Abu Dhabi Aviation: Global Reach Powered by Operational Excellence

Abu Dhabi Aviation (ADA) provides aviation offshore oil support and other services worldwide and in particular for the Emirate of Abu Dhabi’s oil and gas production companies. The company also provides VVIP passenger services, search & rescue for the United Arab Emirates (UAE) and neighbouring borders, crop spraying, aerial construction, seismic support, firefighting in Europe, and third party maintenance support.

ADA is the largest commercial helicopter operator in the Middle East and North Africa and currently operates a fleet of 61 aircraft, 57 helicopters - comprising AgustaWestland AW139, AW109, Bell 412, Bell 212 models – and 4 Bombardier Dash-8 series turboprop transport aircraft. ADA employs a staff of over one thousand, including more than 150 pilots and 283 engineers/technicians for its operations.

Key elements in all the company’s decision-making and operational processes are its quality and safety management philosophy and systems. ADA has held the prestigious Helicopter Association International’s Platinum Award of Safety since 2006. The company exceeded one million helicopter flight hours with an enviable safety record – especially given the extremely high number of offshore takeoffs and landings: each offshore helicopter averages seven cycles per hour. This level of activity demands the highest caliber of flight and maintenance crews supported by a noteworthy quality assurance and training regime. ADA was selected as the Best Offshore Aviation Support Middle East by Capital Finance International.

ADA continues to build on its reputation as a specialist aircraft maintenance company servicing both helicopters and fixed wing aircraft, both in-house and as a significant provider of third party maintenance services. The company has fixed and rotary wing contracts for heavy maintenance and the modification of some of the region’s largest helicopter fleets, as well as a number of maintenance support contracts with the UAE armed forces.

In addition to its UAE civil aviation authorizations, ADA also holds international maintenance and quality certifications from prestigious regulatory authorities, such as the European Aviation Safety Authority 145 (EASA), Federal Aviation Administration of the United States of America (FAA), Presidency of Civil Aviation of Saudi Arabia (GACA), and the International Standards Organisation ISO 9001:2000. The company also secures maintenance authority from a number of regional aviation regulatory agencies when required.

As well as its important maintenance work, ADA continues to provide a number of humanitarian and support services on a year-round basis. These include aerial application missions, aid relief support in disaster areas, including medical evacuation when required. ADA worked with the Saudi Red Crescent Authority (SRCA) for six years, providing helicopter emergency medical services (HEMS) which covered Jeddah and Mecca throughout the year, including the Ramadan period and Hajj, deploying seven helicopters.

ADA has supported, and continues to support, on- and offshore oil production and mining exploration in Ethiopia, India, Brazil, Indonesia, Madagascar, and Papua New Guinea in addition to its ongoing operations in the wider Middle East region. Contract negotiations are well under way for expansion into the South American and Far Eastern markets. Additionally, ADA expects even more growth to come from the expansion of the company’s maintenance, repair, and overhaul activities.

The company has continued to expand its business into other markets as well. It is a 50% equity holder in a VVIP jet company, Royal Jet (www.royaljet.ae) which is the award-winning world’s largest commercial operator of Boeing Business Jets (BBJ). In addition to its BBJ fleet, Royal Jet operates a varied fleet of other business jet aircraft (Falcon / Challenger / Gulfstream), to suit the requirements of its elite clientele.

Another growth area for Abu Dhabi Aviation is the specialised heavy-jet air cargo market. In 2008, ADA acquired a medium-size company based in Abu Dhabi that specialises in global cargo operations, Maximus Air Cargo (www.maximusaircargo.ae). Since then ADA has obtained full ownership of the company. Amongst the many other advantages of having a fleet of heavy-jet transport aircraft available within the Abu Dhabi Aviation operating group, the acquisition also provides ADA with the ability to position its helicopters around the world.

Abu Dhabi Aviation has built its own simulator, which covers the training needs of all of its clients in the UAE and the wider MENA Region. Clients in the Middle East will be able use this training facility instead of going to Europe for training. To expand this business, Abu Dhabi Aviation has constructed a separate state-of-the-art building to house and operate its flight simulator and will develop this infrastructure further with a view to becoming an international hub for helicopter training. This would help build a different platform, type ratings on different aircraft, and allow manufacturers to use the simulator and enable them to cater to their clients.

Some of the elements comprising ADA’s success flow from its corporate vision: one team propelling ADA safely and profitably into the future. The company values include safety and quality, customer focus, teamwork, integrity, and ethics. These guiding values, which the management and employees developed together, enable the company to capitalise upon its strengths.

Group total assets – $1,306m.

Management depth – Forty years corporate experience and diverse executive and management skills.

People depth – An international staff supported by sophisticated training regimes.

Systems depth – Mature safety and quality systems, mature maintenance management systems, mature operational management systems, and mature logistics and spares systems.

These and many other factors contribute to providing ADA’s valued customers and partners with the security of an established and growing organisation that is continuously reinventing itself to meet the demands of the market and its own corporate objectives. i


Maserati on Value Creation: Trident Badge and a Heady Rumble Mean Business, On the Road and In the Showroom

How many syllables would you like with your supercar? One? Porsche will do nicely. Two? Bentley, please. Three? Ferrari, of course. Four? Listen for the growl...

When a 560 bhp 4.7-litre V8 engine coughs and rumbles to life, forget about syllables – and words. There’s nothing to compare to the living, breathing menace of a true performance vehicle, and the Maserati soundtrack is a feral and heady throb. This beast means business, even if you don’t. The three-pronged trident on the radiator grille will prod anyone who hasn’t yet twigged. It’s a Maserati, and it doesn’t mess around.

But suave has been seamlessly blended into the rock-hard Maserati mix, a velvet glove for the iron fist. “The absolute opposite of ordinary,” is how Maserati bills its desirable Ghibli, an almost humble member of the elite wolf pack. With a five-strong model range and the mission statement to "build ultra-luxury performance automobiles with timeless Italian style”, the Modena-based manufacturer is no stranger to success. In May 2014, Maserati sold a record of over 3,000 cars in one month, and nothing has tarnished the appeal in 2018.

[caption id="attachment_13077" align="aligncenter" width="1036"] Maserati Levante MY19 GranLusso & GranSport[/caption]

CFI.co caught up with Cecco Piergiorgio, CEO of Maserati, Switzerland, at the recent Geneva Motor Show. We asked him just what it is that sets Maserati apart from its competition in Switzerland – and elsewhere, of course.

“Today, nobody can afford to build a car that doesn't work well,” said Piergiorgio. “Switzerland is a country apart, it's not like Italy or Spain. Switzerland premium has become volume, that's why I say if you really want to have something special, you have to get a distance between you and (other luxury brands) because everybody is driving Mercedes or Audi in Switzerland.”

"Suave has been seamlessly blended into the rock-hard Maserati mix, a velvet glove for the iron fist. 'The absolute opposite of ordinary.'"

Maserati is determined to retain its place as an affordable luxury. “That's our play, we stay there and we build only 55,000 cars,” says Piergiargio, “and with these 55,000 cars worldwide we are very exclusive. The production worldwide of cars is over 80m.” That 55,000 figure represents quite a hike; back in 2011, Maserati made just 6,000 vehicles.

“We changed our position because before we were really only luxury… but the exclusivity stays with the brand.”

Five models comprise the Maserati stable: the Ghibli, the Levante SUV, the Quattroporte luxury “race-bred” sedan, the two-door GranTurismo and the GranCabrio convertible; there are various engines and states of tune, none of them wallflowers.

When it comes to matching internal technology with outer beauty, Piergiorgio is confident. “We are on the same level as our colleagues from Germany, but we are proposing something special because their cars have become very popular.
“Our competitor for (the SUV sector) is BMW with the X5 or Audi with Q5 and Q7, so it's a step further.

The company has innovative customer care and services, but “our structures are very lean”.

The big advantage of that stripped-back structure is that any problem – with a dealership, with customer care, or a technical issue – that will quickly be signaled to Piergiorgio. “If I see the problem can be only solved (in a certain way), I solve it and it's done. So we are very lean, but the decisions are taken very quickly.”

Piergiorgio admits that innovation has taken a bit of a backseat because of the company’s modest size. “So we are maybe not very innovating because we don't have the people to do this, but we are very straight,” he admits. “We go to the point and then you have the chance to speak to me and then I can decide – me alone – because Switzerland is alone.”

Passion is undiluted in the process, and a small team breeds trust while holding the torch high and proud. “If you work for the automotive branch, you have to be a fan. There are only fans working for me, we are seven fans, seven friends.”

But Peirgiorgio is a pragmatist, who used to work as a marketing director for BMW Switzerland. “I was fan then of BMW, and before that I was fan of Ford – so it's a matter of identification.” So the most important things are friendship, trust and... ? “Passion, passion for the brand.”

How would he describe his management style? “We don't have the time to control each other so everybody works for everybody else. If we have to help each other, we help, and of course and we're very confident that the other guy's doing the maximum.

“That's why I need people with passion. I'm working sometimes on Sunday evening at ten o'clock and I can see that my colleagues are online too and then it's a bit of, ‘Go ahead’. We’re in the same boat. And only like this are we able to manage this volume and with so few personnel.”

