Moving into Pakistan Big Time: China to Invest Serious Money

[caption id="attachment_5239" align="alignright" width="317"] Islamabad[/caption]

China has the money and is not afraid to invest it in Pakistan. The Chinese Water & Electric Corporation (CWE) is set to disburse some $6bn over the next five years in Pakistan’s energy sector in a bid to help that country solve its power shortages. The investments are being carried out by CWE’s Investment Corporation which already runs nine projects in Pakistan.

Clean energy is high on the agenda. Construction of a sprawling 50 mega-Watt wind farm project started in January and is taking place at the breakneck speed China made into its hallmark: Building is scheduled for completion by the end of the year. By that time half of the wind turbines will have been installed. The wind farm will be fully operational and plugged into the Pakistani national grid by June 2014.

CWE already operates two larger 450mW wind farms in Pakistan besides two smaller solar power facilities. The company also runs a state-of-the-art wind measuring project in the Punjab. A much larger punch is still to come with work on no less than three hydropower plants to begin in the next three years.

CWE’s flagship project is the 1,100mW Kohala dam. This project is currently in the tariff negotiating stage which should be completed next year. Land acquisition is slated to be completed by 2015 so that construction may start a year after that. Two smaller hydropower projects – the 720mW Karot dam and the 120mW Taunsa dam – are also in the works.

“We can only hope that by investing in Pakistan, the economy of that country will bounce back. In time this should contribute to political stability and social peace.”

In July, Pakistan Prime Minister Nawaz Sharif went to Beijing on his first official visit in order to meet up with President Xi Jinping and talk about China’s growing stake in his country. The two leaders signed eight bilateral deals that aim to cement relations.

The eye-catcher among the deals signed is China’s commitment to the building of a 2,000km long economic corridor linking the port city of Gwadar on the shores of the Arabian Sea to Kasghar, the most westerly Chinese city on the famed Silk Route. The corridor – initially a highway and later possibly a rail link as well – offers China a shortcut to the Middle East and markets beyond, bypassing the Strait of Malacca which authorities in Beijing see as a bottleneck to be avoided.

Apart from the rather formidable topographical obstacles to be overcome by Chinese and Pakistani engineers, the proposed corridor must deal with political uncertainties as well. The project cuts right through the restive Balochistan Province, home to a number of militant groups of varying persuasions.

For Liu Xiaoxue of the Institute of Asia-Pacific Studies in Beijing, China has little choice but to commit firmly to projects as the transport corridor: “We can only hope that by investing in Pakistan, the economy of that country will bounce back. In time this should contribute to political stability and social peace.”

China is not merely trying to remain Pakistan’s largest contractor. The country also is keen on opening new routes for its essential oil imports and corridors for exporting its manufactured goods to the far corners of the world in ever more efficient ways. To this end, China took over management of the port in Gwadar earlier this year. The fledging port is set to receive an initial investment of up to $750m to upgrade existing quays and loading and warehousing facilities.

China’s plans for Gwadar are close to mind-boggling. The city’s current population of 85,000 is expected to increase fivefold over the next five years as investments bear fruition and activity picks up. A total of $12bn in construction projects is set to take place in and around the city.

The importance of Gwadar for China is hard to overstate: Middle East oil now has to travel some 16,000km from the Gulf to Shanghai, a trip that takes two months and leads through pirate-infested and often stormy waters. By rerouting its imports via Gwadar, tankers with oil bound for China need only navigate 2,500km of generally calm and safe seas.

There is a multi-faceted political element to China’s expanded presence in Pakistan as well. The authorities in Beijing should like to assist Pakistan in taming its wilder regions by fomenting development and bringing prosperity to the societal fringes of the country. China would also like to contribute to improved conditions in Northwest Pakistan in order to possibly deflate the East Turkestan Islamic Movement, a budding separatist movement that seeks independence for the Muslim Uighurs of the Xinjiang Region. Right now, the unruly regions on the Pakistan side of the border – places often deprived of governmental authority – offer this group a safe haven, something both governments would like to change.


Angola: Powering A Booming Economy with Renewables

[caption id="attachment_5243" align="alignright" width="275"] Angola[/caption]

Alternative, renewable energy is not merely an afterthought in oil-rich Angola as the country seeks to diversify its booming economy. After an absence of three full decades, sugar cane made its return as a cash crop just five years ago and is now poised to become yet another engine of growth.

