European Environment Agency: EU 2050 - Green Economy Needs Fundamental Change

The EU is largely on track to meet its climate change-related goals for 2020. While this is a considerable achievement, I believe there is a lot more to do. Most critically, the incremental gains we are currently achieving to meet such targets may not necessarily put us on track to long-term sustainability or a truly green economy, in line with Europe’s objectives for 2050.

Many of our existing environmental policy targets focus on incremental efficiency improvements within the current technological and economic paradigm. However, incremental efficiency gains are often offset by changes in human behaviour or by the rapid globalisation of unsustainable systems of production and consumption. The result is further environmental degradation. Efficiency gains alone are not enough to enable the transition to a green economy. Indeed, I will argue that we need a systemic shift in order to resolve many of our environmental problems in the long-term.

Bouncing Back

Incremental gains in efficiency – for example in car fuel efficiency or energy saving household appliances – are offset by changes elsewhere due to the rebound effect. This reduces the effect of efficiency gains, and means that the earth’s resources remain under pressure.

“Most critically, the incremental gains we are currently achieving to meet such targets may not necessarily put us on track to long-term sustainability or a truly green economy, in line with Europe’s objectives for 2050.”

The rebound effect can be easily seen as it applies to our use of energy. Europe’s economy now employs far less energy per unit of GDP – indicating improved energy efficiency. But economic growth has increased further with the end-result that energy consumption in the EU has not changed greatly since 1990. With 76% of primary energy demand in 2011 being met by the burning of fossil fuels, this continues to place enormous pressure on the planet.

The housing model prevalent in the EU offers another example. Contemporary homes are more energy efficient, but this gain is partly offset by the increased size of homes. It costs less to heat a square metre of housing, but we now have more square metres of housing to heat. As a result, overall fuel consumption still goes up. There are many other examples to cite – in our mobility systems, food systems, and so on. If we fail to take the rebound effect into consideration, our efforts will result in improvements that are too small and come too slow. These improvements also fail to address the more fundamental systemic challenges we face.

Beyond the Current Model of Development

The rebound effect is an example of how the current model of development – based on unsustainable levels of production and consumption – is harming the environment.

The current development model did, however, register a few successes as evidenced by our collective effort to improve the lives of the world’s poorest people. The proportion of people living in extreme poverty has been halved globally, while the hunger reduction target of the Millennium Development Goals is within reach. Since 1990, over two billion people have gained access to safe sources of drinking water, and the proportion of slum dwellers in the metropolises of the developing world is declining.

The global middle class is set to expand dramatically over the coming decades. According to the OECD (Organisation for Economic Cooperation and Development), this demographic will increase from 27% of the world population of 6.8 billion in 2009, to 58% of a predicted world population of 8.4 billion by 2030. Such a development will clearly have profound implications for the environment: Middle-class consumption patterns are typically resource-intensive and as such contribute to environmental pressures.

We should see this within the context of a planet which is already being overburdened by the demands placed on it. Most people on earth still live within the boundaries of what the planet can tolerate – but they live poorly. Many others live in material comfort, but do so beyond planetary boundaries. Our habits of consumption cannot be replicated by the rest of the world without huge environmental repercussions.

While improving the living standards of the poorest people is important, we must be careful that our development model does not simply move people from the category of living poorly within planetary boundaries to the category of those living well but beyond that what the earth can reasonably expected to support. Hence, the challenge is to guarantee a good quality of life for all citizens of this planet, yet to do so within the boundaries of our shared and finite ecosystem. This implies the need of a serious and fundamental rethink of the socio-economic development paradigm.

A Vision of the Green Economy

We urgently require a model of change that will allow us to live well within our environmental means. This is often referred to as a green economy – a model which aims not only for improved efficiency, but also for the maintenance of long-term ecosystem resilience and enhanced human well-being.

The EU already has a vision for Europe in 2050, based on three main elements:

A society that limits the generation of carbon emissions.

A circular economy in which resources are being efficiently used, preventing and minimising waste.

A region that is engaged in the preservation of ecosystems within and beyond its borders, respecting planetary boundaries.

The third and last point is particularly important for providing essential ecosystem services, such as flood protection or the preservation of soil fertility, that people across the world depend on for their well-being and livelihoods.

The 2050 vision highlights the gap between the path we are currently on and the destination we need to reach. For example, our current trajectory will not be enough to successfully conclude the transition to a low-carbon economy. By 2050, we are projected to only have reduced our greenhouse gas emissions by 40%. We must do much more and reduce greenhouse gas emissions by at least 80%. This means fundamental systemic action needs to take place between 2020 and 2050.

So what does systemic change look like? Instead of incremental improvements to the efficiency of cars, we must make the transition to an entirely new system of mobility. Instead of making incremental improvements to the efficiency of housing, we must re-think our housing, urban design and planning models. In the same vein, we must re-orient our food production system so that it promotes human well-being and ensures the resilience of ecosystems.

Ideas like the circular economy may provide a useful focus. This implies limiting our use of natural resources, and strengthening efforts at continuous recycling. Europe is still very far from achieving its target of 50% recycling by 2020. We need to start valuing waste as a resource in order to avoid depleting the earth’s increasingly slim bounty.

Recent EEA (European Environment Agency) assessments show that European environmental policies appear to have had a clearer impact on improving resource efficiency than they did on maintaining ecosystem resilience. In this context, it may be useful to consider other kinds of green economy objectives and targets, which explicitly recognise the relationships between resource efficiency, ecosystem resilience and human well-being.

Managing the Transition

Unfortunately there is a vital gap in the knowledge needed for the implementation of a transitional agenda. We know a lot about managing incremental change, but we know far less about managing systemic change in socio-technical systems. However, there seem to be some promising ways with which to manage this transition.

The most basic one entails the creation of new targets: Europe has already set targets for 2020 and 2030. These mostly aim at improved efficiency. We also have a vision for 2050, but this needs to be fleshed out with concrete new targets for period spanning from 2030 to 2050.

Economic policies may help drive this transition. Removing environmentally harmful subsidies is a goal clearly articulated in the EU’s 7th Environment Action Programme (EAP) – the recently-approved plan that sets out the EU’s environmental objectives and priorities for the next seven years. This should be part of a broader push to adopt environmental fiscal reform, which aims to take the tax burden from labour and put it onto consumption. Such an initiative also presents a particularly attractive opportunity for those economies that have been hit by the European debt crisis.

Alongside these policies, we will need to continuously monitor progress. This also means improving the knowledge base and the systems we use to measure environmental phenomena.

Over the coming years, work at the EEA will continue to refine our knowledge of the world around us, to inform policy implementation and assess systemic challenges up to 2050. In this context, we will be monitoring and evaluating implementation of the 7th EAP.

If we are to successfully change the way our social, technical and economic systems work, we need new ways of thinking about old problems. The challenge is both daunting and exciting. At the EEA, transition will be a priority work area over the years to come.

About the Author

Prof. Hans Bruyninckx is an Executive Director, of the European Environment Agency.


OECD: Latin America’s Outlook Clouded by Asia’s Slowdown and Financial Uncertainty

[caption id="attachment_6781" align="alignright" width="131"] Mexico City: Angel of the Independence[/caption]

The external scenario is less favourable for the region due to the downturn in global trade, the moderation in commodity prices and the increased uncertainty surrounding global financing conditions.

General Overview

The euro area’s weak economic performance, the slowdown in the Chinese economy and its effects on metal and mineral prices, and the impact that the normalisation of US monetary policy will have on international capital markets directly affect Latin American economies.

First, demand for exports of the region’s goods and services is forecast to decline due to more moderate growth in global trade. Second, while the prices of imports have remained stable, the prices of Latin American and the Caribbean’s main commodity exports have declined since 2012. These factors have contributed to the deterioration of the trade balance (Figure 1), which is lower than in the 1990s, but increasingly more uniform. At the one extreme are the net exporters of oil and gas, which have current-account surpluses, and at the other are the economies of Central America and the Caribbean, which are net importers of commodities and have current-account deficits of more than 10% of GDP. Finally, if the United States tightens its monetary policy, external financing will steadily become more expensive and capital outflows to the region will probably fall, resulting in greater uncertainty and more volatile capital markets.

“Several countries are converging towards their potential GDP from an expansionary phase of the business cycle.”

Although an increase in domestic demand could partly compensate the slowdown in external demand, many Latin American economies are converging towards their potential GDP following an expansionary phase of the business cycle.

Although many of the region’s economies have some monetary and fiscal space for an additional stimulus to compensate for temporary external shocks, the region is faced with a more permanent, widespread economic slowdown that makes it difficult to provide this kind of stimulus. Moreover, several countries are converging towards their potential GDP from an expansionary phase of the business cycle, and some are also faced with supply-side bottlenecks, making them vulnerable to domestic and external imbalances if there is an additional stimulus.

[caption id="attachment_6787" align="aligncenter" width="558"] Figure 1: Current account as percentage of GDP of Latin America and the Caribbean. Source: Based on ECLAC (CEPALSTAT) data.[/caption]

Previous episodes of economic instability in the region are a reminder to be vigilant of expanding domestic credit and changes in fiscal aggregates.