What about technological advances? “We have always been, and we will always be, followers,” admits Piergiorgio, “because such a little brand cannot afford to risk, invent something new and develop.

“We are adopters, we buy as soon as we see, ‘OK, it works’. Today we have in our cars everything you need… We leave the Germans to make special things (that) nobody really needs. I mean an infrared night camera telling you, ‘Take care, a sheep is coming’? For them, maybe it's the only way to find something special.

“For us, we propose a driver's car with all the features you need to drive, with highway assist and everything, but we don't exaggerate.”

Maserati, like most manufacturers, is looking ahead to the electric revolution. “As soon as we see a positive business case – and this will be maybe in 2012 – we will come up with the technology (we want). We don't have to reinvent the wheel so we will buy something which is suitable to us, and sporty, and then we will (decide). But just now we see the others are struggling and losing money with these cars that they can't really sell. They propose it, but nobody buys it.”

New CO2 emissions rules mean that eventually, electricity may provide the “go” behind the famous trident badge. But until then, listen to the beat of that mighty engine, and pay heed to the message.


UNCTAD's World Investment Forum: Looking for a Way Out of the Lucas Paradox

[caption id="attachment_13104" align="alignright" width="300"] Geneva: United Nations[/caption]

Any and all talk about a determined, sustained, and final push to eradicate poverty from the face of the earth revolves around a single question, one often lost in the peripheric chatter: How best to allocate the world’s savings?

The answer is deceptively straightforward and involves doing the right thing by the investors who own or manage those savings. What this entails is up for discussion at the 10th annual World Investment Forum (WIF) set to take place from October 22 to 26 at the Palais des Nations in Geneva, the United Nations’ European headquarters.

The event, organised by the United Nations Conference on Trade and Development (UNCTAD) brings together all stakeholders in the global development value chain, from steely-eyed fund managers to starry-eyed idealists, a vast and diverse universe held together by experienced policy advisors and assorted experts in various fields related to growing something out of (nearly) nothing, otherwise known as development economics.

Since the first WIF took place in 2008, the world has changed: it has suffered a Long Recession, entered an equally long expansion phase, and managed to successfully implement an ambitious set of Millennium Development Goals. Just as the Asian financial crisis of the 1990s did, the Long Recession – sparked in the United States but mainly, though not exclusively, focused on Europe – saw the accumulation of a savings glut created by policies to hedge against future cash crunches. In times of crisis, creditor nations usually fare much better than those in the red.

Alternatives to Aid

Perhaps even more importantly, the global development agenda as compiled and driven by the UN has come to recognise that dispensing aid – while certainly useful and welcome – is not the most effective way to end world poverty. Aid, even at today’s near-record volumes, offers incidental relief and seldom, if ever, sets the recipient nation on the path of sustained growth.

The reformulated mantra of the global development agenda now reserves a leading role for the formerly eschewed private sector whose untold billions must be mobilised for, and channelled towards, those countries – now called markets in tune with the new philosophy –lagging in development or mired in poverty.

The updated mindset, already reflected at last year’s WIF in Doha, includes the ditching of most appeals to conscience. With a few exceptions, investors are seldom moved by humanitarian reasons. In Doha, pragmatism prevailed over woolliness. UNCTAD, formerly a bastion of leftish progressive thought, has become a UN agency that leverages knowledge and experience to make a clear-cut business case for development.

"The eradication of world poverty can be made into a profitable pursuit with the potential to add untold trillions to the bottom line of private enterprise as millions of formerly marginalised people join the market as consumers."

UNCTAD’s message to the private sector is simplicity itself, and rather brilliant: The eradication of world poverty can be made into a profitable pursuit with the potential to add untold trillions to the bottom line of private enterprise as millions of formerly marginalised people join the market as consumers.

UNCTAD may, in fact, owe a debt of gratitude to China. Without much assistance from a sceptical outside world, the People’s Republic demonstrated how a desperately poor nation that suffered a string of unspeakable tragedies can reshape and reinvent itself in a single generation.

Lessons from China

When, in the late-1970s, the reformist Deng Xiaoping emerged from the Cultural Revolution and outmanoeuvred his opponents to assume the de facto leadership of the country, China’s per capita income (PPP) hovered around the $200 dollar mark. Last year, China boasted a per capita income in excess of $15,500. The country is now well on its way to progress from middle income to high income status.

The lesson from China is that, politics aside, sensible economic policies can make or break an economy. For all its open-door qualities, that lesson sparked a global shift in development thinking: countries must “own” their policies – as opposed to being told what to do – and encouraged to adopt a workable model geared to tangible results. This is not quite the contradiction it would seem.

The morally-pure approach to development previously furthered – good governance for its own sake and that of the well-being of the nation – does not always yield the expected results. Many rulers, even those democratically elected, often say lofty things to please their audience, but such expressions of good intent may hide a different and somewhat less enlightened agenda that takes its cue from purely personal and/or political considerations.

The question before the WIF, as it unfolds in Geneva, is how to convince the world’s least developed countries (LDCs) which policies to adopt, implement, and adhere to for private investors to take an interest – and release the funds required to accelerate growth and development. Talk about the socially equitable distribution of the fruits of future development is premature. The pie comes before its carving up.

The Lucas Paradox

Estimates of the actual size of the much-reported global savings glut vary wildly and are probably all wrong: it is not a metric easily captured. Some argue there is no such thing, just a vast pile of money parked in low-yield and possibly illiquid instruments. A considerable pool of funds has been looking for yield in all the wrong places. This constitutes the essence of the Lucas Paradox, first detected, analysed, and described in 1990 by Robert Lucas of the University of Chicago (winner of the 1995 Nobel Memorial Prize in Economic Sciences).

Lucas formulated his paradox after observing that the neoclassical model failed to explain the lack of significant capital flows to countries where the marginal product of capital is (much) higher than elsewhere. A well-functioning market should, he argued, direct excess savings to where the return is highest. At the time, the return on invested capital in India could be up to 60 times higher than in the United States, no appreciable volumes of capital were moving into that country.

Since its first edition 10 years ago, the WIF has been trying to resolve this conundrum, central to the funding of the Sustainable Development Goals (SDGs). Emerging, pioneering, and LDC markets usually offer fantastic returns to investors, yet Mr and Mrs Moneybags still fail to move, and show precious few signs of their willingness to change policies and procedures for the allocation of resources they command.

Whose Money and Where Is It?

Though the savings glut is hard to pin down or quantify, its existence – much like the mass of the elusive Higgs Boson particle – may be inferred from observable effects. Take the recent transfer of Brazilian soccer player Neymar from FC Barcelona to Paris Saint-Germain for a record-setting sum of €222m.

Bankrolled by owner Qatar Sports Investments, the club can hardly expect a profit out of the Brazilian star player, even if its stadium fills to capacity for every game and Neymar shoots his team to the finals of the Champions League. But profit is not so much the point here; it is about projecting a positive image of Qatar. Qataris set to return to a record-setting current account surplus as its revenues from natural gas prices increase along with the recovery of world oil prices.

The story is not much different across the English Channel, where investors from countries that enjoy significant surpluses on their current accounts have been buying up nearly all assets they can get their hands on, regardless of price. Here, the enticement – until Brexit – was political stability, sound government, and the rule of law. The same class of investors have also bought some $6tn worth of US treasury bonds since the late 1990s. In Europe, the demand for safe investment havens drove the interest rate on German and Dutch government bonds into negative territory, allowing both countries to actually get paid for debt, while underscoring the peculiarities of the Lucas Paradox.

Contrary to popular belief, the global current account metric is not necessarily a zero-sum proposition. Over the long run, surpluses and deficits net out to exactly zero as per the force of logic – if one country “borrows” through its c/a deficit, then another one must be willing to “lend” from its surplus. Things look rather different on a shorter timescale: countries can – and do – keep part of their surplus in reserve. The International Monetary Fund has found that since about 2002, the world has consistently run a current account surplus, which last year amount to an estimated $300bn.

This money did not flow into someone’s capital account. The savings glut started to grow towards the end of the 1990s as the emerging market economies of Asia sought to increase their resilience to external shocks by paying-off debts and increasing domestic saving rates in a form of delayed gratification applied on a national scale. China initiated the trend by accumulating vast current account surpluses and stashing a significant part of the proceeds in the country’s foreign exchange reserve – which in July 2018 amounted to almost $3.2tn. Observing differences in scale, most of the former Asian Tigers, tripped but never down and out, followed suit.

Benefiting rather handsomely from the euro’s design flaws, Germany took over from China as the world’s current account surplus champion in 2011. The country’s severely undervalued exports inundated a world amazed by relatively cheap marvels of Teutonic engineering. In Europe, tilted demographics play an outsized role in the creation of the savings glut as people nearing the retirement age save a larger part of their earnings compared to young people just starting out in life. In a continent where young people are scarce, this makes a difference.

The worryingly large c/a deficits sustained in the Anglophone world are predominantly a sign of the relative health of its two major economies. Both the US and the UK offer attractive business environments that attracts more capital than is needed, resulting in asset price bubbles.

