Otaviano Canuto, Center for Macroeconomics and Development: How to Heal the Brazilian Economy

[caption id="attachment_13449" align="alignright" width="300"] Author: Otaviano Canuto[/caption]

If I were to encapsulate the current situation of the Brazilian economy in one sentence, I would say: “It is suffering from a combination of ‘productivity anemia’ and ‘public sector obesity’".

On the one hand, the country’s mediocre productivity performance in recent decades has limited its GDP growth potential. On the other, the gluttony for expanding public spending has become increasingly incompatible with the potential expansion of GDP – particularly since the former has not been achieving socio-economic results that match such an appetite.

In my judgment, the crisis, followed by slow recovery in recent years, reflects the advanced stage of evolution of the disease, preceded by an incubation period during which its symptoms were disguised.

On August 23, the World Bank released a set of public policy notes laying down three reform paths to rediscover a trajectory of shared prosperity. As well as proposals to improve productivity performance, the notes suggest reforms in the governance model of the Brazilian public sector. Those reforms should be accompanied by a review of public spending as the main element of a necessary adjustment in public accounts.

Let’s start with the anaemic productivity increases in goods and services that the Brazilian economy can produce with its available material and human resources. More than half of per-capita income growth over the past two decades has come from increases in the share of the economically active population, a source of expansion that will decline with the aging of the population.

"The World Bank suggests the adoption of a programme of trade liberalisation, as low productivity levels are one of the consequences of the exacerbated closure in Brazilian foreign trade. This imposes barriers to access to foreign inputs and technologies."

From the mid-1990s, Brazilian production per employee has been increasing at a snail’s pace rate – just 0.7% a year – partly because the level of physical investments has remained low, but mainly because the overall efficiency in the use of human and material resources has remained stagnant (Chart 1 – left side).

[caption id="attachment_13444" align="aligncenter" width="1378"] Chart 1 - The Productivity Anemia: Total Factor Productivity growth during 1995-2014 (left). Distribution of firms’ managerial quality compared to the USA (right). Source: World Bank, “Promoting sustainable productivity growth”, (Brazil) Public Policy Notes - Towards a fair adjustment and inclusive growth, August 23, 2018.[/caption]

The World Bank suggests the adoption of a programme of trade liberalisation, as low productivity levels are one of the consequences of the exacerbated closure in Brazilian foreign trade. This imposes barriers to access to foreign inputs and technologies.

There are other factors that limit competition in domestic markets – lack of logistics infrastructure, differentiated state tax regimes, subsidies to specific firms – that make the rate of survival and resource retention in less efficient companies higher than in other countries. The price to be paid is in terms of lower average productivity. Such a retention of resources in inefficient uses is illustrated in the right side of Chart 1, which shows Brazil’s distribution of firms’ managerial quality compared with the US. Policies to support the private sector need to shift from compensation for high internal costs to strengthening the adoption and diffusion of technologies.

The unfavourable business environment for entrepreneurs also undermines productivity. The complexity and imbalance of the tax system is a priority item for reform. The lack of investments in infrastructure, and their declining quality in the recent past, takes another toll on productivity (Chart 2).

[caption id="attachment_13445" align="aligncenter" width="1376"] Chart 2 - Infrastructure Investments: Infrastructure investments (% of GDP) (left). Quality of infrastructure (Ranking WEF – the lower the better) (right). Source: World Bank, “Overcoming the challenge of improving and expanding infrastructure services”, (Brazil) Public Policy Notes - Towards a fair adjustment and inclusive growth, August 23, 2018.[/caption]

In the same way, financial intermediation in the country does not provide financing appropriate to investment. The World Bank also notes how the quality of education and the formation of human capital could benefit from the less-rigid allocation of public resources and sharing the successful experiences taking place in states and municipalities.

While productivity and GDP growth potential have maintained their weak increases, annual public spending has risen sharply in real terms over the past decades: 68% between 2006 and 2017. As a proportion of GDP, public expenditure rose from less than 30% in the 1980s to about 40% in 2017. Meanwhile, public investment declined – less than 0.7 percent of GDP last year – partly explaining the precariousness of infrastructure.

With tax revenues reflecting the decline in GDP in 2015-16 and the subsequent fragile macro-economic recovery, a deterioration in the primary balance by more than four percentage points of GDP launched public debt on an explosive trajectory, rising from 54% to 74% of GDP between 2012 and 2017.

Not surprisingly, fiscal adjustment is another of the paths suggested by the World Bank, which noted that a path of gradual improvement in the primary balance (equivalent to that contained in the constitutional amendment establishing a spending ceiling - 0.6% of GDP per year) could allow a return to a sustainable debt trajectory in 10 years.

Given the levels achieved by public spending, as well as the automatic expansion mechanisms in place and the potential pace of GDP growth, the World Bank's macro-economic projections do not give any hope for recovery of primary balances by tax collection. Attempts to revitalise the economy via increases in public spending that is not backed by some credible fiscal adjustment plan will not be able to convince private players to believe that growth might be sustainable.

Under the assumption of a combination of a GDP growth rate at 2.4% per year and real interest rates at 4%, the World Bank projects rising and dampening public debt trajectories, respectively, with and without the spending cap (or an equivalent fiscal adjustment in the latter case). (Chart 3 – left side).

[caption id="attachment_13446" align="aligncenter" width="1377"] Chart 3 - Fiscal Obesity: Projections of General Government Gross Debt, without and with spending cap (GDP growth at 2.4%% and real interest rate at 4%) (left). Projection of pensions expenditures and spending rule (% of GDP) (right). Source: World Bank, “Fiscal stabilization and fiscal adjustment: returning to a sustainable fiscal path”, (Brazil) Public Policy Notes - Towards a fair adjustment and inclusive growth, August 23, 2018.[/caption]

Expenditures on social security, the public sector payroll and subsidies and tax exemptions are areas in which the World Bank highlights existing opportunities to reduce public expenditures while minimising impacts on the bottom layers of the income pyramid, and opening space for other types of public expenditure. The right side of Chart 3 shows how a pension reform will be necessary to turn the spending cap feasible.

If the option to reconstitute primary balances falls to some extent on the tax side, there are possibilities for reform that would not only reduce its negative weight in the business environment, but also reduce the social inequality of the current system. Similar directions are also proposed for subnational public accounts.

The third path outlined by the World Bank is state reform. The mismatch between the limited growth potential that results from the "productivity anaemia" and growing public spending is aggravated by an inefficiency in the provision of several services, comprising a "public sector obesity".

The World Bank pins the cause on an excessive number of rules and budget rigidity, fragmentation of service delivery, poor planning, monitoring and evaluation of projects and policies, human resource management without positive performance incentives, judicialisation of policy decisions, and growing risk-aversion in the bureaucracy. Chart 4 illustrates these points by displaying the evolution of earmarked revenues (left side) and results achieved by public spending (right side).

[caption id="attachment_13447" align="aligncenter" width="1533"] Chart 4 - Public Sector Obesity: Evolution of earmarked revenues (left). Brazil’s state spends more than most peers but achieves less (right).
Source: World Bank, “Reforming the state”, (Brazil) Public Policy Notes - Towards a fair adjustment and inclusive growth, August 23, 2018.[/caption]

This is true for health, education, violence, infrastructure, transportation and logistics and water resources management. In all these areas, greater consistency between planning and execution, emphasis on evaluation, and higher fine-tuning between public and private sectors would lead to better socio-economic results per unit of public expenditure.

An acknowledgement of the double malaise afflicting the Brazilian economy here approached can be noticed in some policy priorities already hinted by the government team to assume on January 1st: maintenance of the spending cap, for which a pension reform and some de-indexation of revenues and expenditures will be necessary; a gradual foreign trade opening; a tax reform; privatization as a way to help adjust the public-sector balance sheet; reinforcement of market-friendly aspects of infrastructure regulation; moving ahead with the agenda of “microeconomic reforms” pursued by the outgoing government and others. The feebleness of the on-going macroeconomic recovery will open some space for a higher GDP growth in 2019. A transition to a new sustained growth path, however, will depend on the success of the new government in using the opportunity to make real those intended reforms.

About the Author

Otaviano Canuto is a world-renowned economist and the principal for the Center for Macroeconomics and Development (Washington, D.C.). He is a former Vice President and a former Executive Director of the World Bank, as well as a former Executive Director of the IMF and a former Vice President of the Inter-American Development Bank. Otaviano has been a regular columnist for CFI.co for the last six years. Follow him on Twitter: @ocanuto


“When the middle class constitutes only 20–30 percent of the population, it may side with antidemocratic forces because it fears the intentions of the large mass of poor people below it and the populist policies they may pursue.”

For Francis Fukuyama the ultimate goal of any given liberal democracy is “Getting to Denmark” – a metaphor for a nation-at-rest with a solid legal system in place, a body politic purged of extremism, a credible democracy, and a “dose of healthful end-of-history tedium.” As such, Denmark perhaps represents the closest humanity may expect to get to perfection.

Mr Fukuyama, a senior fellow at the Center on Democracy, Development and the Rule of Law at Stanford University, is best known for his ground-breaking The End of History and the Last Man (1992) – a tome in which he argues that, with the advent of Western liberal democracy, mankind may have reached the end of its sociocultural evolution.