Credit relative to the size of the economy has grown rapidly in most Latin American countries in the last ten years, especially mortgages and consumer credit. The authorities should therefore monitor the amount of credit so they can prevent or mitigate potential booms, which lead to internal and external imbalances. They should take measures to ensure that the financial system remains solvent, avoiding excessive risk-taking and limiting the system’s procyclical nature. Moreover, although currents debt levels are sustainable under the baseline scenario, the fiscal space has shrunk considerably in various Latin American countries. This divergence between fiscal balances and indebtedness is the result of a series of factors, including currency appreciation and lower effective interest rates compared to the recorded rate of GDP growth. It is therefore important to design and implement fiscal reforms to create a larger fiscal space and to adopt measures to ensure continued access to sufficient levels of liquidity, whether by accumulating and holding international reserves or arranging contingent credit lines.

The current macro-economic context further highlights the structural challenges that remain, such as the imbalance between tradeable and non-tradeable sectors of the economy.

Commodities make up 60% of the region’s exports of goods, up from less than 40% at the beginning of the last decade (2000-10). Also, around half the increase in the value of Latin American exports in the 2000s was a result of commodity price rises, whereas in the 1990s it was mainly due to increases in the volume exported. Moreover, the surplus resulting from the concentration of exports in a limited number of commodities has also contributed to growth in domestic sales, which, in line with the decline in domestic industrial production, have led to a rise in imports. Consequently, manufacturing has slowed and the imbalance between the tradeable and non-tradeable sectors has widened.

The challenge of achieving sustainable growth and greater economic diversification comes at a time in which a new “middle class” is emerging.

After a decade in which economic growth was accompanied by a substantial reduction in poverty and improvements to inequality indicators, a “middle class” has emerged in the region. In the emerging economies this “middle class” will grow from 55% of the population in 2010 to 78% in 2025, so it can become a fundamental pillar for further economic development. It will also place new demands on the region’s policy makers for efficient, high-quality public services. To meet these demands countries will need to expand their fiscal space by introducing reforms to increase fiscal revenue and by setting up institutions to ensure that government resources are spent on projects that greatly benefit society. Meanwhile, the deficiencies in the region’s infrastructure and logistics considerably hinder economic growth, and will therefore require additional financial effort by the public sector and substantially better quality spending. In addition to the new demands for public services from Latin America’s “middle classes”, public policies must provide growth in a way that also improves the market distribution of income in the long run. Therefore, the economic structure must create opportunities for more and better jobs and greater productivity for large sectors of society to consolidate the emerging “middle class”. These needs are even more pressing in the light of Latin American integration into the context of shifting global wealth, led by the Asian economies.

The current economic climate is characterised by a shift in global wealth towards emerging economies This transition is mainly a result of China’s and India’s economic modernisation and their integration into the world economy. The size of these economies, in conjunction with their rapid, sustained growth and their strong demand for natural resources, has supported growth in many emerging and developing economies. While at the turn of the century non-OECD economies accounted for 40% of the global economy, by 2010 this figure had risen to 49%, and by 2030 it is projected to rise to 57%. This is in sharp contrast to the contribution made by Latin America and the Caribbean, which remains at the 1990s level of between 8% and 9%.

The emerging economies, including those in Latin America, must avoid falling into the middle-income trap, and this would help them satisfy the needs of their “middle classes”.

A rise in per capita income in emerging economies is bolstered by factors that characterise early-stage economic development, such as urbanisation, demographic shifts, cutting the size of the agricultural workforce, and closing the technology gap. Because these sources of development reach their limits, economies often see their per capita income stall, a phenomenon known as the middle-income trap. The middle-income trap is a source of vulnerability for the emerging “middle classes”, 6 which demand more and better public services, and it can reduce social mobility and create a more convulsive social environment.

The increasingly dynamic role of the Asian emerging economies in global shifting wealth is a challenge for the competitiveness of many of the region’s manufacturing industries.

China’s development pattern combines elements such as factor endowments, scale and productivity that considerably bolster the competitiveness of Chinese manufacturing. Latin America, for its part, is faced with systematic problems that make it difficult for the region to raise its productivity due to the limitations of its development model, from structural heterogeneity to low rates of savings. Growing competition from Asia’s emerging economies magnified the impact of these limitations, counteracting some of the natural advantages that some Latin American countries enjoy, such as being located close to the United States. This trend towards de-industrialisation in Latin America caused by endogenous and exogenous factors can be counteracted by the development of new capacities to produce increasingly sophisticated goods. i

Source: LATIN AMERICAN ECONOMIC OUTLOOK 2014 Logistics and Competitiveness for Development © OECD/UN-ECLAC/CAF 2013


IMF on MENAP: Call for Focus on Job Creation

The near-term economic outlook for the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region has weakened. Difficult political transitions and increased regional uncertainties arising from the complex civil war in Syria and the ongoing developments in Egypt weigh on confidence in the oil-importing countries.

Meanwhile, domestic supply disruptions and weak global demand are reducing oil production, notwithstanding recent upward pressure on oil prices arising from increased geopolitical risks. Growth in the MENAP region is expected to decline to 2¼ percent this year (¾ percentage point below our May 2013 projections). Growth is expected to pick up in 2014 as global conditions improve and oil production recovers. Substantial downside risks weigh on this outlook, and, more worrisome, growth will remain well below levels necessary to reduce the region’s high unemployment and improve living standards. In this setting, the region risks being trapped in a vicious cycle of economic stagnation and persistent sociopolitical strife, underlining the urgent need for policy action that will enhance confidence, growth, and jobs.

Oil Exporters: Heightened Risks to Oil and Fiscal Positions

Domestic oil supply disruptions and lower global demand are set to markedly reduce growth in MENAP oil exporters to about 2 percent this year after several years of strong performance. Renewed oil output disruptions in Iraq and Libya, falling oil exports in Iran in response to tightening sanctions, and a modest fall in oil production in Saudi Arabia reflecting a still amply supplied global oil market imply a fall in regional oil production this year, for the first time since the global crisis. By contrast, the non-oil economy continues to expand at a solid pace in most countries, supported by high levels of public spending and a gradual recovery of private sector credit growth. A recovery in oil production and a further strengthening of the non-oil economy will likely lift economic growth in 2014.

“A large aggregate fiscal surplus of about 4¼ percent of GDP masks underlying vulnerabilities.”

A large aggregate fiscal surplus of about 4¼ percent of GDP masks underlying vulnerabilities. Half of the MENAP oil-exporting countries cannot balance their budgets and have limited buffers against shocks. Most countries are not saving enough to allow for continued spending for future generations once hydrocarbon reserves are exhausted. Some countries have started to unwind fiscal stimulus this year; still, without further adjustment, the region’s governments will start spending from their savings by 2016. External balances are also falling because of lower oil production, rising domestic consumption, and insufficient fiscal savings.

Risks to this outlook are broadly balanced for the countries of the Gulf Cooperation Council (GCC) and tilted to the downside for the non-GCC countries. On the upside, increased geopolitical uncertainties may push oil prices higher. Further supply disruptions caused by weak domestic security or a difficult external environment could reduce oil production in some countries, especially outside the GCC, while benefitting growth in oil suppliers with spare capacity (mostly in the GCC) as they compensate for the shortfall. On the downside, slowing global oil demand, for instance caused by lower growth in emerging markets or rising supply from unconventional sources could reduce oil prices and/or induce members of the Organization of the Petroleum Exporting Countries (OPEC), particularly in the GCC, to cut back supply.

Apart from oil, a main downside risk for all oil exporters in the region is the possibility of slower nonoil private sector growth and higher unemployment and inequality if governments’ efforts aimed at diversification do not bear fruit.

In this environment, policies should focus on strengthening fiscal positions and engaging in structural reforms to bolster private sector growth, diversification, and job creation. Oil exporters need to consolidate their budgets to ensure fiscal sustainability while minimizing the impact on growth and enhancing equity. Structural reforms should include strengthening the business climate and competitiveness, especially in the non-GCC countries; measures to support diversification; fostering credit to small and medium-sized enterprises; and improving incentives for private sector employment of nationals and female labor force participation.

Oil Importers: Complex Political Dynamics and Security Challenges

The economic recovery in the MENAP oil-importing countries has once again been delayed. Heightened security concerns, rising political uncertainty, and delays in reforms continue to weigh on confidence, preventing a recovery in investment and economic activity in many countries. The devastating civil war in Syria and recent developments in Egypt have sparked concerns about regional spillovers, further complicating economic management. While there are nascent signs of improvement in tourism, exports, and foreign direct investment in some countries, the economic recovery in the MENAP oil importers remains sluggish, with growth of about 3 percent, in 2013–14, significantly below the growth rates necessary to reduce persistent unemployment and improve living standards.

Domestic and regional factors are the main sources of downside risks. Insufficient improvement in economic conditions risks aggravating sociopolitical frictions and dealing additional setbacks to transitions in many countries, thereby reinforcing delays in the economic recovery, potentially leading into a vicious cycle. In addition, a deterioration of conditions in Egypt would further damage confidence and recovery prospects. Increased escalation of the conflict in Syria would intensify pressures on neighboring countries (Iraq, Jordan, Lebanon) as refugee inflows would rise sharply. Under a plausible adverse scenario, assuming domestic and regional risks partially materialize, growth could fall to 1¾ percent next year, though a stronger shock or a combination of domestic and external shocks could halt growth to zero and significantly raise unemployment. In addition, geopolitical tensions might lead to a spike in oil prices, which, if sustained, would reduce growth and widen fiscal and external deficits (though for some countries in the Mashreq, the effects would be mitigated because of strong linkages to the GCC). A weakening in the external environment, for example, lower-than-anticipated growth in the BRICS (Brazil, Russia, India, China, South Africa) and/or the GCC countries, or a protracted period of slower European growth, would weigh on tourism, trade, remittances, and capital flows.