Eurozone member states – led by Germany – are also aware of the inherent weaknesses of their shared currency, which is still a work in progress. To avoid a repeat of the 2008/9 financial troubles, eurozone members are encouraged to build their reserves and pursue solid c/a surpluses.

There is, for now, no scenario that includes a drawdown of the global savings glut. For Europe, welcoming more immigrants – boosting the ranks of the young – might do the trick, but the option remains a political no-go area. Perhaps, the upcoming wave of retirees in Europe and, to a lesser extent, North America may help – a little. In retirement, people draw on their savings instead of adding to them.

The only sure-fire way of dipping into the savings glut is for surplus countries to spur consumer demand via the direct spending of their national incomes and reserves as opposed to quantitative easing and other artificial constructs. Increasing consumption in surplus countries has the added advantage of helping along emerging, pioneer, and other ambitious markets since all that added demand must somehow be met and will lead to a new commodity super-cycle.

Which brings us back to the beginning: countries stand the best chance of attaining the rapid growth needed to eradicate poverty when their livelihoods improve – either because they obtain better prices for their resources or because sensible policies attract investors. The latter part is well within the purview of the World Investment Forum, as long as its participants first manage to solve the Lucas Paradox.

The key to that one is good governance. The search for shortcuts has, so far, yielded no other approach.

That reluctance in the face of opportunity may yet subside. A significant number of LDCs have started to recognise the importance of good governance, enticed, perhaps, by the riches to be tapped into and helped along by the prodding of restless populations that have discovered – and embraced – online platforms.

Particularly in Africa, young people are no longer willing to keep silent. They boldly take their governments to task over the lack of opportunities and underdevelopment. Knowing full-well what the modern world has to offer, these masses will not be huddled for much longer in poverty. The amount of talent available thanks to improved education – one of the MDGs almost realised – is staggering and constitutes an asset that investors will not be able to ignore for much longer.

The Time is Now

For now, however, they do: UNCTAD’s own statistics show a 21% year-on-year decline in foreign direct investment (FDI) in Africa – shrinking to $42bn in 2017. Morocco proved the exception thanks to sizeable investments in car-assembly plants. On the other end of the scale was Southern Africa, which last year registered a 66% slump in FDI to a paltry $3.8bn. Happily, UNCTAD Director James Zhan, who heads the organisation’s Investment and Enterprise Division, expects FDI to rebound this year. “The beginnings of a commodity price recovery, as well as advances in interregional cooperation through the signing of the African Continental Free Trade Area agreement, could encourage stronger FDI flows to Africa in 2018, provided the global policy environment remains supportive,” he said.

Volumes are still too low to make a marked difference in the rate of growth. Home to about 15% of the world’s population, Africa attracts only about 5% of global FDI flows. According to UNDP chief economist Ayodele Odusola, the best moment to invest in Africa is now: “Africa is the most profitable region in the world,” he says. “Between 2006 and 2011, Africa had the highest rate of return on inflows of foreign direct investment – 11.4%. This compared to 9.1% in Asia and 8.9% in Latin America and the Caribbean. The global figure is 7.1%.”

But while the higher rate of return on capital may mitigate risk, the gap with risk-free yield obtained elsewhere is slowly closing as interest rates in North America and Europe are bound to rise, and fund managers are under less pressure to look for yield in faraway places.


An Inspiring Trajectory

Amina J Mohammed has been called one of the world’s greatest leaders (Fortune magazine), Diplomat of the Year (Foreign Policy magazine), and Climate Warrior (Vogue).

The UN Social 500 praised her for her transparency. On social media she shares her experiences, workload, and accomplishments in daily tweets and posts. CFI.co would like to add its name to that roll by commending the UN deputy secretary-general on the unwavering determination that marks her personal life and professional trajectory.

Hers is an inspiring tale of a personal and professional quest that starts in North-eastern Nigeria and continues today in New York. He father, a civil servant and veterinarian, sent Amina to a boarding school in the UK where her mother, a registered nurse, already lived. Later, after leaving school, she worked in retail, sold insurance policies, helped in a nursing home, and managed a restaurant.

Her CV also includes a stint in Italy, studying hospitality management. Returning to Nigeria, Mohammed joined an architecture and constructing company. She learned the business on the fly, almost by osmosis, for 11 years, before setting up her own engineering company.

Convinced that ambition trumps talent, Amina J Mohammed has never allowed her career to be side-tracked. Nor did she waver in her commitment or rest on the laurels gathered along the way. The eldest of five daughters, she knows what it takes to run a household as well. It is, perhaps, not that different from running an, at times, unruly and quibbling group of nations.

"We don’t always communicate very well the effect that we have on the ground, and the lives that we change. That needs to be done better and, once we have the changes, we will see the United States doing probably even more."

Before joining the United Nations, Mohammed had already served three Nigerian presidents in various capacities. In 2005, she was entrusted with the management of the state funds after Nigeria became eligible for inclusion in the debt-relief programme of the Paris Club of major creditor countries, which ultimately shaved some $30bn off the country’s debt stock. Mohammed was in charge of the rerouting of funds towards initiatives in support of the millennium development goals (MDGs).

For six years, she acted as senior special assistant to Nigeria’s president for all matters relating to the MDGs. Towards the end of 2015, she assumed office as Minister of Environment in the cabinet of President Muhammadu Buhari. At the time, she was already helping then-UN secretary-general Ban Ki-moon with the planning of a set of post-millennium development goals. She was instrumental in formulating and selecting the 17 Sustainable Development Goals (SDGs).

At the UN, Mohammed stresses the importance of shared responsibility as a tool to change attitudes, reach agreement, and forge unity. Her job hasn’t become any easier as the current US administration continues to question the UN’s usefulness, direction, and budget. At the insistence of the American ambassador to the UN, Nikki R Haley, the organisation saw its $5.7bn budget cut by almost $300m this year.

The US contributes about $1.2bn towards the annual UN budget. At the instigation of Washington, the $6.8bn budget for UN peacekeeping operations was cut by $500m for the 2018-2019 exercise. Earlier, UN Secretary-General António Guterres agreed that his organisation does stand in need of some moderate pruning to improve efficiency.

Mohammed remains is eager to engage with the sceptical US administration to ease its concerns and show the value of the UN’s work and accomplishments. In an interview with The Guardian she said: “We don’t always communicate very well the effect that we have on the ground, and the lives that we change. That needs to be done better and, once we have the changes, we will see the United States doing probably even more.”

Outside the UN, Mohammed has one rather big ambition: fixing her own country. Her leitmotiv – “there’s always a job to be done” – will see Amina J Mohammed eventually return to Nigeria, where she may well rack up a long list of additional achievements.

Mohammed is far from done. In fact, she may only just have started.


Amina J Mohammed: Energy for Sustainable Goals

[caption id="attachment_13098" align="alignright" width="300"] Deputy Secretary-General: Amina J Mohammed[/caption]

If, by way of magic, cynicism and indifference could be banned, the world would undoubtedly be a much happier place.

For United Nations Deputy Secretary-General Amina J Mohammed (56) those two deplorable traits represent the principal obstacles to meeting the sustainable development goals (SDGs) which, incidentally, she helped boil down to just 17 from the 500 or so originally submitted. “Cynicism is such a killer,” she says. “I have no patience at all with people who start out by saying that things can’t be done.”

Mohammed is used to getting things done, such as securing the funding for a 250-bed hospital she helped design in Gombe, the city in north-eastern Nigeria, where she was born, when she worked at an architectural design bureau. Adding willpower to perseverance, she managed to get the facility built. It has since become her signatory style: where there is a will, there is bound to be a way – and she will find it. That philosophy drove Amina J Mohammed to the top.

Ahead of the Curve

To prove the point, in June she launched a valuable policy compendium that synthesises almost 15 years’ of practical experience and research by UNCTAD – the United Nations Conference on Trade and Development. The document – Achieving The Sustainable Development Goals (SDGs) In The Least Developed Countries (LDCs) – offers a detailed roadmap of concrete steps and actions to achieve specific development goals.

Speaking from Geneva, Mohammed welcomed the publication’s focus on LDCs: “UNCTAD has always been ahead of the curve, producing cutting-edge policy options based on sound analytical research.” The compendium identifies a number of policy instruments in different areas that can accelerate progress, boost growth, and support the drive to eradicate poverty. The document’s suggestions dovetail with the requirements of international partners, such as donor countries and private investors.

According to Mohammed, LDCs are pressed for time, with some of the world’s fastest-growing populations and a slowing rate of economic growth. For the poorest countries to attain the sustainable development goals, their economies need to expand by an average of 7% annually. Since 2015, growth rates have slumped to barely 5% per annum.

Mohammed emphasises that achieving the SDGs is but a mile-marker and most certainly not the end of the road. Countries that graduate from LDC status need to have solid productive capacity which enables them to keep the momentum going. Some SDG targets were specifically included to spark an ongoing process of structural transformation that builds on, and gradually expands, previous accomplishments.

The ‘Golden Thread’

For Mohammed, the UN Sustainable Development Goals represent not 17 separate lines to cross but an intricate web of mutually supportive markers that together ensure balanced growth over a long period, to benefit all sectors of society. Clean and affordable energy is another pillar of the SDGs. Mohammed calls it the “golden thread” that holds everything together and propels countries in the right direction.

