The Surprising Vitality and Resilience of NASDAQ

At the close of yesterday’s business, the tech-heavy NASDAQ index was just about forty points shy of hitting its all-time record high of 5,048.62 attained on March 10, 2000 (with an intraday peak of 5,132.52). The Dow Jones Industrial Index moved into positive territory in early 2012 and has since added another 54.7%, while the S&P500 crossed the line a year later and went on to gain 37.8%.

Celebrating a bull market lasting six years, the NASDAQ is, however, still a long way from recouping the losses incurred after the Internet bubble burst fifteen years ago once inflation is figured in. Corrected for inflation, the Dow is up 13.8% since its 2000 high, the S&P500 breaks about even at plus 1.4%, while the NASDAQ is still down 27.6%.

The good news is that tech companies have not yet run out of steam. In its latest evaluation of the broader market, BlackRock – the world’s largest asset manager with close to $4.6tn in its portfolio – points out that four tech giants (Apple, Cisco, Google, and Microsoft) between them have about $360bn in cash reserves. The deep pockets of this quartet contain fully a quarter of the total stash available to US corporations.

"Celebrating a bull market lasting six years, the NASDAQ is, however, still a long way from recouping the losses incurred after the Internet bubble burst fifteen years ago once inflation is figured in."

BlackRock analysts consider that tech stocks “still have some way to go” given that they represent a growth sector in a still maturing economic cycle. Also, today’s P/E (price-earnings) ratios are decidedly modest as the table below illustrates:

Company
2000 P/E ratio
2015 P/E ratio

Apple
-
15

Cisco
127
13

Google
-
19

Intel
43
14

Microsoft
57
16

After the market collapse of 2000 many pundits expressed doubt that the NASDAQ would regain the lost ground in their lifetimes. The low point was reached in October 2002 when the index has shrivelled to barely 1,114.

Interestingly, NASDAQ’s buoyancy is even more pronounced if the index is purged of Internet-related stocks. The exchange has profited handsomely from the strong performance of the US auto industry as carmakers try to lure buyers with ever-more sophisticated technology supplied by NASDAQ-listed companies. Biotech stocks also seem to be doing exceedingly well.


Germany: Immigrant Workers Benefit Economy

Germany’s opposition to British attempts to limit the freedom of movement within the European Union is grounded in economic self-interest rather than lofty principle. Instead of whining endless about the influx of workers from other EU member states, the Germans have embraced the newcomers as a welcome addition to the country’s strong economy. Some ill-informed Pegida malcontents notwithstanding, the government of Chancellor Angela Merkel is clearly aware of the economic boon the 500,000 or so new arrivals represent.

The Institute for Employment Research (IAB – Institut für Arbeitsmarkt- und Berufsforschung), part of the federal employment agency (Bundesagentur für Arbeit), has found that immigrant workers on average contribute €3,300 annually more in taxes and social security payments than they receive in benefits. IAB draws its conclusion from a detailed study on the economic effects of immigration conducted by the Centre for European Economic Research (ZEW – Zentrum für Europäische Wirtschaftsforschung) in Mannheim.

"The IAB found that most recent arrivals have higher educational qualifications than their native peers."

Net immigration into Germany has reached a twenty-year high: this year, the country expects to welcome close to 550,000 workers (up 10% over last year) to keep its assembly lines humming. According to the Organisation for Economic Cooperation and Development (OECD), Germany is now the second most popular destination for economic migrants after the United States. About 85% of newcomers hail from other EU member states such as Poland, Romania, Bulgaria, Italy, and increasingly Spain and Portugal. Fully 60% of the 1.7 million jobs created since 2010 have been taken up by non-Germans.

The IAB found that most recent arrivals have higher educational qualifications than their native peers. The institute concludes that without foreign workers, the German economy would have been significantly less resilient and, as a consequence, suffered more during the recent downturn.

As it is, Germany’s greying population will deprive the economy of up to 14 million workers – a third of the labour force – by 2050. These skewed demographics may also come to undermine the pay-as-you-go social security system and destabilise pension provisions.

According to IAB, intra-European labour mobility constitutes a cheap and cheerful fix that will shield Germany from an otherwise gloomy future. IAB estimates that the country needs to attract a minimum of 400,000 workers annually in order to keep its workforce stable and ensure strong economic growth.


A Synchrotron for Africa: Scientists Unite Behind Proposed Project

[caption id="attachment_9492" align="alignright" width="248"] The European Synchrotron Radiation Facility (ESRF) in Grenoble France.[/caption]

Of the world’s almost fifty synchrotron light sources, not a single one is to be found in Africa. That, however, may soon change. Later this year, a 15-member steering committee, comprised of European, US, and African scientists and government officials, will meet at the Synchrotron Radiation Facility in Grenoble (France) to discuss plans for the design and construction of a cyclic particle accelerator in Africa.

The initiative aims to boost scientific investigation on biomedical, environmental, and other problems of particular concern to the continent. Taking a cue from the Brazilian synchrotron – which is widely credited with enabling a significant increase in local scientific research – the facility envisioned for Africa is to provide the impetus for a surge in academic inquiry and cooperation.

Like the Brazilian synchrotron, the African accelerator is also meant to stem the exodus of scientists from the continent. According to a 2013 study conducted on behalf of the United Nations’ Department of Economic and Social Affairs, approximately 450,000 Africans with tertiary education degrees migrated to OECD (Organisation for Economic Cooperation and Development) member states over the 2007-2012 quinquennium. The study also found that in Sub-Saharan countries the emigration rate of highly-skilled people is up to twenty times higher than the overall rate.

"The initiative aims to boost scientific investigation on biomedical, environmental, and other problems of particular concern to the continent."

Professor Herman Winick, a physicist at the Stanford Linear Accelerator Center and the driving force behind the nearly-completed Middle Eastern synchrotron in Jordan, says that an African particle accelerator may be designed and built in under a decade: “It is necessary to bring countries together and commit to the project. Depending on construction costs, the proposed facility should require about $200m to complete.”

Prof Winick was instrumental in forging scientific cooperation in the Middle East which led to the construction of the SESAME (Synchrotron-Light for Experimental Science and Applications in the Middle East) – a 2.5 GeV (Giga electron Volt) storage ring in Allan, about 30km northwest of Amman. The SESAME initiative was launched in 1999 with construction beginning in 2003.

[caption id="attachment_9493" align="aligncenter" width="851"] The SESAME (Synchrotron-Light for Experimental Science and Applications in the Middle East) facility in Jordan.[/caption]

The project is backed by UNESCO (United Nations Educational, Scientific, and Cultural Organisation) and supported by the governments of Bahrain, Cyprus, Egypt, Iran, Israel, Jordan, Pakistan, Palestinian Territories, and Turkey which all contributed funds towards the realisation of the contraption. As such, SESAME cuts across political boundaries and enmities. The facility – already hailed as a landmark of international cooperation – is expected to emit its first light later this year.


Taxing Mobility: A Liberal Icon Gone Awry

The sale, earlier this week, of the publically-owned stake in cross-Channel rail operator Eurostar for £757m shows that pragmatism – or common sense – is still the rarest of commodities in Whitehall. The privatisation of British Rail, set in motion in the late 1980s and ongoing still, reads as a comedy of errors – or as a greed-filled tragedy.

Though in February 1993 Prime-Minister John Major told Parliament that “franchises will provide a better, cheaper, and more effective service for the commuter,” real life has reduced Mr Major’s assurances to a mockery.

The 7.29 Brighton to London Victoria, operated by Southern, has reportedly never arrived on time. This slowcoach may be an extreme example of shoddy punctuality; it is by no means exceptional. According to the private rail operator’s own statistics, 44% of its trains plying the route arrive late – meaning ten minutes or more after the scheduled arrival time.

Today, hopping on a train in Britain is the preserve of the deep-pocketed traveller. A single journey in the UK, made on the spur of the moment, is a proposition up to 50% more expensive than anywhere else in Europe. Budget-minded travellers may only access cheaper fares by making reservations well in advance.

"The 7.29 Brighton to London Victoria, operated by Southern, has reportedly never arrived on time."

Even so, in 2009 National Express East Coast – operator of the East Coast Main Line – was forced to appeal for financial assistance. When none was forthcoming, the company folded and the line was taken over by the hastily created Directly Operated Railways (DOR) – a holding company wholly-owned by the Department for Transport to run rail franchises on lines brought back into public ownership.

While most expected the East Coast Main Line – which connects London to Leeds, Newcastle, Edinburgh, and other large cities – to become a money pit under state management, and offer poor service to boot; it in fact turned a handsome profit of close to £300m which found its way to the Treasury. Late February, the line was taken over by Virgin Trains which will pay the state £3.3bn for the privilege of exploiting the franchise for eight years.

In between the East Coast Main Line and Eurostar, the UK government just received a windfall in excess of £4bn. Experience has proved that the improvements, cheap fares, and efficiency promised by John Major and countless others failed to materialise. Then again, privatisations are only seldom about delivering better services at lower cost: it is oftentimes a quick-and-easy fix to bolster the health of public finances.

Presently, Greece is being strongly encouraged to sell off its power grid, ports, and utilities in order to reduce the country’s debt to foreign creditors. Formerly an icon of liberal thought, privatisation has become yet another way to raise cash.

In Britain, the windfall may go some way to alleviate the still worryingly large budget deficit (estimated at 4.6% of GDP for 2015), though the government has pledged to use the proceeds of the Eurostar sale to fund new rail projects.