Though Mr Fukuyama’s conclusion has repeatedly been tried by later developments, he did quite successfully demolish the classical Marxist expectation that an antagonistic world would inevitably lead to communism displacing capitalism.

Political Order and Political Decay is the second (and final) volume of what may well turn out to be Mr Fukuyama’s magnum opus. Together with the first instalment of his diptych – The Origins of Political Order: From Pre-Human Times to the French Revolution – Mr Fukuyama aims to explain how we reached the end of history. Notwithstanding the ambitious scope of the project, he does a rather admirable job of it.

The journey starts as humanoids descent onto the plains and organise in hunter-gatherer groups and ends – 1,200 plus pages later – in the present-day world. However, unlike biological evolution, the progress of humankind has an endpoint. The trouble is that while the world is trying to get to Denmark, it barely understands how the Danish arrived at their present state of national bliss. Thus attempts to impose liberal democracy on wayward countries such as Somalia, Libya, Afghanistan, and Haiti are destined for failure. The endpoint is known; the path to it remains shrouded in fog.

Though insightful and a tour-de-force of singular significance, the two-volume work by Mr Fukuyama does seem to ignore the more irrational motivators of political development such as national myths, identities, and enmities. These less tangible, but nonetheless very real, considerations oftentimes determine the attitudes and aspirations of entire nations that – as a result – seem wholly uninterested in pursuing the Danish model.

Still, Mr Fukuyama’s tomes are essential reading for anyone interested in understanding the course of human development and how the end of history will come about.

Title
Political Order and Political Decay: From the Industrial Revolution to the Globalization of Democracy

Author
Francis Fukuyama

ISBN
978-0-3742-2735-7

Link
http://www.amazon.com/gp/search?index=books&field-isbn=9780374227357


Nordea Asset Management: Pinch, Push, and Shift…

While financial markets globally have undergone substantial stress and change, an increasing number of mainstream investors see ESG (Environmental, Social, and Governance) integration as a way to improve their long-term financial performance and to respond to the increasing client demand for sustainable investments.

This trend offers companies opportunities to attract long-term investors while, at the same time, reduce shareholder turnover by aligning their investment strategy with the real needs of their business and laying down the foundation for a sustainable future. Asset owners see ESG integration as an opportunity to generate long-term performance while fulfilling their fiduciary obligations, while investment managers see it as a way to improve risk management in the financial performance of their investment portfolio.

“Weaving ESG factors into the fabric of a company can improve shareholder value over time by permanently shifting the expected share price to a higher level, creating a valuation premium.”

For listed companies, long-term investors constitute a more attractive investor base. First, compared to short-term investors, they generally invest over a period of time that is better aligned with companies’ business cycles and long-term sustainability strategy. Second, by holding shares over a greater period of time, long-term investors reduce share turnover, which is costly for companies. While short-term investors have exacerbated what Dominic Barton at McKinsey calls “quarterly capitalism,” long-term investors allow companies to reconnect investment strategies with the real needs of their business.

Nordea Asset Management believes that aligning ESG issues with core business agendas can help companies create shareholder value in three measurable ways.

Pinch

Downside risks should be reduced or “pinched,” especially in a global marketplace that is increasingly volatile, resource-constrained, and socially engaged. One way to do this is by integrating ESG and financial reporting, which can increase transparency, improve understanding of ESG risks, and help drive targeted mitigation strategies.

Improved transparency can also help build trust with customers, investors, and employees, creating a halo effect that makes it easier for a company to earn forgiveness when things go wrong, while getting more credit for the things it is doing right.

Push

Companies can also leverage social and environmental issues to create new product and service innovations that drive revenue and reduce operating costs. Deloitte’s research on innovation shows that leaders on ESG issues are over 400% more likely to be considered innovation leaders.

Shift

Weaving ESG factors into the fabric of a company can improve shareholder value over time by permanently shifting the expected share price to a higher level, creating a valuation premium. Part of this shift comes from pinch and push, which strengthen a company’s brand, reduce risk, and fuel innovation. Another part comes from improved operating efficiency and reduced waste, which can significantly reduce costs and increase profitability.

In addition, a strategic approach to ESG issues can boost a company’s value by helping to attract financial and human capital. Responsible enterprises attract more funding and enjoy a lower cost of equity capital than their less responsible counterparts. They also have an easier time attracting talent – especially younger workers, who tend to be particularly conscious of social and environmental issues. These effects can help create a lasting competitive advantage.

Growing consensus indicates that ESG analysis adds value to investments. For asset owners, ESG integration may soon reach a tipping point: There is good reason to think that ESG considerations will become a regular component of investment decision-making in the future.

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Nordea Asset Management takes returns with responsibility to a new level to ensure competitive, consistent, and responsible returns on all funds

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All Nordea Asset Management’s products now include environmental, social, and governance (ESG) data as one of the factors used in assessing investments. The aim is to ensure better and more consistent returns on customers’ investments.

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Environmental, social, and governance issues are increasingly a source of both risk and opportunity. Therefore, we seek to integrate ESG issues into our investment analysis methodology. Potentially, this is a source of better performance and, at the very least, it is a way of controlling risk in an investment portfolio. Good returns for our customers are the focus of Nordea Asset Management which necessitates taking ESG issues into account in all the company’s investment products.

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This has the added advantage of increasing transparency. Nordea Asset Management customers will know at all times how ESG issues are handled. This information can in turn be passed on to the customers’ stakeholders as part of their communication on how money is being invested. “Money that has been earned in a responsible way should also be invested in a responsible way,” says Allan Polack, CEO of Nordea Asset Management.

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The process developed at Nordea Asset Management is now gradually being implemented. It offers an approach that is considered particularly promising, although it will take time to obtain the full results and conclusions of the ESG integration effort.

Nevertheless, it is the stated ambition of Nordea Asset Management to leverage ESG analysis and engagement solutions in order to embed ESG across all investments processes. The company is committed to assisting clients with the adoption of responsible investment strategies that enhance long-term investment performance.

Today, Nordea Asset Management offers an opportunity to steer investments towards the future and once again rebuild portfolios for the long term. Responsible investments will create opportunities and rewards, but this will also mean challenging the pernicious orthodoxy of short-termism. As an inflection point in the global economy and the global environment is reached, the imperative for change has never been greater.


“He sounded like Jean-François Revel, a French socialist writer who talks about one of the great unexplained phenomena of modern astronomy: namely, that the dark night of fascism is always descending in the United States and yet lands only in Europe.”

The 1962-3 New York City newspaper strike deprived the US metropolis’ inhabitants of broadsheets and tabloids for all of 114 days. The Daily News was the first paper to be shut down, followed by The New York Times, Post, Herald Tribune and a host of others when talks collapsed and the workers of the NY Typographical Union walked out.

The strike proved a boon to magazines. Amongst others, it begat the New York Review of Books – undoubtedly still one of the world’s finest literary journals and the preeminent redeeming feature of contemporary US culture. The strike also gave Tom Wolfe his first break. On leave from the shuttered New York Herald Tribune, he was asked to write an article for Esquire magazine on the lively hot rod scene of Southern California.

Struggling with the assignment and with a deadline looming large, Tom Wolfe sent his editor a letter explaining in great detail what he had wanted to write about the subject – but couldn’t. The editor, Byron Dobell, simply removed the “Dear Byron” from the top and published Wolfe’s letter – talis qualis – In the magazine. The reportage, breaching all journalistic style and convention, became the basis of There Goes (Varoom! Varoom!) That Kandy-Kolored Tangerine-Flake Streamline Baby – Tom Wolfe’s literary debut and an instant classic.

In 1965, The New York Times described Mr Wolfe as “a genius who will do anything to get attention.” The reviewer drawing this conclusion was none other than Kurt Vonnegut who would go on to attain cult status with Slaughterhouse-Five (1969). Mr Vonnegut was right on the mark: Tom Wolfe was set to surprise all and sundry with outrageous titles such as The Electric Kool-Aid Acid Test (an account of writer Ken Kesey’s LSD-fuelled cross-country road trip with a group of friends known as The Merry Pranksters), The Pump House Gang (on the 1960s surfers’ counterculture), Radical Chic & Mau-Mauing the Flak Catchers (on the moneyed elite’s love affair with the Black Panther Party), and Mauve Gloves & Madmen, Clutter & Vine – a collection of essays loosely themed around the liberals’ well-known penchant for romanticising the plight of the poor.

After finding his literary groove, Tom Wolfe relentlessly pumped out remarkable reportage and gave rise to New Journalism, superimposing literary styles and techniques previously reserved for work of fiction on fact-based journalistic endeavours. His book on the astronauts of the Mercury space programme and the test pilots of Edwards Air Force Base living on the cutting edge of aeronautical research – The Right Stuff – was adapted for the silver screen in 1983. The eponymous movie received eight nominations for the Academy Awards and went on to claim four of them.