Next year, the Malanje Province, on the fertile central highlands, is to become a major producer of biofuels with the completion of a processing plant slated to crush over two million tons of sugar cane annually.

The $197m project – Companhia de Bioenergia de Angola (Biocom) – is a joint venture between Brazil’s Odebrecht and Angola’s Damer conglomerates. The state’s ANIP (Agência Nacional para o Investimento Privado) investment agency holds a minor stake in the venture.

The Biocom plant is expected to output 260,000 tons of sugar besides 30 million litres of ethyl alcohol (ethanol) each year. A power plant fuelled by bagasse, a post-processing sugar cane waste product, will generate 28MW of electricity for the strained local grid.

“Angola now imports all the sugar it consumes though thirty years back the country was a net exporter of the commodity. We now reintroduce sugar cane as a viable cash crop and as a way to help re-launch Angola’s largely dormant agriculture sector,” says Rui Amaral Gourgel, president of Biocom’s Board of Directors.

"Angola now imports all the sugar it consumes though thirty years back the country was a net exporter of the commodity."

According to Mr Gourgel, by this time next year some 500 fulltime jobs will have been created. Training of key personnel is already taking place in Brazil with a first group of 62 newly formed ethanol plant technicians expected back in Angola shortly. Additionally, up to 700 people in Malanje Province may find work as subcontractors.

Biocom is by no means the only biofuel initiative unfolding in Angola. Around the town of Humbe, close to the border with Namibia, two large-scale biofuel projects are by now already well on their way with ethanol production volumes steadily increasing.

The Marubeni Corporation from Japan has recently been asked to build a third sugar cane processing plant valued at well over $650m. This facility, near the town of Cunene, is to produce about 40 million litres of ethanol annually. This order represents the second largest contract awarded Marubeni by Angolan authorities. Earlier the company received a $1bn contract for the rehabilitation of three textile plants in the country.

By any measure, Angola’s capacity for renewable energy generation is enviable: The government in Luanda has just finished a feasibility study on the hydropower potential of the Kwanza River identifying nine sites suitable for damming. The river may generate up to 6,000 mega-Watts of power. Currently only two mid-sized dams span the Kwanza generating about 700MW. The Russian government has pledged financing for two hydropower projects on the Kwanza River that will generate some 2,000MW.

Meanwhile, a $7bn bi-national project is taking shape on the Angola-Namibia border. Here, a 400MW dam is to be built.

However, renewables in Angola suffer from a lack of legislation. The national parliament is mulling a series of proposals regulating both the hydropower and renewable energy sectors. Investors are waiting for regulation to be put in place before committing to other large-scale projects in the country. It is estimated that the current complex web of subsidies cause inefficiencies equivalent to about 1.6% of Angola’s GDP.

Revitalizing and upgrading distribution networks is a must should the government want to meet its ambitious targets of boosting domestic power production to 7,000MW by 2016, enabling per capita consumption to increase eight-fold to 4,000 kWh.


Experts Debate Dubai's Post-Recession Property Boom - Another Bubble or Sustained Recovery?

More than 750 senior real estate professionals prepped for Global Real Estate Summit and MENA Mortgage and Affordable Housing Congress

[caption id="attachment_5252" align="alignright" width="303"] Dubai[/caption]

Dubai, UAE, 11 August, 2013: With all sectors of the Dubai property market now gaining momentum in making a healthy recovery, industry experts are debating whether the Emirate is entering another bubble and what needs to be done to maintain a sustainable growth path

That will be one of many hot debates at the upcoming Global Real Estate Summit, taking place alongside Cityscape Global – the Middle East’s largest and most influential international real estate event – from 8-10 October at the Dubai World Trade Centre.

Tariq Ramadan, Chairman of UAE real estate and business conglomerate, Tharaa Holding, and a headline panellist at the three-day summit, said some speculation has returned to the market, while the large amount of cash transactions continue to cause headaches for regulators looking to curb sharp price increases.

“The laws and other regulatory reforms made by the Dubai Land Department and the Real Estate Regulatory Agency have provided a sufficient and transparent environment for Dubai real estate investors, but more importantly, they have provided the much needed protection for investors by making developer requirements more secure,” said Ramadan.

“However, as an open international market, it is hard for authorities to put restraints on demand to avoid another property bubble, especially since more than 75 per cent of Dubai real estate transactions are cash deals. This means the use of interest rates and other constraints on loans will have minimum impact on overall demand.”