Small external and fiscal buffers make MENAP oil importers highly vulnerable to shocks. Foreign exchange reserves are running low, and current account deficits remain substantial in many countries. High or rising public debt levels are of concern, driven by persistently large fiscal deficits, which in turn reflect strong pressures for subsidies and other social spending amid high unemployment. Even as countries are realizing the need for fiscal consolidation, fiscal deficits are still rising in most countries, and medium-term plans for fiscal consolidation remain unclear.

In this environment, characterized by significantly increased risks due to heightened political uncertainty and rising regional tensions, policy goals are threefold: (1) fostering economic activity and creating jobs to help sustain sociopolitical transitions, (2) making inroads into fiscal consolidation to restore debt sustainability and rebuild buffers protecting the economy from unanticipated shocks, and (3) embarking without delay on structural reforms that will improve the business climate and governance, and enhance equity:

Creating jobs. High and rising unemployment amid a strained social fabric and heightened political uncertainty in many countries calls for an urgent focus on spurring economic growth and job creation. Delays in the revival of private investment suggest the need for government to play a key role in shoring up economic activity over the near term. With limited room for widening fiscal deficits in many countries, consumption spending on broad-based subsidies needs to be re-oriented toward growth-enhancing public investment, while improving protection of vulnerable groups through well-targeted social assistance. External partners could support this priority by providing additional financing for public investment spending and basic services based on the existence of adequate policy frameworks.

Fiscal consolidation. With concerns about debt sustainability rising and fiscal and external buffers eroding, most countries need to start putting their fiscal house in order. This said, in some cases, there may be scope for phasing the fiscal adjustment over time to limit its impact on economic activity in the short run. The feasibility of such phasing will depend on a credible medium-term fiscal consolidation strategy to ensure continued willingness of domestic and foreign investors to provide adequate financing. Consideration needs to be given to supporting fiscal consolidation through greater exchange rate flexibility, which can help to soften the shortterm impact of fiscal consolidation on growth and help to rebuild international reserves.

Structural reforms. A bold structural reform agenda is essential for propelling private sector activity and fostering a more dynamic, competitive, and inclusive economy. Reforms need to be focused on a multitude of areas, including improving business regulation and governance, expanding access of businesses and consumers to finance, enacting labor market policies that support job creation and employment opportunities, and protecting the vulnerable through welltargeted social assistance. Early steps in these areas can help to signal governments’ commitment to reforms and can help improve confidence.

The region’s need for improving economic conditions and living standards is tremendous, as is its human and economic potential. Delays in economic recovery and rising unemployment underscore the urgency of policy reforms. Early progress across all three priority areas—supported by the international community through scaled-up financing, enhanced trade access, and technical assistance—is essential to begin achieving the much-awaited dividends from the recent economic and political transitions.


The World Bank: Accelerating Africa’s Aspirations

As Sub-Saharan Africa develops rapidly, it is estimated that the continent will need millions of engineers just to reach a single Millennium Development Goal, that of access to safe water and improved sanitation. However, there is a serious shortage of engineers—and also of scientists, health professionals and technicians—in nearly all of Sub-Saharan Africa’s 48 countries.

To help address this gap, the Government of Rwanda, a champion of science and technology, and the World Bank, one of Africa’s largest partners in higher education, are co-hosting a high-level forum on Higher Education for Science, Technology and Innovation in Kigali this week.

The time is right to focus on science, technology and innovation because African economies have been growing, partly due to demand for raw commodities. With more graduates in the applied sciences and technology, these economies could add value to raw commodities and compete in the global market for processed products and high-quality services.

Well trained graduates in science- and technology based disciplines can also help their countries find effective, cost-efficient, homegrown solutions to pressing development problems that are related to poverty, food security, climate change, urbanization and health.

“What we are gathered here to do has profound implications for young people in Africa.”

- Tawhid Nawaz, World Bank Director for Human Development in Africa

Themed Accelerating Africa’s Aspirations, the forum brings together senior representatives from governments, academia, development partners and the private sector. They will discuss priorities and solutions as part of a “big push” to upgrade higher education systems across Africa, making them more relevant to the needs of its fast-growing economies.

H.E. Paul Kagame, President of Rwanda, and Makhtar Diop, World Bank Vice President for Africa will address public sessions of the forum on Thursday, March 13. Speeches and high-level panel discussions will be livestreamed through the day at www.livestream.com/worldbankafrica

“What we are gathered here to do has profound implications for young people in Africa,” said Tawhid Nawaz, World Bank Director for Human Development in Africa, addressing ministerial delegations and technical experts today. “Essentially, young people can take advantage of economic opportunities only if they have the right knowledge and skills.”

The forum is sparking an Africa-wide conversation on Twitter and Facebook with the hashtag #Science4Dev, with live tweeting from @AfricaGathering @TWASnews @MINEDUC1 and @WorldBankAfrica.

Members from @kLab (an open space for IT entrepreneurs) and @GirlsinTechRW as well as alumni from the Google Students Ambassadors program will also add their voice to the online conversation, highlighting the role of mobile technology in education.

While watching the live broadcast on March 13, online viewers can ask questions using the Livestream chat bar, moderated by World Bank education specialists Atou Seck and Hiroshi Saeki, who will identify select questions to be answered by panelists.

In conclusion, Rwanda’s Minister of Education, Hon. Vincent Biruta and fellow ministers participating in the forum from Ethiopia, Mozambique, Rwanda, Senegal, and Uganda will announce a Call for Action on behalf of the participants. This will signal high-level attention to the transformation of African economies through greater access to high-quality education in science, technology- and mathematics-based disciplines.


EU: Single Rule Book in Banking

The European Commission has adopted a package of Regulatory Technical Standards (RTS) needed to implement important provisions of the Capital Requirements Regulation and Directive (CRR/CRD). The nine RTS define the ways in which competent authorities and market participants must, inter alia, handle disclosures linked to securitisation instruments, measure potential losses from derivative positions and counterparty failure, as well as specifying the types of instruments that can be used for paying bonuses.

These RTS were developed by the European Banking Authority (EBA). They draw on the experience of EU Member State banking supervisors and take account of the results of stakeholder consultations. They have now been endorsed by the European Commission.

Commissioner Michel Barnier said: "The development of the single rule book in banking is a vast undertaking. Its objective is to ensure all banks comply with one set of rules across the single market. This ensures good regulation and a level playing field wherever banks are based. The adoption of the Capital Requirements package created a framework. But to reap the full benefit of the single rule book, many aspects must be further developed by technical standards, delegated and implementing acts. What we are delivering today is a decisive step in that direction thanks to the excellent cooperation between the European Banking Authority and the European Commission."

"The development of the single rule book in banking is a vast undertaking."

The new capital requirements rules (CRR/CRD), which apply from 1 January 2014, provide for the adoption of a large number of delegated and implementing acts to specify how competent authorities and institutions shall comply with the obligations laid down in CRR/CRD.

The RTS are a crucial building block in the construction of a stricter regulatory environment for banks and investment firms and are directly binding European rules that do not need to be transposed into national law.

Over a hundred mandates for regulatory and implementing technical standards are provided for in CRR and CRD. To date, the Commission has adopted thirteen Regulatory Technical Standards (RTS) and one Implementing Technical Standard (ITS), some of them covering several mandates1. More details on each RTS can be found in MEMO/14/181.

What’s next?

The European Parliament and the Council have one month to exercise their right of objection, with the possibility to extend this period for a further two months at their initiative. Following the expiry of this objection period, the RTS will be published in the Official Journal of the European Union and will enter into force on the twentieth day following the date of their publication. Their provisions will be directly applicable (i.e. legally binding in all Member States without implementation into national law) from the date of entry into force.


EU Statement on Crimea

[caption id="attachment_6818" align="alignright" width="161"] Crimea[/caption]

As stated by all 28 EU Heads of State or Government on 6 March 2014, the European Union considers the holding of the referendum on the future status of the territory of Ukraine as contrary to the Ukrainian Constitution and international law. The referendum is illegal and illegitimate and its outcome will not be recognised.

The solution to the crisis in Ukraine must be based on the territorial integrity, sovereignty and independence of Ukraine, in the framework of the Ukrainian Constitution as well as the strict adherence to international standards. Only working together through diplomatic processes, including direct discussions between the Governments of Ukraine and Russia, can we find a solution to the crisis. The European Union has a special responsibility for peace, stability and prosperity on the European continent and will continue pursuing these objectives using all available channels.

We reiterate the strong condemnation of the unprovoked violation of Ukraine's sovereignty and territorial integrity and call on Russia to withdraw its armed forces to their pre-crisis numbers and the areas of their permanent stationing, in accordance with relevant agreements.

In advancing these goals, the Ministers of Foreign Affairs will evaluate the situation tomorrow in Brussels and decide on additional measures in line with the declaration of the Heads of State and Government of the EU of 6 March.


Shami Chakrabarti: The Need for Loyal Dissent

In a free society, dissent is a civic duty. The presumed fallibility of those in power leads to a system governed not by men, but by laws – a system of rights and due process. Fear can undermine this system. A scared population might be willing to give up certain rights and freedoms in favour of security. One measure of a democracy in any given society is how it treats its most reviled members. For the UK, prior to July of last year, that member was Abu Qatada.

