missing middle presents a challenge to the government’s plans for economic diversification – but it also presents investors with a rare opportunity to move into a virgin territory.

Angola is arguably the most promising nation for investment in sub-Saharan Africa. It has a stable government, a peaceful society and one of the world’s youngest populations. Most of Angola’s twenty million people live in cities and around half the population is under the age of twenty. More young people are going to university than ever before and the government provides grants to facilitate overseas education.

Angola also has a large number of entrepreneurs. Many of these are tiny, micro-entities that exist outside of the tax system. These are essentially sole traders who are self-sufficient but who do not have the infrastructure or access to capital to grow a business. At the other end of the spectrum are the global oil companies and public sector bodies that hire large numbers of Angolans.

Well organised and well-structured SMEs that work in a formal manner, paying taxes and social security, with HR departments and systems are incredibly rare. In most mature economies these businesses are niche players, driving specialised innovation and experience. They create highly expert professionals and a rich and colourful work force. There is a glaring gap in Angola and for this reason it is difficult for the economy to diversify. This is where the real opportunity lies.

Lack of Capital

One of the reasons why SMEs have not traditionally been successful in Africa has been the lack of access to capital, the high cost of borrowing and reluctance from banks to lend to small businesses. Set up costs can also be high in Angola, particularly Luanda. In the manufacturing sector for example, there are simply not enough factories, so industrial start-ups may need to buy land in order to build a facility.

It is in areas like this that venture capital companies can step in. They not only provide access to capital and credit but they have an important role to play in guiding and advising young companies.

Fundo Activo de Capital de Risco Angolano (FACRA) is a public venture capital fund that supports Angolan SMEs in building, innovating and expanding their businesses in Angola. Capital investments from venture capital companies or external businesses are greatly needed in order to stimulate local industry, to provide space for innovation to flourish and succeed. This need means that the time is right for overseas businesses to take market share, create jobs and steal a lead in one of the world’s fastest growing markets.

There are a number of areas where SMEs can – and will – play a major part in the growth and development of the nation’s economy. Agriculture and manufacturing are ripe for growth and the government of Angola is particularly keen on working with young businesses and external parties in helping to stimulate growth in these sectors.

The IMF Angola Economic Update 2013 states that growth in agriculture and manufacturing has been relatively strong over recent years but is performing below its full potential. Agriculture employs two-thirds of the Angolan labour force and whilst the sector grew by 7.3 per cent in 2012, it remained below its 10-year average rate of 13 per cent. The report goes on to say that, “….increasing investment to boost productivity in agriculture and manufacturing could make a strong contribution to employment creation, particularly given the human-capital dynamics of the Angolan labour force.”

Technology

The technology sector is also underdeveloped, presenting investors with an opportunity to drive innovation in areas such as mobile apps and software. Angola’s communications and information technology industries are expanding rapidly – 4G networks launched in 2012 and mobile phone penetration is more than 50 per cent. Angolans are hungry for technology and with little innovation currently happening in the country, there is a major opportunity for companies to move in and steal a march in the sector.

Hospitality is perhaps one of the largest and most important sectors for development in the country and further afield across sub-Saharan Africa. Luanda is a major business hub and as such requires world-class hospitality. There are opportunities for investment in everything from hotels to restaurants and leisure facilities as the country works towards providing the infrastructure needed to accommodate business and leisure travellers from around the world.

The development of these key industry sectors will also help to boost intra-Africa trade and stimulate a strong regional market. A strong African market will see African goods and services replace the region’s dependence on imports. It will also drive innovation, create jobs and raise living standards across the board.

Angola is a nation that desperately needs to build an SME segment in order to diversify its economy and continue to grow. It has all of the ingredients necessary to make this happen: Political will, a young and hungry population, tax incentives for foreign companies and a stable, peaceful society. The government in Angola is investing billions of dollars of the nation’s wealth in building infrastructure, educating its people and providing a framework for growth.

The country is also attracting investment from external bodies. The World Bank has promised to provide $1 billion for infrastructure development and the Africa Development Bank is set to loan Angola $1 billion to develop its electricity grid.

There is a lot happening in this young nation – but much more to do in order for it to realise its full potential. Attracting the investment of foreign companies is one way in which the people of Angola can benefit from the development of an all-important SME segment.

By Teodoro DE Jesus Xavier Poulson, Member of Investment Committee, FACRA

About FACRA

The Fundo Activo de Capital de Risco Angolano (FACRA) is a public venture capital fund that supports small and medium enterprises (SMEs) in building, innovating and expanding their businesses in Angola.