At the annual meeting of the UNCTAD governing body in June, Mohammed noted that 14% of the world’s population live without access to electricity. In Africa, it is estimated that, even today, nine out of 10 children attend primary schools that are off-grid. “Energy is key to most of the sustainable developments goals, particularly those that concern health, education, gender equality, and the environment,” she says, remarking that electrical power also improves access to clean water and refrigeration.

In its 2017 report on the 47 LDC-countries, UNCTAD states that economic advancement hinges on the generation of clean and renewable energy. The conference’s secretary-general Mukhisa Kituyi warned in Geneva that planners must address the future power needs of private enterprise as well: “Though most electrification initiatives have prioritised households, the requirements of industry should not be forgotten.

“Energy only becomes a game changer when it powers economic productivity and competitiveness.”

In the three years since the 2030 Agenda for Sustainable Development was adopted, the United Nations has found that a business-as-usual approach does not suffice. “It just won’t work,” says Mohammed: “We need action. In fact, we need bold action to build an inclusive, resilient, and sustainable future that leaves no-one behind.” At the 2018 Economic and Social Council (ECOSOC) Partnership Forum – an annual event that promotes inclusive societies and innovative business models – the UN deputy secretary-general pleaded for more involvement from the private sector, calling business an indispensable partner in the quest to reduce inequality.

A $12tn Opportunity

Mohammed called on the forum’s participants to strive for better engagement with the private sector: “Welcoming policies and a well-functioning dialogue between all stakeholders can and will encourage companies to conduct business in a way that works for both the global good and their bottom line.” Mohammed suggested participants significantly up-scale their efforts to cement partnerships that can generate results felt in the furthest communities and villages.

ECOSOC president Marie Chatardová emphasised that inclusive development models which fight inequality are critical to achieving the SDGs. According to Chatardová, societies also need to build their resilience to economic downturns, natural disasters, and other internal or external shocks. Pointing to a research paper compiled and published by the Business and Sustainable Development Commission, Chatardová argued that the 17 SDGs represent economic opportunities worth a combined $12tn and may create 380 million new jobs by 2030. “Most companies are already aware that investing in sustainable development is a most profitable proposition.”

Mohammed fully agrees, but offers an addendum: “There is plenty of talk about good governance in the corporate world. We now need to find the courage to apply those same principles to governments.”

Recognising that excellence in governance is essential to securing outside investment, Mohammed has repeatedly expressed her concern that LDCs may yet lose out when the global economic climate worsens – as it is bound to do. She argues that countries need to seize the moment as the current, fairly solid state of the global economy ensures the availability of a large pool of money from which it is possible to source, with the right mix of policies, considerable funds.

Enabling Environment

Mohammed envisions the creation of a global enabling environment to support long-term development policies and initiatives. One of the main obstacles the deputy secretary-general identified relates to the short-term outlook of most large and publicly-listed corporations which need to produce stellar results each quarter to keep shareholders happy. “Short-termism is a persistent threat to the successful eradication of poverty,” she says. Most CEOs of large companies who can, and want to, make a difference have indicated that they are often reluctant to invest in projects which only become profitable over the longer term. “We understand this reluctance, but must act to remove these pain points in order to unlock investments on a meaningful scale.”

Mohammed calls on both governments and the private sector to come up with innovative solutions to current financing challenges. She convincingly argues that there is enough capital available globally to end poverty, but its allocation falters, resulting in unmet funding needs. “We need the think outside the box about ways to catalyse the growing interest and potential of private capital for the implementation of SDGs.” Mohammed is supportive of Secretary-General António Guterres’ efforts to reshape the UN’s development framework to award a much greater role to private investors, and broaden the agenda by pursuing social inclusiveness and by engagement with the financial community.

Mohammed expects the move to improve both the coherence and effectiveness of global development initiatives such as the SDGs. “The United Nations will be at the forefront of this trend by brokering partnerships, leveraging resources, and building capacity.” Trouble, Mohammed realises full well, often rears its head as the result of environmental degradation or other major shocks, leading her to surmise that development issues have a great many vectors that all need to be considered and fine-tuned.

Disappearance of a Lake

The deputy secretary general cites the collapsing ecosystem of Lake Chad, which has shrunk by an estimated 90%, as an example of how easily things can go wrong – and how hard it is for a disadvantaged country to formulate a set of adequate policy responses. “The near-disappearance of Lake Chad has negatively impacted regional food security and increases the prevalence of water-borne diseases,” she said. “It also causes poverty by taking away farmers’ livelihoods. The disaster has a gender dimension as well, since women suffer the greatest losses and school enrolment of girls declines. Taken together, all these factors contribute towards greater insecurity throughout the region which is already affected by religious extremism.”
In the case of Chad, the UN works hard to help the country to increase its resilience to shocks and mitigate the consequences of the environmental tragedy. Mohammed points to Lake Chad as an example of the strife and societal stress induced by the poor management of water resources. Water wars may become a reality as stressed ecosystems give way and people are left helpless.

Whereas the United Nations receives ample praise for pinpointing and thoroughly analysing problems and their causes, its proposed solutions are often slightly less well received. The impression prevails that the UN is a body of eagerly talking heads that crisscrosses the world, travelling from event to event preaching to the converted, proffering grand solutions to complex issues that are grounded in idealism rather than realism.

Not so, according to Amina J Mohammed, though she readily agrees that, to outside observers, looks may be deceiving. She instantly points to the Millennium Development Goals (MDGs) which, she argues, may constitute the most successful anti-poverty drive in history. Formulated at the 2000 Millennium Summit, and fully agreed upon by 191 UN member States and 22 multilateral organisations, the eight goals were given an implementation period of 15 years. Though the end-result was not evenly spread amongst the target countries, MDGs did manage to slash the number of people living in absolute poverty – defined as having $1.25 or less per day to live on – by over half: from 1.9 billion to 836 million (MDG 1).

Primary school enrolment numbers have risen sharply while gender parity improved noticeably (MDGs 2 and 3). Both child and maternal mortality rates have declined significantly too, though not as much as was hoped for (MDGs 4 and 5). The halting and reversion of the spread of HIV/Aids has failed, though the number of new infections did decline by 40% (MDG 6). Between 1990 and 2015, an estimated 2.6 billion people gained access to clean drinking water (MDG 7) while the volume of development aid from industrialised donor countries increased by two-thirds in real terms, reaching a record-high of almost $135bn in 2013 (MDG 8).

Owning the Process

The 17 sustainable development goals being implemented provide a framework for continued development. Mohammed understands, better than most, that such far-reaching objectives can only be reached when all stakeholders agree to co-ordinate their policies and actions. She never fails to emphasise that the countries which stand to benefit must “own” the process. The time when others dictate the terms of development is gone. As with any co-operative effort, much talking is needed before gears get shifted and speed gathers.

Amina J Mohammed displays a truly remarkable talent for bringing people together. She is convincing in her call to action, and inspiring when it comes to making a difference.


Lord Waverley: Brexit and Trade - The UK Must Now Be Flexible, Opportunistic & Respectfully Machiavellian

The Trade Bill before Parliament is a necessary piece in the BREXIT jigsaw. A question to start with, however, is this: will the bill survive the environment in which it must serve, or will it require amendment once the conditions under which the United Kingdom leaves the European Union are known?

It would appear that the architects of the BREXIT vision did not anticipate the complexity of the negotiations, from the unfolding contagion in important emerging markets to trade tariffs distorting globalisation – all of which could become centre-stage challenges. Those are insecure foundations on which to build a secure future.

Substantive points have been made about the ability to renegotiate trade agreements; nevertheless, the UK Government must shoulder the consequences of its policies and actions. History will judge whether the architects of BREXIT made a fundamental error of judgment by looking to the future with blinkered vision, along with a negotiating flaw of not being sensitive to the unsurprising strength of opinion across the Channel that could possibly haunt us further. Time will tell, and shortly at that. At this late stage we must be flexible, opportunistic and respectfully Machiavellian. All that said, we are where we are – but just where are we? We must either wrap-up what was started or change tack, decisively searching for an assured future. As Cicero said, “Where there’s life, there’s hope”; in that we may take some comfort.

There are many aspects to the Trade Bill, but I focus my central remarks on a cornerstone of the economy: financial services. The bill represents a building block, as it should. It is inconceivable that the EU 27 would allow as important a sector as financial services to remain fully offshore. Brexit may indeed mean Brexit, but Brexit also means consequences. Post-Brexit pressure will undoubtedly grow on the City of London, and other financial centres around the United Kingdom. The European Central Bank is already implementing its location to the continent in mandatory stages.

"I absolutely recognise the importance of trade, which allows people to work their way out of poverty, and supports job creation, value-addition and clean industrialisation."

The combination of principle and the possibility of rich pickings will place further sustained pressure on the financial services sector. The list of annual rankings of international financial centres has been published. An eye must be kept on how London fares, now and in subsequent years, having mostly maintained its position at number one until now.