Tom Wolfe reached the apex of his career with his 1987 (debut) novel The Bonfire of the Vanities (also made into a successful movie) about the apparent lack of control people exercise over their own lives, regardless of riches or wisdom. The book narrates the painful fall of Sherman McCoy as he tumbles from Park Avenue to Skid Row and beyond.

The mixed reviews his next novel, A Man in Full, elicited erupted into a delicious literary row – if not brawl – pitching Tom Wolfe against titans as John Updike, John Irving, and Norman Mailer who dared criticise his story-telling techniques. In return, Mr Wolfe reminded the “three stooges” – as he branded his antagonists – that while high-brow literature may have a place and function, it also fails to connect with, or engage, readers. In his review, Norman Mailer – an early adopter of New Journalism and cofounder of The Village Voice – couldn’t help notice that A Man in Full had sold well over 750,000 copies and concluded, magnanimously, that its author must be on to something. And so it is.

Title
The Kandy-Kolored Tangerine-Flake Streamline Baby

Author
Tom Wolfe

ISBN
978-0-0994-7938-3

Link
http://www.amazon.com/gp/search?index=books&field-isbn=9780099479383


Danièle Nouy: Getting Tough with Bankers

[caption id="attachment_13455" align="alignright" width="300"] Danièle Nouy: Chair of the Supervisory Board at the European Central Bank. Daniel Roland | AFP | Getty Images[/caption]

It is her job to keep Europe’s banks on the straight and narrow and remind their executives that honesty pays. During her four years as chairperson of the European Central Bank’s (ECB) supervisory board, Danièle Nouy made few friends in the financial world: as a strict principal she showed no tolerance whatsoever for the follies some bankers engage in when challenged by circumstance.

Earlier this year, Irish bankers found out that Nouy does not favour polite conversation when discussing their plight. She bluntly told them, on RTÉ national television, that they “do not deserve” any bonuses until Ireland’s banks have fully cleared up the mess left in the wake of the financial crisis. Reminding the bankers that they still have plenty of work to do on their bloated balance sheets, she wondered aloud if this was the right time to discuss bonuses. To make her position abundantly clear, she added: “Definitely not, in my view.”

Troubled banks – those perilously close to needing ECB life support – are required to apply to the ECB for permission to top-up their executives’ salaries or pay dividends to shareholders. Nouy takes a dim view on banks that “sort-of” address their issues in order to quickly revert to their old ways. She routinely rejects such requests.

Nouy is the architect of the ECB’s single supervisory mechanism (SSM), the first building block of the banking union to provide added resilience to the eurozone. In November 2014, the SSM took over the role of national entities in monitoring the financial stability of banks in all eurozone member states. Initially, the SSM suffered from a number of deficiencies which came to light during the first stress-test it jointly organised with the European Banking Authority. The remedies imposed on a few weak Italian banks ultimately proved too lenient, and insufficient to ensure their survival under adverse market conditions.

"Nouy is the architect of the ECB’s single supervisory mechanism (SSM)."

Nouy learned from her faux pas and has since shown no mercy to banks that fail to meet the tightened capital adequacy requirements. She also helped establish the ECB’s reputation for toughness, particularly when it comes to dealing with financial institutions that keep non-performing loans (NPL) lingering on their balance sheets. Nouy repeatedly clashed with national regulators – often still a bit resentful for having lost a considerable chunk of their heft to the ECB – as she forced banks to disclose and address the full extent of bad loans. She also got her way in Italy, and forcefully convinced banks to significantly reduce their NPL portfolios.

Following that, Nouy launched a broad investigation into the more esoteric parts of banks’ balance sheets, such as the size and quality of Level 2 and Level 3 assets, which may roughly be defined as illiquid instruments that are not usually traded and can therefore not be readily or objectively valued. The programme aims to stop banks from overstating the value – and understating the risk – of these assets.

Nouy is particularly well equipped to detect and expose flaws in Europe’s banking system; she’s been inspecting banks for over 40 years, first at the Banque de France and later at the French Prudential Supervision and Resolution Authority, which she headed between 2010 and 2013, before being invited to join Mario Draghi’s executive team at the ECB.

As Nouy’s five-year term draws to a close, the race is on the find a worthy successor who can expand the role of the single supervisory mechanism she helped to build. The prime contender for the job – also possibly the only one to have submitted an application (the ECB has so far failed to publish a shortlist of candidates) – is Sharon Donnery, deputy governor of the Central Bank of Ireland.

The first order of business awaiting Nouy’s replacement is to deal with the sudden influx of a considerable number of larger investment banks that are preparing to up-stakes in London and descend in the eurozone after the UK exits the European Union. Ultimately, however, the choice of a successor is likely to be gender-inspired. The ECB’s governing council is known to favour female candidates to address its gender imbalance at the top. This helps explain why three male candidates informally suggested by Italy have declined to submit their applications.

After stepping down from her job on December 31, Danièle Nouy will retire from public life. Her boss, ECB president Mario Draghi, has another year to go before his non-renewable eight-year term expires. Draghi will hand over the reins to the ECB in October 2019.


The Roca Brothers: Community-Based Solutions for Food Security

To become the best is not necessary to go global. Spain’s three Roca brothers, celebrated as royalty in foodie circles, believe that food security begins at home.

The brothers have repeatedly questioned the viability of current agribusiness models which see foodstuffs trucked over thousands of kilometres before reaching supermarket shelves or dinner tables. The Rocas also advocate for the preservation of local and regional culinary traditions that enrich food diversity.

Jordi, Joan, and Josep Roca own and operate El Celler de Can Roca restaurant in Girona, just north of Barcelona. Established in 1986, the small and intimate restaurant seats no more than 45 patrons – who have secured reservations by booking almost a year in advance. Online booking is only available from midnight on the first day of each month and usually closes within a few minutes; slots get fill up rapidly.

As is to be expected at a restaurant twice voted best in the world, a three-course meal doesn’t come cheap, though it is still considered value at an average of €190 per person, plus another hundred or so for the wines. That compares favourably to Sublimotion on Ibiza, another of Spain’s top restaurants, which charges diners close to €2,000 for a tasting menu.

Head chef Joan Roca i Fontané, the oldest brother, is famed for his sous-vide style of slow cooking which can take up to 72 hours. He travels the world to promote his cuisine and his philosophy, a passion for excellence, family life, and, of course, gastronomy. He aims to rescue original flavours via the meticulous control of cooking temperatures. His first signature dish was also the one that brought him near-instant fame: warm cod served with spinach and a cream of idiazabal cheese, pine nuts, and a slowly thickened sauce of Pedro Xímenez sherry. Later, Joan Roca offered novel creations such as honey-laced foie gras and pork dewlap with green pepper samfaina, one of the basic sauces of the Catalan cuisine.

The Roca brothers receive considerable praise for their culinary research which has resulted in, among other things, improved techniques for cleaning oysters. They regularly publish their experiments and findings in peer-reviewed papers on topics as varied as the use of smoke in the preparation of food and the many ways in which customised distillates can be employed to enhance taste sensations. Recently, the Roca brothers have ventured into street food with a dedicated bar at Barcelona’s upscale and trendy Hotel Omm, where they also run the Roca Moo restaurant, a 2.0 version of one of the city’s most celebrated and traditional fine dineries.

Goodwill ambassadors of the United Nations Development Fund since early 2016, the Roca brothers have been at the forefront of the global campaign to raise public awareness of the Sustainable Development Goals (SDGs) that seek to eliminate hunger, unemployment, climate change, and inequality. The brothers focus their efforts on questions of food security and advocate for a food chain that is not only sustainable, but inclusive. The Spanish chefs were the first UNDP goodwill ambassadors to be appointed following the definition of the SDGs and will particularly contribute towards innovation in the growing, processing, preparation, and serving of nutritious food.

Joan Roca explained that food security encompasses much more than just ensuring superior crop yields and includes other essential elements, such as the protection of local sources and types of food, and the preservation of time-honoured culinary traditions that have grown out of specific circumstances and are often best-suited to ensure the most efficient use of limited resources.

The brothers are also involved with the establishment of training centres in a number of developing countries to help local communities combat waste, improve market conditions, and promote small businesses, particularly farmers who are often left out of the food equation altogether. “By entering into a dialogue with the farmers who work the land and grow the food, it is possible to improve livelihoods, boost the availability of high-quality food, and ensure the wellbeing of entire communities,” says Joan Roca.


Dubai Ranks First Globally in Attracting FDI for AI & Robotics

[caption id="attachment_13472" align="alignright" width="300"] Dawood Al Shezawi, CEO of Annual Investment Organizing Committee[/caption]

Dubai ranks first globally in attracting foreign direct investments (FDI) for artificial intelligence and robotics

The emirate has attracted from 2015 to 2018 $21.6 billion worth of FDI in high-end technology transfers with the most from the European Union and the U.S. — $5.7 billion and $3.9 billion, respectively

Annual Investment Meeting (AIM 2019) to highlight strategies and mechanisms for enhancing tech solutions to draw FDIs

Dubai, United Arab Emirates, 17 March 2019: Dubai ranked first globally in attracting foreign direct investments (FDIs) for artificial intelligence and robotics; while the UAE ranked sixth in the global Smart Service Index, surpassing the US, UK and South Korea. The Emirate has attracted from 2015 to 2018 $21.6 billion worth of FDI in high-end technology transfers, with the most from the European Union and the U.S. — $5.7 billion and $3.9 billion, respectively.