Elon Musk: A Man on a Mission

 Philanthropist, self-made multibillionaire, technological genius and indeed a dreamer: The list goes on. These are some of the marks and traits that best describe Elon Musk. According to Forbes Magazine, the 39-year Mr Musk has a net worth of $9.3bn.

Elon Musk is the co-founder of multibillion dollar companies such as PayPal, SpaceX, and Tesla Motors. The latter two also stand testimony to both his altruistic spirit and his thirst for innovation.

With Tesla, Mr Musk created a completely new technological platform for electric cars spearheading a greener era of transport by designing vehicles that drive almost solely on non-fossils such as solar and electrical power. Far ahead of other electric car alternatives, Mr Musk could have easily patented his technological breakthroughs, however he deliberately chose not to so that the whole industry might benefit and usher in a new era of mobility together.

Though ethically correct, the decision was not a wise one from a business perspective. Any larger corporation with resources to match its size could easily wipe Tesla off the market in an afternoon or so. The decision does confirm that Mr Musk is motivated not just by money and the process of multiplying it.

Mr Musk has taken one step in the direction of non-fossil powered mobility but that does not satisfy his curiosity or quench his thirst for innovation. His dreams and aspirations stretch far beyond what can be achieved on our tiny blue planet. This is what drove Mr Musk to create SpaceX – a company with the modest goal of enabling humans to live and inhabit other planets, or more specifically Mars.

Since its birth in 2002, the company has erected several historical milestones. In 2008, it became the first private company to successfully reach orbit with the spacecraft Falcon 1. Two years later, the spacecraft Dragon was the first privately-owned vehicle to dock at the international space station (ISS), delivering a cargo of supplies. SpaceX signed a $1.6bn contract with NASA to send a dozen shipments to the ISS.

The company recently signed yet another deal with NASA. This $440m contract calls for modifications to be made to Dragon so that it can safely ferry crews to and from the space station. SpaceX is now in the final stages of creating the world’s most powerful rocket. The magnitude of the technological breakthroughs SpaceX is nothing short of dazzling. Even more impressive is the fact that the company’s CEO is also its chief designer: Mr Musk does not only know how to make money in vast quantities, he has a vision to match.

Asked why he invests so much time, money, and effort in breaking down yesterday’s walls, he simply says: ‘’I can either watch it happen, or be a part of it’’. He went for the latter option.


Making Every Drop Count: Reducing Water Loss in the Middle East and North Africa Region

The problem of water loss has become an even greater challenge for public utilities throughout the Middle East and North Africa region due to climate change, which threatens natural water supplies and increases the cost of new waterresources.

Malta, with one of the world’s highest population density and lowest renewable water supplies, switched from building more desalination plants to meet rising demand to a more effective strategy focused on water loss.

The World Bank organized a conference that brought representatives from 30 regional utilities to Malta, to learn how the island implemented its successful campaign to lower water loss.

[caption id="attachment_7982" align="alignright" width="289"] NASA satellites reveal massive water loss in the Middle East.
NASA[/caption]

Water loss, and its operational and financial consequences, is a major concern for urban water utilities in the Mediterranean region. Losses, both physical and commercial, are due to leakages and the failure to bill customers for the full amount of water they use. A combination of these two factors puts the financial viability of water utilities at risk.

In countries already coping with water scarcity, the burden of water loss often leads to rationing and intermittent supply. As climate change exacerbates the problem—threatening the supply of renewable water and increasing the cost of new water resources—reducing losses from leaky pipes and under-billing, is becoming a priority for water utilities in the Mediterranean and throughout the Middle East and North Africa (MENA) region.

Malta, situated at the very center of the Mediterranean, provides a remarkable illustration of how major water resources challenges can be successfully overcome. The island has one of the lowest rates of renewable water supplies in the MENA region, at 100 m3 per capita per year. It also stands in the top ten countries with the highest population density, alongside Gaza, Bahrain, Hong Kong and Singapore.

Several decades ago, Malta became one of the first countries in the region to invest in desalination plants but, in the 1990s, as new plants were being built to meet increasing demand, it became clear that demand for water was fast outstripping its supply.

The Water Services Corporation (WSC), Malta’s national water utility, turned its attention to water loss instead, initiating an aggressive program that achieved significant results. In addition to state-of-the-art concepts and technology for monitoring and reducing leakages, the WSC also put in place a program to optimize energy consumption at its desalination plants, reducing average energy consumption from 6-7 to 4.5 kWh/m3.

"The success of the program allowed the WSC to decommission two desalination plants and reduce the level of water extraction from the island’s aquifer to levels not seen since the 1960s."