The financial services sector is on the move, and it is necessary to be diligent and keep abreast of unfolding events. The likes of Frankfurt, Paris, Toronto, Tokyo, Seoul, Astana and Moscow, along with others, are the founding members of the newly established World Alliance of International Financial Centres, to be headquartered in Frankfurt and incorporated under Belgian law. Currently, London has observer status only. The UK Minister responsible should become acquainted with this alliance.

Then there is China’s increasing influence in Europe, and the world at large. As in times past when the pound was superseded by the dollar, so a potential parallel yuan could become a base currency for the changing face of global geo-economics, which centres such as Ankara, Tehran and others might find increasingly appealing. China’s impact is growing. It is delivering west-bound the infrastructure that supports economic growth and the evolution of the old Silk Road. In the first five years since the Belt And Road initiative was announced,103 countries worldwide have signed 118 agreements with China.

The UK’s expertise is considered to be well-placed, with useful experience in supporting and promoting that infrastructure development. The UK has the experience and proven ability in supporting and promoting infrastructure development. Together we can advance east-bound, thus increasing trade and connectivity, improving quality of life and reducing the cost of living.

But corporate partnership in the spirit of local content is fundamental, and I would urge UK players to seek out co-operation agreements with local players of merit, wherever the trillions of dollars are likely to be invested. Many countries and regions along the Belt And Road have considered integrating the initiative with their own development programmes – including Mongolia’s Prairie Road, Kazakhstan’s Nurly Zhol, and the Eurasian Economic Union –with Pakistan having high expectations for the EU’s Juncker investment plan. The Belt And Road initiative has been incorporated into the documents of many international mechanisms including the UN, the G20 and the Asia-Pacific Economic Cooperation.

The US-China trade war is not close to being resolved and its impact is already being experienced in Asia, particularly in those countries that have good trade relations with China, such as South Korea and Singapore. UK trade with these countries has had an upward trend in recent years and is likely to be impacted as these countries get caught in the crossfire. China has warned that it will take countermeasures if the United States escalates the trade war. The United Kingdom needs to take a holistic approach.

Technological advancement makes access to any financial centre easy. This is a good time to look to the future, and fully understand and respect the importance of partnerships. As Amina Turgulova, head of global markets at the Astana International Financial Centre in Kazakhstan has reminded me, while London will always be an attractive destination with many opportunities, there must be a clear and innovative development plan based on partnership. It follows that it is imperative that we build strategic links with other capital markets. Linkages and partnerships are paramount. The London Stock Exchange Group is working on links with the Shanghai Stock Exchange, and the London Metal Exchange belongs to the Hong Kong Exchange.

There is a real necessity for a regulatory framework to adjust to changes; this will distinguish the leading financial centres from the rest. No less a body than TheCityUK is calling for the UK to make the most of the once-in-a-generation opportunity to recalibrate and repurpose its trade and investment policy to benefit the wider economy once it leaves the EU. I commend its thinking to Government and refer the Minister and her team to its report of January 2017, entitled Future UK Trade And Investment Policy. TheCityUK’s latest report of August 30, 2018, entitled A UK-EU Association Agreement And Future UK Free Trade Agreements, in effect builds on last year’s report by going further into the detail of the issues that will concern financial and related professional services. I share many of its conclusions.

The potential presented by deals that focus on regulatory coherence and co-operation, as well as next-generation international trade and investment agreements, would not only strengthen London’s position as the leading global financial centre but bring new growth opportunities to key financial centres across the country. Trade policy is useful ammunition here; equally, it serves as a carrot.

I absolutely recognise the importance of trade, which allows people to work their way out of poverty, and supports job creation, value-addition and clean industrialisation. A message to the world at large is that trade is as critical to us as it is to others. The UK Government should ensure, however, that equivalent levels of market access are accorded.

Agreements with implications such as these for consumers, businesses, development and human rights – to which should be added the scourge of corruption – should have maximum scrutiny. It is suggested that the replication of some FTAs and EPAs is the way forward. I can see the benefits, but does this approach merely store-up problems for the future, and should it be challenged? Scrutiny and approval of all agreements on the overseas front should become mandatory. However, while remaining broadly supportive of much of what the Trade Bill contains, Government should reflect on the benefits of scrutiny and participation by allowing a framework that covers consultation with stakeholders, including a process that embraces public support. We need a more formal system of accountability, definition of the devolved Administrations’ roles, full debate, approval by both Houses of Parliament – including a dedicated committee – and parliamentary scrutiny in the proposed process.

I recognise that this requires a seismic change, but our country’s future should centre on the change needed to prepare for tomorrow’s world. The role of Parliament in approval and ratification processes for international trade agreements – enshrining the Ponsonby rule, whereby international treaties have to be laid before Parliament 21 days before ratification – should be unequivocally embraced. The Government’s performance in ratification timelines is – if I may choose my word carefully – precarious. This needs attention. i

About the Author

Lord Waverley (JD) (Member, House of Lords, London) is the founder & CEO of SupplyFinder.com. Contact: jd@supplyfinder.com


Blockchain Technology Proves Its Point

Blockchain is playing its part in the unfolding Fourth Industrial Revolution.But this key technology – that powers and sustains Bitcoin – has yet to gain a solid foothold outside the cryptocurrency domain. The technology’s revolutionary powers and impact have been praised to such a degree that it is difficult to separate the hype from the vision. And the facts.

Blockchain is not magic stardust to be sprinkled on any challenge, but blockchain has demonstrated its effectiveness as an enabling technology beyond the scope of cryptocurrencies. The hype may yet approach reality, as blockchain is combined with other Fourth Industrial Revolution technologies – artificial intelligence, quantum- and edge-computing, and the Internet-of-Things (see Ian Fletcher’s article in the Summer 2018 issue of CFI.co).

A Definition

Blockchain could be defined as a distributed ledger of transactions between two parties recorded in a way that ensures data integrity, and is resistant to modification – a process that is enforced by every node in a decentralised network (Fig. 1).

How Blockchain Works

Blockchain technology gathers, orders, and fits data into blocks, then strings these together in a process that is secured by cryptography. Each transaction is stored in a block of data with a hash – a string of characters generated in real time to serve as a unique stamp, and a way to transform data to a uniform, fixed size.

"Blockchain has demonstrated its effectiveness as an enabling technology beyond the scope of cryptocurrencies."

These hashes are cryptographically produced, making the blockchain virtually impervious to tampering. As the information is sequential and time-stamped, duplicate entries are not possible (Fig. 1).

After two parties agree to undertake a transaction, information specific to the deal is digitally signed and broadcast to every other user node in the network. Once these nodes have checked the information and deemed it legitimate, the transaction is confirmed, and each node updates its copy of the blockchain accordingly. The block is then data-packed with other chronologically ordered transactions and, once all have been connected and timestamped, a blockchain is formed (Fig.1).

Distributed Ledger Technology (DLT) vs. Blockchain
Blockchain is a distributed ledger technology (DLT) which can be implemented in various ways. As Chris Kacher notes: “Every blockchain is a DLT, but not every DLT is a blockchain.

“A distributed ledger is a database that is shared and synchronised across networks. It could be said that the beating heart of blockchain is its underlying distributed ledger technology, just as the beating heart of Bitcoin is blockchain.” (To read more of Dr Kacher, look online at CFI.co.)

Brief History

The history of blockchain can be split into five distinct phases – the last of which is still to play out (Fig. 2).

It all started with some theoretical work in the early 1990s (phase 1). Blockchain proper was invented by Satoshi Nakatomo in 2008 (phase 2). He followed-up his findings the next year by using blockchain as the cornerstone of Bitcoin. Interest in blockchain only really exploded in 2015 (phase 3) when the technology had become generally accepted, and mainstream.

Since then, blockchain has been all about deploying the technology and adapting it to the requirements of different industries (phase 4). Large global corporates, including banks, have now entered this new space looking for value-creation through enterprise-grade commercial applications (phase 5).

Uses of Blockchain

Even modestly sized companies have asked: How can we use this new digital technology to improve our business? The answer stretches across a broad spectrum.

Blockchain technology can be used in multiple paperless ways to improve efficiency and security, as well as simplify transactions and cut-out intermediaries (Fig. 3).

CB Insights, a purveyor of market intelligence to companies, identifies some 42 sectors and industries that blockchain could help to transform.

Some of the key current and future uses for blockchain are financial services – trade finance, transaction settlement, payments, identity management, FinTech, RegTech – as well as supply chain (manufacturing/retail) management, utilities, professional services (smart contracts), and asset/goods management.

[caption id="attachment_13112" align="aligncenter" width="1000"] Figure 2[/caption]

Waiting for the Killer App

There may not be a single killer application for blockchain yet – other than, perhaps, cryptocurrencies.

According to Vitalik Buterin, co-founder of Ethereum cryptocurrency, there is unlikely to ever be a “killer app” for blockchain technology. “The reason for this may be found in the doctrine of low-hanging fruit,” he says. “If there existed some particular application for which blockchain technology is massively superior to anything else, then people would be loudly talking about it already. And so far, there has been no single application that anyone has come up with that has seriously stood out to dominate everything else on the horizon.”

Most banks are currently facing the 3C conundrum (see my article on Reg-Tech in the previous issue of CFI.co): How simultaneously to reconcile compliance with multiple new regulations - with the need to cut costs and improve customer service.