While this may make – some – financial sense, the proposed course of action also contains a degree of absurdity. The state is to invest public money in railway lines which then will be actioned off to the highest bidder who will recoup his investment by charging the public. Straightening this rather cumbersome (and wasteful) flow of cash, it becomes clear that the travelling public is paying the state excessive amounts of money to use facilities which were financed out of the public purse to begin with. High-priced fares are essentially an indirect form of taxation levied on mobility. Why not just say so?


China: Now You See It, Now You Don’t

At long last, China is living its very own Silent Spring. Or not. Since late February, well over 300 million Chinese have watched the 103-minute online documentary Under the Dome – a powerful crowd-funded exposé of air pollution and other forms of environmental degradation. Independent journalist Chai Jing shows how “mist” – the euphemism employed by authorities to describe the blanket of noxious fumes that regularly covers China’s major cities – affects public health.

Newly-installed Minister of Environment Chen Jining initially welcomed the release of the searing documentary and said he hoped the film would help spread awareness of the issues raised. Meanwhile, state news agency Xinhua showered Under the Dome with praise. Premier Li Keqiang also weighed in and called pollution a “blight on people’s lives” in what many pundits considered a nod of approval.

However, the Chinese government has since rethought its position. Last Friday, the film suddenly disappeared from all major websites after the Publicity Department of the Communist Party ordered it taken down. At the popular online television provider Youku, links to the video went dead. The same occurred at China’s most-visited Internet portal Tencent. At the People’s Daily, the party’s official newspaper, stories that commended the film were pulled and links to it removed.

"Newly-installed Minister of Environment Chen Jining initially welcomed the release of the searing documentary and said he hoped the film would help spread awareness of the issues raised."

“The documentary has been spirited away by the gremlins,” concluded Zhan Jiang, a professor of media studies in Beijing. Prof Jiang explained that usually authorities are fine with people discussing issues, but tend to grow concerned when talk escalates into calls for action: “Also, when foreign media cover both the documentary and the public discussion that followed, it becomes an incident.”

The suppression of the documentary started with an instruction issued on Wednesday by the Communist Party ordering all media outlets to cease reporting on the documentary. When this measure failed to stem popular interest in the film, a new instruction was sent out pulling all references to video now deemed inconvenient. At a Shanghai newspaper, a worker was summarily dismissed from his job for leaking the secretive media order. Ukases issued by the Publicity Department are considered highly confidential.

Under the Dome going viral in a matter of days generated a groundswell of popular indignation at the sorry state of environmental affairs that could easily have overwhelmed authorities. Coincidence or not, the censors swung into action only hours after the People’s Congress – China’s rubberstamp parliament – got together for its carefully choreographed annual session.

On Friday, the assembled congress was told by President Xi Jinping that his government would punish “with an iron hand” any violators of environmental law. President Jinping appealed to his countrymen to care for their natural surroundings as they would for their own life. He also promised a 3.1% cut in carbon dioxide emissions and a reduction of coal consumption by 160m tonnes over the next five years.

On Saturday, the suppressed documentary was the elephant in the room as Environment Minister Chen Jining talked to the press. During the 70-minute long stage-managed event, foreign journalists from mainstream outlets were politely ignored while local media representatives only fielded questions that allowed the minister to embark on lengthy self-congratulatory monologues. Minister Jining admitted that China is facing an “unprecedented conflict between development and environment” and said that, after hopping out of bed in the morning, he immediately looks at the sky. Presumably to check if it can be seen.


Bill Clinton: Words of Real Value

 As nations and economies converge, interdependencies are created between people and give rise to new challenges. To strengthen the capacity of people to deal with these and the other changing realities of the contemporary world, the Bill Clinton Foundation was created by the former US president. The foundation, which in 2012 received more than $250m in donations, is focused on four key areas: Health security, economic empowerment, leadership development, and ethnic and religious understanding.

The foundation’s remarkable growth, and its success, may be ascribed to Mr Clinton’s exceptional ability to bring together public and corporate leaders. This former president knows how to bridge divides and find a common denominator even between people of wildly differing worldviews.

The foundation has spun off a number of ambitious projects such as the Clinton Health Access Initiative – now a separate organisation – that aims to broaden access to the treatment of diseases such as malaria, tuberculosis, and HIV/AIDS. The organisation has successfully managed to obtain cost-reduction commitments from major pharmaceutical companies. Thanks to the initiative, second-line drugs for the treatment of HIV/AIDS patients is now available for as little as a dollar per day in most African countries.

“He has helped secure the release of two American journalist from North Korea and was made UN special envoy to Haiti in 2009. After that country was struck by a massive earthquake in 2010, Mr Clinton went back at the request of President Barack Obama to coordinate US relief efforts.”

The Clinton Foundation’s flagship programme is the Clinton Global Initiative (GCI), launched in 2005, that offers global leaders a forum to discuss innovative solutions to problems affecting the world. The annual CGI meeting in New York coincides with the opening of the United Nations General Assembly. Since its start, the CGI has welcomed 150 heads of state, 20 Nobel laureates, and hundreds of CEOs, philanthropists, and leaders from non-governmental organisations.

The initiative has a growing number of permanent members, including presidents of both countries and corporations, who are asked to adhere to a specific action plan and propose a realistic timetable for the implementation of measurable change. In line with Mr Clinton’s unifying way of working politics, members are encouraged to share ideas and experiences. Since its inception, nine years ago, over 2,300 “Commitments to Action” have been made, affecting the lives of more than 400 million people across the world.

It is mostly because he can bring people together and inspire the pursuit of common goals that Mr Clinton has no trouble raising cash for his foundation. Notwithstanding allegations of improprieties made by diehard opponents on the far right fringes of US political life, the Clinton Foundation receives the full support, and significant chunks of cash, from donors beyond reproach such as the government of Norway, the Bill & Melinda Gates Foundation, and the Dutch National Lottery.

After leaving the White House in 2001, Mr Clinton has not faded from public view. Though briefly considered a liability by campaign managers as his wife vied for the Democratic ticket in 2008, Mr Clinton has proven himself the elder statesman time and again. He has helped secure the release of two American journalist from North Korea and was made UN special envoy to Haiti in 2009. After that country was struck by a massive earthquake in 2010, Mr Clinton went back at the request of President Barack Obama to coordinate US relief efforts.

Showered with honorary degrees from the world’s top universities, awards, accolades, and merits of all sorts, Mr Clinton is perhaps the personification of the US president the international community would like to see return to power: A skilful politician who doesn’t divide the world into “us and them,” but who actually manages to bring people together.

He is an excellent administrator as well. Not only did Mr Clinton preside over the longest US economic boom since the end of World War II, he also did well for himself; paying off several million dollars in legal fees and earning over $100m, mostly from books deals and speaking engagements. The interesting twist is that Mr Clinton actually has something of value to say.


Oil Price Plunge Analyzed In New World Bank Policy Research Note

Rapid expansion of oil supply from unconventional sources, a significant change in OPEC’s policy stance, and weak global demand are driving the recent plunge in oil prices, according to a new paper by the World Bank.

These underlying forces are buoyed by a strengthening U.S. dollar and the fact that oil production in the Middle East has not been severely disrupted by ongoing conflict, says the paper, titled “The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses”.

The paper, authored by John Baffes, Ayhan Kose, Franziska Ohnsorge, and Marc Stocker, presents a comprehensive analysis of the causes and economic and financial consequences of the oil price decline.

The paper was published as the first in a new series of Policy Research Notes (PRNs), a product of the Office of the World Bank Chief Economist and Senior Vice President for Development Economics.

"The idea behind the Policy Research Note series is to synthesize current research and data, and shed light on issues of contemporary policy concern; as such, these occasional publications should be of value to policymakers and analysts especially in emerging market economies."

- Kaushik Basu, World Bank Chief Economist and Senior Vice President

“The idea behind the Policy Research Note series is to synthesize current research and data, and shed light on issues of contemporary policy concern; as such, these occasional publications should be of value to policymakers and analysts especially in emerging market economies,” said Kaushik Basu, World Bank Chief Economist and Senior Vice President. “This inaugural PRN draws out the many reasons why the current slump in oil prices could persist and exert important effects on the global economy.”

Oil prices fell almost 50 percent between June 2014 and February 2015, possibly marking the end of the commodity price super cycle that began in the early 2000s. The decline has been quite large, but not unprecedented, notes the paper. The latest episode has some significant parallels with the price collapse in 1985-86, which also followed a period of strong supply of unconventional oil and the eventual decision by OPEC to forgo price targeting.

Unconventional and higher-cost oil producers (i.e. US shale, Canadian oil sands and global biofuel production) may well become the new swing, or influential, producers in the oil market. While volatility in oil markets will likely persist, prices are expected to remain soft over the next few years.

The paper estimates that an almost 50 percent decline in oil prices could be associated with a 0.7-0.8 percent increase in global GDP over the medium term.

Low oil prices should exert downward pressures on other commodity prices, especially for natural gas, fertilizers, and food commodities. Cheaper food should benefit a majority of the world’s poor, who are net consumers. With more than 70 percent of the world's poor living in oil-importing countries, low oil prices should help in the drive to reduce global poverty. The poor could gain further if falling oil prices allowed expenditures on subsidies to be reallocated to better-targeted pro-poor programs, the paper says.

The impact of lower oil prices for the world economy and developing countries should generally be positive over the medium term, though oil-exporting nations will be hit adversely. Indeed, sharply lower oil prices have dampened investor sentiment about oil-exporting emerging market economies and could add to volatility in financial markets, as we’ve already seen in recent months,” said Basu.

Falling oil prices will affect monetary policies differently depending on whether a country is an oil importer or exporter. For many importers, a side effect has been slowing inflation, which may temporarily ease pressure on central banks and, in some cases, could provide room for continued low or lower interest rates or other accommodative policies in an environment of subdued growth. For exporters, central banks will have to balance the need to support growth against the need to contain inflation and currency pressures.