According to the Dubai Land Department, real estate transactions in Dubai were up 63 per cent year-on-year for the first quarter of 2013, reaching US$12 billion, highlighting growing investor confidence in the Emirate’s property market.

Ramadan said that Dubai’s open market policy and regulatory framework introduced over the past few years has been key to the Emirate’s real estate revival, but warned that any interference with current policy to temper escalating demand could impact its credibility and reduce investor confidence.

He added: “I’m sure that there are certain measures that can be taken to manage demand and provide a strong foundation for sustainable growth. This is indeed a very hot topic that is getting significant attention from media and industry experts. I am confident the Global Real Estate Summit will present some clear insights on the subject, and provide suggestions on how to make this growth sustainable.”

One route to a more sustainable real estate market in Dubai and the Middle East is said to be through investing in affordable housing and mid-range developments – a key topic to be explored further at the MENA Mortgage and Affordable Housing Congress, taking place from 8-9 October. The congress will run alongside the Global Real Estate Summit at the 12th edition of Cityscape Global this year

According to the United Nations, one in five people living in the MENA region is classified as youth, between the ages of 15 to 24, bringing the total of number of youth in the region to nearly 90 million which creates unprecedented demand for affordable and social housing communities.

Chris Seymour, Partner and Head of Property & Social Infrastructure at consultancy firm, EC Harris, and another speaker at the Global Real Estate Summit, said developers are taking note.

“Affordable housing is now considered seriously by both developers and the government and I think that we will see improvements in this segment to enable better access to good quality housing at the right price for the younger population in the MENA region,” said Seymour.

“Mixed-use developments are making a place for the younger population to work and be able to afford to live in close proximity. This provides balance to the community and we are seeing this extend into retail and hotels at mid-scale levels to fill in those ‘affordable option’ gaps”.

Added Seymour: “Improvement in the maturity of real estate in the region is evidenced by the co -existence of premium, secondary and tertiary sector markets. This should be looked at as healthy, and a good indicator of sustainable growth in the region.”

Other headline speakers at the Global Real Estate Summit and the MENA Mortgage and Affordable Housing Congress include Nenad Pacek, President of Global Success Advisors, and co-founder of CEEMEA Business Group; Philip Blumberg, Founding Chairman and CEO of Blumberg Capital Partners; and Maysa Sabah, Managing Director in the GCC for the Affordable Housing Institute.

Future Cities, the leading event in sustainable urban development jointly organised with Dubai Municipality completes the Conference line up at Cityscape Global this year.

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

The three-day event will host more than 200 exhibitors and 750 Conference delegates in 2013, and returns with support from Foundation Sponsors Emaar, Nakheel, and Dubai Properties Group; Strategic Sponsor Barwa; Gold Sponsor Union Properties; Official Broker, TRISL Real Estate; Silver Sponsors Abu Dhabi Finance, Anantara Residences and Pacific Ventures; Al Aribya as Regional Broadcast Partner;  and CNN as the International Broadcast Partner.


The War on Tax Evasion: How a Good Pursuit Gets Ugly

[caption id="attachment_5256" align="alignright" width="268"] Geneva[/caption]

At first glance, the showdown between the US government and the Swiss banks seems to have produced a satisfactory outcome: Tax dodgers can no longer park their undeclared monies in Switzerland without fear of discovery.

Under a new bilateral deal, Swiss banks are forced to hand over comprehensive details of their US customers – in fact, just about all they know but for actual names – that enable the American Justice Department to file robust “mutual legal assistance” requests. These petitions subsequently force Swiss courts to order the full disclosure of banking records regarding suspected US tax evaders.

The deal severely punishes banks that refuse to participate or do so less than wholeheartedly. Switzerland’s oldest bank, Wegelin & Co founded in 1741, has to close its doors earlier this year after it pleaded guilty in a New York court to hiding about $1.2bn from US tax authorities. Though the bank had not violated a single Swiss law and does not operate from US soil, it paid close to $58m in fines after which it shut down.

"The banks then may expect fines of 20 to 50% on the undeclared account balances."

Swiss bankers, having watched the execution of Wegelin & Co, are now cordially invited to “voluntarily” disclose information on their US customers to the Internal Revenue Service (IRS). The banks then may expect fines of 20 to 50% on the undeclared account balances. Even Swiss banks with no foreign customers are wise to participate and furnish independently obtained proof that they do not hold any deposits of US citizens or green card holders.