New FinTech companies hold the upper hand, with large commercial banks with heritage systems neither suited nor designed for tomorrow’s world. Banks have now built consortia to explore and exploit blockchain and DLT in trade finance pilot projects (Fig. 2). Blockchain can be used to streamline international trade transactions and also shows great potential for efficient and secure global financial services enterprise applications.

Key advantages include operational efficiencies, cost-effectiveness, traceability, transparency, and accountability. These partnerships can also cut down on compliance costs, as they are fully scalable across the globe.

To this new technology – which favours the rapid progress of agile players such as, say, FinTech start-ups – this is important when considering the disadvantages of the millstone of legacy systems around major banks’ necks.

Playing to Its Strengths

The advantages of blockchain are plenty and easily identifiable:

Blockchain can be used to record or store anything of value, not just financial transactions

Blockchain is a secure validation mechanism and as such is accountable for the fail-free objective truth, without the possibility of human or digital error

Blockchain cannot be controlled by any single entity

Blockchain is incorruptible: no unit of information in the blockchain can be altered without overriding the entire network.

Fourth Industrial Revolution Applications

Here are a few of the many promising applications of blockchain technology as the Fourth Industrial Revolution takes shape:

Supply-chain management

Trade finance replacing often archaic and fallible banking procedures

Improving secure-edge computing, which is data-processing near the data creation (a mesh network of microdata from, for example, one or more sensors)

Smart contracts tracking multiple assets, automatic and self-executing when set conditions are met

Digital assets management backed by real estate and tokenised ownership

Secure decentralised social networks

Combined with the IoT for enhanced security and speed

Combined with AI (artificial intelligence) and robotics for smart cities and mobility

Government applications for secure storage, citizen IDs, and smart contracts

Myth of Immutability

Just as the claim that encryption can resist new quantum computer power, the myth of immutability of the blockchain can be hard to accept. Surely, no technology can be 100% secure…

An efficient and direct blockchain, cutting out the middle man, could lead to lack of accountability and less transparency – with some actors missing out on value-added services and requiring human knowledge and assistance.

Fear and Hope

The optimism that blockchain will revolutionise business in general, and the financial services industry in particular, could merely be a reflection of an intense desire to change a global financial and monetary system deemed unfair by some. The way in which banks operate and the increased inequality, fuelled by successive asset bubbles inflated by quantitative easing, are cause for concern. The hope for a more inclusive, equitable, and egalitarian society, as well as for a fairer, decentralised form of governance, has inspired many to consider blockchain an agent of change.

And while mankind continues to yearn for new technologies to cure its many ills, it has so far failed to find any that fit the bill. The internet and the mobile phone have been transformative, but the societal impact of the humble washing machine has been more measurable – at least according to Cambridge economist Ha-Joon Chang, who regularly cautions against too much optimism on determining the transformative potential of new technologies.

Blockchain, though useful in many ways, including those that cannot yet be foreseen, is no doubt a game-changer for some. To others, it will end up being a disappointment. What to do if blockchain gets it wrong? Is it uncrackable, or hackable? There surely be no such thing. So, if the computer says no, where to turn to for a human override to stop your assets from becoming trapped in virtual reality…


Lawrence Summers: Setting the Record Straight on Secular Stagnation

[caption id="attachment_13125" align="alignright" width="300"] Author: Lawrence Summers[/caption]

Joseph Stiglitz recently dismissed the relevance of secular stagnation to the American economy, and in the process attacked (without naming me) my work in the administrations of Presidents Bill Clinton and Barack Obama. I am not a disinterested observer, but this is not the first time that I find Stiglitz’s policy commentary as weak as his academic theoretical work is strong.

Stiglitz echoes conservatives like John Taylor in suggesting that secular stagnation was a fatalistic doctrine invented to provide an excuse for poor economic performance during the Obama years. This is simply not right. The theory of secular stagnation, as advanced by Alvin Hansen and echoed by me, holds that, left to its own devices, the private economy may not find its way back to full employment following a sharp contraction, which makes public policy essential. I think this is what Stiglitz believes, so I don’t understand his attacks.

In all of my accounts of secular stagnation, I stressed that it was an argument not for any kind of fatalism, but rather for policies to promote demand, especially through fiscal expansion. In 2012, Brad DeLong and I argued that fiscal expansion would likely pay for itself. I also highlighted the role of rising inequality in increasing saving and the role of structural changes toward the demassification of the economy in reducing demand.

What about the policy record? Stiglitz condemns the Obama administration’s failure to implement a larger fiscal stimulus policy and suggests that this reflects a failure of economic understanding. He was a signatory to a November 19, 2008 letter also signed by noted progressives James K. Galbraith, Dean Baker, and Larry Mishel calling for a stimulus of $300-$400 billion – less than half of what the Obama administration proposed. So matters were less clear in prospect than in retrospect.

We on the Obama economic team believed that a stimulus of at least $800 billion – and likely more – was desirable, given the gravity of the economic situation. We were told by those on the new president’s political team to generate as much validation as possible for a large stimulus because big numbers approaching $1 trillion would generate “sticker shock” in the political system. So we worked to encourage a variety of economists, including Stiglitz, to offer larger estimates of what was appropriate, as reflected in the briefing memo I prepared for Obama.

"We cannot rely on interest-rate policies to ensure full employment. We must think hard about fiscal policies and structural measures to support sustained and adequate aggregate demand."

Despite the incoming president’s popularity and an all-out political effort, the Recovery Act passed by the thinnest of margins, with doubts about its ultimate passage lingering until the last moment. I cannot see the basis for the argument that a substantially larger fiscal stimulus was feasible. And the effort to seek a much larger one certainly would have meant more delay at a time when the economy was collapsing – and could have led to the defeat of fiscal expansion. While I wish the political climate had been different, I think Obama made the right choices in approaching fiscal stimulus. It is of course also highly regrettable that after the initial Recovery Act, Congress refused to support a variety of Obama’s proposals for infrastructure and targeted tax credits.

Unrelated to the topic of secular stagnation, Stiglitz takes a swipe at me by saying that Obama turned to “the same individuals bearing culpability for the under-regulation of the economy in its pre-crisis days” and expected them “to fix what they had helped break.” I find this a bit rich. Under the auspices of the government-sponsored enterprise (GSE) Fannie Mae, Stiglitz published a paper in 2002 arguing that the chance that the mortgage lender’s capital would be depleted was less than one in 500,000, and in 2009 he called for nationalization of the US banking system. So I would expect Stiglitz to be well aware that hindsight is clearer than foresight.

What about the Clinton administration record on financial regulation? With hindsight, it clearly would have been better if we had foreseen the need for legislation like the 2010 Dodd-Frank reforms and had a way to enact it with a Republican-controlled Congress. And certainly we did not foresee the financial crisis that came eight years after we left office. Nor did we anticipate the ways in which credit default swaps would mushroom after 2000. We did, however, advocate for GSE reform and for measures to rein in predatory lending, which, if enacted by Congress, would have done much to forestall the accumulation of risks before 2008.

I have not seen a convincing causal argument linking the repeal of the Glass-Steagall Act and the financial crisis. The observation that most of the institutions involved – Bear Stearns, Lehman Brothers, Fannie Mae, the GSE Freddie Mac, AIG, WaMu, and Wachovia – were not covered by Glass-Steagall calls into question its centrality. Yes, Citi and Bank of America were centrally involved, but the activities that generated major losses were fully permissible under Glass-Steagall. And, in important respects, the repeal of Glass-Steagall actually enabled the resolution of the crisis, by permitting the merger of Bear and JPMorgan Chase and by allowing the US Federal Reserve to open its discount window for Morgan Stanley and Goldman when they otherwise could have been sources of systemic risk.

The other principal attack on the Clinton administration’s record targets the deregulation of derivatives in 2000. With the benefit of hindsight, I wish we had not supported this legislation. But, given the extreme deregulatory approach of President George W. Bush’s administration, it defies belief to suggest that it would have created major new rules regarding derivatives but for the 2000 act; so I am not sure how consequential our decisions were. It is also important to recall that we pursued the 2000 legislation not because we wanted to deregulate for its own sake, but rather to remove what the career lawyers at the US Treasury, the Fed, and the Securities and Exchange Commission saw as systemic risk arising from legal uncertainty surrounding derivatives contracts.

More important than litigating the past is thinking about the future. Even if we disagree about past political judgements and about the use of the term “secular stagnation,” I am glad that an eminent theorist like Stiglitz agrees with what I intended to emphasize in resurrecting that theory: We cannot rely on interest-rate policies to ensure full employment. We must think hard about fiscal policies and structural measures to support sustained and adequate aggregate demand.

About the Author

Lawrence H Summers was US Secretary of the Treasury (1999-2001), Director of the US National Economic Council (2009-2010), and President of Harvard University (2001-2006), where he is currently University Professor.


Instrumental in Rental with CEO Charles Haresnape: Gatehouse is a Shariah-Compliant Bank on the Move

Gatehouse Bank is a Shariah-compliant UK bank, lead by CEO Charles Haresnape, whose operations span residential and commercial property financing and investment as well as retail savings and real estate investment advice.