Mr Qatada came to the UK in 1993 and was granted asylum on grounds of the religious persecution he allegedly suffered in his native Jordan. In Britain, he quickly gained notoriety as a “hate cleric”, publicly preaching violence against non-Muslims. In October 2002, Mr Qatada was arrested in south London and taken to Belmarsh Prison, where he was detained indefinitely without charge under the Anti-Terrorism, Crime and Security Act 2001.

The UK government then wished to deport him to Jordan, where Mr Qatada had been convicted in absentia of conspiracy to carry out terror attacks in 1999 - a conviction based on evidence extracted through torture. In January 2012, after a decade of appeal and on and off detention, the European Court of Human Rights ruled that Mr Qatada could not be deported as that would be a violation of his right to a fair trial under Article 6 of the European Convention on Human Rights.

She was described as “the most effective public affairs lobbyist of the past twenty years” by The Times.

Following this ruling, many Britons including PM Cameron expressed frustration. Public opinion ran strongly in favour of deportation. In the British media, one dissenting voice speaking in defence of Mr Qatada rights was that of Shami Chakrabarti.

On the BBC’s This Week, Mrs Chakrabarti, director of the civil liberties pressure group Liberty, raised the question why, despite being detained on and off for ten years, no charges were ever brought against Mr Qatada; and why evidence used against him in the deportation case could not be used to try him in a British court.

Mrs Chakrabarti worked as a barrister for the Home Office before joining Liberty in 2001 as an in-house counsel. Since being appointed director in 2003, she has campaigned for human rights and the upholding of due process. Her frequent appearance on news and debate programmes, as well as in newspaper columns, has gained Mrs Chakrabarti much attention, though not always favourable.

She was described as “the most effective public affairs lobbyist of the past twenty years” by The Times and as “the most dangerous woman in Britain” by The Sun.

Though Mr Qatada was eventually deported to Jordan, his case brought Mrs Chakrabarti’s heroism to the fore. She bravely and eloquently stated her case in the face of hostile public opinion: Mr Qatada may be a villain, but that does not deprive him of his rights and those rights are worth defending.

When a fair trial at home becomes too much of a bother or when due process becomes too much of a hassle for both government and public, we all lose. The law is supposed to be tedious, inconvenient, and – at times - frustrating for those in power. A government that forgets this stands in need of loyal dissenters such as Shami Chakrabarti.


How to Tame an Unruly Bear

[caption id="attachment_6828" align="alignright" width="227"] Natural Gas Flare[/caption]

You heed Teddy’s advice: Speak softly and carry a big stick.

That’s how a bear is brought to its senses. Hardly rocket science. With his simple, yet effective approach to foreign policy, Theodore Roosevelt (1858-1919) – the 26th US president – laid the foundation of what was to become the world’s premier superpower.

Contrast this, if you will, to the Right Honourable Neville Chamberlain (1869-1940) – the endearing, yet bumbling British prime minister who understood only half of Teddy’s equation: He mastered the speaking softly part, but failed to carry a stick of any kind. Mr Chamberlain readily acceded to a strongman’s demands, took him at his word and lived to regret his folly.

Just as Adolf Hitler’s thirst for territorial gain was not quenched by the absorption in 1938 of Czechoslovakia’s Sudetenland – home to a German-speaking population – into the Third Reich, Mr Vladimir Putin will not stop his expansionist policies now that the Crimea – home to a Russian-speaking population – has been wrenched from the Ukraine.

While peace in our time is unlikely to be disturbed, this does not imply that the bear should be allowed to run amok.

Interestingly enough, the West – much upset over Russia’s assertive ways – already carries the requisite stick. And it’s big too.

"Europe’s dependency on Russian natural gas is much overstated."

For all its bluster and all the millionaires it seems to spout, Russia is an economic wimp. Its national output amounts to barely €1.4tn. The country’s exports are less than those of The Netherlands. Its gross domestic product amounts to only 80% of France’s. The European Union represents fully eight times the economic weight of Russia. Add to that the US economy, and Russia disappears from the screen altogether.

The West is being bullied by a country that may be geographically quite impressive, but is rather underwhelming when economic power is considered. This is something that Mr Putin’s attention must be urgently drawn to. Europe’s dependency on Russian natural gas is much overstated. In fact, the EU can readily do without that supply.

Natural gas fields in Norway and The Netherlands can take up any slack. The Trans Mediterranean Pipeline – connecting Algeria to both Italy and Spain – can easily be reinvigorated. In Rotterdam, the €3bn Gas Access to Europe (GATE) terminal has just commenced operations. This import terminal is set to become the biggest of its kind in the world and has already started to pump natural gas received from LNG (liquefied natural gas) tankers into the European pipeline network. Moreover, natural gas stocks in Europe are at an all-time high as a result of the mild winter.

There is little need to appease Mr Putin. Shut off Russia’s natural gas deliveries; stop trading with the country; and freeze the Russian kleptocracy’s assets esconded in Europe and elsewhere, currently estimated at €420bn.

Once the stick is properly in place, it is time to tell the Russians that we do love them and – even more importantly – understand them as well. It is tough being so large and puny at the same time. Life, after losing an empire, is no cakewalk. Ask the Brits.

Also, the Ukraine was in fact not very grateful for all that energy supplied at neighbourly rates. Europe too could have been a tiny bit more understanding of Russia’s anxieties and insecurities. With the benefit of hindsight, the European Union should probably have refrained from courting the – none too pristine – powers that be in Kiev.

The West must understand, and make some allowances for, Russia’s collective mind set of which Mr Putin is but the embodiment. This, however, does not at all imply that the West should allow Russia to engage in land grabs, flimsily justified by demographic realities or democratic farces running on scripts inspired by North Korean practices.

Mr Putin’s utterances that his ambitions do not extend to beyond the Crimea are not to be believed. Moldova – with its break-away Transnistria province – might be next. Georgia, Armenia and even the Baltic states and Poland are feeling the heat.

If the West is to ensure peace in our time, it must find ways to engage with the Kremlin. The man in charge here understands power politics as few others do. Speaking loudly without carrying Teddy’s stick is not helpful, nor smart. It will not fool Mr Putin.

The learning curve is going to be steep, but must be mastered fast. Once Mr Putin realises that he reigns over a country of little economic consequence, he will eventually be brought to his senses.

This does not necessarily entail profound changes to the realities he created by the threat of force in the Crimea. It’s too late for that already. However, faces need saving and Russia needs to tone down – or at least be seen to do so.

Europe must tame this unruly bear. If it fails to do so, the bear will bite again. It will keep on biting and nibbling until patience runs out and reason is lost at which point we will not have peace in our time.


World Bank Support to Promote Transparency, Accountability and Job Creation in Jordan

[caption id="attachment_6832" align="alignright" width="176"] Amman, Jordan[/caption]

A US$250 million loan, approved last week, will ease Jordan’s fiscal strains, which have been deepened by the influx of Syrian refugees and by regional turmoil that has disrupted its hydrocarbon supplies from Egypt. The World Bank’s support to Jordan over the last two years, amounting to US$700 million in loans and grants, has focused on a two-track approach, medium term budget support and emergency response to the Syrian crisis.

“Jordan is striving to offset the impact of exogenous shocks that have deepened its economic difficulties,” said Ferid Belhaj, World Bank Director of the Mashreq Department. “The World Bank’s support to Jordan over the last several months is a case in point of how engaging fast and in earnest to tackle emergency situations, such as the impact of the Syrian crisis on the country, can help maintain government focus on policy dialogue and prevent the derailing of its broad structural reform agenda.”

The Second Programmatic Development Policy Loan complements an earlier operation approved in January 2012 which supports key elements of the Government’s Executive Development Program. It aims to improve transparency and accountability, enhance debt management and the efficiency of government spending, and promote private sector-driven growth.

“Jordan is striving to offset the impact of exogenous shocks that have deepened its economic difficulties.”

- Ferid Belhaj, World Bank Director of the Mashreq Department

More recently, in July 2013, the World Bank committed US$150 million through a rapid, direct financial assistance to help Jordan maintain access to essential healthcare services and basic household needs for the population affected by the large and increasing impact of the Syrian crisis.

The World Bank has also spearheaded efforts to mobilize donor grant financing to support the resilience of stretched public service delivery to Jordanian communities hosting Syrian refugees. In October 2013, the Bank secured a US$50 million grant targeting municipalities and communities under stress. The grant, co-financed by Britain, Canada, Switzerland and the World Bank through its State and Peace Building Fund, strengthens municipal capacity to support local economic development.

External shocks, the global recession and the regional turmoil that followed the Arab Spring, including the impact of the disruption in low-cost gas supplies from Egypt, have heightened long-term structural vulnerabilities in Jordan. "As of mid-2012, it became apparent that the external shocks and regional turmoil have resulted in fiscal and current account imbalances which have been partially financed by external aid,” said Eric Le Borgne, World Bank Lead Economist for Jordan. “The programmatic operation approved today is contributing to the reform agenda Jordan needs, which places a high priority on growth and jobs.”


WEF Recognises Young Global Leaders from Africa

[caption id="attachment_6840" align="alignright" width="183"] Charlize Theron, Young Global Leader[/caption]

The World Economic Forum announced last week the new members selected to join the Forum of Young Global Leaders.