Failure to comply will be met with aggressive persecution. Many of Switzerland’s 300 or so banks are quite small and do not have the wherewithal to fight the IRS. They simply must accede to any and all requests emanating from US authorities or risk ending up like Wegelin & Co.

There is a lot wrong with the Foreign Account Tax Compliance Act (FATCA) which seeks to extend the reach of US legislation far beyond the country’s national confines. For starters, the legislation inverts the burden of proof. Bankers now have to prove their innocence.

While it may be true that some of the larger Swiss banks in the past actively and knowingly courted US tax dodgers, this is no reason to proffer blanket accusations against all banks. In fact, the IRS has now abdicated its own obligations to properly investigate tax evasion: Alleged offenders will be handed to them on a plate.

Also, tax experts argue that FATCA mainly targets small-time tax dodgers. The truly rich and tax averse keep their millions out of sight through highly complex offshore vehicles of the type US politician Mitt Romney was found to use during his failed bid for the presidency. These dubious monies are decidedly not targeted by the IRS and the US Justice Department.

While fighting tax evasion and avoidance are entirely legitimate pursuits, the heavy-handed weapons chosen by the US and some other countries force an unwelcome breach of long-established privacy laws and practices. As such, FATCA is akin to the War on Terror which justifies extra-judicial killings by remote control, the wholesale invasion of privacy and a vast range of other questionable restrictions on freedom.

Most bothersome, however, is the fact that governments worldwide increasingly aim to cover-up the inefficiencies of their own bureaucracies with broader and sweeping powers; be that in the quest against terrorism or the fight against tax evaders.


Learning the Ropes in Peru: Chinese Companies Engage Local Communities

[caption id="attachment_5274" align="alignright" width="181"] Peru[/caption]

Chinese companies are learning how to navigate the tricky waters of community politics in perhaps the most unlikely of places: Peru. Here, Chinese businesses have found it next to impossible to buy their way into the local hearts and minds. Instead, companies must engage communities, offer tangible improvements in living conditions and be seen to respect the environment with more than just token gestures.

“The loopholes available to Chinese companies doing business in Africa are quite simply not present in South America where local communities often will have their interests looked after by an at times bewildering array of non-governmental organizations. These NGOs are no pushovers and cannot be bought off easily with a school or a road,” says Hongxiang Huang of the Dialogue for Chinese Investment in Africa and South America.

According to Mr Huang, most Chinese companies are used to conducting their business exclusively with national governments or even in face-to-face meetings with presidents. “Chinese businessmen have a penchant for reaching straightforward deals with those that hold power. This is how it works in Africa. However, power in South America is much more diffuse and the government’s say is by no means the last word. This has caused no small degree of confusion.”

Chinese mining companies are raising their stakes in Peru and have already committed to invest up to $7bn over the coming four years in a number of extractive projects. Even though Peru can stand to use the proceeds of its vast mineral wealth, mining projects are often plagued by serious delays due to vociferous local opposition.

“Chinese businessmen have a penchant for reaching straightforward deals with those that hold power. This is how it works in Africa. However, power in South America is much more diffuse and the government’s say is by no means the last word. This has caused no small degree of confusion.”

In 2009, a campaign of civil disobedience directed against oil exploration in the Peruvian Amazon Region got ugly and resulted in the death of 32 protesters and soldiers dispatched to restore order. Since then, the Lima government has pledged adherence to the International Labour Organization’s Convention 169 – a binding statute that gives indigenous people a say on extractive projects that may affect their way of life.

Last May, President Ollanta Humala also convinced parliament to pass a Prior Consultation Law that calls for a non-binding vote of approval to be sought in any community where a new mining project is underway. “Chinese companies now have to learn talk to possibly restive locals”, says Alana Tummino, a researcher of the Americas Society. “Operating within the confines of national law is no longer sufficient to ensure the execution of any given mining project; you have to convince local communities as well.”

Chinese companies have already felt the consequences of ignoring local opinions. In the Morococha District, Chinalco (China Aluminium Corporation) has faced bitter protests against its plans to move an entire village of some 5,000 inhabitants to make way for an open-pit mine estimated to hold about 5.7m tonnes of copper.