“While beneficial for the global economy overall, cheap oil could complicate monetary policy making in economies that are already grappling with strong deflationary forces,” said Ayhan Kose, Director of the World Bank’s Development Prospects Group.

Fiscal implications of low oil prices will be markedly different for oil importers and oil exporters, but declining oil prices present a unique window of opportunity to reform inefficient fossil fuel subsidies everywhere, the paper says.

To offset the medium-term incentives for increased fuel consumption, while at the same time building fiscal space, policymakers could modify tax policies and increase fuel taxes where appropriate, the paper concludes.

For oil-exporters, the sharp decline in oil prices is also a reminder of the vulnerabilities inherent in a highly concentrated reliance on oil exports and an opportunity to reinvigorate their efforts to diversify. These efforts should focus on encouraging higher value added activities in both manufacturing and services, and on supporting the development of skills and human capital that are important for the expansion of these sectors. Source

The complete PRN is available at - http://www.worldbank.org/en/research/brief/policy-research-note-0

PRN #1 builds on the analysis of oil markets, published in the January 2015 editions of the World Bank’s Global Economic Prospects (http://www.worldbank.org/globaloutlook) and Commodity Markets Outlook (http://www.worldbank.org/commodities).


Egypt: Set for Growth and Showcasing Opportunities

[caption id="attachment_9535" align="alignright" width="377"] Egypt: Cairo[/caption]

As the most populous Arab country with over 88 million inhabitants, Egypt has a definitive edge over most other emerging economies: a robust domestic market that allows for economies of scale. That – and the country’s privileged geographic position at the crossroads between Africa, Europe, and Asia – make for a heady mix of promise and opportunity.

Now that political stability has returned and economic reforms implemented, Egypt is poised for a significant growth spurt. A series of high-profile infrastructure projects are underway, such as the widening and deepening of the Suez Canal to allow for a two-way flow of marine traffic. A new logistics hub is also being developed to support the increased capacity of the waterway.

Private investment is picking up as well and last year amounted to over $4bn. Last December, British Petroleum announced a $12bn mammoth five-year project to double the supply of natural gas to the domestic market. Meanwhile, Swiss food processor Nestlé announced the building of a $138m facility to supply foodstuffs and health products to the local market. Kellog’s moved in as well and acquired a majority stake in Bisco Misr, the country’s premier industrial bakery concern and a producer of snacks, biscuits, and other baked goods.

“The enhancements we realised at Bisco Misr were successful in growing the company’s domestic market, but we also saw enormous potential to increase exports and expand the company internationally.”

- Mohamed Younes, Chairman, Concord

Kellog’s paid slightly over $123m a controlling share in Bisco Misr, a former state-owned company privatised in 1998 when its shares were floated on both the Cairo and Alexandria stock exchanges. Seven years later, in 2005, the Concord International Investment Group managed to acquire a 56.2% stake in Bisco Misr and proceeded to upgrade and expand the company’s plants and operations with investments totalling $35m.

“The enhancements we realised at Bisco Misr were successful in growing the company’s domestic market, but we also saw enormous potential to increase exports and expand the company internationally,” says Concord Chairman Mohamed Younes: “With the new government and improvements to the Egyptian quality of life, Kellogg’s is now well positioned to help this great Egyptian company grow at home and abroad.”

The success story of Bisco Misr is by no means exceptional: Coca Cola and PepsiCo have also expanded their footprint in Egypt as have many other major corporations. To harness Egypt’s newfound economic prowess, the government of President Abdel-Fattah El-Sisi has organised an international conference to showcase both its accomplishments to date and the many opportunities open to investors.

The three-day Egypt Economic Development Conference is kicking off this Friday in Sharm El-Sheikh with over a thousand investors, public officials, policymakers, and thought leaders in attendance. The goal of the event is to attract in excess of $15bn in investment to well over sixty select projects.

The moment to act seems well chosen: the pace of economic growth is picking up with GDP set to swell by four percent this year and an average of seven percent annually over the next four years. The conference also aims to bury the country’s image as a place of turmoil. Egypt is now firmly set on a growth path that seeks to satisfy the aspirations of its population.

The El-Sisi Administration has already pushed through a number of reforms that increase the country’s appeal to foreign investors. Additional reforms are being prepared to ensure the fiscal stability necessary to underwrite sustained economic progress.


Egypt: Investors Rally Billions to Empower Development

[caption id="attachment_9541" align="alignright" width="276"] Abdel Fattah al-Sisi[/caption]

Governments and private investors earmarked well over $36bn to underwrite projects in Egypt at a three-day economic conference held over the weekend in the Red Sea resort Sharm el Sheikh. The mega-event, hosted by President Abdel Fattah al-Sisi, was attended by about 3,500 investors, government delegates, corporate moguls, and – inevitably – droves of consultants.

President al-Sisi took the opportunity to unveil his plan for the building of a new capital city to relieve the demographic pressure on Cairo. Egypt’s yet-to-be-named future capital is to arise on the plains between Cairo and the Suez Canal. The city is slated to cost in excess of $45bn to build. It will be home to the country’s entire state apparatus and, eventually, some five million inhabitants.

President al-Sisi framed his ambitious project as a catalyst for the government’s accelerated development drive which aims to reinvigorate the country’s long-ailing economy. The Egypt Economic Development Conference was organised to herald the arrival of more promising times. The event showcased over sixty large-scale projects open to foreign investors. President al-Sisi is in a hurry since his administration’s survival depends on its ability to deliver sustained levels of economic growth to, and improved living conditions for, the country’s burgeoning population, now standing at close to 90 million.

"It has fully paid down the country’s $7bn debt with oil and natural gas suppliers, floated the currency thereby easing trade and deflating the back market, and scaled back state fuel subsidies which earlier claimed up to a quarter of the government’s total expenditure."

At the conference, the delegations of the United Arab Emirates (UAE), Saudi Arabia, and Kuwait – President al-Sisi’s staunched supporters – jointly pledged over $12bn in new investment on top of the $20bn or so already in the pipeline. However, Egypt’s notoriously bloated bureaucracy – little changed since President al-Sisi came to power in June 2014 – remains a stumbling block to rapid development. Although a number of reforms have been implemented, the government has so far proved unable to streamline the civil service and drag it into the 21st century.

The president seems aware of the challenges yet to be tackled. His first order of duty is to maintain political stability. Before the Arab Spring blossomed in 2011 and dethroned the atrophied Mubarak Administration, Egypt was already beginning to gain favour with foreign investors. President al-Sisi now wants to recapture that moment, firmly inserting his country into the global marketplace. After years of lacklustre performance, Egypt’s economy is forecast to grow by an average of 7% annually over the next four years.

Seizing the moment, the Egyptian government now seeks to capitalise on its so far almost exemplary management of the country’s strained finances. It has fully paid down the country’s $7bn debt with oil and natural gas suppliers, floated the currency thereby easing trade and deflating the back market, and scaled back state fuel subsidies which earlier claimed up to a quarter of the government’s total expenditure. The al-Sisi Administration also introduced a number of laws aimed at bolstering investor confidence by providing both incentives and added protection.

As a result, investor interest has returned: British Petroleum announced a $12bn project to bring online the natural gas reserves of the West Nile Delta while Siemens from Germany is to build a $4.2bn to build a power plant and wind farm in the country. Siemens CEO Joe Kaeser, also present in Sharm el-Sheikh over the weekend, was particularly pleased with the speedy conclusion of the deal. Mr Kaeser revealed that his company engaged directly with President al-Sisi whom he hailed as an “exceptionally shrewd and skilful negotiator.”


Mary Jo White: Pushing Back Softly but Relentlessly

Over the course of her career, Mary Jo White, the current chair of the US Securities and Exchange Commission (SEC), has accumulated much experience going after mobsters, terrorists, and financial fraudsters. As New York district attorney, a position she held for nearly a decade, she helped bring down amongst others, John Gotti Jr – aka Teflon Don – the notorious boss of the Gambino crime family who was, much to his own surprise, sentenced to life in prison without parole and passed away in 2002 at age 61.

Some consider Mary Jo White slightly less implacable when it comes to putting away misbehaving business leaders. According to Rolling Stone Magazine – one of the few remaining bastions of investigative reporting – while heading the litigation department at law firm Debevoise & Plimpton, Mrs White used her influence to shield a Morgan Stanley executive from the fallout of allegations made by a whistle blower.

However, Mrs White was also instrumental in having all charges dropped, albeit posthumously, against Aaron Swartz – the computer programmer and hacktivist who in January 2013 committed suicide rather than admit to charges of computer and wire fraud for allegedly systematically downloading academic journals and other papers from the JSTOR digital library.

Forbes Magazine named Mrs White the 73rd most powerful woman in the world. This may very well underestimate the lady. In September, Mrs White called high frequency traders to task as she slapped a record-setting $16 million fine on Latour Trading for failing to comply with capital requirements and creating fictitious trading positions to mask the issue.

In its search for a successor to outgoing US Attorney General Eric Holder, who announced his resignation in September, the Obama Administration has placed Mrs White on its shortlist of candidates acceptable to both sides of the aisle in the US Senate. In an increasingly rare bipartisan move, the senate last year confirmed Mrs White unanimously to the chair of the Securities and Exchange Commission.

At the SEC, Mrs White’s tenure has been challenging. For one, the House of Representatives is not overly excited about her attempts at pushing though a major overhaul of financial regulation that goes beyond the already approved Dodd-Frank Reform Act. She also has to content with the near-constant threat of lawsuits brought by financial entities jealous of their prerogatives.