From Africa, this year’s class includes:

Bernice Dapaah, Ghana, Executive Director of the Ghana Bamboo Bikes Initiative, a social enterprise which uses locally sourced bamboo and labour to make strong, simple, lightweight bicycles.

Michael Macharia, Kenya, Chief Executive Officer of Seven Seas Technologies, one of East Africa’s most reputable IT services firms, which he founded when he was 25.

Sara Menker, Kenya, Founder and Chief Executive Officer of Gro Ventures, a data-driven advisory that is creating a network of farmers to report farming data, allowing banks to lend with less risk.

Danladi Verheijen, Nigeria, Founder and Chief Executive Officer, Verod Capital Management, an investment management firm that specializes in funding projects in emerging markets, with a special focus on Nigeria.

Lerato Mbele, South Africa, presenter of Africa Business Report on BBC World News, whose interviews include Kofi Annan, F.W. de Klerk, Bill Gates, Goodluck Jonathan and Uhuru Kenyatta.

Marlon Parker, South Africa, Founder, Reconstructed Living Labs, a social entrepreneur who uses information communications technology (ICT) to empower communities.

Anton Du Plessis, South Africa, Managing Director, Institute for Security Studies, an expert on human security and international criminal justice who has worked in over 20 African countries.

Hanli Prinsloo, South Africa, filmmaker and ocean adventurer and 11 times South African free-diving record holder.

Charlize Theron, South Africa, Oscar-winning actress and Founder, Charlize Theron Africa Outreach Project.

Angellah Jasmine Kairuki, Deputy Minister for Constitutional and Legal Affairs, Tanzania, who has special interests in women’s economic empowerment.

Luca Neghesti, Tanzania, Chief Executive Officer, Jefag Logistics, a serial entrepreneur who has set up and run several enterprises in the media, ICT and logistics industries.

Vincent W. Bagiire, Member of Parliament of Uganda, who is championing the use of ICT among farmers to boost yields and address persistent poverty in rural Uganda.

Thirteen African YGLs have the chance to benefit from the Dangote Fellowship, created in collaboration with Aliko Dangote, President and Chief Executive Officer, Dangote Group. The aim is to increase the quality and quantity of young African leaders across the continent by supporting the engagement of African YGLs in the community, such as those from small enterprises or the non-business sector. The Fellowship helps YGLs from Africa attend YGL and World Economic Forum events and funds the organization of an YGL Africa Education Module.


Blythe Masters: The Risks of Spreading the Risk

Out of a tragic oil spill came forth a new financial instrument: The credit default swap – to some a financial weapon of mass destruction; to others a nifty way to spread, and thus diminish, credit risk.

The credit default swap sprung from the brain of Blythe Masters, at the time one of the most promising bankers at JP Morgan. The US investment bank sensed trouble when Exxon was facing up to $5bn in punitive damages for the Valdez oil spill which saw up to 750,000 barrels worth of crude oil leak into the pristine water of the Prince William Sound in Alaska.

As it happened, JP Morgan had extended some $4.8bn in credit to Exxon. A team of wizard bankers was duly convened and went to work finding a solution to the risk. Mrs Masters suggested selling the credit risk of these loans to reduce the JP Morgan’s exposure to an Exxon default and – as an added bonus – reduce the volume of reserves the bank was required to carry.

“They are only as good as those who manage them.”

- Blythe Masters on credit default swaps

A dupe of sorts was found in the European Bank of Reconstruction and Development. Following this, the Exxon loans were sliced into more manageable packages which found their way onto the market – and off JP Morgan’s books – as Broad Index Secured Trust Offerings, BISTROs for short. These were the first-ever investment vehicles specifically aimed at spreading a greater than acceptable financial risk over a large number of investors who are led to believe that they are acquiring prime rate securities.

While a great way for banks to make money without the attendant risk, Mrs Masters later admitted that the credit default swaps she invented might have been structured differently in order to avoid an increase in systemic risk. Mrs Masters told an investigative committee of the European Parliament in April 2010 that the recent financial meltdown indeed contains “valuable lessons”.

However, Mrs Masters maintains that credit default swaps do not deserve the blame they have been apportioned: “They are only as good as those who manage them”. Most bankers would agree and consider CDSs as manna from heaven. Just before the 2008 meltdown, the total amount of outstanding CDSs approached an astonishing $65tn. That number has now fallen to about $25tn but has been picking up as of late.

Mrs Masters is quite right in asserting that managing credit default swaps requires expertise and good sense. Both were lacking in Bruno Iksil, a trader for JP Morgan who became known as the London Whale for the huge iffy positions he had taken. These triggered heavy opposition from other traders betting on the whale’s sinking. Even other JP Morgan traders happily joined the party. The bank eventually lost about $2bn, demonstrating yet again the folly of markets unleashed and unbound.


2014 Set to be Turning Point for Saudi Real Estate Sector

2014 Edition of Cityscape Jeddah Set to be Largest Event Ever Held

[caption id="attachment_6859" align="alignright" width="203"] Jeddah[/caption]

Jeddah, March 2014: The year 2014 is all set to witness huge achievements in the Saudi real estate industry, especially the housing sector in which the private sector is now playing a greater role in supporting the government’s initiatives.

Experts from Saudi Arabia and the region will discuss the challenges and opportunities awaiting the real estate sector at the 5th annual Jeddah Urban Development and Real Estate Investment Event – Cityscape Jeddah 2014 which is to be held on May 4-6 under the theme “Kingdom on the Rise”.

The Kingdom really is on the rise and the real estate sector is expected to benefit from the huge funds injected by the government into the housing market, such as the decision to further support housing by allocating SR250 billion to construct 500,000 units.

Also, after years of planning and continuous hard work, the Ministry of Housing’s efforts have started to pay off and tangible results have begun to surface including the launch of the eligibility rules and Iskan gateway last week, which will reveal the real size of the housing problem and who really needs support from the Ministry.

Another factor that will boost the real estate market is the availability of home mortgages enabling individuals and families to become homeowners.  Furthermore, massive investment in mega infrastructure projects such as the economic cities and general transportation plan are giving an even bigger boost to the sector.

"Another factor that will boost the real estate market is the availability of home mortgages enabling individuals and families to become homeowners."

Riyadh Al Thagafi, CEO of Ewaan Global Residential Company said: “While home financing has been witnessing a rise in activities and with banks expanding their lending last year, most developers still suffer from lack of project finance, which is hindering the growth of the real estate sector in Saudi Arabia.”

Mr. Al Thagafi went on to say: “This is expected to change in 2014, especially with the efforts the Ministry of Housing are making to spin the wheel of development. Developers from across the Kingdom have been recently engaged in a series of meetings with the Ministry discussing means of collaboration to solve the housing shortage estimated at 200,000 units a year.”

 Attracting global interest in the Kingdom’s buoyant real estate sector, Cityscape Jeddah expects an estimated 8,000 visitors to attend the three-day event that presents developers from KSA and the GCC with a platform to showcase new projects and connect with customers and industry professionals.

In addition, the two-day, Jeddah Real Estate Summit Workshops organized alongside the exhibition, has become the premier forum where regional and international leaders meet to discuss growth and investment strategies, along with the most recent innovations and developments in the real estate sector.

Commenting, Dr. Abdullah bin Mahfouz, Chairman, National Exhibitions Company, organizers of Cityscape Jeddah, said: “Cityscape Jeddah brings together regional and international investors, developers, architects and designers, governmental authorities, key decision makers and senior executives involved in the design and construction of public and private real estate developments.  These are the people who have the power to influence and shape the curve of Jeddah’s real estate market.”

The Real Estate Summit this year is going to focus on hot topics which include: how to ensure a quality workforce; forecasts for the Kingdom’s real estate sector; ways to mitigate against project cost fluctuations; emerging KSA market niches with strong ROIs; and frank discussions on how to improve KSA’s legal landscape for the property market.

Adding something new this year, Cityscape Jeddah 2014 includes a Mortgage Clinic where professional advisors will help aspiring home buyers to learn about the new laws, what banks will ask of a mortgage candidate, what mortgage products are available, and what protection the law provides.

A highlight of Cityscape Jeddah 2104 will be Cityscape Awards for Real Estate in Saudi Arabia, which will be presented on May 5.  The Awards are a prestigious annual event that recognizes and rewards industry professionals and companies who have shown outstanding real estate development and architecture for both built and future projects in the Kingdom.

Supporting the vision for growth in the real estate industry, The Jeddah Urban Development and Real Estate Investment Event - Cityscape Jeddah 2014 is sponsored by Sumou Real Estate (Principal Sponsor) and Ewaan Global Residential Company (Founding Sponsor) along with Sobah Hartland and Flash properties as Gold Sponsors.

There is no doubt that Jeddah Urban Development and Real Estate Investment Event - Cityscape Jeddah is the leading real estate event in the Kingdom, supporting the government’s vision for growth in the real estate industry, highlighting iconic architecture and innovative development, and providing direct access to the region’s biggest real estate market – Saudi Arabia.

About Cityscape Jeddah

The Jeddah Urban Development and Real Estate Investment event - Cityscape Jeddah, provides a platform for the regional and local real estate communities to come together to network, create partnerships and discuss the future of real estate in the Middle East’s largest real estate market Saudi Arabia.

Complete event details are available at www.cityscapejeddah.com.