These figures were released in connection with Annual Investment Meeting (AIM 2019), which will be held from 8th to 10th April in Dubai. The organisers of AIM said that digitalisation is becoming an increasingly important part of globalisation, and the fact that Dubai ranks on the top position for artificial intelligence and robotics confirms that the city is fast emerging as the global destination for investment in smart technologies.

While AI adoption will account for 45 percent of the world economy’s total gains by 2030, the UAE ranks first in the Arab world in terms of expected annual growth of AI contribution to the economy at 33.5 percent, followed by Saudi Arabia at 31.3 percent, the rest of the GCC region at 28.8 percent and Egypt at 25.5 percent.

“Digital growth is significant to the growth of the economy. In the UAE, it is in line with UAE Vision 2021, which aims to position the country as a top spot for tech investments,” said Dawood Al Shezawi, CEO of Annual Investment Organizing Committee.

Annual Investment Meeting is the world’s leading platform for FDI, aimed at facilitating strategic networking and promoting investments. Power-packed with international investment community, this exalted gathering witnesses high-ranking policy makers, business leaders, regional and international investors, successful entrepreneurs, leading academics and celebrated financial experts showcasing up-to-date information and strategies on attracting FDI.

“Disruptive technologies like AI, blockchain, internet of things (IoT) boost the productive capacity of countries and also the global GDP. To maximize its benefits, countries need to integrate new avenues that will drive more investments in these solutions,” added Mr. Shezawi.

At the upcoming Annual Investment Meeting (AIM), experts will highlight strategies and mechanisms for enhancing tech solutions to draw FDIs, in addition to highlighting internal and external incentives that encourage companies to adopt these solutions. The three-day exhibition will also offer opportunities for governments and private organizations to launch and promote their projects to a vastly diverse audience.


Rakesh Rawal, CEO of Anand Rathi Wealth Services Ltd Makings of a Great CEO: Professionalism, Humility and being a Good Human

[caption id="attachment_20217" align="alignright" width="300"] CEO: Rakesh Rawal[/caption]

What excited you about the businesses you worked for during your earlier career, and what excites you about the business you now lead?
Rakesh Rawal: In my earlier career I worked for Hindustan Unilever. What excited me in those days was how successfully a business can be run in India. That it can be done in the most ethical manner, and with complete professionalism. Every decision taken by the company was thought-through and backed by data and mathematics. I am glad I was part of that wonderful journey.

The second thing that I did in my journey was to run my own business. The excitement of doing that is always high. What excites me about my current business is that it started off as an experiment in wealth-management, which was genuinely customer-centric – in an Indian and global environment. This concept was dying, so we were standing alone to explore this experiment. Whether we would succeed or not was up in the air. Now, after 12 years, I believe that this thought has taken shape and gathered momentum. I believe that, in the future, and under the stewardship of (deputy CEO) Feroze Azeez, this will create a name not only in the Indian echelons of business, but globally. That excites me.

What is special about the management style at your organisation, the team you lead, and the workforce?
Rakesh Rawal: There is nothing special about what we do. I think the only principal that we follow is that we do not create a distinction between the relationships that we build at home, with friends and on the personal side, and the relationships that we build at office. It is strange that (businesses) spend 60% of their waking life in the office, but follow methods of relationship-building which are not the best. I question that, and say “Why should 60% of my waking life not also be as joyful as the 40%?”. If you treat your colleagues as friends, in a genuine fashion, you end up building a culture which is a differentiator, and a much happier culture. A happier person is more likely to give great output, and that leads – as a corollary – to phenomenal returns for the business.

How would you characterise short to mid-term prospects for the industry in which you operate?
Rakesh Rawal: I think that the prospects of the wealth management industry – short- to mid-term, as well as long-term – are endless. The economy is growing at a sustainable rate of 7-8%. This then automatically leads to a large number of billionaires created – and they need to be serviced. This industry is constrained by supply rather than demand. So, I think that the prospects for this industry are phenomenal.

What are the personal and business strengths that qualify you as a corporate leader?
Rakesh Rawal: There are just two parts - one, the ability to think and strategize and two, the courage to implement differentiated ideas where you do not have the security of numbers. Third, being a good human being and encourage people to be good human beings and show to them that good human beings can be No. 1, hugely successful and so much enjoyable to lead a life rather than a rat in the rat race. Fourth, humility in a person classified by the world as successful is mandatory. My Guru used to say, 'Be like the Bamboo tree, the higher you grow, the deeper you bow.' This trait is admired, acceptable and sustainable across the world. Look at the industry and world leaders such as Sundar Pichai, Indira Nooyi and our Indian Prime Minister Narendra Modi. These practices are not applicable only to the wealth industry but all the industries as well.

What are your short-term hopes for the future of your business and the industry as a whole?
Rakesh Rawal: I believe that for the next 20 years, our business should grow at a 25% compounded rate, in all terms – assets under management, revenue and number of hires. I think that the industry has immense potential, and I am sure my competition will have healthy growth as well.


Håvard Halland and Justin Lin: How to Mobilise Private Capital for Climate Finance

The conclusion of the United Nations Intergovernmental Panel on Climate Change’s most recent report is stark: climate action is far more urgent than previously believed.

Action must include a wide range of initiatives, from improved regulation to continued technological innovation. But without massive amounts of long-term “patient” capital – which only institutional investors can muster – it will be impossible to transform energy systems fast enough to mitigate the risk of ecological, economic, and social disaster.

Technically, institutional investors – such as pension funds, sovereign wealth funds, and insurance companies – hold sufficient financial firepower to address climate change, and some are seeking to align their portfolios with the UN Sustainable Development Goals (SDGs). In OECD countries alone, institutional investors control an estimated $92 trillion in assets. Annual official development assistance by multilateral finance institutions (MFIs) and governments amounts to just 0.16% of that – about $145 billion.

But, as commercial actors, institutional investors’ primary objective is to maximise financial returns. Even as some purge their portfolios of carbon-intensive companies, they generally consider investing in new clean-energy infrastructure projects to be too risky, particularly in emerging markets.

"Simply put, in order to mobilise institutional capital effectively, MFIs will need to start functioning more like private investment organisations."

To finance the SDGs, including clean-energy infrastructure, MFIs have committed to mobilise capital from private investors. This mobilisation takes place largely through so-called blended finance, whereby MFIs and other public finance institutions use their own capital to crowd in private financing. Yet, institutional investors have been largely absent from multilateral blended-finance initiatives, which have in turn failed to achieve a scale relevant to climate change.

So what will it take to mobilise the needed capital from institutional investors? A recent paper by researchers at Stanford and Maastricht universities suggests a focus on three recent developments in the global financial sector.

First, a growing number of institutional investors are reducing their dependence on financial intermediaries. Institutional investors have traditionally outsourced their investments to investment-management firms, whose performance is generally assessed on a quarterly basis. Yet the investment horizon for infrastructure, including clean-energy infrastructure, is often more than 20 years.

From the perspective of blended finance, traditional financial intermediaries, with their short-term biases, constitute a bottleneck between institutional investors and MFIs. The elimination of such intermediaries could thus provide new opportunities for direct cooperation between institutional investors and MFIs, as it enables the former to focus more on investment in long-term assets.

Second, many institutional investors are establishing collaborative platforms to enable cost-sharing on deal sourcing, due diligence, and other stages of the investment process. Each of these platforms represents a large amount of long-term capital. But, with few exceptions, they do not include MFIs.

Third, there are new types of local strategic investors that can be highly effective at mobilising private capital, including from institutional backers. Over the past decade, at least 20 countries have established state-sponsored strategic investment funds to co-invest in infrastructure projects with private-sector partners. Other countries have established green banks, whose domestic focus reflects the fact that 90% of private climate-finance investments are made within the capital’s country of origin.

The strategic investment funds that have successfully mobilised private capital are structured much like private investment organisations. They emphasise the independence and integrity of the investment decision-making process; and their boards and board committees have a high share of independent directors selected for their financial and business expertise. Some funds, such as India’s National Investment and Infrastructure Fund, are owned mainly by private and institutional investors, with the government in a minority position.

Managed by finance professionals recruited from the private sector, these strategic funds invest primarily in equity, and take an active role in structuring and arranging new deals. Because they are linked to local government and business networks, they are in a strong position to mitigate local risk.

MFIs, by contrast, tend to emphasise country representation on their boards, leaving these boards with less financial-sector expertise in the relevant sectors. At the management and staff level, the private sector branches of MFIs frequently have expertise in a wide range of sectors. In spite of this, MFI boards generally do not, like their private counterparts, establish a broad investment policy and delegate decisions on individual infrastructure projects to an independent investment committee; instead, they themselves make the decisions on capital allocation.

Given MFIs’ bureaucratic structures and frequently cumbersome procedures, institutional investors tend to be sceptical about MFIs. Institutional investors often consider the projects MFIs pitch to be too small, too risky, or not profitable enough; and they also worry that, if something goes wrong, MFIs’ bureaucracies will not permit them to address it swiftly.