Mrs White even caused irritation in the White House by openly questioning the wisdom of the Financial Stability Oversight Council’s decision to designate large asset managers as posing a systemic risk. Mrs White argued that systemic risk must be reduced through a stricter regulation of both products and practices rather than by naming specific companies as possible culprits of any future event.

She is now fighting yet another turf war with the Public Company Accounting Oversight Board, created in the wake of the Enron disaster, over regulatory competencies.

As she aims to restore public confidence in the capital markets – battered by the popping of two large bubbles in less than a decade – Mrs White has to allay public fears that the system is rigged. This forces her to tread a fine line between the need for strict regulation and the necessity of maintaining free markets. It is a line she has not strayed from. Mrs White’s steady pace may not have won her many friends; she does receive a fair degree of admiration. Then again, the chair of the SEC seldom wins popularity contests.


CFI.co Meets the Head of Responsible Investments at Nordea Asset Management: Sasja Beslik

Sasja Beslik, head of Responsible Investments at Nordea Asset Management, spends a fair chunk of his time on the road visiting projects around the globe to evaluate environmental and social impacts. Much more than the latest fad, to Mr Beslik the concept of responsible investment is part and parcel of asset management. It is also ingrained into Nordea’s corporate DNA. “Responsible investment is a long-established tradition at our bank, as indeed it is throughout the Nordic World. We believe in the power of sustainable investments as a tool to contribute to the well-being of future generations,” explains Mr Beslik.

“Worldwide, the investment landscape has changed. As an angle for investors to consider, sustainability is here to stay. The question that remains is how the concept will be implemented.” Mr Beslik recognises sceptics abound and may argue that incorporating ESG (Environment, Social, and Governance) parameters into investment decisions detracts from the bottom line. “Cynics may have different views and that is just fine. As it happens, we believe that when looking at risks that could affect the return on investment, sustainability must enter into the mix.”

At heart a do-gooder with a pronounced penchant for the pragmatic, Mr Beslik cannot easily be dismissed as a tree-hugger in a suit. “I am not bound to my desk or spending my days shuffling around paper. At Nordea, we take a hands-on approach and this means that I’m travelling on average around 130 days a year to visit projects in the field and see what companies are actually doing on the ground.”

Mr Beslik was trained as a journalist and economist. A war correspondent for a few years, he has seen perhaps more than his fair share of human suffering. “At a certain point I became too involved with what I was seeing and wanted to do something more than just report.” After a stint as a consultant on ethical and social issues for a number of multinational companies, Mr Beslik joined ABN AMRO Asset Management as global head of engagements before arriving at Nordea.

In 2007, Sasja Beslik was voted Sweden’s most influential young professional under 40. In 2013, he was knighted, receiving the Royal Order of the Seraphim from King Carl XVI Gustaf.

Mr Beslik has come a long way since stepping off the ferry in Ystad, South Sweden, in 1993 with about twenty Deutschemark in his pocket and a plastic bag containing his meagre belongings. On the run from the Bosnian Army that had ordered him into its ranks as cannon fodder, Sasja Beslik was looking for a new home and found it in Sweden.

Even as a banker, Sasja Beslik has not lost the ability to speak frankly and call things by their proper name. “Climate change poses a bigger threat to humanity than terrorism. I have little patience with business leaders that talk the talk but refuse to walk the walk. Quite frankly, I’m not at all interested in chatter about values. I need to see how these values are applied to actions, products, and services. My generation is tired of hearing bullshit. If some mobile phone manufacturer goes on-and-on about sustainability, yet fails to produce a single eco-friendly phone, I cannot take them too seriously.”
Mr Beslik also does not accept arguments put forward by some financiers that sustainability is “fuzzy” or bad for growth: “The progress of time, and the resulting change in values, bothers some people. I call them the 80s Generation. They see corporations merely as vehicles that produce profits for their owners. However, a business is not an island, but part of the wider community. In fact, companies that are in tune with the times, and behave in a socially responsible manner, tend to produce larger profits. There are plenty of examples that prove this.”

Nordea may be a case in point. The bank weathered the storm unleashed by the 2008 global financial meltdown deftly without incurring the mega-losses that had other financial institutions creaking at the seams. “The philosophy imposed by Nordea’s top management paid off handsomely at that time and was shown to be extremely valuable in averting risk.” i


Containers on Rail: China’s Next Big Opportunity in Supply-Chain Logistics

The transportation of containers by rail could grow substantially in China, especially if the nation continues adopting the kind of operating practices and regulatory reforms that have boosted the development of the North American rail network, according to a new World Bank research paper.

Those measures include the ability of rail operators to tailor service offerings including pricing, routing and delivery time to client needs, as well as “mainstreaming” of specialization in the value chain, allowing rail operators to focus on the things they are good at, according to the paper, Customer-driven Rail Intermodal Logistics: Unlocking a New Source of Value for China.

“A more intense use of rail as part of the country’s containerized freight delivery logistics system could be a game-changer for Chinese manufacturers and consumers alike, as we have seen in North America,” said Luis Blancas, a World Bank Senior Transport Specialist and lead author of the paper. “That’s because more and more manufacturing has moved to China’s western provinces, which increases the distance of international and domestic shipments. At the same time, China’s highways are becoming more congested, making it difficult to deliver goods and get value-for-money in trucking services.”

“A more intense use of rail as part of the country’s containerized freight delivery logistics system could be a game-changer for Chinese manufacturers and consumers alike, as we have seen in North America.”

- Luis Blancas, a World Bank Senior Transport Specialist

Since 1998, freight container traffic in China has grown faster than the rate of economic growth. While container traffic on trucks and ships has increased, the use of trains for part of the journey – which is known as rail intermodal logistics – decreased in the same period. A 2013 study found that only 1.3 percent of container traffic through China’s ports involved trains, with 85 percent of all containers entering or leaving the ports on trucks and the rest on ships.

Faced with similar challenges, the United States partially deregulated a stagnated rail transport industry unable to innovate in response to growing demand. By eliminating government-regulated tariffs to promote competition and freeing rail carriers to design their networks and collaborate with other transport service providers in the supply chain, regulatory reform in the U.S. rail transport sector empowered rail operators to become critical players in international and domestic supply chains.

That experience resonates in China, because North America shares many of China’s economic geography features, and many of the supply chains served by rail intermodal in the U.S. originate in China.

China Railway Corporation, China’s national rail operator, began reforms in 2013 to improve operational efficiency and customer service, with more flexibility in setting rates and offering services based on market forces of supply and demand.

Such initial reforms can pave the way for the broader adoption of some of the approaches that helped make North America a world leader in rail container transport, according to the paper.

This paper is part of the China Transport Note Series produced by the World Bank to share experience about the transformation of the Chinese transport sector. The World Bank has supported numerous freight and passenger railway development projects in China. Source


Mohamed Ould Abdel Aziz: A Pragmatist Claiming Centre Stage

It is a long lane that has no turning. The life of Mauritanian president Mohamed Ould Abdel Aziz is marked by quite a few abrupt twists and turns. In August 2008, Mr Abdel Aziz masterminded the military coup that toppled the democratically elected government of President Cheikh Abdallahi. International rebuke duly followed. The African Union (AU) declared Mr Abdel Aziz persona non grata and banned him from traveling anywhere in the continent.

Now, barely six years later, Mr Abdel Aziz is the chairman of that same African Union. He also was re-elected to a second term as president of Mauritania. Though a coup leader twice over, President Abdel Aziz is no longer an outcast. In fact, during a recent visit to Washington he was lavishly praised by US Secretary of State John Kerry who repeatedly called Mr Abdel Aziz a “key leader” and congratulated him on his election to the chair of the AU.

The secret to Mr Abdel Aziz’ good fortune is perhaps his insistence on order and dislike of Islamic fundamentalism. It helps that he generally pursues his goals without resorting to open violence even though few in Nouakchott doubt that President Abdel Aziz retains a strong grip on the army.

Contrary to other coup leaders in West Africa, Mr Abdel Aziz never seemed quite at ease wielding dictatorial powers. After he assisted in the removal of President Maaouya Taya in 2005, Mr Abdel Aziz insisted the military shorten their hold on power and convoke elections. As commander of the elite Presidential Guard Battalion, then-Colonel Aziz had ways of imposing his will. It also enabled him to ensure fair and largely fraud-free elections.

However, three years later Mr Abdel Aziz – now a general – again found himself at odds with a president, this time over alleged attempts at creating a single party state and financial mismanagement. The president was promptly removed in a bloodless coup and a High Council of State instituted to prepare the country for a return to democracy within a year.

That timetable was kept almost to the day and on August 5, 2009, Abdel Aziz was sworn in as president – a grey eminence at long last emerging from the shadows. Last June, President Aziz was re-elected to a second term in office receiving 82% of the vote in a field of five contenders. Some opposition parties, still sour over the 2008 coup, boycotted the election. However, almost 57% of registered voters turned up at the polls. Observers dispatched by the African Union judged the electoral process “relatively” fair and peaceful.

In Abdel Aziz, the African Union has now found a chairman who is a pragmatist first and foremost. Elected to the job at the beginning of 2014, Mr Abdel Aziz is concentrating his efforts on aligning Africa in order for the continent to speak with one voice as it reasserts its place and role in the world. At the opening session of the 69th General Assembly of the United Nations, President Abdel Aziz said that, “as Africa strives to become an area free of scourges, wars, and conflicts – and a place where justice, good governance, and respect for human rights prevail – we need unity in purpose and resolve.”

As a skilful operator with more political substance than rhetorical fluff, AU Chairman Abdel Aziz has actually a better chance than most at pushing Africa’s development agenda forwards. Notwithstanding his earlier peccadilloes as a coup plotter, Mr Abdel Aziz has become the voice of reason in a region not devoid of turmoil. Mauritania’s constructive approach to the unsettling events in neighbouring Mali have made President Abdel Aziz into a regional leader of note and his country into an oasis of stability.