The success of the program allowed the WSC to de commission two desalination plants and reduce the level of water extraction from the island’s aquifer to levels not seen since the 1960s. The leakage in the water distribution network “was around 4000m3/hr in 1995, yet [has] decreased to below 450m3/hr today”, according to Stephan Riolo, executive director of the network’s infrastructure in Malta.

Malta clearly had lessons to share in reducing water losses and operating desalination plants. As part of their program of support for MENA countries, the World Bank therefore organized a conference on the small Mediterranean island that brought together 30 senior officials from major water utilities in Morocco, Tunisia, Libya, Lebanon, the Palestinian Territories and Yemen.

All the countries that participated are facing similar problems and have keen interest in reducing losses and improving the management of their water supply. Most said that in their experience, however, reducing water losses had proved difficult and complex. Malta’s case was particularly valuable as it shows that countries can achieve successful water loss reduction, as long as it is part of a comprehensive, well-designed program.

The WSC had applied a structured approach based on four pillars: (i) the acknowledgement of the many components of water loss and the interaction between them, (ii) the need to take into consideration, when setting targets, the economically acceptable level of non-revenue water (water supplied but not billed for), (iii) the need to move away from short-term interventions, and (iv) the recognition that water loss lies at the core of assets management.

Participants agreed that replicating the WSC’s success in other MENA countries would require a similarly structured approach, based on long-term strategic planning. This would have to include the following phases: (i) a careful diagnosis of the water loss situation, identifying activities that would generate the largest savings, and setting realistic targets, (ii) a comprehensive program of intervention covering all relevant aspects of water loss (as opposed to “one shot” actions), and (iii) institutional reforms to establish the right framework for maintaining the utility’s economic performance.

There was great interest from all participants to move forward with specific technical assistance, with the WSC transferring its knowledge through peer-to-peer exchanges and a twinning approach. It was agreed that twinning activities between the WSC, Tunisia’s SONEDE utility, and utilities in Gaza, would be supported, in part through a grant from the Center Mediterranean Integration.

Other participants, such as Morocco’s ONEE, Northern Lebanon’s water establishment, and utilities from Sana’a and Aden, also expressed their interest in exchanges with the WSC. Based on this, a comprehensive twinning program between the WSC and MENA utilities will be finalized in the next few months, so as to start exchanges in the field before the end of 2014.


Matteo Renzi to the Rescue? European Union - Looking for a Leader to Reassert Its Role

[caption id="attachment_7987" align="alignright" width="176"] PM: Matteo Renzi[/caption]

To the pundits and other talking heads who wrote off Europe as a spent force: You ain’t seen nothing yet! The hand-wringing is about to be cut short as the old world prepares for a makeover. Indeed, the exercise may be long overdue but that doesn’t detract one iota from the role the European Union is destined to play on the global stage.

Numbers tell the story. With a GDP of well over $16.5tn (EUR12.9tn) that is unequalled by any power, the EU boasts the world’s largest economy. Significant though they are, the US and China play second and third fiddle when it comes to raw economic – and financial – power.

The differences become even clearer when taking into consideration the current account balance – a fairly accurate profit/loss indicator of any given economy. Since a number of years the United States is being run at a significant loss. Last year, the US current account balance, though narrowing, ran at a deficit of some $400bn (down from almost $800bn in 2010) whereas the European Union managed to obtain a rather healthy surplus of $95bn.

Money Matters

In fact, the US has been running current account deficits since the late 1970s with a one-off respite in 1991. Meanwhile, European surpluses have been fairly constant. In simplified practical terms this means that the US economy – including its assets and means of production – is slowly but consistently being bought up by non-US investors who supply the wherewithal to ensure the necessary zero-sum outcome on the balance of payments.

“If we want to save Europe, we must change Europe.”

- Matteo Renzi

These providers of liquidity are to be found in the countries producing surpluses on their current accounts: China, Norway, Russia, the countries of the Middle East and, indeed, the countries of the European Union. The United Kingdom, France, Germany, Luxemburg, and The Netherlands are amongst the largest investors in the US, not just when it comes to foreign direct investment, but also with regards to snapping up treasury papers.

Europe seems to derive an almost perverse pleasure in downplaying its economic might. The EU may not dispose of an impressive army to help throw its weight around; it does possess a nicely filled war chest with which to make waves. The union is home to over 505 million people, fully half of whom are waiting for consistent growth to deliver increased prosperity. The EU’s economy thus offers plenty room for domestic growth. The union’s already formidable GDP is ready for take-off as the less-developed nations of the former Eastern Bloc shake off the legacy of their unfortunate past and welcome the first post-communist generation into the productive demographic.