Whereas MFIs have expanded their offers of risk-mitigation for investors, they remain overwhelmingly providers of debt. Crucially, they invest very little in infrastructure equity. This is a significant distinction, because whereas equity investors frequently take an active role in structuring and arranging new infrastructure projects, providers of debt and risk mitigation generally engage once a project is fully documented and confirmed as “bankable”.

To achieve their goal of mobilising private-sector capital, MFIs need to engage on institutional investors’ collaborative platforms, and address these investors’ concerns. This means helping them to assess and mitigate risk in new regions and sectors where green infrastructure is needed, if appropriate in co-operation with local strategic investment funds and green banks.

By developing the capacity to assess and bear risk on commercial terms, traditionally risk-averse MFIs could engage more productively with institutional investors. And by building up the capacity to undertake equity investment in clean-energy infrastructure, MFIs could increase their capacity to engage with institutional investors at relevant stages of the infrastructure-investment cycle.

Simply put, in order to mobilise institutional capital effectively, MFIs will need to start functioning more like private investment organisations, even as they fulfil a policy-defined mandate. This is a tall order; the OECD has suggested that efficient private capital mobilisation may require a culture change within MIFs. But, if we are to curb climate change and achieve the SDGs, it could be the only way for MFIs to mobilise institutional investor capital at any relevant scale. i

About the Authors

Håvard Halland is a visiting scholar at the Stanford Global Projects Center, Stanford University. His research focuses on strategic investment funds, sovereign wealth funds, development finance, and climate finance. He was previously a senior economist at the World Bank.

Justin Yifu Lin, former Chief Economist of the World Bank, is Dean of the Institute for New Structural Economics and the Institute of South-South Cooperation and Development, and Honorary Dean at the National School of Development, Peking University. His recent books include Going Beyond Aid: Development Cooperation for Structural Transformation and Beating the Odds: Jump-starting Developing Countries.


Bahrain Minister of Industry, Commerce, and Tourism Zayed Bin Rashid Al Zayani: Maintaining and Expanding a Leading Edge

[caption id="attachment_13481" align="alignright" width="263"] Minister of Industry, Commerce, and Tourism: Zayed Bin Rashid Al Zayan[/caption]

The smallest economy of the Gulf Region registered solid growth, adding a robust 2.4% to its GDP over the past 12 months, courtesy of a steady rise in crude oil prices and a buoyant non-oil private sector. Bahrain has little oil of its own, but the kingdom benefits from its neighbours’ resources.

The Bahrain Economic Development Board (EDB) noted that the economy is firing on all cylinders with every major sector contributing its share to the upswing. EDB Chief Economist Jarmo Kotilaime emphasised that Bahrain’s growth dynamics are firmly linked to non-oil drivers that now represent close to 80% of GDP.

The International Monetary Fund (IMF) forecasts that the country is looking at 3.2% growth in 2018, down slightly from 3.8% the previous year. The fiscal deficit, though sharply down, is still deemed a tad too high, while the debt-to-GDP ratio has ballooned to 82%. But the IMF praised the Bahrain government for the structural economic and fiscal reforms it is pushing through with the help Kuwait, Saudi Arabia, and the UAE, which have jointly provided Bahrain with $10bn in support.

To eliminate the budget deficit, the kingdom’s government unveiled plans to sell parts of its stakes in three large logistics companies. The plan is to float around 20% of these companies’ shares on the Bahrain Bourse. The divestment is part of a wider plan to cut deficit spending by reducing overall outlays. The programme also aims to improve efficiency, promote a voluntary retirement scheme for civil servants, and introduce VAT at an initial rate of 5%.

Building a Dynamic Economy

Bahrain minister of Industry, Commerce, and Tourism Zayed Bin Rashid Al Zayani told CFI.co at the World Investment Forum in Geneva that the kingdom is building a vibrant economy on solid foundations, to be driven by technology and innovation. Bahrain wants to become a greater hub of global talent; a place where bright minds meet to find inspiration, tinker with ideas, and launch products and services.

“We need to keep revitalising our economy – and society,” he said. “We also want to bring in new businesses, new talent, and new ideas. It is our expectation that by transforming Bahrain into a centre of excellence, innovation, and – why not? – entrepreneurial disruption, our local business community will get excited, and involved as well, and change its mindset slightly in order to become part of this transformation.”

Al Zayani thinks that the kingdom is well equipped to latch onto the Fourth Industrial Revolution, and help to drive it. Bahrain has an edge over the competition in that it boasts modern judicial and educational systems and offers a high standard of living. Next year, the kingdom celebrates a full century of formal education. The main assets of the kingdom are, however, often overlooked. It has a highly-educated and computer-savvy population and enjoys “a very high sense of business ethics, which actually may constitute our best selling point”, says Al Zayani.

Thanks to to its low-intensity regulatory environment, businesses often find it cheaper and easier to serve the wider Gulf Region from Bahrain. “Essentially, we offer the best of both worlds with an ample pool of local talent and the ability to bring your own expertise as required.”

Competitive Advantages

The minister dismisses any talk of “untoward competition” between member states of the Gulf Co-operation Council (GCC) and says the “cake is big enough” for all to share. “There is a healthy degree of competition in the region, and we appreciate that, for it keeps us on our toes. Competition for investment and business also stops us from becoming complacent. However, GCC member states quite often complement each other as well, which encourages co-operation and joint ventures. In due time, this will perhaps lead towards a customs union or a single currency.”

Some competitive advantages derive are geographical – such as Bahrain’s position at the very heart of the GCC. It is no more than a 45-minute flight from any GCC member state. Riyadh or Kuwait City are within a four-hour drive. As far as accessibility goes, Bahrain is hard to beat.

Home to one of the freest economies in the Middle East, and regularly amongst the fastest growing countries in the world, Bahrain is considered a textbook example of how to diversify from dependency on a single commodity. With dwindling oil reserves (the present production level hovers around 40,000 bpd), the kingdom realised in the 1980s the urgent need to replace the support pillars of the local economy. Embracing liberalisation, Bahrain managed to expand into heavy industry, tourism, and banking. The country now boasts one of the world’s largest aluminium smelters and has become a world-class banking hub in Sharia finance.

The business capital of the Gulf is now set to become its silicon island. “The government’s National Sustainability Plan includes ambitious targets, such as a drop in energy usage of 6% by 2025 – even accounting for economic growth. That, and our other goals, call for the deployment of new technologies which we’d like to see developed right here.” Al Zayani admits that much attention has been given to the kingdom’s e-mobility programme but explains thatit represents just one vector of a much broader approach: “We’re moving into solar energy ‘big time’, aiming to generate in excess of 100MW before long.”

Bahrain did not escape the malaise of the Gulf Region following the drop in oil prices that began in 2008, and only bottomed-out seven years later. The country was quick to respond by deepening its reform agenda and its reputation as a place always open for business.

Next stop: driving the Fourth Industrial Revolution as it engulfs the region, opening a wealth of opportunities as the post-oil future dawns.

Most promising investment sectors: e-Mobility // High-Tech Innovation // Logistics // Financial Services


Over 1,700 Projects Worth USD 1tn Fall Under China’s Ambitious One Belt, One Road Initiative (OBOR)

Annual Investment Meeting 2019 to host AIM-OBOR Forum

With more than 1,700 projects worth USD 1 trillion, China’s ambitious One Belt, One Road Initiative aims to positively impact 4.4 billion people, or 65 percent of the world’s population that equals to about 40 percent of the global gross domestic product (GDP). Spanning across to 70 countries across Asia, Europe, Africa, and Oceania, the One Belt, One Road Initiative has been allocated over $340bn in construction contracts secured by Chinese companies.

These statistics were released in conjunction with the upcoming Annual Investment Meeting which will be held from 8th to 10th April in Dubai focusing on ‘Mapping the Future of FDI: Enriching World Economies through Digital Globalization. ’This year, the forum will put a spotlight on China’s ambitious One Belt, One Road Initiative through a full-day special forum, which will be held on the second day of the event. It will provide participating high-ranking Chinese officials with an international platform to present the plans for the One Belt, One Road Initiative and to strengthen investor confidence on the same. In addition, the workshop will brief the business community worldwide with various investment opportunities running around the mega project.

“The Belt and Road Initiative will pave the way for a stronger trade ties within Asia, the Middle East, and Europe. Targeted to be completed by 2049, the landmark project will bring about inclusive growth, spur unprecedented development, and enhance cooperation, trade, and investment worldwide. AIM is founded based on these objectives too, thereby prompting us at the organizing committee to host this special event this year to keep with our commitment to highlight investment opportunities around the world under the support of respective governments,” said Dawood Al Shezawi, CEO of Annual Investment Organizing Committee.

During the forum, renowned keynote speakers will tackle various fundamental aspects of the project. There will be four sessions which will focus on infrastructure development, new technologies, renewable energy, and agriculture and food security.

While One Belt One Road Initiative will be a key topic at the upcoming Annual Investment Meeting, the premier international foreign direct investment (FDI)-focused platform will also offer high-ranking policy makers, business leaders, regional and international investors, successful entrepreneurs, leading academics, and celebrated financial experts an opportunity to discuss best practices and economic issues of global importance.