The Renewable Electricity Grid: The Future Is Now

New World Bank report finds that with the right policies and investments, countries can integrate high levels of variable renewable energy such as solar and wind into their power grids without compromising the reliability or affordability of electricity

Together with falling prices for solar panels and wind turbines, these new approaches can facilitate a scale up of renewable energy in developing countries

The report focuses on the complementary role of natural gas and energy storage in electricity grids that draw on high levels of solar and wind

Even a few years ago, renewable energy played only a small role in most countries’ energy planning.  While governments and publics were eager to increase the share of renewables in their energy systems, the economics of doing so were challenging.  There were also serious concerns about the impact on the electricity grid of adding too much capacity from variable renewable energy sources, such as solar and wind.

This has all changed.  Prices for inputs—particularly for solar photovoltaic panels and wind turbines—have come down so far that renewable power is now cost-competitive with conventional generation in some regions. As of 2014, 144 countries had established national plans to expand renewable energy, and almost hundred had set specific targets and incentives.

And as a new report from the World Bank’s Energy Sector Management Assistance Program (ESMAP) makes clear, with the right combination of new policies and investments, countries can integrate unprecedented shares of variable renewable energy into their grids without compromising adequacy, reliability or affordability.

“Renewables are no longer a marginal business,” said Anita Marangoly George, senior director of the World Bank’s Energy and Extractives Global Practice.  “We are talking about levels of energy that can bring light to thousands of households, grow businesses, meet the needs of cities, and drive entire economies.”

Making the transition to large-scale renewable energy supply requires substantial shifts in thinking and infrastructure: grid modernization, adoption of new technologies, reworked business models for utilities, and updated policy and regulatory frameworks. The new ESMAP report, Bringing Variable Renewable Energy Up to Scale: Options for Grid Integration Using Natural Gas and Storage, looks at a number of new approaches to facilitate these shifts and ensure the success of this transition.

"Renewables are no longer a marginal business. We are talking about levels of energy that can bring light to thousands of households, grow businesses, meet the needs of cities, and drive entire economies."

- Anita Marangoly George, Senior Director, Energy and Extractives Global Practice, World Bank Group

These approaches include strengthening interconnections between areas, diversifying the contribution of different renewable energy sources from various locations, and building up complementary generation and demand response technologies. The report builds upon previous reports on the topic published by the World Bank and other international organizations, by focusing on the important role that natural gas and energy storage can play in integrating variable renewable energy sources.

With their fast start-up times, natural gas-fired power generation technologies have an edge over other conventional generation options such as nuclear or coal in that they can ramp up and down quickly, providing power as needed to balance variations in wind and solar inputs.

Likewise, energy storage options have the potential to address most of the challenging aspects of integration. Comprising a wide range of technologies—including pumped hydro, compressed air, multiple battery technologies, and thermal storage—energy storage can act as a source of demand (through charging) at times of low energy use throughout the day, and a source of supply (through discharging) when demand increases.

As the report makes clear, this new comprehensive approach also brings new challenges.  For example, using natural gas for complementary power generation can have an impact on national budgets and gas procurement strategies, and running gas generators on a part-time basis can also increase maintenance costs.

Utilities and regulators will also have to rethink their business models to accommodate an increasing number of clients that are both consumers and distributed generators.

Additional compensation mechanisms or incentives may need to be created for flexibility and reserve capacity, so that system operators can procure the necessary supply to ensure reliable delivery of electricity.

These and other policy proposals mark just how far forward the debate has come, according to Anita Marangoly George.

“Five years ago, we would not have even been talking about these issues,” she said. “We are no longer talking about getting to five percent renewable energy penetration; we are talking about the challenges of balancing when you go above 20 percent.  We are no longer talking about intermittency; we are talking about managing variability across the entire system.” Source


Seven Days of Mourning for Lee Kuan Yew, Architect of Modern Singapore

[caption id="attachment_9578" align="alignright" width="384"] Photo: Singapolitics[/caption]

Singapore is now mourning its founding father, Lee Kuan Yew who died from pneumonia on March 23rd, aged 91 years.  This towering giant of the region ruled his country for three decades overseeing the country’s independence from Britain (1963), its eventual separation from Malaysia (1965) and a miraculous transition from unpromising British outpost to one of the world’s richest nations by per capita measurement.

Cambridge educated Lee had a clear vision of the way forward for independent Singapore. The three ethnic groups (Chinese, Malay and Indian) should work together to create an industrious society like no other in the region. He was to say, ‘If we were just like our neighbours we would die.’

Although Singapore was to become a multi-party state, the cards were stacked against political opponents.  There has always been tight control of the press and, some would say, an occasionally inappropriate meddling in the lives of the people. There has never been any apology for this autocratic style and indeed Lee took the view that any leader of Singapore should have iron in him: and if not, he had better give up.

"If we were just like our neighbours we would die."

- Lee Kuan Yew

Singapore’s strategic position along shipping lines improved prospects for the fledgling nation and, given the positive signals coming from Lee, the country would soon become an attractive destination for foreign direct investment. Before long, Singapore was making a name for itself in electronics manufacturing and the provision of financial services. The people would marvel at their rapidly improving standard of living and this has endured throughout global economic down-turns.

Announcing the passing, the current prime minister noted that, ‘to many Singaporeans, and indeed others too, Lee Kuan Yew was Singapore.’  He went on to say that the world would not see another man like him. Maybe not, but there will be a strong continuation of his style in Singapore because, perhaps inevitably, the prime minister who spoke these words, Lee Hsien Loong, is the son of the founder.

Few in Singapore would criticise the methods of government employed by LKY to create this dazzling economic success but perhaps there could now be a case for the country loosening up a little? Radical change is unlikely to come anytime soon and this, in any case, does not seem to be on the minds of the many. Most Singaporeans, now placing flowers in his memory, regard this man as their father. And he promised to rise from the grave if unhappy with the way things move forward after his departure.


UN Spotlights Key Role of Evaluation in New Development Agenda

[caption id="attachment_9582" align="alignright" width="278"] Deborah Rugg, Chair of the UN Evaluation Group (UNEG) and Director of the Inspection and Evaluation Division at the Office of Internal Oversight Services (OIOS). UN Photo/Devra Berkowitz[/caption]

Evaluation will become more necessary for the post-2015 Sustainable Development Goals, a United Nations body said today, as it launched a new publication highlighting the critical role of assessment in enhancing the UN’s effectiveness, cultivating change and empowering nations.

“We must review what we learned implementing the Millennium Development Goals – what worked and what didn’t work,” Deborah Rugg, Chair of the UN Evaluation Group (UNEG), said in a news release. “As evaluators, we offer evidence to answer these questions and help determine what needs to be done differently.”

The Group’s new report, entitled ‘Evaluation Changes Lives – Realizing Evaluation’s Potential to Inform the Global Sustainable Development Goals,’ focuses on topics ranging from gender equality, improving public accountability, cutting greenhouse gas emissions and protecting civilians in conflict zones.

It states, for example, that the evaluation of peacekeeping missions’ effectiveness in protecting civilians highlighted weak links in peacekeeping operations for review by the Security Council, troop-contributing countries and missions, and paved the way for a new comprehensive review with far-reaching impact.

"We must review what we learned implementing the Millennium Development Goals – what worked and what didn’t work."

According to the UNEG publication, capacity-building for evaluation at the country level is imperative to ownership of the development agenda and improved public accountability, as witnessed by the success of the Moroccan Evaluation Association and the national monitoring and evaluation system of the Philippines.

The official launch of the publication took place during the 2015 UNEG Evaluation Week (9-13 March), which brought together UN evaluators from all over the world to discuss the inclusion of evaluation in the post-2015 development agenda through evaluation capacity building.

“Evaluation everywhere, and at every level, will play a key role in implementing the new development agenda,” Secretary-General Ban Ki-moon said at the High-level Event of the Evaluation Week. “Evaluation is not easy. Nor is it popular. But it is essential. All of us share a responsibility to strengthen this important function.”

On 19 December 2014, the General Assembly adopted the first resolution on evaluation and also designated the year 2015 as the International Year of Evaluation.

The UNEG is an inter-agency professional network that brings together the evaluation units of the UN system, including UN departments, specialized agencies, funds and programmes, and affiliated organizations. It currently has 45 members and three observers. UNEG’s mission is to promote the credibility and usefulness of the evaluation function across the UN system. Source


Peter Carington: The Sole Survivor of a Bygone Era

The first casualty of the 1982 Falklands War, and one of the last scions of the empire-building Eton / Sandhurst generation, Lord Peter Carrington played a major – if not always visible – role in British conservative politics between 1946 and 1982. A failure to foresee the Argentine invasion of the Falkland Islands caused him to resign from the Foreign Office and exit domestic politics.

However, the 6th Baron Carrington was not ready for retirement yet: In 1984 he became the 6th secretary-general of NATO, succeeding Joseph Luns. That same year, Lord Carrington was appointed chancellor of the Order of St Michael and St George, a prestigious position he was to hold for ten years.

Ever active behind the scene, Lord Carrington in 1991 led an ultimately doomed diplomatic initiative aimed at the orderly disassembly of Yugoslavia. The plan entailed granting each of the country’s constituent republics full independence.

Last May, Peter Carington celebrated his 95th birthday. He is the last surviving member of the Churchill ministry of 1951. Though not a full cabinet member, Lord Carrington served the third government of Prime-Minister Winston Churchill as parliamentary secretary to the Ministry of Agriculture and Fisheries.