Military Might

Even militarily the EU is much less feeble than it is made out to be. With a combined annual defence expenditure of EUR192bn ($261bn), and fully 1.5 million military personnel of whom 425,000 are ready for instant deployment, the union is no pushover. Together, the 28 EU member states can field around 6,500 main battle tanks, 46,000 plus armoured fighting vehicles, over 2,100 self-propelled howitzers and close to 350 state-of-the-art attack helicopters.

The EU’s combined naval forces include four carriers (with two super carriers under construction in the UK), 18 assault and support ships, almost sixty submarines, and 170 destroyers, frigates and corvettes for a grand total of 550 plus ships. The combined EU air forces are similarly impressive with over 2,000 fighter jets and over 500 transport, tanker and air-lift planes.

These numbers may still pale in comparison with the forces the United States can and does deploy around the world. However, Europe is not about military conquest. In popular parlance: It has done that, been there and got the resulting t-shirt blown to shreds. Americans may think their country has a manifest destiny as leader of “the free world” – or some such slogan – Europeans have suffered wars and now know better than to conquer the world. Standing armies remain a necessity, but only for self-defence and a few humanitarian interventions should the need arise.

The Search for Common Ground

Europe of course still lacks a degree of cooperation, integration and, perhaps, an increased sense of togetherness. The European Union is very much a collective of cooperating nation states, each with its own unique make-up, history, and culture. Language remains a barrier to integration: The EU has no less than 24 official languages providing healthy incomes to a veritable army of translators and writers.

Though Greece bears little resemblance to Belgium, and the Polish instinctively distrust the Germans (as do the Dutch and a host of others), the European Union is – for all its diversity – very much a contemporary version of the concert of nations (Vienna, 1815), providing for stability, mutual dependencies, growth and prosperity. It has been doing so since the 1950s.

As the UK mulls an EU-exit, expressing grave doubts about the union’s increasing say in domestic matters and its perceived lack of transparency, the country is seen to cling to its glorious past as the ruler of a quarter of mankind. For the British it may be hard to grasp and accept the fact that the empire has gone and that their green and pleasant land now stands all alone in a fast-changing world. Worse, the fair isle is about to be split in two as the rather unruly Scots seem to fancy the idea of becoming a fully sovereign state.

Exit Opportunity

The much-discussed pros and cons of a UK exit from the EU constitute an opportunity, as welcome as it is unique, to showcase the full extent of the union’s relevance to both individual citizens and nation states. The only possible good that may be produced by the UK turning its back to the continent could be summarised as a drop in London real estate prices, making life in the city somewhat more affordable to non-millionaires.

Frankfurt would be grateful. The German city stands to become the premier financial centre of the world in case the UK opts out of Europe. No multinational corporation would keep its European head offices in the UK as the union is decidedly unfriendly to those who do not belong. Economically it doesn’t make any sense to turn your back on a market of some 505 million avid consumers to which the country now enjoys full and unfettered access.

How some 57 million people crowded on a possibly divided island could possibly ensure lasting prosperity in a world of large trading blocs is a question the politicians of the UK Independence Party have so far utterly failed to address.

Cheap Calls

Politicians, and not just the UKIP ones, are the bane of the continent. Since the inspired generation of Adenauer, Monnet, Schuman, Spaak, and Mansholt – the great post-war visionaries who forged the Treaty of Rome that evolved into today’s EU – few politicians have dared take Europe to the masses. Fewer still have found the courage to explain in plain language the historical importance of the paneuropean edifice that was, and still is, being erected in Brussels. In today’s impoverished political landscape – in which debate has been reduced to parallel discourse – leaders with eloquence and vision are few and far between.

The pro-European lot are a sorry sight to behold. Take the leader of the Dutch Democrats 66 (D66), a staunchly pro-EU party, Alexander Pechtold. Explaining on primetime national television the great importance of the union, and the untold benefits it delivers to common folk, Mr Pechtold twice mentioned cheap calling rates: “Before, when you were vacationing in Greece or Italy, calling home might have set you back up to three euros a minute. Today, thanks to EU regulation and network integration that call can easily be made for pennies.”

Normally Mr Pechtold is a reasonable and reasoned man who abhors any and all forms of extremism. He appeals to people’s common sense and their ingrained sense of justice. However, when it comes to the EU, Mr Pechtold insists on spouting nonsense. It is almost as if one can hear the audience thinking: “So… because we now can call home cheaply while relaxing on a Mediterranean beach, we must also be ok with bailing-out all these almost-broke countries.”

Popular perception in the Netherlands, and elsewhere in the union, is largely based on the antics of pro-EU politicians who insist on running before the troops. Nigel Farage, Geert Wilders, Marine Le Pen and other euro-sceptics merely reap the electoral harvest sown by the likes of Alexander Pechtold.