Annual Investment Meeting 2019 to Host Strategic Sessions to Draw Foreign Direct Investments

This year the event will witness the presence of 60 high level official

The organizing committee of the Annual Investment Meeting 2019, has completed the preparations for the upcoming event, which will be held from 8th to 10th of April in Dubai. More than 20,000+ corporate leaders, policy makers, businessmen, regional and international investors, entrepreneurs, leading academics, experts, and stakeholders from over 140+ countries from Europe, North America, Latin America, Africa, Middle East, and Asia are participating in the three-day event.

[caption id="attachment_13489" align="aligncenter" width="650"] H.E. Dr. Mohd Amin Liew Abdullah, Minister of Finance, Brunei Darussalam[/caption]

Some of the heads of states coming to the event are H.E. Evo Morales, President, Plurinational State of Bolivia; H.E Muhammadu Buhari, President, Federal Republic of Nigeria; H.E Rustam Minnikhanov, President of Tatarstan, Russian Federation; H.E. Ramzan Kadyrov, Head of Chechen Republic, Russian Federation; and H.E. Huchiev Muslim, Deputy Chairman of Chechen Republic, Russian Federation.

More than 60 high level officials including heads of state, government ministers, and other top public officials will join prominent global business figures, over 1,000 FDI experts, and representatives of Chambers of Commerce and Industry and business councils. They are set to tackle the most pressing challenges and key opportunities in the midst of exponential digital innovations, technological developments, and influential global trends.

H.E Mr. Fareedon Hartoqa the Secretary General of the Jordan Investment Commission (JIC), said, “We in Jordan, and at the Jordan Investment Commission (JIC), are committed to working with investors and businesses to facilitate their work in Jordan and maintain strong mutually beneficial relationships with those entities. JIC continues its determination on leveraging Jordan’s strengths. Our position in the heart of the Levant makes us a strategic platform to the GCC and MENA region. It also makes us an ideal global East-West hub. Our Free Trade agreements give us access to over one billion consumers. Jordan offers the ideal destination when looking for a manufacturing base, outsourcing center, distribution and back office operations. Jordan also could serve as a base for infrastructure and reconstruction projects in our region.”

A delegation from Bolivia will also participate at AIM. Widely regarded as the country's first president to come from the indigenous population, this is the first time any president from Bolivia has made it to the UAE. H.E. Evo Morales, President, Plurinational State of Bolivia, stated that Plurinational State of Bolivia intends to promote greater FDI such that at least 40 percent of Foreign Direct Investment contributes to diversify the productive matrix of the country and generates added value (productive industrial complexes, services and tourism) through partnerships in mixed state companies, in alliance with the central level of the State and Autonomous Territorial Entities. The Bolivian perspective aims to encourage foreign investors in a way that they become strategic partners and not owners of natural resources and surpluses. The country’s goal is that FDI should respect the country’s sovereignty, mother earth and the profits in the territory should be converted to strengthen the model of living well.

In addition, a delegation from Kingdom of Bhutan will also participate at the event. According to H.E. Lyonpo Loknath Sharma, Minister of Economic Affairs, Kingdom of Bhutan, the number of FDI projects approved in the year 2018 has more than doubled from the number in 2017. A total of 16 projects were approved in 2018 against just seven in 2017.

The Kingdom of Saudi Arabia, which has just recently formulated an open economy policy, gains a strategic move participating at AIM 2019. “We saw growth in both FDI inflows, which were 127 percent higher in 2018 than in 2017, and in the number of new licenses awarded. 739 new licenses were awarded in 2018, an increase of 96 percent on the previous year. This momentum has continued in 2019, with broad based growth across all sectors and geographies. The Saudi Arabian economy is undergoing a period of rapid transformation, and this is creating new opportunities for the private sector and international investors. Through Vision 2030, we have been able to introduce a number of new policies and reforms that are allowing investors to tap into these opportunities in an unprecedented way,” H.E. Majid bin Abdullah Al Qasabi Minister of Commerce and Investment, Kingdom of Saudi Arabia.

[caption id="attachment_13490" align="aligncenter" width="1280"] H.E. Evo Morales, President, Plurinational State of Bolivia[/caption]

Further, with the participation of Brunei Darussalam, AIM 2019 provides an ideal platform to push their economic agenda, specifically on attracting higher FDI this year. “As one of the biggest events on the global FDI calendar, AIM 2019 will provide the perfect platform for Brunei Darussalam to showcase the direct investment and collaboration opportunities, as well as the world class products and services we have to offer. As per revised 2017 figures, Brunei Darussalam recorded a Foreign Direct Investment (FDI) net inflow of BND635.3 million, equivalent to USD 470.37 million. This positive momentum continued into 2018, where a further number of FDI projects came online, particularly in the food sector. We are confident that the global conference will provide useful insights into the latest trends & challenges to enable us to deep dive and further refine our investment promotion strategy,” said H.E. Dr. Mohd Amin Liew Abdullah, Minister of Finance, Brunei Darussalam.

To be held under the theme ‘Mapping the Future of FDI: Enriching World Economies through Digital Globalization,’ the 9th edition will feature a series of conferences focusing on game-changing technologies that have been dramatically reshaping the nature of industries and business models of investors. It will tackle the profound impact of industry technologies such as artificial intelligence, robotics, big data, and blockchain, smart city solutions, sustainable economic practices, clean and renewable energy, and startups on international investments and trade.

“Trends towards sustainable development are transforming business and societies. This shift provides opportunities to target quality investment in those areas with greatest capacity to foster diversification and support sustainable development. The conversion towards renewable sources of electrical power generation is just one example where FDI and the public policies framework have played a key role,” said Mario Cimoli, Deputy Executive Secretary, Economic Commission for Latin America and the Caribbean (ECLAC), a United Nations regional commission based in Chile.

For his part, UNCTAD Secretary General Dr. Mukhisa Kituyi, said, “Digital development and other technological advances are largely seen as positive factors that will buoy investment. The adoption of digital technologies has the potential to transform the international operations of multinational enterprises (MNEs) and the impact of foreign affiliates on host countries. The impact of digital MNEs on host countries is less directly visible in physical investment and job creation, however, their investments can have important indirect and productivity effects, and contribute to digital development.”

This year’s edition will hold the ‘Global Leaders Debate’ session to tackle the overall theme and deliberate the best practices that warrant the creation of inclusive growth as well as evaluate governments’ legal frameworks and market-friendly policies favoring FDIs and the private sector. The Global Leaders Debate will host sessions titled 'Blockchain, Big Data & AI: Foreseeing the Impact of Digital Economies'; 'Countering the Global Rise of Protectionism Policies for Sustainable Growth'; and 'Investment Promotion Agency Roundtable: Attracting Investments in the 4.0 World'.

An Investors Debate will be staged on the second day along with plenary sessions on 'Family Office Roundtable: Investing in the Future'; 'Small and Medium Enterprise Focus: Strengthening SMEs in a Digitalized World'; 'FDI and Human Capital: The Evolution of Workforce in a Digitally Globalized World'; and 'Regional Focus: Withstanding Headwinds in the Foreign Direct Investment Market'. A special presentation on 'The Future of Work' will be hosted on the same day.

AIM 2019's 'Invest In' series will be held on the third day, focusing on Africa and Latin America and the Caribbean. The 'Invest In: Africa' session will talk about the benefits of the continent's digital transformation, while the 'Invest In: Latin America and the Caribbean' will shed light on how FDI can accelerate the digital transformation of the Latin American production system.

A three-day exhibition will simultaneously be held alongside the conferences. Over 500 exhibitors and co-exhibitors will be part of the exhibition to network, promote industry projects and services, and attract investors to various participating countries. It will also serve as an opportunity for governments and private organizations to launch and promote their projects to a vastly diverse audience.

[caption id="attachment_13491" align="aligncenter" width="670"] H.E. Majid bin Abdullah Al Qasabi, Minister of Commerce and Investment, Kingdom of Saudi Arabia[/caption]

Additionally, the AIM exhibition will provide participating countries with an opportunity to meet and connect with over 20,000 visitors and 1,000 conference delegates, including industry leaders and key stakeholders from the regional and international community through various networking functions. Some exhibitors include the Hong Kong Trade Development Council (HKTDC); Abu Dhabi Investment Office; ICEX SPAIN; Enterprise Georgia; Croatian Chamber of Economy; Botswana Investment & Trade Centre (BITC); and ANAPI - National Investment Promotion Agency.

Furthermore, participants will have an opportunity to learn more about China’s One Belt, One Road Initiative during a full-day special forum dedicated to the massive trillion-dollar construction project, which will significantly impact the economies of more than 65 countries across Asia, Europe, Africa, and Oceania.

To be held on the second day of the AIM event, the ‘One Belt and One Road Business Cooperation and Development Forum at AIM 2019’ will provide participating high-ranking Chinese officials with an international platform to present the plans for the initiative. In addition, they will brief the business community worldwide with various investment opportunities running around the mega project.