From this humble perch Lord Carrington rose fast: high commissioner to Australia, first lord of the Admiralty, leader of the House of Lords, secretary of state for defence, secretary of state for energy, and finally secretary of state for foreign and commonwealth affairs. Outside government, Peter Carington held an impressive number of directorships and other positions of note and influence.

An inside man at home in that rarefied atmosphere discreetly inhabited by earls, viscounts, barons, and a few men of slightly less elevated station, Lord Carrington was a natural to chair the Bilderberg Conferences. In this setting, for most of the 1990s, he mingled with the world’s high and mighty as experiences were swapped, solutions cooked up, and ideas debated. An Atlanticist though-and-through, Lord Carrington laboured unswervingly for the deepening of transatlantic relations and understanding.

Recently on Radio 4, Lord Carrington lamented the collapse of the Soviet Union and the end of the Cold War: “While the bipolar world wasn’t conducive to a strengthening of international cooperation and quite expensive in terms of defence, it did impose a discipline on nations that has now disappeared.”

Lord Carrington considers the current lack of constraints on countries to be responsible for the emergence of many smaller wars: “Previously nobody dared do anything which could conceivably bring about a nuclear war. If the Cold War had still been going on, Yugoslavia would never have broken up because people would have been too frightened. Saddam Hussein would never have invaded Kuwait. Afghanistan would never have happened.”

With so many offices and duties to fulfil, it should come as no surprise that Lord Carrington at times landed on the wrong side of history. During the troubles in Northern Ireland, he reportedly sanctioned the use of torture while minister of defence in 1971.

Later, in 1979, Lord Carrington chaired the Lancaster House Conference which brought the Rhodesian Bush War to a close and Zimbabwe into existence. Lord Carrington’s stated preference for entrusting the newly independent country to Robert Mugabe and his fellow revolutionaries, helped pave the way to Africa’s most enduring autocracy.

However, these few blots on an otherwise impeccable reputation in no way detract from Lord Carrington’s remarkable career as one of Britain’s last true insiders for who honour and country meant so much more than just a sound bite or a set of principles to be jettisoned at convenience.

Note from the editor: Whereas Mr Carington’s surname is spelled with a single r, his hereditary title Baron Carrington is spelled with double r. It is Lord Carrington because Peter Carington took his seat in the House of Lords (in 1940) as the 6th Baron Carrington.


UN Trade Report Calls on Governments to Improve Environment for E-Commerce

[caption id="attachment_9590" align="alignright" width="431"] Between 2011 and 2014, global deliveries of small packets and parcels by Posts worldwide increased by some 48 per cent. Photo: Universal Postal Union (UPU)[/caption]

The scope for developing countries to participate in and benefit from e-commerce is expanding, according to a new United Nations report released today, with improved connectivity, new e-commerce applications, platforms and payment solutions, and the emergence of local e-commerce companies that are tailoring their services to local demands.

The 2015 edition of the Information Economy Report (IER), published by the UN Conference on Trade and Development (UNCTAD), analyses trends and international policy issues related to information and communications technology and its links with trade and development.

“As the digital economy expands and more business activities are affected, it becomes more important for governments to consider policies that can help to harness e-commerce for sustainable development,” said UNCTAD Secretary-General Mukhisa Kituyi, specifying that governments need to improve areas including information and communications technology infrastructure, the legal and regulatory environment, and develop skills in their populations.

The report includes a B2C (Business-to-Consumer) E-commerce Index, which draws on data to assess e-commerce readiness and help States to formulate their national e-commerce strategies. Through the Index, governments can identify their relative strengths and weaknesses. In Africa, for example, internet penetration levels need to rise to promote e-commerce readiness.

“As the digital economy expands and more business activities are affected, it becomes more important for governments to consider policies that can help to harness e-commerce for sustainable development.”

- UNCTAD Secretary-General Mukhisa Kituyi

Making information and communications technology work for development requires more than expanding the infrastructure, the report says. In order to foster productive and inclusive use of information and communications technology, governments need to create legal, institutional and policy frameworks and generate the necessary skills in government, business and civil society and the Index measures progress in those areas.

Among developing countries, States at the top end of the Index are in East Asia, including the Republic of Korea and Singapore, with larger countries such as Brazil, China and Russia performing better than predicted, suggesting that large markets facilitate e-commerce.

Business-to-consumer e-commerce, valued at $1.2 trillion, is currently much smaller than business-to-business (B2B), which is worth $15 trillion, but is growing at a faster rate, especially in Asia and Africa, and is expected to double in size to $2.4 trillion by 2018.

To enable that, postal networks will be vital and the report measures data on home postal delivery as an indicator of countries’ readiness to engage in B2C e-commerce. In Latin America and the Caribbean and in Asia and Oceania, the extension of postal home delivery was found to be particularly important.

“Posts are seeing the mail makeup changing, with more merchandises making their way through their networks,” said Bishar A. Hussein, the Director General of the Universal Postal Union (UPU). “They must prepare for this growth by adapting their products and services, processes and infrastructure.”

The UNCTAD report also notes that growing concerns over cybercrime affect the willingness of both buyers and sellers to make transactions online, with research showing that the enactment of laws to facilitate security and trust in online transactions varies considerably globally, with significant gaps in many developing countries.

Although the United States is by far the most targeted country, accounting for almost half of known cases of cybercrime, information security is a rising concern for governments, enterprises and consumers around the world, especially given that $3.5 billion was lost in supplier revenue due to online fraud in 2012.

UNCTAD’s report calls for interoperability of legal measures between States, with 117 countries having enacted cybercrime legislation. Ensuring international compatibility of e-transaction laws remains a challenge and the report says the legal recognition of e-signatures, electronic contracts and evidence at a national level should ideally be extended to those originating in other jurisdictions.


Government of India and World Bank Sign $500 Million Agreement to Improve Access to Finance for Micro, Small and Medium Enterprises

The Government of India and the World Bank today signed a $500 million loan agreement for the MSME Growth Innovation and Inclusive Finance Project to improve access to finance for Micro, Small and Medium Enterprises (MSMEs) working in the manufacturing and services sector from early to growth stage, including through innovative financial products.

In India, MSMEs account for more than 80 percent of total industrial enterprises, produce over 8,000 value-added products and employ an estimated 60 million people. It contributes around 45 per cent to manufacturing output and about 40 percent to exports, both directly and indirectly. In addition, over 50 percent of MSMEs are rural enterprises and widely distributed across low-income states making them an important sector for promoting economic growth and poverty reduction.

However, lack of adequate finance is one of the biggest challenges facing the MSME sector. Financial institutions have limited their exposure to the sector due to a higher risk perception, information asymmetry, high transaction costs and the lack of collateral. The MSME census of 2006-07 estimated that about 87 percent of MSMEs did not have any access to finance and were self-financed. Credit towards micro and small enterprises represent only around 13-15 percent of formal financial institutions portfolio.

“With eight million people entering the labor force every year, MSMEs have the potential to create many new, innovative jobs. However, for these ideas to take shape, MSMEs will need easier access to finance.”

- Onno Ruhl, World Bank Country Director in India

The project will support MSMEs through direct financing by the Small Industries Development Bank of India or SIDBI, an apex financial institution for promotion, financing and development of MSMEs in India, as also through Participating Financial Institutions (PFIs) across three components. These include support to startup debt financing and risk capital as well as support to service and manufacturing sector financing models.

The loan agreement for the MSME Growth Innovation and Inclusive Finance Project was signed by Tarun Bajaj, Joint Secretary, Department of Economic Affairs, Ministry of Finance, on behalf of the Government of India; Kshatrapati Shivaji, Chairman and Managing Director, SIDBI; and Onno Ruhl, World Bank Country Director in India, on behalf of the World Bank.

“With eight million people entering the labor force every year, MSMEs have the potential to create many new, innovative jobs. However, for these ideas to take shape, MSMEs will need easier access to finance. This project will develop innovative products that address such constraints and help them achieve their true potential,” said Onno Ruhl, World Bank Country Director in India.

The first component will support SIDBI in developing, innovating and scaling up its startup debt financing program as well as support entry of potential participating financing institutions (PFIs). The India’s startup ecosystem is currently one of the fastest growing in the world and the third largest startup base with 3,100 startups (after the United States with 41,500 start-ups and the United Kingdom with 4,000). While there has been incredible growth in equity financing in the Indian ecosystem, debt financing is non-existent for the majority of the vast growing startup enterprises which severely constrains the necessary rapid growth startups need to survive. The project will seek to address this gap and demonstrate financial products that can unlock the potential of India’s startups and early stage ventures.

Its second component will support the financing of MSME enterprises in the services sector. Although the structure of the Indian economy is markedly shifting towards services (65 percent of Indian GDP), enterprises in this sector continue to face challenges in accessing formal finance mainly due to lack of physical assets to provide as collateral. Financial depth (credit to GDP) for this sector is a mere 25 percent (RBI). In an attempt to address this issue, SIDBI has introduced new products and considering their potential to grow, this project will support scale up of innovative products which are better tailored for MSMEs in the service sector, including franchise financing.

The project will also support MSMEs in the manufacturing sector through innovative financial products including Loan Extension Services (LES) and cluster financing – including women-led clusters. Particular focus will be to expand manufacturing activity in financially underserved areas, including low-income states especially through refinancing, as banks and other PFIs have a deeper network in these states.

“Addressing financial constraints of MSMEs and start-ups should generate multiplier effects across the economy by unlocking their inherent growth potential, fostering entrepreneurship and creating employment opportunities,” said Gloria Grandolini, Senior Director of the World Bank Group Finance and Markets Global Practice.