The Untold Story

The story that almost nobody wants to tell is that the European Union is without doubt the greatest experiment at nation-building the world has ever seen. Never before in history has an assembly of independent and well-established nation states come together in order to voluntarily relinquish sovereign powers to a supranational body specifically set up to rule in the common interest of all states pertaining to the group.

After centuries of almost continuous war and strife, Europeans – perhaps rather slow on the uptake – have decided that the only way forward is through increased, and ever increasing, cooperation. The implementation of this simple concept has revolutionised the world. Before the European Economic Community (now EU) came into being, there were no trading blocs other than empires and a very loose, and rather dysfunctional, British Commonwealth.

The EU directly inspired the formation of today’s great blocs of countries seeking common ground and a shared future: Mercosur in Latin America, Asean in Southeast Asia, NAFTA in North America, Caricom in the Caribbean, the African Union, and many others. All these supranational structures were built on the mould first shaped in 1950s Europe. The Old World must have been doing something right.

Left Out

Yet, most Europeans feel completely left out of the processes unfolding and see the rise of the union as a scary show in a faraway place over which they have little to no control. That perception is not without a few kernels of truth. The EU’s powers-that-be do have a tendency to ride roughshod over the express wishes of voters, the prime example being the rejection by the electorates of France and The Netherlands in 2005 of the EU’s proposed constitution.

After the French and Dutch delivered their solid “No”, other member states cancelled their referenda in order not to suffer like blemishes to their reputations. Following the constitution’s defeat at the ballot box, the document was revised – and amazingly enough expanded upon – and rechristened as the Treaty of Lisbon to be duly ratified (if not rubberstamped) by the parliaments of all member states.

And then politicians from across the union wonder out loud why today voters refuse to participate in sham elections for a European Parliament that has virtually no say in any matters of importance and holds no budgetary powers to speak of. The few who still try to make their voices heard are now being told – by the UK government in this particular case – that the political bloc with the most votes may not deliver the next president of the European Commission – the entity in charge of the day-to-day affairs of the union. No matter promises made before the election took place last May.

Getting 28 member states to unanimously agree to anything is a thankless exercise at best, and a hopeless one most of the time. The practical result of the union’s insistence on unanimity is that only the most common and obvious policies are set out. All members agree to the earth being round and spinning on its axle while traveling an elliptical route around the sun. This is about as far as commonality will get you. Almost anything beyond the most basic of understandings is apt to be controversial and draw loud protests out of some far corner of the union.

Tried, Tested, Failed

The alternative to rule by unanimity has also been tried and tested. It may be seen in action as Germany and France team up – with Italy and Spain in tow and the UK going half-heartedly along as a good sport – to bully the lesser powers into compliance with whatever has been decided for them. The perception, popular in some quarters, that Germany won the war forty odd years after its conclusion is not entirely devoid of reason. Armed with the purchasing power of 80 million hard-working and thrifty Germans, Mrs Angela Merkel is swinging her purse in ways that Margaret Thatcher couldn’t even have conceived of.

However, the dictates of Chancellor Merkel, the thinly-veiled threats of Prime Minister Cameron, and the indecisive mutterings of President Hollande do not contribute in the least to the unlocking of the EU’s phenomenal potential. Quite the contrary, the ongoing rivalries between uninspiring leaders; the never-ending stream of silly mandates thought-up by bored Brussels bureaucrats; the spineless resolutions of the Council of Ministers; and the refusal to allow for more openness, all conspire to deprive Europe of its true calling – to be a beacon of freedom, liberalism, reason and prosperity in an often dangerous world. The lighthouse serving that vital role previously is currently dimmed as it slays phantoms around the world by remote control or otherwise.

Matteo Renzi Appears on Scene

To keep to the analogy, a light is flickering down south, in Italy. That country’s youthful Prime Minister, Matteo Renzi, was the only head of government in the EU to receive an unequivocal mandate from voters to proceed with the European project. Prime Minister Renzi (39) ran on a refreshingly simple and straightforward platform: “If we want to save Europe, we must change Europe.”

On top of Mr Renzi’s wish list is a drastic move away from staid orthodox monetarist policies that keep economies gasping for liquidity, wreck societal cohesion, cause infrastructure to crumble, and hurt industry. “Europe must shift its focus to growth, employment and reform. Without significant investment in jobs and growth, any measure linked to austerity is bound to fail.”

In order to get his vision on the agenda, Prime Minister Renzi must first put his own country’s economy – the third largest in the Eurozone – on a track to sustained growth. He has unveiled comprehensive policy initiatives to rid Italy of its stifling bureaucracy, inject dynamism into the country’s vast network of state-run corporations, increase the competitiveness of the country through increased productivity and reduce clientelism in politics.