In all fairness to the Chinese, the idea for moving the village actually came from the previous concession holder PeruCopper. Even though Chinalco has pledged $50m for the move, protests continued. However, after hiring the social consultancy firm Social Capital Group to do the local negotiating, tempers cooled and the local community was won over.

Chinalco’s ultimately successful approach holds many lessons for other companies coveting Peru’s riches. As one of the first Chinese mining companies in Peru, Shougang did not possess the required finesse to manage local sentiment and, as a result, has suffered much hostility directed against its iron ore mine. The company was accused of ruthlessly exploiting its workers and dumping chemical waste into the sea.

“It is quite hard to find something, anything really, that Shougang did right in Peru. The company has received an avalanche of bad press which could have been easily avoided had its directors understood the need for public relations. Instead, they opted to stick to their guns and ride roughshod over local sentiment. This is not a wise, nor a lucrative, thing to do in South America,” says Kevin Gallagher, author of The Dragon in the Room: China and the Future of Latin American Industrialisation.

The need for dealing with communities on a local level – oftentimes absent in African countries – is essential if China is to reap benefits of its proposed mega-investments. Chinalco has paved the way and hopes to extract the first copper ore from its Morococha operation later this year.

This will be nothing less than a milestone for the Chinese in Peru: The Morococha mine is only the second one to enter operation after Shougang’s Marcona iron ore mine in Peru’s Ica Region opened in 1992.

Lima-based business consultant Mariana Costa thinks that Chinese companies are fast learning valuable lessons on community engagement in Peru: “This may in time also alter the way Chinese companies go about projects in other countries. They are the ones with the cash and it would indeed be a positive development should Chinese business become more attuned to the needs of the communities that host their operations.”


An Actor Out of His Depth: Clooney Keeps an Eye on Sudan

[caption id="attachment_5284" align="alignright" width="225"] George Clooney[/caption]

US heartthrob George Clooney – according People Magazine the Sexiest Man Alive – has found a new calling: Spying. The actor has earmarked the proceeds of his Nespresso coffee endorsement to finance an eye in the sky which is to keep tabs on the president of Sudan.

Clooney-the-snoop does not like Mr Omar al-Bashir and the latter better take note: “I want him to have the same amount of attention that I get. I think that’s fair.” The actor said that he got the idea for employing satellites to spy on Sudan from the paparazzi that follow his every move with huge telephoto lenses.

Ever since Mr Clooney came out of the closet and admitted to being a liberal on the Larry King show back in February 2006, he had been looking for a cause. Thanks to Nespresso, the coffee capsules he peddles in television commercials, the actor has found an issue to take up: The defence of South Sudan vis-à-vis its neighbour to the north.

After sipping a cup of coffee powered by beans from South Sudan, Mr Clooney was sold on the world’s newest country. In fact, the actor was so happy to have found his cause that he’s gone quite berserk over it, to the point of getting himself arrested during a protest in front of the Sudanese embassy in Washington, DC. As he was led away by a burly police officer, Mr Clooney said he was just “trying to raise attention.”

"After sipping a cup of coffee powered by beans from South Sudan, Mr Clooney was sold on the world’s newest country."

Stardom in Hollywood isn’t complete without some form of political activism. Sean Penn has taken up the plight of Venezuela and other countries purportedly menaced by US imperialism; Alec Baldwin fights for gun control and the environment; and Richard Gere is enamoured with the Dalai Lama. It would almost seem that no issue can be taken seriously as long as it hasn’t been taken up by someone famous.

While Mr Clooney is stoking the fires, relations between South Sudan and Sudan seem on the mend. The potentially dangerous row between both countries over pipeline fees and border demarcation was largely settled during a recent visit to Khartoum by South Sudanese President Salva Kiir.

As a direct result of the talks in early September between presidents al-Bashir and Kiir, two pipelines carrying South Sudanese oil to Port Sudan on the Red Sea were opened up. This enabled two oil fields in South Sudan’s Unity State to come back on stream after 21 months of inactivity. Oil production is now up to about 30,000 barrels per day. Two additional fields will be activated in November and December boosting oil output by another 30,000 barrels/day.

Notwithstanding Mr Clooney’s claims to the contrary, a most welcome thaw has improved relations between Khartoum and Juba significantly to the point where Sudan Vision, a leading daily in Khartoum, lavishly praised South Sudanese president Salva Kiir of South Sudan for his determination to reach a compromise on most, if not all, outstanding issues between the two nations.