The bank has come to play a major role in the UK’s Private Rental Sector (PRS), facilitating capital that forms the financial foundation for thousands of new homes across the country. It is also highly active in the retail savings market, with competitive rates of return offered across a range of Fixed Term Deposit and Notice accounts.

[caption id="attachment_18975" align="aligncenter" width="900"] Gatehouse CEO Charles Haresnape[/caption]

A key part of Gatehouse Bank’s strategy is to offer products to underserved markets. By providing bespoke Buy-to-Let (BTL) home finance products – and taking the time to assess each proposal on its own merits – those who have traditionally found it difficult to find finance are often able to succeed in their bid. This includes members of the expat and international communities who want to buy homes in the UK as rental properties, but often struggle to find lenders because of rigid and arbitrary application criteria.

These Buy-to-Let products, which are available directly from the bank and through intermediaries, offer flexible terms and competitive pricing. Typically, Gatehouse Bank offers BTL financing of between £75,000 and £5 million, but variations can apply on a case-by-case basis. The bank is also able to finance single and portfolio acquisitions and refinancing.

"The first £100m fund, created in 2014, saw 918 homes created across the Greater Manchester and Merseyside areas."

Following regulatory approval, the bank plans to extend its property finance offering further, with the introduction of a range of Home Purchase Plan (HPP) products to support owner-occupiers.

In the property market, the bank was a pioneer of Build to Rent, entering the UK rental sector in 2014. Much of the capital for this area of the bank’s business comes from inward investment. The first £100m fund, created in 2014, saw 918 homes created across the Greater Manchester and Merseyside areas. These homes – a mixture of one- and two-bedroom apartments and two-, three- and four-bedroom houses – are fully let.

The second £100m project, established in December 2015, has created a further 682 homes built in the Midlands and North West of England.

A further project, expected to be worth £300 million, is about to get under way — promising to bring the total number of BTL homes under the bank’s advisory mandate to 6,500 over the next two years.

These ground-breaking ventures have created one of the first large-scale PRS portfolios of high-quality family homes in the UK, and Gatehouse is proud of its involvement in the supply of homes.

But it’s not just in the residential space that Gatehouse applies its expertise. Asset managers, developers, REITs (Real Estate Investment Trusts) and investors can benefit from its expertise in commercial property financing. The Gatehouse team works across the spectrum, from basic secured financing to senior debt and mezzanine finance. Areas of expertise include providing commercial finance for acquisitions, development, refurbishment; refinancing existing assets or projects; leveraged recapitalisation and finance restructuring.

The bank’s expansion has been complemented by a number of new appointments in the executive team over the past two years.

Charles Haresnape

Charles Haresnape was appointed CEO in May 2017. He is helping the bank sharpen its strategy to offer competitive personal finance products to the UK’s three million Muslim residents, who have been traditionally underserved in the Shariah-compliant market, and widen its appeal to customers of all kinds.

Prior to joining Gatehouse, Haresnape was group managing director at Aldermore Bank, where he was responsible for residential and commercial mortgages and property development. Before joining Aldermore, he was with Connells, one of the UK’s largest estate agency groups, where he was group mortgage services director.

Earlier in his career, he was responsible for intermediary mortgage lending and the branch mortgage sales force at NatWest, and worked at RBS. He has worked for a number of other household-name banks and building societies, including Nationwide and HBOS, where he was a senior executive, responsible for mortgage sales and portfolio acquisitions.

Since Haresnape’s appointment, Gatehouse has frequently been placed at the top of the best-buy savings tables, and the bank’s executive committee has been strengthened with the addition of former Shawbrook Bank Strategy and Innovation director Tim Blease as chief operating officer (COO). Another to join the team is chief commercial officer (CCO) Paul Stockwell – who joined from TSB – while Usman Chaudry, the bank's chief risk officer, was formerly global head of policy and risk governance at Standard Chartered Bank.

Gatehouse Bank is a subsidiary of Gatehouse Financial Group Limited, which is a holding company for Gatehouse Bank and Gatehouse Capital (based in Kuwait). Gatehouse Bank is UK-domiciled, which means savers’ deposits are protected by the Financial Services Compensation Scheme up to £85,000 per person.

Gatehouse Bank believes in the importance of the communities in which it operates, and supports a range of not-for-profit endeavours. Since 2008, the bank has supported Mosaic, a charity founded by HRH The Prince of Wales. The charity provides a platform for employees who wish to volunteer as mentors. The bank also supports young jobseekers by providing internship and apprenticeship opportunities.

Gatehouse is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.


António Guterres: Healing a Fractured World

[caption id="attachment_13180" align="alignright" width="300"] Secretary-General of the United Nations: António Guterres[/caption]

The world is in pieces. No longer the preserve of two competing global powers – or even a single triumphant one – today’s world is nobody’s backyard.

Multiple powers have emerged that no longer expect, or strive for, hegemony far outside their own regions. The multipolar world order, still a novelty that requires some getting used to, is inherently unstable in the absence of multilateral ties that bind and channel the interaction of states of blocs.

United Nations Secretary-General António Guterres accepts the inevitability that leadership by a single state, or perhaps two, will be questioned: “Both the United States and the rest of the world need to be able to adapt to this new reality.”

Guterres refuses to criticise the foreign policy initiatives of the current US administration, deemed disruptive by some. In fact, he has managed to build, and maintain, a close working relationship with the US government, an effort that has not gone unnoticed in Washington. US criticism of the United Nations and its many agencies has become more muted of late. By not engaging openly with critics of the world body, Guterres has also managed to keep the UN above the fray of international politics while others, such as the High Commissioner for Human Rights, Zeid Ra’ad al-Hussein, whose term expired in August, have no such qualms.

It is not Guterres’ style to seek confrontation. Nor can he afford to chastise those inimical to his organisation. By placing emphasis on the themes and topics that Washington considers of vital importance, and mostly ignoring those the US administration deems detrimental to its interests, Guterres tries to keep the Americans on board. So far, the former Portuguese Prime Minister has been remarkable successful in his pursuit. He is reportedly a favourite of Ivanka Trump – daughter of, and senior adviser to, the US president – whose initiative to help women entrepreneurs source funding for their businesses Guterres has quietly helped shape, in tandem with World Bank president Jim Yong Kim. Both men are now welcome guests at the White House.

In his opening speech at the UN General Assembly, late September, Guterres warned that the rules-based global order is nearing breaking point as international co-operation becomes more difficult and the balance between regional powers shifts – sometimes abruptly. The UN secretary-general fears a gradual return to a global order dominated by a few large players who jockey with each other for regional mastery while shunning multilateral co-operative efforts.

To function properly and equitably, a multipolar world needs co-operation more than rivalry. Guterres fears the erosion of universal values and the compromising of democratic principles, including human rights, which already now often take a backseat to sovereignty.

“Today, with shifts in the balance of power, the risk of confrontation may increase,” noted Guterres, warning that the worrying trend coincides with the existential threat of climate change. Unusually for a UN secretary-general, Guterres offered a mea culpa for his organisation’s inability to end the wars in Syria and Yemen, or provide the exiled Rohingya people with the protection they needed. He also lamented the UN’s unsuccessful attempts at promoting a two-state solution for the enduring Israeli-Palestinian conflict.

However, the UN secretary-general prefers to focus his attention on the many topics the UN can successfully influence and address – such as climate change. He reminded the 130 world leaders present during the opening ceremony in New York that time is running out, and people are clamouring for action.

As a former UN High Commissioner for Refugees, Guterres knows only too well how war and strife can disrupt societies. He does not hesitate to add climate change to the list of causes for belligerency. In a recent interview, he talked at length about the re-emergence of irrationality: “The enlightenment is the primacy of reason, it is tolerance, and now we see the emergence of xenophobic instincts, of ethnic and religious fundamentalisms. Obviously all these put into question the cohesion of societies – and the cohesion of societies is a fundamental tool for democracy.”

He disagrees with Francis Fukuyama’s premise that history has ended; it was frozen by the Cold War and has resumed its unstoppable march. Nationalism resurfaced while globalisation had to beat a hasty retreat. These are matters of grave concern to António Guterres, who is a committed multilateralist and internationalist.

“Liberal democracy,” he concludes, “is not the inevitable outcome of history. In order for liberal democracy to survive, it needs to be nurtured.”


Evan Harvey, Nasdaq: Next-Gen ESG - Going Beyond the Basics

For many years, investors have been searching for more perfect sources of non-financial information: data that may not be on the balance sheet, but still offer material and relevant insight into business value.

First, they looked at corporate governance practices – how well the board functions, who provides management oversight, what the risk controls are. As the climate crisis heated up, they began to look for environmental signals, too. How efficiently does the company operate, what kinds of materials does it use, does the business contribute to climate change? Lately the emphasis has turned to social performance indicators, specifically those related to economic access and gender diversity.

These alternative data were categorised as sustainability because – it was argued – they provided a better understanding of the company’s ability to sustain its operation, and its competitive edge over the long term. Lately, the more specific term ESG has emerged. Though by definition ESG means environmental, social, and governance data, the acronym has come to include almost any measurement that cannot be found in a company’s financial filings.