The loan, from the International Bank for Reconstruction and Development (IBRD), has a 5-year grace period, and a maturity of 10 years. Source


Marina Silva: Insistence That May Yet Pay Off

 Brazil may not yet be ready for her, but Marina Silva is the name to watch. The former senator for Acre, a small state in the western part of the Amazonian rainforest, and presidential candidate for the Socialist Party, Marina Silva was tipped as the likely successor to President Dilma Rousseff before her campaign tanked just days before the polls opened for the first of two electoral round on October 5. Marina Silva ended in third place with barely 21% of the vote – a good show, but not quite good enough.

Perhaps it was too much to ask. Marina Silva is black, from a modest background, evangelical, incorruptible, and an environmental activist to boot. She survived five bouts of malaria while growing up on a rubber tree plantation and battled hepatitis and metal poisoning as well. Taken in by nuns after both her parents passed away, she became the first of her family to learn how to read and write. Marina Silva was sixteen when she passed her literacy exam.

Working her way through college as a housemaid, she obtained a degree in history from the Federal State University of Acre in 1984. By now politically active, she helped form the state’s first labour union. Ten years later, Acre voters sent Marina Silva to the federal senate in Brasília. Here, Brazil’s youngest-ever senator fought tirelessly for social justice and sustainable development – concepts at the time mostly seen as quixotic and detrimental to private business interests.

“The dichotomy between development and the environment is one I cannot accept. The two are part of the same equation.”

Elected on the ticket of the Workers’ Party, Marina Silva was invited to join the first cabinet of President Luiz Inácio da Silva – aka Lula – in 2003 as minister for environmental affairs. From that lofty perch, she proceeded to insist on plausible environmental impact studies for any major project undertaken in the country.

Not only did Marina Silva draw the ire of big business, she also frequently upset fellow ministers bent on short-tracking large development projects such as the upgrading of the 4,476 kilometre-long BR163 highway – linking the more developed southern states with the Amazon Region – and the proposed diversion of the waters of the São Francisco River to irrigate farmland in four drought-stricken states of North-eastern Brazil.

In 2008, Marina Silva resigned from the cabinet after a rather public row with Lula’s chief of staff: The same Dilma Rousseff who went on to become president and last October claimed a second term in office. At the time, Dilma Rousseff accused her colleague of wilfully blocking economic growth by denying development projects construction permits.

“The dichotomy between development and the environment is one I cannot accept. The two are part of the same equation. It is not possible to further economic development without taking biodiversity and environmental conservation into account,” said Mrs Silva just days after returning to her seat in the senate.

A while later, she left the governing Workers Party and joined the Greens to become their candidate for the presidency. In the 2010 election, Marina Silva won 19% of the popular vote in a performance that surprised nearly all pundits. Though ending in third place and eliminated from the decisive second round of voting, she had become a force to be reckoned with in Brazilian politics.

In 2014, Marina Silva again tried for the presidency, growing her support another two percentage points and winning in major urban centres such as Brasília, Rio de Janeiro, and Vítoria.
The reason she’s the one to watch is simple: Brazilian voters admire candidates who keep on defying the odds to prove conventional political wisdom wrong. It took two crushing defeats (in 1994 and 1998) before voters in 2002 allowed Lula into the Palácio do Planalto – the futuristic presidential palace in Brasília.

Marina Silva – consistent in her message, upright, and self-made – possesses many qualities that are both admirable and absent in most of her peers. As the need for a shift towards sustainable development policies becomes clearer as time progresses, Marina Silva can very well hitch a ride on the changing times. Worn-out economic models are, yet again, failing Brazil as it seeks to rediscover the path to economic growth. If she manages to stay on message, Marina Silva may yet make it all the way to the top.


World Bank Group Increased Support for Reforms to Accelerate Economic Growth

[caption id="attachment_9609" align="alignright" width="293"] Islamabad, Pakistan[/caption]

Annette Dixon, new Vice President of World Bank Group’s South Asia Region made an introductory visit to Pakistan from April 1 to 4, 2015. She called upon Prime Minister Nawaz Sharif and met with the Finance Minister Ishaq Dar and key members of the Economic Team.

Dixon congratulated the government on stabilizing the economy. Successful implementation of the International Monetary Fund program has paved the way for Pakistan once again accessing IBRD loans of $500 million per annum or up to a maximum of $2 billion in the next four years, a 50% increase of the financing envelope to Pakistan. She also acknowledged the government’s initial implementation of reform actions and staying the course of reforms. “The World Bank Group stands ready to assist the government’s efforts to deepen reforms to accelerate growth, reduce poverty and build shared prosperity andaddress the complex challenges facing the country, especially in energy, revenue mobilization and education,“ said Dixon.

Dixon also discussed the government’s emergency response to the 2014 floods and the return of the displaced persons in FATA, and assured the speedy delivery of the World Bank Group support this fiscal year. She also highlighted the need to invest in human development, particularly in education, and the World Bank Group support in improving service delivery at a faster pace.  Increased revenue mobilization will enable the government to expand its investment in social development and infrastructure.

"The World Bank Group stands ready to assist the government’s efforts to deepen reforms to accelerate growth, reduce poverty and build shared prosperity and address the complex challenges facing the country, especially in energy, revenue mobilization and education."

Dixon welcomed the government initiatives for enhancing Pakistan's regional economic cooperation and acknowledged the progress made in implementation of the Central Asia-South Asia initiative (CASA1000). She reiterated the World Bank Group support for broadening the regional connectivity of Pakistan and its neighbors toward a more integrated regional energy market. She encouraged Pakistan to sustain and share its experience of the social protection program, through the Benazir Income Support Program (BISP) which is global best practice for targeting the poorest of the poor. Dixon was keenly interested in the technology based registration and verification systems during her visit to a BISP beneficiary registration center in Lahore.

Dixon participated in a roundtable discussion on financial inclusion along with Finance Minister Ishaq Dar and State Bank Governor Ashraf Mahmood Wathra, and welcomed the invitation of the Governor to the World Bank Group to support the implementation of the National Financial Inclusion Strategy, which aims to provide access to finance to at least half of the adult population by 2020.

Dixon also met the Chief Minister of Punjab Shahbaz Sharif and acknowledged the World Bank Group’s strong development partnership with the province and the well performing World Bank-supported programs in the social, irrigation, rural and urban development sectors. She also appreciated the provincial government’s focus on governance and transparency, and on promoting small and medium enterprises for jobs creation. They both agreed that swift implementation of reforms is needed to enhance competitiveness and create jobs including through skills development so as to help the province achieve a faster pace of growth. Claudia Costin, the World Bank Group’s Senior Director of the Education Global Practice joined the discussion with Chief Minister Shahbaz Sharif.

Dixon also met with Chief Minister of Balochistan Abdul Malik Baloch in Islamabad. Dixon assured the World Bank Group’s continued assistance for Balochistan’s development particularly in education especially for girls, nutrition, immunization, management of water resources, and the minerals sector.

Dixon held several meetings in Islamabad and Lahore with representatives of diplomatic missions, development agencies, academia, think-tanks, private sector and civil society to deepen her knowledge of the country.

Dixon joined the Bank in 1999 before which she held senior positions in the Government of New Zealand. She concluded her visit on Saturday.


Annual Investment Meeting (AIM), Ministry of Economy, United Arab Emirates, 2015

[caption id="attachment_9637" align="aligncenter" width="684"] Panelists included Ann Low (Deputy Director, Office of Investment Affairs, U.S. Department of State). Photo copyright CFI.co[/caption]

AIM 2015, which was held from 30 March - 1 April 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.

CFI.co was appointed a member of this year’s AIM Investment Awards Judgment Committee to help select the FDI-agency winners. The committee reviewed the results of several months extensive research into investment promotion agencies throughout the world. Candidate agencies were asked to provide comprehensive information about their most significant investment projects in the year 2014. The overall results were analysed and verified by OCO Global, a leading authority on foreign investment.

The Saudi Arabia General Investment Authority was declared winner in the MENA region with Invest Morocco as runner-up.

The criteria used to judge the short-listed investment projects were follows:

Size of investment

Scale of job creation

Trade balance effects

Local linkages

Knowledge Transfer

The Investment Promotion Agencies of the winning countries were invited to AIM for an awards ceremony at the Gala Dinner held at the Armani Hotel, Dubai on Monday 30th March.

Follow this link for a complete listing of all the FDI agency winners: http://www.aimcongress.com/en/features/investment-awards/


Africa: End of the Commodity Super-Cycle Weighs on Growth

Sub-Saharan Africa’s growth will slow in 2015 to 4.0 percent from 4.5 percent in 2014, according to World Bank projections released today.

This downturn largely reflects the fall in the prices of oil and other commodities, notes Africa’s Pulse, a twice-yearly World Bank Group analysis of the issues shaping Africa’s economic prospects released today at the start of the World Bank Group’s 2015 Spring Meetings, which will draw the world’s finance and development ministers to Washington, DC, for talks on the state of the global economy and international development.

The 2015 forecast is below the 4.4 percent average annual growth rate of the past two decades, and well short of Africa’s peak growth rates of 6.4 percent in 2002-08. Excluding South Africa, the average growth for the rest of Sub-Saharan Africa is forecast to be around 4.7 percent.

“Despite strong headwinds and new challenges, Sub-Saharan Africa is still experiencing growth. And with challenges come opportunities,” says Makhtar Diop, World Bank Vice President for Africa. “The end of the commodity super-cycle has provided a window of opportunity to push ahead with the next wave of structural reforms and make Africa’s growth more effective at reducing poverty.”