For more information, please contact:

Eman Al Zari

Senior Media Relations Executive

TRACCS, Jeddah, KSA

Tel:  +966-12-662-5757

M: 0565764276

Email: eman.alzari@traccs.net


Barry E. Silbert: Going Out on a Limb, Reinventing Capital Markets

SecondMarket was set up in 2004 and has since expanded into multibillion dollar trading platform with well over 53,000 registered participants. The exchange offers a bewildering array of securities ranging from public debt instruments to bankruptcy claims and credit derivatives.

More recently, Mr Silbert moved his company – conservatively valued at about $200m and generating an annual revenue of about $35m – headlong into the growing Bitcoin craze with the launch of its Bitcoin Investment Trust (BIT). Mr Silbert does not mince words and calls the digital currency “the ultimate winner”. Also, he expects Wall Street investors to pour hundreds of millions – “if not billions” – into Bitcoin within the next three to six months.

The optimism is not misplaced. Only six weeks into its existence, the trust has already received $70m in deposits whereas success had initially been defined as capturing $10m by year’s end. The value of shares in BIT fluctuates according to the highly volatile Bitcoin exchange rate. Investors are in for a rocky ride: In the first week of February Bitcoin slumped from a high of about $1,200 to a low of barely $650 after Apple decided to pull a popular Bitcoin wallet app from its on-line store, apparently over legal concerns.

Mining exotic financial opportunities such as Bitcoin is precisely what Mr Silbert thrives on. Nothing seems too bizarre or risky not to take a shot at. This should come as no surprise since Mr Silbert got his first taste of trading at the tender age of 13 with that quintessential of American investments – the baseball card. The dollars thus accumulated, plus his bar mitzvah money, got him started trading stocks.

A financial innovator par excellence, Mr Silbert has gathered an impressive number of accolades: Ernst & Young named him Entrepreneur of the Year (2009) as did Crain’s New York Business. In 2011, the World Economic Forum awarded SecondMarket its coveted Technology Pioneer of the Year prize. Barry Silbert’s name also features on Fortune Magazine’s prestigious 40 Under 40 list of most successful young entrepreneurs.


Volume of Investments Boosting the Real Estate Sector Reflected at Largest Ever Edition of Cityscape Egypt

Egypt’s leading international property event to Feature more than 100 Exhibitors.

[caption id="attachment_6873" align="alignright" width="150"] Wouter Molman: Director of Cityscape Group[/caption]

Cairo 24th of March 2014: This April will witness one of the most important events on the industry calendar, Cityscape Egypt 2014 in association with Next Move.

Following 5.9% growth in the sector year on year and real estate’s contribution to overall GDP climbing 4.6% in the same period, Cityscape Egypt 2014 will be the largest in its history withmore than 100 exhibitors and over 100,000 showcased properties.

Key exhibitors at the fifth edition of the flagship event include Abraj Misr, Al Ahly Real Estate Development, Palm Hills Developments, SODIC, Rooya Group, Al Morshedi Group, Amer Group, Cairo Festival City, Emaar Misr for Development, Hassan Allam Properties, Maxim For Real Estate, Arabia Group, New Giza and Talaat Mostafa Group.

Director of Cityscape Group, Mr. Wouter Molman revealed that increased demand for exhibition space has resulted in a sell-out event, with halls booked out weeks ahead of its opening on 9-12 April at the Cairo International Convention & Exhibition Centre (CICC). Visitor numbers are expected to match the continued growth of the exhibition, totaling more than 12,000 in 2013.

Cityscape Egypt 2014 is taking place at a time when Interim government is exerting tremendous effort to boost the real estate market. Key strides include mortgage law amendments and real estate fund legislative changes designed to ease investment hurdles and support overall real estate market growth in the coming period”, added Molman .

Further improvements to the mortgage market include this week’s announcement by Central bank of Egypt to allocate EGP 10 billion funding to affordable housing units.  Over a 20-year period, banks will acquire money from the Central bank at below market interest rates and re-lend to low earners at a 7% decreasing rate of return. The announcement comes just days after the government inked a landmark deal to build 1 million affordable homes across Egypt with UAE construction company Arabtec Holding.

"Key strides include mortgage law amendments and real estate fund legislative changes designed to ease investment hurdles and support overall real estate market growth in the coming period."

- Wouter Molman

Financial flexibility is being reported alongside a number of other positive announcements including Al-Futtaim Group’s $2.2 billion worth of new developments, TalaatMoustafa's 7.2 percent increase in net profit (in 2013) and significant levels of new supply entering the retail and residential markets.

Dr. Mohamed El Mikawi, Managing Director of Al Futtaim Group Real Estate explained “Cityscape provides unparalleled opportunities that can help revive the sector. Having such a wide-range of properties to suit all tastes under one roof enables developers to get more insight into customers’ preferences.” Mikawi added that his company is planning to exhibit the second phase of its “Cairo Festival City” (CFC) mixed used project.

“Cityscape brings better exposure to real estate products, positioning developers among competitors and providing an opportunity to meet customers directly” agreed Abdel Nasser Taha, Development Director Mivida Emaar Misr. He addedthat the company is anticipating an increase in sales volume driven by Egypt’s population growth rate of 1.8% per year.

“The event timing is commensurate with a potential sector rebound on the account of foreign Direct Investment inflows. Investors need events like Cityscape to form a clear vision of the current status of the market,” said Esam Hafez, Country Director at Retail Group Egypt.

Tarek Abdel Rahman, Chief Investment Officer, Palm Hills Developments stated that Cityscape Egypt will contribute significantly to reinvigorating the real estate sector through boosting property sales volumes, and that Palm Hills Development (PHD) will be displaying around 18 projects this year.

Egypt’s real estate market has long been a key pillar of the economy and a lucrative market for investors seeking immediate income, medium to long term capital growth and a good resale potential. Recent announcements affirm that Egypt is on track to accelerate its economic growth, sustained by the government continuous efforts and the increasing property demand and supply.

About Cityscape

Cityscape is owned by Informa, one of the world’s leading knowledge providers in the form of publishing, events, training, market intelligence and academic expertise. Informa consists of around 8,000 employees working in 150 offices in over 40 countries.

Cityscape first took place in 2002 in Dubai and since then, it has grown to be the largest real estate event brand globally, with events taking place across the GCC, Middle East, Asia and Latin America. Since its launch, Cityscape has welcomed over 400,000 real estate professionals and investors from over 160 countries.

Cityscape's portfolio of global exhibitions, conferences, seminars and business breakfasts brings together a large cross-section of real estate professionals including international investors, developers, government and investment authorities, architects, designers, consultants and many others involved in the design and construction of real estate.


World Bank: Helping Electrification Efforts in DRC

Sub-Saharan Africa is blessed with large hydropower resources that can bring electricity to homes, power businesses and industry, light clinics and schools, and spur economic activity, creating jobs and improving human well-being. Yet, only 10% of this hydropower potential has been mobilized, weakening the fight to end poverty and boost shared prosperity on the continent.

To combat this, the World Bank Group’s Board of Executive Directors on March 20th approved a US$73.1 million grant to the Democratic Republic of Congo (DRC) for the Inga 3 Basse Chute (BC) and Mid-size Hydropower Development Technical Assistance Project.

DRC’s overall hydropower potential is estimated at 100 gigawatts (GW), the third largest in the world, behind China and Russia. Only 2.5% has been developed. With a 40 GW potential, Inga is the world’s largest hydropower site and its proper development can make it the African continent’s most cost-effective, renewable source of energy with an estimated generation cost of US$ 0.03 per kilowatt hour.

"DRC’s overall hydropower potential is estimated at 100 gigawatts (GW), the third largest in the world, behind China and Russia."

The technical assistance project will finance in a flexible manner a series of environmental, institutional, social and technical studies that will guide sustainable development of the Inga 3 BC and selected mid-size hydropower projects, with the ultimate goal of bringing more electricity to millions of people who currently have no access.

The project presents a unified World Bank Group approach to support the Government of DRC in developing under a public private partnership Inga 3-BC and mid-size hydropower project through a flexible government-led, transparent process. The project will create functional national institutions such as the Inga development agency to pilot the site development and award concessions on a competitive basis. No construction or operational activities will be funded by the technical assistance project.

Transformative projects that expand people's access to electricity are central to achieving the twin World Bank Group goals of ending extreme poverty and creating shared prosperity in Sub-Saharan Africa. The task of bringing electricity – through grid, mini-grid, and off-grid solutions – is urgent. With only one in three Africans having access to energy, and only one in 10 Congolese citizens having electricity, the challenge could not be greater.


Chinua Achebe (1930-2013): A Great Tree Has Fallen

In the mid-20th century Africa was starting once more to find its own voice, having been gagged by centuries of colonial oppression. For all that time, the story of Africa had been told by Europeans. The narrative they presented was mostly an ugly one. The prevailing view was that the black man, if in fact a brother, was certainly a junior sibling. This view was shattered by the devastating eloquence of Chinua Achebe. This new voice was poignant and undeniably African.

Known as the father of modern African literature, the Nigerian-born Chinua Achebe is the most widely read African author. His work has been translated into fifty languages. Mr Achebe’s style of writing, though novel for English literature, is well rooted in the oral tradition of the Igbo people. Though his stories are set amid the turmoil of colonial and postcolonial Africa, they remain intimately character driven - often tragic, but also vitally universal.

Throughout his life, Mr Achebe spoke out against the corruption and moral failings of colonial and postcolonial governments alike. In his essays and academic work he has laboured to undo the worst of colonial perceptions and rehabilitate the cultural identities and heritage of Africa. Mr Achebe’s works added to an ever growing stream of refutations of that most hopelessly naive moniker: The Dark Continent.