Gauging by the poll numbers, Mr Renzi has struck a chord. His moderately progressive Democratic Party trumped all others, claiming 40.8% of the popular vote in the May 25 election for the European Parliament (EP). The party now holds 31 seats in the 751-strong EP, displacing Germany’s Christian Democratic Union as the largest parliamentary caucus.

Delivery Time

After his stunning victory at the polls, it is time for Prime Minister Renzi to start delivering on his promises. His performance may not just benefit Italy; Mr Renzi’s success at home may well be a harbinger of a fresh start for Europe. A year shy of forty, Prime Minister Renzi is much aware that he is one of the first of his generation to lead a major European power. As such, Mr Renzi has been handed an opportunity to not just set a new agenda, but also to capture the changing zeitgeist and perhaps become the man Europe has been waiting for to lead the continent across the watershed.

This former mayor of Florence, who took Italy’s national political scene by storm earlier this year, is widely considered a future heavy-weight in European politics. Though the continent boasts a few other promising politicians eager to carry out the needed reforms – Swedish Prime Minister Fredrik Reinfeldt (48) and his Dutch counterpart Mark Rutte (47) come to mind – only Matteo Renzi is backed up by a large nation that explicitly mandated him to impose a new style of politics, not merely on Italy but, more importantly, on Europe.

Everything points to Mr Renzi being aware of the weight that now rests on his shoulders: “If mainstream politics becomes convinced that it has survived the danger and goes back to shut itself away again, the eurosceptics will come back with great strength. If we had not done an electoral campaign in the midst of the people, in the piazzas – hard-nosed and open-faced in a very strong way – we would have been carried away, as happened in other countries.”

A Battle as Usual

Meanwhile, now that the European elections are over and a new parliament has been installed in Strasbourg, the battle is on for the nomination of the successor of Mr José Manuel Barosso, president of the European Commission. As 28 heads of government jockey for position behind the two main candidates for the job, Brussels reverts to its politics-as-usual mode that most eligible voters couldn’t be bothered with a few weeks earlier.

Not a single one of the 28 heads of government engaged in the struggle for power – not excepting Matteo Renzi – has stood up to demand attention be paid to the issues at hand: The worrisome alienation of electorates throughout the union; the alarming levels of unemployment affecting young Europeans; the lack of a vision for the continent; the abject failure of the union’s European Neighbourhood Policy in the Ukraine; the dangers posed by an assertive and unpredictable Russia; and the patently unlawful and unfriendly activities of US spy agencies on EU territory. These are but some of the issues that may appeal to people in all EU countries.

Instead, EU leaders such as the president of the European Council Herman van Rompuy explain in fine detail why a directly elected commission president is an inconvenience. This “Mr Compromise” is his own worst enemy: Sorely lacking originality in both ideas and action, Mr Van Rompuy leaves no stone unturned to keep the current status quo intact and to ensure that Europe muddles along from one crisis to the next.

Renzi to the Rescue

In that sense, the UK’s dogged insistence on immediate change is to be appreciated. However, due to its long-standing tradition of scepticism towards the EU, Britain is unable to obtain any tangible results. The growing popularity of the blindly anti-European UK Independence Party further undermines Britain’s negotiating position.

Yet, Italy’s Matteo Renzi may come to the rescue. Should Mr Renzi decide, as he well may, to join forces with the UK, Sweden, The Netherlands and Denmark, his support may well tip the scales and make Mrs Merkel think twice before dictating the terms of surrender in the current tug-of-war over who’s to hold the 12th presidency of the European Commission.

Strengthened by his strong mandate, Mr Renzi could indeed make as much of a splash in Brussels as he did in Rome. For the sake of the union, and thus for the greatest effort at statecraft the world has ever seen, it is to be hoped that Italy’s young Prime Minister hears his calling.


United Kingdom - Splitting Rage Takes Root

[caption id="attachment_7995" align="alignright" width="225"] Edinburgh, Scotland[/caption]

For all admiration the British nation inspires, anglophiles and others slightly less impressed are wondering what is wrong with the United Kingdom and its people. It’s not just that Scotland mulls independence, but also that the remainder of the UK (rUK) is increasingly enamoured with the idea that turning its back to the continent is actually an idea worth entertaining.

The most recent Vox Populi opinion poll commissioned by The Times shows that 40% of respondents favour leaving the European Union, whereas 37% feel comfortable staying in. Though these numbers are likely to change should a referendum be actually held, the outcome of such an exercise will be a close call.