African Exports Still Dominated by Primary Commodities

Sub-Saharan Africa is a net exporter of primary commodities. Oil is the most important commodity traded in the region, followed by gold and natural gas. Over ninety percent of the total exports of eight major oil-exporting countries come from the three biggest exports of each country, which represent nearly 30 percent of their GDP. But the recent price declines are not confined to oil, and Africa’s Pulse reveals that the prices of other commodities are now more closely correlated both with oil prices and with one-another. As a result, terms of trade are declining widely among most countries in the region. The 36 African countries with expected terms-of-trade deterioration are home to 80 percent of the population and 70 percent of the economic activity in the region.

“Despite strong headwinds and new challenges, Sub-Saharan Africa is still experiencing growth. And with challenges come opportunities.”

- Makhtar Diop, World Bank Vice President for Africa

That said, the continent’s huge economic diversity is also mirrored in the impact of commodity price declines – even among oil producers. In Nigeria, for example, although the economy will suffer this year, growth is expected to rebound in 2016 and beyond, driven by a relatively diversified economy, and a buoyant services sector. Low oil prices will continue to weigh down on prospects of less diversified oil exporters such as Angola and Equatorial Guinea. In several oil-importing countries, such as Cote d’Ivoire, Kenya and Senegal, growth is expected to remain strong. In Ghana, still high inflation and fiscal consolidation will weigh on growth. In South Africa, growth continues to be curtailed by problems in the electricity sector.

Foreign direct investment inflows were subdued in 2014, reflecting slower growth in emerging markets and declining commodity prices. African countries continue to tap international bond markets to finance infrastructure projects: Cote d’Ivoire returned to the market this February; and Ethiopia had a debut issue in December 2014. Although debt burdens remain generally manageable, debt-to-GDP ratios for countries with increased bond market access have picked up in recent years. Uncertainty about future global monetary conditions are an additional reason for caution.

“As previously forecast, external tailwinds have turned to headwinds for Africa’s development. It is in these challenging times that the region can and must show that it has come of age, and can sustain economic and social progress on its own strength. For starters, recent gains for the poorest Africans must be protected in those countries where fiscal and exchange rate adjustments are needed.” says Francisco Ferreira, the World Bank’s Chief Economist for Africa.

New and Old Risks to Africa’s Economic Future

Persistent conflict in a number of areas, and recent violence by extremist groups such as Boko Haram and Al Shabaab pose security risks with the potential to undermine development gains. Also, the Ebola outbreak in Guinea, Liberia, and Sierra Leone has highlighted preexisting weaknesses in the health systems of the three most affected countries, as well as others.

Although substantial progress has been made against the Ebola epidemic, it remains premature to declare victory until there are zero cases left. A World Bank study released in January estimated that the three hardest-hit countries (Guinea, Liberia and Sierra Leone) will face at least $1.6 billion in forgone economic growth in 2015, and social costs in terms of nutrition, health and education are equally severe. The Bank Group has mobilized about $1 billion in financing to date for the three countries hardest hit by Ebola.

Policy Challenges Remain

The fiscal policy stance is expected to remain tight throughout 2015 in most net oil-exporting countries across the region, as countries take measures to rein in spending in light of anticipated lower revenues. While capital expenditures are expected to bear the brunt of expenditure measures, recurrent expenditures, including fuel subsidies, will also be reduced. Despite these adjustments, fiscal deficits are likely to remain high. Fiscal deficits are also expected to remain elevated in net oil-importing countries.

“Large fiscal deficits and inefficient government spending remain sources of vulnerability for many countries of the region. It is urgent that these countries strengthen their fiscal positions and fortify their resilience against external shocks,” saysPunam Chuhan-Pole, a World Bank Lead Economist for Africa and co-author of Africa’s Pulse.

Beyond macroeconomic policies, the report stresses the need across the region for structural reforms to ignite and sustain productivity growth in all sectors, and to foster a job-creating, inclusive process of structural transformation. Boosting fundamentals such as lower transport costs, cheaper and more reliable power, and a more educated and skilled labor force will benefit all sectors.

In fiscal year 2015, the World Bank delivered $15.7 billion in new lending for over 160 projects across Africa. They include a new record of $10.2 billion in zero-interest credits and grants from the International Development Association (IDA), the World Bank’s fund for the poorest countries, representing the highest level of IDA delivery by any region in the World Bank’s history. Source


Mario Draghi: Bond Buying a Success but Deflation Threat Remains

[caption id="attachment_9650" align="aligncenter" width="680"] Mario Draghi[/caption]

According to European Central Bank (ECB) president, Mario Draghi (speaking at a news conference on Wednesday 15th April) the Euros 1.1 trillion bond buying plan executed by the Bank has been effective.

He commented that the buying of bonds had successfully fed back into the real economy but cautioned that the deflation threat to the Eurozone had not gone away. Mr Draghi went on to say that ‘inflation will remain low or negative during the coming months’. The ECB is maintaining its interest rate at 0.05 per cent – an all-time low which has been in place since September 2014. A female protestor demurred somewhat and delayed the conference briefly after screaming, ‘End ECB dictatorship’. She was removed from the stage by security staff.

Late in March this year, the rating agency Standard and Poor’s claimed that ECB quantitative easing would not bring growth in the Eurozone unless structural issues relating to an ageing population, slowing globalisation, declining productivity gains and low investment were properly addressed. S&P’s European Sovereign analyst Moritz Kraemer also pointed out that although there was more optimism in the region with lower borrowing costs and a reduction in the value of the euro following the ECB stimulus, the approach taken did involve significant risks: ‘Monetary policies such as QE can help stabilise economies in the short term, but if they lead to policy complacency they could be counterproductive in the long term.’


Countries and Oil Companies Agree to End Routine Gas Flaring

Endorsements of initiative so far represent more than 40% of global gas flaring.

Chief executives from major oil companies joined together today with senior government officials from several oil-producing countries to commit, for the first time, to ending the practice of routine gas flaring at oil production sites by 2030 at the latest.

The “Zero Routine Flaring by 2030” initiative—already endorsed by nine countries, ten oil companies and six development institutions—was launched today by United Nations Secretary-General Ban Ki-moon and World Bank Group President Jim Yong Kim. They were joined by Royal Dutch Shell Chairman Jorma Ollila; Statoil CEO Eldar Sætre; Norwegian Foreign Minister Børge Brende; Gabonese Minister of Petroleum Etienne Dieudonne Ngoubou; and several other senior government and corporate officials, and representatives of international development banks. The endorsers collectively represent more than 40 percent of global gas flaring.

Every year, around 140 billion cubic meters of natural gas produced together with oil is wastefully burned or “flared” at thousands of oil fields around the world. This results in more than 300 million tons of CO2 being emitted to the atmosphere—equivalent to emissions from approximately 77 million cars. If this amount of associated gas were used for power generation, it could provide more electricity (750bn kWh) than the entire African continent is consuming today. But currently, the gas is flared for a variety of technical, regulatory, and economic reasons, or because its use is not given high priority.

“Gas flaring is a visual reminder that we are wastefully sending CO2 into the atmosphere,” said World Bank President Jim Yong Kim. “We can do something about this. Together we can take concrete action to end flaring and to use this valuable natural resource to light the darkness for those without electricity.”

By endorsing the initiative, governments, oil companies and development institutions recognize that routine gas flaring is unsustainable from a resource management and environmental perspective and agree to cooperate to eliminate ongoing routine flaring as soon as possible and no later than 2030. They will publicly report their flaring and progress towards the target on an annual basis. Furthermore, routine flaring will not take place in new oil fields developments. Governments will provide an operating environment conducive to investments and to the development of functioning energy markets.

“As we head towards the adoption of a meaningful new international climate agreement in Paris in December, these countries and companies are demonstrating real climate action,” said U.N. Secretary-General Ban Ki-moon. “Reducing gas flaring can make a significant contribution towards mitigating climate change. I appeal to all oil-producing countries and companies to join this important initiative.”

The World Bank has been active on this issue for 15 years, as a founding member of the Global Gas Flaring Reduction Partnership (GGFR). The Bank works with its partners in GGFR and the United Nations Sustainable Energy for All initiative (SE4All) to increase the use of associated gas by helping remove the technical and regulatory barriers to flaring reduction.

Oil companies and governments that have yet to endorse the initiative are currently undertaking comprehensive reviews of their gas flaring. Many are expected to join the Initiative in the coming months.

The following have endorsed the “Zero Routine Flaring by 2030” initiative (in order of date of endorsement received). Source


The Saudi Arabian Stock Exchange: Opening to Foreign Investors in June

As of June 15th this year, the largest stock market in the Middle East– Saudi Arabia’s Tadawul – will be open to foreign investors for the first time.

The Saudi exchange, which is worth well over $500 billion, is dominated by energy-related and financial organisations including major banks and petrochemicals giant Saudi Arabian Basic Industries Corporation (SABIC). After a roller-coaster ride since July 2014 when the intention to liberalise was announced (and a barrel of oil traded at $100) the market is up 11 percent this year.

This long anticipated development confirmed on April 15th by the Saudi government will go a long way towards positioning the Kingdom as a highly significant emerging market. Given the size of the Saudi market (similar to that of South Africa) there is a virtual guarantee of eventual inclusion in the MSCI Emerging Market Index, moving up from the Frontier Markets Index.  Two much smaller regional players (Qatar and the UAE) were promoted in this way last year.

This stock market liberalisation programme should also result in the acknowledgement of Saudi Arabia as a key G-20 economy.  It is widely thought that the opening up of the exchange would be the final piece in the economic jigsaw.

The Saudi stock market is relatively more representative of the real economy than many others in the region. The country is also very active in the IPO markets and last year the National Commercial Bank raised $8 billion in the largest share sale in the Arab world.

Worries that a change of government following the death of King Abdullah in January would result in a reconsideration of the opening up of the market were thus shown to be unfounded.