Another highlight of the event is its capacity-building workshops to be facilitated by a faculty of global FDI experts. A small group of 25 registered delegates will have a chance to learn more about FDI trends, projections, and investment promotion strategies, among others.

AIM 2019 will also hold the Country Presentations feature to give participating states a direct access to key decision-makers, government leaders, and investors. Taking part in this feature are 10 countries/investment destinations, including UAE, South Africa, China, Georgia, Italy, the Democratic Republic of Congo, Botswana, Sierra Leone, Cameroon and Indonesia. During the session, they can emphasize important economic features of and investment environment in their respective countries.

Moreover, a special zone called Investors’ Hub will be set up during the meeting for top investment houses and investment corporations, development banks, and Sovereign Wealth Funds representing different countries and covering multiple sectors. This feature will allow investors to meet with official government representatives as well as project developers to discuss the possibility of new ventures and potential partnerships.

As part of AIM’s onsite networking functions, bilateral G2G, G2B, and B2B meetings will be staged for government officials, private sector executives, businessmen, and investors to network, collaborate, and discuss among themselves investment projects and prospective partnerships from different regions. Additionally, the event will hold a rapid networking session for investors to meet with potential partners and introduce business opportunities. This feature is a dedicated platform for exclusive, quick one-on-one meetings offering a networking opportunity through a secured platform.

During the scheduled gala dinner, the AIM Investment Awards will take place to recognize the best FDI projects from each region of the world. Besides the winning countries, the Awards will honor their Investment Promotion Agencies as well for their successful investment promotion strategies and exceptional investment projects.

 “The Annual Investment Meeting will be held at a time when we need to ramp up investment activities worldwide as we strive to promote inclusive growth and sustainable development for all nations. Additionally, it is taking place against the backdrop of impressive digital transformation that is clearly influencing the latest FDI trends and developments. All these factors make Dubai the ideal host of AIM 2019 as the emirate and the entire UAE have been at the forefront of digitalization in the region as part of their bid to become one of the world’s preferred investment destinations,” Dawood Al Shezawi, CEO of Annual Investment Organizing Committee.

The UAE as an FDI destination remains ahead of other nations in the Arab region thanks to its strategic location, business-friendly environment, advanced infrastructure, ability to attract highly skilled human resources, and commitment to implement the best industry practices. In 2017, it received 40 percent of the total FDI flows to the Arab world and Western Asian nations. Additionally, in spite of the global FDI slowdown, the country’s FDI flows grew 7.8 percent to reach USD 10.4 billion during the same period.


UAE Backs China’s One Belt One Road Initiative at Annual Investment Meeting

His Excellency Abdulla Al Saleh, Undersecretary for Foreign Trade Ministry of Economy UAE stated,“ Trade activities to amount to $ 33 billion dollars between the UAE and China.”

Dubai, United Arab Emirates, 9th April 2019: The UAE is set to play a big role in China’s One Belt and One Road Project, as stated on the sidelines of Annual Investment Meeting (AIM), which runs until the 10th of April in Dubai. The 9th edition of AIM brought to focus several investments and projects associated with the initiative.His Excellency Abdulla Al Saleh, Undersecretary for Foreign Trade, UAE Ministry of Economy said, “The UAE is proud to host this forum as a testament of our strong economic and trade ties with China. The trade between two countries have been growing each year. We anticipate trade activities to amount to $ 33 billion dollars between the UAE and China. The UAE is an important trading partner for China. In addition, both the countries have several strategic partnerships in place to promote scientific research and renewable energy and water, and this cooperation is set to expand the mutual trade between the UAE and China. In addition, strategic partnership has been strengthened through signing of 13 MOUs between the UAE and China. This forum will not only help us exchange ideas, but also help us integrate sustainable trade and investment partnerships.”

Yi Zhang, Deputy Secretary General, China Chamber of International Commerce (CCOIC) said, “The OBOR is a great achievement for us. This forum will become the core platform for us to share our ideas and development policies. China and the Arab states have good and friendly relations and the OBOR initiative will catapult this relationship to a new level. There are lot of projects announced in OBOR. CCOIC is aimed at promoting business investments all over the world. It is one of the biggest China commerce federation so far. We are confident that the activities held in UAE will be promoted well and through OBOR we will scale the trade opportunities between China and the UAE.”

A McKinsey Global Institute Report found that globally, there is a need to invest an average of US$3.3 trillion annually in economic infrastructure in order to support currently expected rates of growth through to 2030. Emerging economies are projected to account for some 60 percent of that need.

Highlighting the importance of OBOR, Dr. Mukhisa Kituyi, Secretary General, United Nations Conference on Trade and Development (UNCTAD), Switzerland said, “OBOR is a great initiative. This model has led to the rise of investment in infrastructure development in China and Chinese infrastructure projects overseas. However, building capacity for economic activity goes beyond infrastructure. We need to understand the business models that have worked in China and move up the value chains by converting trade relations into global engagement.”

The Belt & Road Initiative is a $900 billion policy initiated by the Chinese government to build on ancient trade routes from China through central Asia by rail (Belt) and to Africa and beyond by sea (Road). The initiative covers 69 countries which make up 60 percent of the world's population and 40 percent of global gross domestic product (GDP), according to a report released by Knight Frank.

Raymond Yip, Deputy Executive Director, Hong Kong Trade Development Council (HKTDC) said, “Dubai continues to forge closer business ties with Hong Kong (HK) and our motherland China. HKTDC is the office trade promotion organization of the HK government which is maintaining an office in UAE from the early 70s. We have good faith and confidence in the country as we achieve milestones in very short time.”

Underscoring the importance of OBOR initiative, H.E. Marwan bin Jassim Al Sarkal, Executive Chairman, Sharjah Investment & Development Authority Shurooq stated UAE’s important position in developing trade and business in the region. He also outlined Sharjah’s role in boosting the economic growth being an important investment destination for Chinese investors.

Focusing on key projects across technology, renewable energy, and food and agriculture, the One Belt, One Road Initiative forum at AIM brought to focus several important highlights of the initiative.


Ian Fletcher, IBM: The Moral, Ethical & Societal Implications in a Smart-Human World

Every so often during our professional lives, something truly inspiring comes along, something that encourages us to look at the world from a completely different angle. This happened to me recently, when I came across what might be a Pandora’s box of exponential change – the Fourth Industrial Revolution (4IR). While the allegory of Pandora’s box may be emphasising the dramatic, and I don’t really expect 4IR to unleash horrors that will afflict all humankind, I do believe we are entering a world filled with immense uncertainty, as well as opportunity.

By enabling and accelerating the convergence of our physical, digital and biological worlds, 4IR has the power to change every aspect of our daily lives. It will unleash new journeys of discovery that will, in turn, force society to challenge a number of its core values and principles. As technological advancements continue to push new boundaries, we will constantly need to re-evaluate and balance the benefits of those advancements against the moral, ethical, social and economic impacts.

A double-edged Sword

The 4th IR won’t be dominated by any single technology or mega-corporation. Rather, it represents a convergence of many different elements that impact our interactions and experiences in the physical and virtual worlds. New game-changing technologies will straddle the traditional, physical world, reshape the digital landscape and facilitate human interconnectivity, using science, mathematics and biotechnology.

"Humans will be biologically interconnected with the future technology, developing an interdependency and reliance on its outcomes."

Many of these technologies are nothing short of astonishing, pushing the limits of what is acceptable to society, versus what is technologically possible – transforming science fiction into science fact.

On one hand we are witnessing an explosion in ground-breaking technologies that push the boundaries of our imagination, enabling radical new business models and providing solutions to problems that could previously only have been imagined. But these breakthroughs will come with real, if not unintended, risks to our lives and communities when they start to blur the boundaries between the physical, digital and biological. We, as citizens and recipients of these transformational changes, must acknowledge the payoff we are taking and how much we are prepared to risk or sacrifice to achieve new technological advances.

Our smart-human World

Over the past few years, artificial intelligence (AI) has become increasingly embedded in our lives, as personal assistants in our homes or as machine-learning applications in our businesses. In the Fourth Industrial Revolution, AI will become a more integral part of our culture, helping us make better-informed decisions and enhancing human cognition. In coming years, we can expect to see AI take a place around the boardroom table, providing real-time analyses, debate, counter-arguments and recommendations – based on the best data.

In February 2019, IBM’s Project Debater became the first AI system able to debate with humans on complex topics. The core technology breaks new ground in AI, including data-driven speech writing and delivery, listening, comprehension and the ability to model human dilemmas for more informed decisions. It sets a whole new benchmark for AI systems that listen, learn, understand and reason, since it can debate topics without prior training. Project Debater can create an opening speech by searching billions of sentences on the relevant topic, processing text segments to remove any redundancy, and selecting the strongest claims and evidence to form themes for a narrative.

It then pieces together the selected arguments to create and deliver a persuasive speech. Finally, it listens to the opponent’s response, digests it, builds a rebuttal, and creates an interactive conversation in real-time to support its perspective. This represents another breakthrough in humans and machines working together, and emphasises the importance of opening our minds to new and alternative points of view.