For its part, the government of Sudan confirmed its “total cooperation” with the efforts of the African Union (AU) to address any remaining issues. The head of the AU Monitoring and Verification Mechanism, Julius Olakunle, called the statements by Khartoum officials as “most constructive” and said that the levels of cooperation he found on the ground along the border offer “great encouragement.”

Mr Olakunle called on the people of the two countries to avoid unlawful actions that might jeopardize the AU’s mediation efforts and said he expected the press in both countries to refrain from jingoism.

The improvement in bilateral relations followed a thorough cabinet shake-up in South Sudan which resulted in the dismissal of some of that country’s more sanguine government officials. Pundits in Juba have it that president Salva Kiir decided on the reshuffle after growing increasingly frustrated at the lack of progress in mending fences. Earlier the South Sudanese president had met significant opposition to his policy of détente.

In light of recent developments, the antics of a Hollywood movie star seem rather silly. The ever suave Mr Clooney should perhaps keep to his trade of setting hearts on fire. Moreover, his unwarranted interference smacks of latter-day colonialism: As African nations seek and find models of cooperation and development, they are decidedly not in need of advice from an ill-informed actor and coffee hawker with ambitions extending beyond the silver screen.


Looking for an Easy Fix: The Great Banking Crisis Five Years Later

Greed, malfeasance, incompetence and a lack of both regulation and oversight brought the world perilously close to a financial Armageddon when Lehman Brothers investment bank collapsed five years ago this week. The tumultuous event left a gaping hole of well over $610bn and precipitated a worldwide financial calamity which still reverberates. In the wake of the Lehman crash, scores of banks and even entire countries tumbled and fell.

For the past five years the origins and causes of the crisis have been exhaustively analysed and discussed. In the US, Europe and elsewhere, regulations were tightened a bit with a view to avoiding a future meltdown.

However, the perception is that the bungling (investment) bankers got away almost scot-free and in many instances even kept claiming their exceedingly fat pay checks and bonuses. Yet these inept financiers and their creative accounting techniques ultimately caused untold millions to lose their jobs or suffer from severely decreased living standards.

In the US, the Justice Department has filed criminal charges against but a handful of bankers and secured only a few convictions. In Britain, not a single banker was put in the dock even though the country had to bail out three of its largest banks and while doing so uncovered a conspiracy that had been rigging Libor, the benchmark interbank lending rate. In all fairness, the Serious Fraud Office did recently charge a few traders for Libor manipulation but so far has left their bosses in peace. Also, Royal Bank of Scotland CEO Fred Goodwin was stripped of his knighthood.

"Yet these inept financiers and their creative accounting techniques ultimately caused untold millions to lose their jobs or suffer from severely decreased living standards."

Compare this to the Savings & Loan crisis of the 1980s in the US which resulted in over a thousand bankers being convicted for their wrongdoings. Part of the problem faced by prosecutors is that running a company into the ground is not actually a criminal offense. Also, it has proved hard to link misbehaviour on the trading floor to the powers-that-be in the top-floor corner offices. Whilst it may be true that some investment bankers instilled a mentality of excessive risk taking, a smoking gun – such as a clear instruction to defraud investors – is seldom if ever found.

However, misdeeds left unpunished encourage more of the same. In London’s City a new acronym has now cropped up: BAB – Bonuses Are Back. And, indeed, five years after the crash it’s business as usual.

Former chairman of the now defunct Financial Services Authority Lord Turner warned last week that “as long as people expect to make money out of nothing, it will happen again.” This is precisely what some people expect. The strengthening of banking regulation has failed to address the underlying issue of the sector’s penchant for “socially useless” endeavours such as the creation of exotic financial instruments whose complexity merely seeks to mask or spread otherwise excessive risk levels.

Former City Minister Lord Myners sees the regulatory changes as largely cosmetic and quite modest: “Banks are still too big, too interconnected and too undercapitalised.” Lord Myners emphasized that the capital ratio of 3% currently imposed on UK banks is still very thin and sets the stage for future failures.

Some bankers are, however, seeing the light. Douglas Flint, chairperson of HSBC, caused no small measure of surprise with his frank analysis of the industry’s state of mind. On the regulatory reforms Mr Flint said: “The focus has been on capital requirements because that is a parameter we can measure. However, culture is the real issue.”