"We expect companies to disclose not only their carbon emissions, and the process whereby those emissions are tracked and trended, but also the emissions of their vendors and suppliers."

We expect companies to disclose not only their carbon emissions, and the process whereby those emissions are tracked and trended, but also the emissions of their vendors and suppliers. Relatively straightforward metrics like gender diversity have blossomed into categories and subcategories of inquiry. Definitional changes, more sophisticated measurements of inclusion and belonging, and ever more finite gradations in the gender pay-gap.

But despite a rapid increase in the number and complexity of these data signals, they still represent a very primitive understanding of the way business operates. An infinite array of discrete data points could be weighted and arranged in such a way as to give the savvy investor a significant edge. But what if we need more than data points to paint the true picture of a company? Is it time to fundamentally revisit some of our assumptions about ESG value? Two recent developments seem to argue just that.

From Human Resources to Human Capital

Many ESG metrics are managed by the Human Resources department. HR departments (especially in the US) monitor and measure employee demographics to ensure compliance with laws and strategic mandates, to reduce risk-related costs, and to demonstrate a commitment to diversity.

If we look at ESG indicators recommended by the Global Reporting Initiative (GRI), there are many that touch on HR functions: Gender diversity, age diversity, salary comparisons, and so on (GRI 405: Diversity and Equal Opportunity, 2016). A company may provide all that information, and yet reveal little about the underlying cultural health of the organization. And it is exactly that sense of cultural health and productivity that a new discipline – human capital – seeks to illuminate.

As Harvard Economics Professor Claudia Goldin wrote in Human Capital in 2014, “Human capital is the stock of skills that the labour force possesses. The flow of these skills is forthcoming when the return to investment exceeds the cost (both direct and indirect). Returns to these skills are private in the sense that an individual’s productive capacity increases with more of them. But there are often externalities that increase the productive capacity of others when human capital is increased.”

Far from being an amalgamation of specific organisational statistics, human capital represents something intangible: the collective resource value of a company’s employees. If one could tally up the training, experience, skills, judgment, and wisdom embedded in all of a firm’s employees, we would better understand the current and potential value of that human asset.

"We believe the measurement and management of corporate performance should evolve to incorporate social and human capital, alongside financial and environmental measures. We are here to make that happen."

- Mark Graham, Technical Director for the Social & Human Capital Coalition (SHCC)

The Human Capital Management Coalition (“a diverse group of influential institutional investors [seeking] to further elevate human capital management as a critical component in company performance”) was established last year and already has grown to include 25 asset owners, representing over $2.8tn in assets.

This group is ramping up its advocacy as well. Last year the coalition initiated a petition with the US Securities and Exchange Commission (SEC) to embed Human Capital metrics in required financial disclosures – something the SEC has not done with much effect on ESG itself. More than 30 comment letters, most of them highly supportive, have been filed by other firms and institutions.

In March 2018, the biggest asset manager of them all joined in. “Research has consistently shown the importance of human capital to company performance,” according to a Blackrock statement. The paper further asserted that attention to human capital is part of its “fiduciary duty to protect and enhance the value of our clients’ assets”.

Other market participants are also interested. In April, the World Business Council for Sustainable Development (WBCSD)—a global CEO-led business membership organization—launched its own human capital initiative. “We believe the measurement and management of corporate performance should evolve to incorporate social and human capital, alongside financial and environmental measures,” says Mark Graham, Technical Director for the Social & Human Capital Coalition (SHCC). “We are here to make that happen.”

Climate Reporting Becomes Climate Risk

Environmental performance indicators have undergone a similarly maturing process. Current ESG metrics rely on a basic valuation of environmental drivers: energy consumption, energy reduction, fuel sourcing, water sourcing. When the World Federation of Exchanges (WFE) issued its ESG disclosure guidance in 2015, these were the kinds of data points included. In the years since, there has been a move towards science-based targets (SBTs), which exert more discipline and rigour in the decarbonisation process.

But even the SBTs are, at best, discrete and specific measurements of one aspect of environmental performance.

When the WFE began to revise its ESG guidance this year, it had to take into account the work of the task force on Climate-Related Financial Disclosures, or TCFD. Borne of the Financial Stability Board in 2015, and led by Mark Carney and Michael Bloomberg, the TCFD seeks to upend the way we think about climate reporting in business.

By focusing on capital allocation, risk forecasting and scenario planning, the TCFD offers investors a more holistic understanding of the company’s commitment to environmental responsibility.

Metrics and targets are still included in the TCFD recommendations (published in 2017), but even those data points are pushed into new aspects of performance measurement. TCFD focuses on the process whereby a company determines the right metrics and targets for itself; the internal price on carbon used, rather than an arbitrary disclosure of its consumption; and the amount of investment (OpEx) dedicated to low- or no-carbon alternatives.

Even in its call for scenario planning – difficult to do, and something companies rarely undertake in other areas – the TCFD argues for reporting on multiple potential outcomes. How will two-degree rise in temperature affect access to materials? What will a company’s energy mix look like in 2040? How much water will be needed, and where will it be sourced?

Time will tell if the TCFD idea really catches on, becoming the new standard for climate-related corporate reporting; only a handful of large companies are embedding TCFD recommendations into their filings right now. And new research may demonstrate a widening gap between climate awareness and climate action. More than 80% of companies acknowledge physical, financial, and political risks related to the low-carbon transition, but a much smaller percentage are actually taking meaningful steps to handle that transition (Ready or Not: Are companies prepared for the TCFD recommendations? CDSB and CDP report, March 2018).


Robert Azevêdo: Levelling the Playing Field

[caption id="attachment_13166" align="alignright" width="300"] Robert Azevêdo Director-General, WTO (World Trade Organisation)[/caption]

In times such as these, with rapidly escalating trade tensions and countries engaging in tit-for-tat spats that can – and do – spin out of control, the job of Roberto Azevêdo, director-general of the World Trade Organisation, becomes nearly impossible.

Well-known by all but little-understood by most, the WTO is an easy – and politically gratifying – target for critics, who mostly blame it for their own lack of trading prowess.

Speaking at an event in Berlin, Azevêdo noted that all warning lights were flashing: “A continued escalation of tensions would pose an increased threat to stability, to jobs, and to the kind of growth that we are seeing today.”

A full-blown trade war could shrink global trade by up to 17% and shave almost 2% off global GDP, he believes. Azevêdo is adamant that such a conflict would have no winners: “Every region would be affected, including large blocs such as the European Union, which could potentially miss out on 1.7% of its GDP.”

The Brazilian, a veteran of his country’s highly esteemed diplomatic service, is determined to prevent this. He is currently finishing a broad set of reform proposals, supported by a some key members, which seek to address unfair trade practices and improve dispute resolution mechanisms. The G20 summit taking place this November in Buenos Aires promises to turn into high noon for the WTO director-general, who will call on all world leaders present to keep a cool head and stick to the rules.

Azevêdo is the first to acknowledge that the global trade regime offers plenty room for improvement. However, he cautions that it remains of vital importance that WTO member states adhere to the rules in place and not venture outside the established framework: “Members have to agree which rules they wish to change and which reforms they wish to focus on.”

The WTO has offered to mediate between the United States and China and has encouraged both countries to keep an open dialogue. Azevêdo said that he fears that the tariff walls erected thus far are only the opening shots of a trade war that may spill over into non-tariff areas. “To be honest, I don’t think it’s over,” he said. “They have lots of ammunition.”

All the same, the WTO chief remains cautiously optimistic since Chinese premier Li Keqiang in September stressed his country’s commitment to open borders in a keynote speech delivered, tellingly, in the Tianjin port city. Keqiang said the world was approaching a crossroads and had to choose between globalisation and protectionism. The premier also said that China did not believe in unilateralism, and could open its domestic market to foreign investment and trade faster than anticipated.

Azevêdo is particularly well equipped to lead the WTO. An alumnus of the celebrated Rio Branco Institute for International Studies, he headed for four years the Dispute Settlement Unit of Brazil’s Foreign Affairs Ministry, a capacity that allowed him to help smooth numerous WTO issues and establish case law.

He now aims to harness the institutional strength of the WTO to find solutions to disputes arising from an ever more interconnected world. Azevêdo is also a tireless advocate for trade liberalisation, pointing out the benefits of commerce and its role in empowering emerging and pioneer markets. He is particularly interested in e-commerce and its future role in driving growth.

To tackle the rise of protectionism, Azevêdo has hammered almost incessantly on the need for plurilateral talks to unblock the negotiations that have largely stalled in the multilateral arena. He believes that no WTO member is served by attempts to bypass the organisation’s dispute settlement mechanisms and vehemently denies the charges of “judicial overreach” lodged by the US, which earlier this year blocked the appointment of trade experts to the WTO appellate body, which has the final say on dispute rulings.

To rescue the WTO from paralysis due to the non-co-operation of some of its principal members, the EU and Canada are laying the groundwork for an extensive update to the organisation’s 23-year-old rulebook. Azevêdo has welcomed the initiative for recognising that global trade needs an impartial adjudicator and a governing body that sets out clear rules – and levels the playing field.