In the election for the European Parliament of last May, the UK Independence Party claimed 27.6% of the vote leaving both Labour and the Conservatives trailing far behind. Meanwhile up north in Scotland the Yes Campaign is slowly gaining momentum. After the most recent faux pas of Chancellor of the Exchequer George Osborne, who rather abruptly dismissed the idea of a currency union between an independent Scotland and rUK, the yes votes shot up to 43% of the total.

Running Gag

The problem with secession referenda is that they keep recurring. No is never the final answer. Secessionists just wait a decade or two before trying again. Sooner or later a yes vote will be produced which is, by its very definition, final.

In Québec they keep on trying to get out of Canada every twenty odd years, while Catalonia is pressing hard to get the Spanish government to agree to a first referendum regarding its independence. A no vote in Scotland will not stop secessionist from trying again in a couple of decades. This running gag will go on until, through sheer exhaustion or supreme annoyance, voters actually agree – if only momentarily – to the proposed split.

“The problem with secession referenda is that they keep recurring. No is never the final answer.”

In the case of Scotland the yes campaign is not likely to succeed this first time around. A devo-max solution whereby the Scots gain a larger degree of autonomy within the UK is a much more plausible outcome. First-Minister Alex Salmond does himself and his cause no favour by insisting that an independent Scotland retain the British Pound as its currency; keep its (non-existing) membership of the European Union; and preserve its access to superior BBC radio and television programming.

Disentangling Scotland from the UK is of course a Herculean task. However, given time and effort it can probably be done. A currency union is an entirely different matter. If some Scots seem dissatisfied with socially insensitive macro-economic policies set in London – and see this as one of many reasons for supporting an exit from the UK – why would an independent Scotland allow its monetary policy to be set by the Bank of England? That makes absolutely no sense whatsoever.

A Wee Bit Lost

The pro-independence movement led by First-Minister Salmond at times seems a wee bit lost and quite unaware of the way sovereign countries operate and the instruments they use to manage their domestic affairs. A proper currency is one of those essential instruments. If an independent Scotland truly wishes to manage its own affairs it simply cannot use the British Pound. Unless the First-Minister thinks that the Bank of England is actually going to take Scottish national realities and aspirations into consideration when setting its monetary policy.

An even thornier issue concerns Scotland’s status vis-à-vis the European Union. Again, the pro-independence camp seems motivated by wishful thinking. Though for all its libraries of rules and regulations, the European Union lacks a proper procedure to handle the split-up of a member state. However, common sense dictates that an independent Scotland may face an uphill battle when it tries to remain in the EU.

The key here is in the word “remain”. Scotland is most decidedly not a member of the European Union. The United Kingdom is. Scotland leaving does not terminate the UK as a sovereign entity. The United Kingdom will just be a little smaller. As such, the UK will not see its legal status in the EU changed.

On the Outside Looking In

Since an independent Scotland is to be a new sovereign state with all the attendant trappings, it will find itself outside the EU. This logical course of events and its outcome were repeatedly confirmed by European Commission President José Manuel Barroso on British television.

Mr Barroso did not make this stuff up as some of the more ardent proponents of Scottish independence suspect.

Thus Scotland will need to apply for EU membership from scratch. That should not pose a challenge. Having been formerly part of an EU member state, Scotland already abides by all the rules and regulations. But that’s only the administrative part of the story. For the exact same reason why the African Union refuses to award diplomatic recognition to break-away states, the European Union does not want to reward secessionists with instant membership status: It is likely to open the floodgates and cause severe disruption.

Catalonia is a case in point: Spain would rather not see one of its most prosperous regions depart. However, the Catalans will not think twice should Scotland manage to gain fast-track access to the EU as an independent state. What is to stop the Basques to follow suit? The northern regions of Italy may very well want to go at it separated from the more cumbersome south. Belgium will split at its language seam while France will have to deal with the Corsicans. The list of possible splits and divisions is well-neigh endless.

Another Split

Then, of course, the UK – with or without the preceding “r” – increasingly seems to fancy a split of its own, seriously entertaining notions of independence from the eurocrats in Brussels and their interfering ways. Gone are the days of the late 1960s when, deprived of its empire and say in the world, Great Britain couldn’t wait to gain access to the then- European Economic Community in order to bolster its flagging fortune.

Britain’s first attempt at joining the continent was blocked by a loud French “non” in 1963. President Charles de Gaulle suspected – not entirely without reason – the British of wanting to sabotage the community at the behest of their American overlords. A second attempt in 1967 failed as well due to French opposition. It was indeed American prodding that persuaded the British government to give it a third go in 1969 which resulted in the UK finally being admitted as a member in 1972.

“The freedom of movement EU citizens enjoy throughout the union, is one of four fundamental rights enshrined in the union’s founding treaty.”