Quantum computing

We are witnessing an unprecedented and exponential growth in the use and understanding of personal and corporate data. Organisations will soon need to find ways to harness and manipulate that data more efficiently and profoundly. Current systems and architectures don’t scale well enough; the future of complex data computing may lie in the power of quantum.

Quantum computing can be viewed in this way: When a traditional computer reads a book, it does it line-by-line and page-by-page. Quantum reads an entire library – simultaneously. Or, put another way, what might take a traditional systems a million years to perform a task, a quantum computer could complete in seconds.

Quantum represents a new paradigm that has the potential to reinvent the worlds of business, science, education and government. Data simulations of environmental, industrial, chemical or pharmaceutical processes are representative of the sort of opportunities that quantum computing can serve. Analysing the genetic makeup of plants, gene-sequencing to develop drought-tolerant crops, and creating self-repairing paints – at the molecular level – would be possible.

Quantum computing’s algorithmic power could also be used to advance the next generation of machine-learning technologies that use self-adaptive neural networks, in real time, to drive autonomous robotics. With its exponential speed, quantum could become the tool of choice in healthcare, being particularly well suited today to oncology. But it’s a double-edged sword – quantum computer security must be addressed.

Given the current development of quantum computing power, potentially all electronic applications would become insecure. In theory, quantum computers could provide a vehicle for hackers to crack our numeric PIN codes in seconds. Developers will need to create new security protocols to protect algorithms from quantum hackers at source. This is known as post-quantum cryptography or homomorphic encryption. This is another area that IBM has already developed to safeguard future blockchain algorithms for example.

Immersive security remains one of the highest priorities for business. As globalisation becomes prevalent and more companies merge, share and expand, securing a diverse set of interconnect assets becomes vital. Quantum cryptography represents an opportunity to build security tools at a much deeper level. Companies must improve education and prepare well in advance by developing “quantum readiness” strategies.

Mirroring the human brain

Neuromorphic computing has been around since the 1980s, but is only now starting to enter the mainstream. Biologically inspired, energy-efficient computer chips mimic the neurobiological architectures of our nervous system, mirroring the brain’s synapse function. This hybrid analogue-digital chip architecture can form deep neural networks made up of a billions of neurons – the lightbulbs – and multiple billions of synapses – the wires, all independently learning. This technology opens up new possibilities for making the world smarter, and more connected. This next evolution of neuromorphic technology promises a breakthrough in computing power, revolutionising self-learning artificial intelligence, education, manufacturing, healthcare and self-driving cars. It also delivers key advantages around energy efficiency, execution speed, and robustness.

A human technology platform

We are on the brink of a new era of genetics, which will change the way we see and interact with the environment around us. It enables the use of our personal biology as a technology platform, whereby the body’s natural electricity becomes a conduit for wireless data transfer, connecting us through wearables and sensors to activate smart devices in the physical world.

These types of innovations will lead to a world of immersive experiences and interactions with everything we touch or sense. New biometric models are also emerging around memory-driven DNA computing, which uses human DNA, biochemistry and molecular biology as its storage mechanism, instead of traditional silicon-based media.

This new field of science, while in its infancy, demonstrates a different way of thinking, exploring the use of chemical reactions on biological molecules to perform computation. In the data-centric world of 4IR, there could be the ability to store information for hundreds or thousands of years, with minimal maintenance. Just one gram of human DNA can store billions of gigabytes of data, opening up all sorts of possibilities for smart-human connectivity, molecular simulation, backing up our biometric functions, or maybe in the future, our brains.

Science tells us that the human body holds approximately 20,000 genomes, our genetic makeup and the code of life itself. Genome technology is an integral part of the future foundation of medicine, and warrants serious consideration. Imagine holding our individual patient record on a strand of our DNA, and being able to share and monetise our biometric data with a globally interconnected healthcare ecosystem focused on the individual.

The outcome would be personalised, tailor-made treatment and medicines. This would drive down the cost of treatment and facilitate a move into preventive maintenance models, as well as an ability to forecast life-threatening illnesses.

However, another dilemma appears here – elitism. Having our genome read may also open us up to risks of segmentation by gender and economic circumstances, influencing decisions on whether or not a company will insure you based on your lifestyle or family history. Moral and ethical questions come with this connected world we are entering.

We are seeing tangible examples of these technologies being used today to benefit humankind. Young entrepreneurs – millennials who look beyond technological change to focus on the more consumable elements – ask how it can be accessed. A great example is Ayann Esmail, a 14-year-old entrepreneur who is the co-founder of Genis. He uses nanotechnology and quantum physics to significantly reduce the time and cost of gene sequencing. Genis allows an average person to sequence the genome, and to have access to personal medical treatments and bio-hacking tools. In 2008, the cost of extracting one genome was in the millions. Now it costs around $1,000.

Morals, ethics and imbalance

We are entering an era of transparency, where everything we do can be analysed, connected or shared. It's a world where nothing seems to be off-limits. What makes the Fourth Industrial Revolution different and perhaps harder to comprehend is that humans will be biologically interconnected with future technology, developing an interdependency and a reliance on its outcomes. This carries an air of inevitability that must be countered by the human element, to be supported by trust and inclusivity, and moral and ethical behaviour. If we lose sight of the positive and negative impacts of technology’s transformation of society, we risk leaving people feeling disenfranchised, unsure of their role.

Ethics and accountability will play a major role in addressing the imbalances within society, but this level of awareness and responsibility isn’t taking place in many areas. According to a recent study by IBM’s Institute For Business Value – Artificial Intelligence Ethics – executives are either unprepared for the changes or don’t understand the magnitude of what’s coming their way. While they recognise that AI is becoming central to business operations, they must consider how to address and govern potential ethical issues.

Executives believe data responsibility is the most important issue related to AI ethics, which suggests they are more focused on impacts on their enterprise rather than on society at large. Only 38% of Chief Human Resource Officers (CHROs) surveyed indicated their organisation had an obligation to retrain or upskill workers impacted by AI. This represents a real challenge to the workforce; business leaders should see the bigger picture, recognising their moral and ethical obligation to do the right thing. Governments will have an active role to play in enacting legislation for AI ethics and data transparency. Most executives (91%) acknowledge that there is some need for regulation to address AI ethics requirements.

Conclusion

The Fourth Industrial Revolution represents a transformational moment that will be limited only by our imagination and ability to innovate. In addition to the transformational technologies, we are witnessing the appearance of economical mega-trends such as “the sharing economy” (collaborative consumption), “self-sovereign identity” (monetisation of personal data), and the "Circular Economy" (extracting the optimum value from resources or assets). These all contribute to the new emerging landscape that is unrecognisable today.

Society and businesses are woefully unprepared to absorb the magnitude of change. If businesses are to thrive and be ready for 4IR – recognising the interconnected evolution from human-to-automation-to-digital-to-smart human – they must adopt agile business practices, and develop continuously evolving 10-year plans based on innovation and transformational disruption, rather than the short-term, tactical strategies of today.

This mighty double-edged sword that we now hold, together with its moral dilemmas and potential societal impact, yields enormous power. As citizens, developers, entrepreneurs and leaders, we owe it to the next generation to use this technology to make the world a better place to live in. I believe that when we look back on this moment in history, we will realise this was the start of an amazing and evolutionary human journey.

About the Author

[caption id="attachment_12846" align="alignleft" width="252"] Author: Ian Fletcher, IBM Institute for Business Value Director MEA[/caption]

Ian Fletcher was educated in the UK, building a successful career in IBM Global Services. With over 30 years’ experience in technology and business consulting services, Ian leads the IBM IBV C-suite Study for MEA. Ian also runs IBM’s thought leadership programme, advising clients on business transformation and strategy. Ian specializes on the impact of the Fourth Industrial Revolution and, in turn, its impact on the C-suite and society.

About IBM

IBM is a leading cloud platform and AI solutions company. It is the largest technology and consulting employer in the world, with more than 380,000 employees, serving clients in 170 countries.

About IBM Institute for Business Value

IBM Institute for Business Value, part of IBM Services, develops fact-based strategic insights for senior business executives.


<br>UAE is Recognised by CFI.co as Best FDI Destination in the Middle East

Following presentation of the Annual Investment Meeting  (AIM) Awards for FDI-agencies at a Gala Dinner at the Armani Hotel in Dubai on Monday 30th March, CFI.co was pleased to provide a special prize in further recognition of the outstanding investment environment efforts of the host country.

The UAE Minister of Economy, Sultan Saeed Al Mansouri received the award on behalf of the government and state in recognition of his country’s achievement in becoming the prime destination for FDI in the Middle East. The UAE has created an impressive global business hub from scratch during a very brief moment in history. The CFI.co prize also reflects the UAE’s success in creating a business environment conducive to solid FDI: one with world-class supporting infrastructure, superb living conditions for families, an attractive tax regime, a knowledge-based society, plus a dynamic, outward-looking and “go-to” business culture.

AIM, which was held at the Dubai international Convention and Exhibition Center, focused on ‘Sustainable Development through FDI Induced Innovation and Technology Transfer’. This was an important gathering of some of  the world’s leading FDI academics, experts and practitioners – including Knowledge Partner CFI.co – under the patronage of HH Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President, Prime Minister and Ruler of Dubai.