“Imaginative literature does not enslave; it liberates the mind of man. Its truth is not like the canons of orthodoxy or the irrationality of prejudice and superstition. It begins as an adventure in self-discovery and ends in wisdom and humane conscience.”

- The Truth of Fiction in Hopes and Impediments: Selected Essays 1988

Mr Achebe first book, Things Fall Apart, was published in 1958. He had sent manuscripts to several publishing houses where they met with prompt rejection. The manuscripts were saved from obscurity by Donald MacRae, an educational adviser at Heinemann who convinced the hesitant publishers with his succinct report: “This is the best novel I have read since the war.”

In Things Fall Apart, Mr Achebe tells the story of Okonkwo, a proud village chief struggling with his father’s legacy and his experience of white missionaries coming to his village. Mr Achebe borrowed themes from his own childhood. He was brought up Christian in a traditional Igbo village, forbidden to speak his native language at school.

Things Fall Apart went on to become one of the most important books in African literature, selling over 8 million copies around the world.

In 1960, Mr Achebe published his second book about Obi Okonkwo, No Longer at Ease, who leaves his village in order to obtain a British education and subsequently a job in the Nigerian colonial civil service. Mr Achebe based this novel on his personal experience working in Lagos, the capital city of a country on the cusp of independence.

Mr Achebe continued to produce books while being employed at the Nigerian Broadcasting Service until civil war broke out between government forces and the secessionist Biafra Republic. The war forced the Achebe family to flee their home and relocate to Aba, the Biafran capital. During his time in Aba, Mr Achebe concentrated on his poetry. Later, he explained that the short, intense form of poetry was more in keeping with his mood, set by the challenges and dangers of living in a war zone.

Mr Achebe was a firm supporter of Biafran independence. He went on a US tour with fellow writers Cyprian Ekwensi and Gabriel Okara in an effort to raise support for, and awareness of, the cause. In January 1970 the Biafran forces surrendered. The war had left some three million dead including Mr Achebe’s close friend, Christopher Okigbo.

After the war Mr Achebe took up a job at the University of Nigeria. He was unable to accept job offers from abroad: Authorities had revoked his passport in response to his support for Biafra. While at the University of Nigeria, Mr Achebe helped start two magazines: The literary journal Okike, and Nsukkascope, an internal publication.

In 1972, Mr Achebe with his passport restored, accepted a professorship at the University of Massachusetts Amherst and moved his family to the US. During his time there, he published the, at the time quite contentious, essay An Image of Africa: Racism in Conrad’s Heart of Darkness.

In this essay, Mr Achebe accuses Joseph Conrad of being “a thoroughgoing racist” for depicting Africa as “the other world”. Though opposed by his colleagues, Mr Achebe’s criticism eventually worked its way into the mainstream perspective on Conrad’s work.

In 1976, Mr Achebe returned to Nigeria. He retired from academia six years later. In the following years, Mr Achebe spent his time editing a literary magazine and working on novels. He also became involved in his country’s politics, becoming deputy national vice-president of the People’s Redemption Party (PRP).

However, elections marked by violence and fraud caused him great disillusion. Mr Achebe gave up on party politics and distanced himself from the PRP. After the military coup of 1984, the party was banned.

In 1990, three years after the publication of his fifth novel, Anthills of the Savannah – one of his greater successes, Mr Achebe was severely injured in a car crash in Lagos. The damage to his spine was such that he remained confined to a wheelchair for the rest of his life.

Soon after this tragic accident, Mr Achebe became the Charles P. Stevenson Professor of Languages and Literature at Bard College in Annandale-on-Hudson, New York – a position he was to hold for more than fifteen years. In the autumn of 2009, Mr Achebe joined the Brown University faculty as the David and Marianna Fisher University Professor of African Studies.
Professor Achebe died after a short illness on 21 March 2013 in Boston. He was 82 years old.

During his lifetime, Chinua Achebe received numerous awards and honours, including The Man Booker International Prize (2007), an Honorary Fellowship of the American Academy of Arts and Letters (1982), and over 30 honorary degrees from universities in England, Scotland, Canada, South Africa, Nigeria and the United States.

In 1986, Mr Achebe celebrated as Wole Soyinka, his friend and fellow countryman, received the Nobel Prize in Literature – the first African ever to do so.

Mr Achebe’s body was brought back to Ogidi, the village where he was born. Thousands of Nigerians gathered outside the St Philips Anglican Church as friends, family, and dignitaries, including Nigerian President Goodluck Jonathan, paid their last respects. A colleague at Brown University, Professor Corey D.B. Walker summed up his feelings on the death of Professor Achebe with the phrase, “A great tree has fallen.”

Nelson Mandela, recalling his time as a political prisoner, once referred to Mr Achebe as a writer “in whose company the prison walls fell down.”

Chinua Achebe knew the power of storytellers. He knew the damage done when a people are defined solely by the stories of others. What transpires when people are robbed of their own stories may be seen throughout postcolonial Africa: War, poverty, and stagnation. Despite everything Africa has endured, hope remains. It may prevail yet. Stability is slowly gaining a foothold in a number of regions, including Nigeria, with Lagos becoming an economic powerhouse.

Chinua Achebe life’s work was dedicated to re-establish a balance of stories. When Mr Achebe went to school, he only could read books by the likes of Shakespeare and Dickens. Today, millions of school children may too read not just the works of these literary giants but also those by home-grown authors such as Chinua Achebe. Today, Africans continue to tell their story. i

About the Author

John Marinus, who also contributes to our Editor’s Heroes section, is a freelance writer based in the Netherlands.


Bitcoin - Chronicle of a Failure Foretold

Transaction malleability – a fraudulent, though most lucrative, way of receiving money without anyone actually sending it – is driving another nail into Bitcoin’s coffin. The digital money is by no means dead (yet), and could even perform a Phoenix trick, but its value tumbled all the same as the Tokyo-based Bitcoin exchange Mt Gox early February reported the software-related bug and halted Bitcoin transfers between the virtual wallets it manages and those of other exchanges.

The financial geeks of Mt Gox are said to be working with the core Bitcoin software developers to solve the issue that involves hashes and other exciting crypto sciences. As these coders plugged away to plug the hole, the Bitcoin exchange rate slumped to barely $500 from an earlier high of $1,200.

Digital currencies should be used only by the strong of heart or – at a pinch – by those who possess more money than they probably should. As Bitcoin jumped and leapfrogged to its all-time high, even some quite respectable pundits got caught up in the excitement, predicting that before long a single Bitcoin could be worth as much as $700,000.

Now that’s financial innovation at its very best: A currency you can’t actually touch or hold in in a wallet other than a virtual one being worth about half of Detroit’s housing stock. You just gotta love it.

“Bitcoin is deflationary money. Its growth is limited to 21 million coins ensuring continued appreciation in value.”

You also have to be rather daft in supposing the hash-generating software that underlies Bitcoin to be resistant to hacking when the stakes are that high. When obtaining just ten measly Bitcoins can potentially land a hacker or fraudster seven million in real money, that software is going to be cracked.

It’s not a question of technical prowess; it’s a philosophical one. No group of crypto geeks and geniuses can outsmart the collective intelligence and resourcefulness of the world’s hackers and fraudsters. Examples abound of powerful and cash-loaded companies that have tried – and utterly failed – to outwit this collective ingenuity. Ten or so years ago, Sony invested tens of millions of dollars to secure its music CDs against copying by home computer users. The system the company developed was hailed as a marvel of technology until – merely days after the first protected CDs hit the high streets – some guy in Germany discovered that marking the disc with a felt-tip pen at a spot near the inner rim could defeat the security system.

Microsoft has also repeatedly tried and failed at securing its software against hackers. Within a day after its then-CEO Bill Gates pompously declared that Windows 7 could not be hacked because of some supremely nifty security feature, the operating system was cracked wide open for all to use.

This is the Bitcoin conundrum: As the digital currency appreciates in value, the likelihood of it being undermined by hackers-turned-counterfeiters increases exponentially. The Bitcoin geeks can plug all the holes they want and unleash all might of cryptology, their efforts will prove to be in vain. The most interesting part of this equation is that the best crack will assuredly come in the form of some felt-tip pen, i.e. the simplest of solutions that produce a ‘duh’ moment.

Now, as such Bitcoin seems a swell idea, especially the part that has central banks and the governments they serve lose their power to manipulate the currency. This certainly appeals to anyone with even a single anarchic gene in their body. However, let’s be careful what we wish for. Yes, the system of fiat money that runs today’s world is bizarre in the extreme. Trillions of dollars and euros are called into existence at the stroke of a pen or the punching of a few keys.

This cannot be a good thing for anyone, save for the select few holding that all-mighty pen or keyboard. Fiat money is also inflationary and some people in some countries go wild with that power and inflict serious economic and financial damage. Venezuela comes to mind. As does Mr Mugabe’s Zimbabwe. As Aristotle noted way back when, it is better to rise from life as from a banquet - neither thirsty nor drunken.

Bitcoin is deflationary money. Its growth is limited to 21 million coins ensuring continued appreciation in value. That may seem like a good thing, but is actually a damaging feature. Deflation is understood to be a general decline in prices as a function of supply and demand. Why spend today, when your money may be worth more tomorrow?