Barely three years into its membership, some UK politicians already wanted the country to pull out. In 1975 a referendum was hastily organised to put the question to the electorate. However, slightly over 67% of voters wanted the UK to keep its EEC membership.

Even though British opposition to the European Union is reasonably argued, some countries – notably France and even Germany – are growing rather tired of the incessant complaints emanating from across the Channel. Most continental politicians have just about gotten over the antics and tirades of Margaret Thatcher who in 1980 lost her cool over the perceived largess of “Brussels” and threatened to withhold VAT payments, famously exclaiming in the presence of her stunned continental colleagues “I want my money back!”

Sick Man Shouting

It certainly made for good television and boosted Mrs Thatcher’s sagging popularity at home. However, her outburst came at a time when Britain was still very much the sick man of Europe – a country where only recently the lights had gone out during a coal miners’ strike and home to an economy burdened by monumental inefficiencies, a weak currency, and an unruly and unproductive workforce.

For all her handbag swinging and banging, Mrs Thatcher was considered but a British oddity in Brussels – someone best left to her own, rather eccentric, devices. Just as the UK had slipped silently back into the European fold along comes Prime-Minister David Cameron, threatening to overturn the apple cart yet again. It doesn’t take much imagination to see eyes rolling in Brussels.
Mr Cameron objects to a great many things of the EU: The union lacks transparency and democratic checks and balances; the union is also too large and cumbersome an administrative entity; it interferes too much and too heavy-handedly in the domestic affairs of member states; and it should place curbs on the freedom of movement of people. Mr Cameron’s list of complaints is depressingly long.

Interestingly enough for someone who complains about democratic shortcomings, Mr Cameron gets quite worked up over the fact that the next president of the European Commission hails from the parliamentary bloc that received the most votes in last May’s European elections. Mr Cameron just happens not to trust the guy which is why the voters’ express wishes should be ignored.

All Worked Up for Theatrics

Mr Cameron goes to Brussels all worked up to play for a home audience of people who have been whipped into as much of a frenzy as the British can possibly allow for by Mr Nigel Farage cand his happy band of eurosceptics, collectively known as the UK Independence Party (UKIP).

Mr Farage, quite the public speaker and with an uncanny knack for creating Kodak Moments, wants the UK to withdraw from the continent and erect all sorts of barriers in order to shield his beloved isle from wicked foreigners such as the untold hordes of Bulgarians and Romanians that are apparently overrunning the UK and causing havoc wherever they appear.

In fact, the hordes failed to materialise. When immigration restrictions were lifted for Bulgarians and Romanians as per EU directive earlier this year, nothing really happened. UKIP scaremongers were left Waiting for Godot. He never showed up.

The freedom of movement EU citizens enjoy throughout the union, is one of four fundamental rights enshrined in the union’s founding treaty. The others concern the freedom of capital transfers, the freedom of movement of goods and the freedom to establish businesses and provide services.

No Love Lost for Freedoms

Mr Farage and his followers do not like these freedoms one bit and would rather retreat to their side of the Channel. No matter that well over one million British subjects have made use of their freedoms to move elsewhere in the union and British corporations profit handsomely from having free and unfettered access to the EU’s internal market – the largest on the planet.

UKIP has so far been most explicit in its desire to take the UK out of the EU. However, it has failed to address any of the post-exit realities. Who will buy Made in Britain products? Will London survive as a hub of international finance? Who will provide work for the hundreds of thousands likely to lose their jobs as multinational corporations move their European head offices to the continent? How does little Britain expect to survive, let alone prosper, in a world dominated by large trading blocs that enjoy throwing their weight around? Where will pensioners go if they no longer enjoy the freedom to enjoy their retirement on Mediterranean beaches, with free healthcare thrown in for good measure by their amiable host countries?

Storm in a Teacup

Rather than leave the EU, the United Kingdom could possibly take a more constructive approach to any outstanding issues by bringing them to the negotiating table with the support of a few allies and friends. Belgium and The Netherlands are obvious choices and so are Denmark, Sweden and the Baltic states. Italy could also easily be brought aboard, thus forming a mighty coalition of like-minded nations that together may provide a counterweight to the now dominant interplay between Paris and Berlin.

Thankfully, all the discussion, talk and noise over Scotland going its own way and the UK being fed-up with the European Union may just be the proverbial storm in a teacup.

Plus ça change, plus c’est la même chose - the more things change, the more they stay the same.

In the end, the British being an exceptionally reasonable people and a nation of shopkeepers to boot, the storm now raging will probably leave little damage. Some reputations may get bruised, some toes may get stepped on – overall common sense will likely prevail. The alternative is too fraught with risk and danger to even seriously consider.