To see what deflation does, just look at the housing market in Spain. Nothing moves because everybody thinks that real estate prices are likely to drop further. Only a fool buys today when he expects a lower price tomorrow. As a result millions of construction workers are idle.

One might even say that hackers would do Bitcoin a favour by minting counterfeit coins, by so doing upping inflationary pressure. But in fact, for all its appeal, Bitcoin is merely an interesting, albeit severely flawed, concept. It will be run through its paces, cause both awe and wonder as it moves from low to high and back again, and then ultimately be confined to the outer reaches of the financial world where it will reside in the company of other crackpot ideas such as universal income and unlimited growth. i


Inez Murray: Women in Business - Bankers Advised to Take Note

Getting banks to notice women is quite the challenge. Whereas research consistently shows that women are exceedingly good at managing money and budgets, banks often ignore the female demographic or fail to put processes in place that facilitate the financial inclusion of women.

The Global Banking Alliance for Women (GBA) aims to change this pattern and by doing so foster wealth creation for women. Ms Inez Murray is CEO of the Global Banking Alliance since November 2012 and works tirelessly for the empowerment of women at every economic level – business owners, household managers, and community leaders.

“Women are critical to progress. For banks this means that catering to the specific needs of female customers is of institutional importance.”

Though most bankers readily agree that women are essential to their business, few understand the needs of female customers. One of the GBA’s flagship programmes tries to change this by mentoring banks willing to offer financial services and products to low-income women entrepreneurs.

In January, the MetLife insurance company, through its MetLife Foundation, awarded GBA a sizeable grant to help develop this mentoring programme further, recognizing that the women’s market represents “the single biggest untapped opportunity” in the financial services sector.

GBA’s mentoring programme mainly aims to help member banks capitalize on talent and expertise they may already have in-house but have failed to either tap or identify. Ms Murray emphasizes that women entrepreneurs are creating businesses at an ever increasing rate that in some countries already surpasses that of their male counterparts. “We now are suggesting banks take a closer look at this dynamic segment. The business case then often builds itself. Banks can simply not afford to ignore the female demographic any longer.”

The Global Banking Alliance for Women was founded in 2000 and is the leading organisation striving for female financial inclusion and wealth creation. GBA has 25 member institutions working in 135 countries to provide women-run business with access to capital, markets, education and training. GBA provides member institutions with technical assistance, peer learning and best practice guidelines.


IFC: Indonesia Needs Good Corporate Governance

[caption id="attachment_6927" align="alignright" width="266"] Indonesia[/caption]

Indonesia’s economy is facing tough challenges: A slowdown of gross domestic product growth, a depreciation of the rupiah and a tightening of external financing. On the political side, the country is entering a period of uncertainty with upcoming legislative and presidential elections. Moreover, under current market conditions, companies are operating in ever tougher competitive environments.

These developments challenge the attractiveness of the country’s corporates to investors. In this climate, Indonesia needs to restore foreign investors’ trust and redirect their attention to its strong fundamentals: A politically stable country with the world’s fourth largest population, and a young and growing consumer base.

One fundamental step to restoring this trust and raising Indonesia’s standing as an attractive investment destination is to shore up the private sector’s corporate governance practices.

Earlier this month, Indonesian finance minister M. Chatib Basri rightly pointed out that during the era of easy money foreign investors tend to place their portfolios with less scrutiny. Now that Indonesia is going through a period of economic instability, investors will be more careful. They’ll analyse the business environment with a critical eye and examine the level of protection of investors’ rights and other corporate governance practices closely.

“Studies confirm investors will pay a premium to own shares in well-governed companies as they tend to perform better.”

In this situation, Indonesian companies can build trust by protecting the rights of shareholders and honouring their obligations to staff, investors, suppliers and local communities. They should also institute a competent and independent board that can review management decisions effectively and make roles and responsibilities of board and management public.

At home, such good corporate governance builds trust between companies, local investors and other stakeholders. Internationally, good corporate practices send a positive signal to foreign investors that their money will be safe in Indonesian companies. Let’s not forget that Indonesia competes with other emerging market nations for a slice of global capital.

Studies confirm investors will pay a premium to own shares in well-governed companies as they tend to perform better.

In Brazil, for example, a segment of companies on the stock market, which voluntarily commit to higher corporate governance standards (called Novo Mercado, or New Market), have consistently posted larger gains and experienced less volatility over the past decade.

Similarly, the Hawkamah Institute in the United Arab Emirates launched a pan-Arab index of listed companies across the Middle East and North Africa in 2011. Its work shows that the top 10 rated companies in terms of good governance significantly outperformed the market average between 2011 and 2013.

In short, companies that practice good corporate governance advance their long-term survival and prosperity. A well-performing company with streamlined internal practices has a positive impact on private sector development. Good corporate governance builds healthy organizations and institutions and leads to sustainable economic growth. With a young population that needs jobs, it is crucial Indonesia adopts long-term ways of building and sharing prosperity among its more than 240 million people.

To do just that and place corporate governance front and centre of Indonesia’s economy, the Financial Services Authority (OJK) recently launched with support from the International Finance Corporation (IFC), a member of the World Bank Group focused on private sector development in emerging markets, the Indonesian Corporate Governance Roadmap and Manual.

The roadmap defines key principles of governance which will shape the regulatory framework for listed companies. It emphasizes transparency and seeks to strengthen the role of company boards. There is evidence to show that investors gain great confidence in companies that are more transparent and have active boards that are capable of stewarding companies effectively.

Complementing the roadmap is the Indonesia Corporate Governance Manual, a benchmark of existing laws and regulations within the context of globally recognized practices. The manual provides practical guidance to Indonesian companies – not just those that are traded on stock markets – on how to implement sound governance practices.

Now, as Indonesia’s corporates navigate choppy economic waters, is the right time for companies to improve their practices and prepare for the future. Indonesia’s companies — and the country as a whole — will be all the stronger for it.

About the Author

Sarvesh Suri is Indonesia Country Manager for IFC, a member of the World Bank Group and the largest global development institution focused exclusively on the private sector.

About IFC

IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries.
Established in 1956, IFC is owned by 184 member countries, a group that collectively determines their policies. IFC’s work in more than a 100 developing countries allows companies and financial institutions in emerging markets to create jobs, generate tax revenues, improve corporate governance and environmental performance, and contribute to their local communities.
IFC’s vision is that people should have the opportunity to escape poverty and improve their lives.


Fatema Mernissi: Beyond the Veil - A Seismic Shift in Islamic Society

An Islamic feminist may seem a contradiction in terms, but Fatema Mernissi is anything but. This Moroccan author and sociologist has made it her life’s work to question the alleged sayings of Muhammad that for some still justify the subordination of women in the Muslim world. It is the discrepancy between these hadiths – sayings attributed to the prophet – and the texts of the Qur’an that fascinate Mrs Mernissi most.

In fact, nothing in the Qur’an would seem to indicate that women should be confined to a subservient role in society. From this parting point, Mrs Mernissi attempts to reconcile traditional Islamic faith with progressive feminism. In fact, she argues that faith and female empowerment are not at all incompatible.

In her historical research on the role of women in Islamic societies, Mrs Mernissi found that in early Muslim culture women enjoyed equality with their male counterparts in areas such as property rights and spiritual exercise. In The Veil and the Male Elite: A Feminist Interpretation of Islam (1988), Mrs Mernissi profiles the religion’s influential women who today mostly reside in near-oblivion. In Forgotten Queens of Islam (1990), she portrays the life of no less than 15 female Islamic rulers who preceded Benazir Bhutto as heads of government.

“Arab audiences are almost universally enthralled by strong, eloquent women showing off their professional prowess on television.”

According to Mrs Mernissi, the distorted gender dynamics prevalent in most of today’s Islamic societies are caused by a refusal to adapt traditional Muslim structures to modern times. However, she sees much reason for optimism as women across the Muslim world slowly reassert their role, using technology to do so. Women are dominant on the 200 or so satellite television channels that have sprung up in Islamic countries and beam views to global audiences. The Internet has opened windows on the wider world as well, facilitating the free exchange of ideas, experiences and initiatives.

Mrs Mernissi regrets the emphasis Western societies place on the veil and other traditional garments often considered to be depriving women of their freedom. This fixation, she argues, stops Western societies from fully appreciating the revolution taking place in the Islamic world. Mrs Mernissi sees a “mind-blowing civilizational shift” unfolding that brings the sexes closer together in a meaningful dialogue.

A case in point is personified by Mai Al-Khalifa, an anchor lady at the Al Jazeera television network who commands near universal respect. Whenever Mrs Al-Khalifa comes on the screen, people gathered at cafes, eateries and shops grow quiet to listen attentively to what she has to say. “Coming from a society in which belly dancers were the only women to be seen on screen, this is a monumental change,” says Mrs Mernissi, emphasising that Mrs Al-Khalifa is by no means an exception: “Arab audiences are almost universally enthralled by strong, eloquent women showing off their professional prowess on television.”

Mrs Mernissi boldly takes this reasoning to a level beyond. She argues that the increasing space women have carved out for themselves in Islamic society actually encourages men to engage in a struggle for liberation against oppressive, authoritarian censorship. As such, power becomes disconnected from sex and a new world – full of possibilities – opens up.

The much-maligned veil is today but an outward expression of a faith in search of a new course: It is largely unimportant. Mrs Mernissi now draws attention to more relevant developments in Islamic society that are mostly hidden from view because of our collective obsession with an outmoded garment.