That culture – of greed unbound – has not changed since the crisis hit. In fact, things may have gotten even worse. In first five months of 2013, some £14bn was paid out by UK banks and insurance companies for bonuses. In the entire year preceding the financial crash, bonuses of about £20bn were disbursed to the chosen few.

Most of the proposals made by the Independent Commission on Banking (ICB), set up in the aftermath of the 2008 crisis, have yet to be implemented. In its report, published two years ago, the ICB strongly recommends regulation be put in place to separate retail banking from its much more risky wholesale and investment cousins. The commission also suggested capital ratios for ring-fenced banks to hover around 17%.

The ICB suggests nothing more than a return to the relatively calm era of the US Glass-Steagall Reforms introduced during the Great Depression in 1933. This – at the time ground-breaking – piece of legislation mandated a strict and total separation between retail banks and investment banks. The act was repealed in 1999 at the urging of investment bankers who coveted the cheap money deposited in high street banks to raise the stakes of their gambling to new heights.

In the years following the Great Depression, most countries adopted their own versions of the Glass-Steagall Act and indeed in the late 1990s again followed the US in scrapping the legislation.

Though experts may offer more nuanced views and attach a plethora of buts and ifs to their analysis of the financial crisis, its causes and its remedies, seldom a problem´s initial fix was easier to pinpoint than this one: Stop gambling bankers from having access to people’s savings.


European Commission Confirms Billions Lost in VAT Gap

An estimated €193 billion in VAT revenues (1.5% of GDP) was lost due to non-compliance or non-collection in 2011, according to a new study on the VAT Gap in Member States. The study was funded by Commission as part of its work to reform the VAT system in Europe, as well as its wider campaign to clamp down on tax evasion. The study sets out detailed data on the gap between the amount of VAT due and the amount actually collected in 26 Member States between2000-2011. The main factors contributing to the VAT Gap are also presented, along with an overview of the effect of the economic crisis on VAT revenues.

Algirdas Šemeta, Commissioner for Taxation, said: "The amount of VAT that is slipping through the net is unacceptable; particularly given the impact such sums could have in bolstering public finances. However, there is also a positive message to be drawn from today's findings. Our ambitious reform of the VAT system, the EU measures to combat tax evasion and our recommendations for national tax reforms, are all targeted in the right direction. We know the problem; we have identified solutions to it, and now it's time for Member States to act. Today's figures will serve as a baseline to assess their progress in improving VAT compliance in the years ahead."

The VAT Gap is the difference between the expected VAT revenue and VAT actually collected by national authorities. While non-compliance is certainly an important contributor to this revenue shortfall, the VAT Gap is not only due to fraud. Unpaid VAT also results from bankruptcies and insolvencies, statistical errors, delayed payments and legal avoidance, amongst other things. Therefore, effectively tackling the VAT Gap requires a multi-pronged approach.

"The amount of VAT that is slipping through the net is unacceptable; particularly given the impact such sums could have in bolstering public finances."

First, a tougher stance against evasion, and stronger enforcement at national level, are essential. The VAT reform launched in December 2011 has already delivered important tools to ensure better protection against VAT fraud. For example, the Quick Reaction Mechanism, adopted in June 2013, will allow Member States to react much more swiftly and effectively to sudden, large-scale cases of VAT fraud.

Secondly, the simpler the system, the easier it is for taxpayers to comply with the rules. Therefore, the Commission has focused intently on making the VAT system easier for businesses across Europe. For example, new measures to facilitate electronic invoicing and special provisions for small businesses came into force at the start of the year, and a standard VAT declaration form for the entire EU will be proposed in the coming weeks. From 1 January 2015, a One Stop Shop will enter into force for e-services and telecoms businesses, which will promote more compliance by greatly simplifying VAT procedures for these businesses and enabling them to file a single VAT return for their activities across the EU).

Finally, Member States need to reform their national tax systems in a way that facilitates compliance, deters evasion and avoidance, and improves the efficiency of tax collection. The Commission has given clear guidance in this respect through the country specific recommendations. Today's report also suggests that complicated tax systems with multiple rates are two main contributors to non-compliance. Therefore, the Commission's repeated call to Member States to broaden national tax bases and to limit tax exemptions and reductions, should be given particular attention. Not only would this help simplify tax systems, but it may enable Member States to avoid hikes in the standard VAT rates.


UN Condemns Terrorist Outrage in Nairobi

[caption id="attachment_5316" align="alignright" width="275"] Ban Ki-moon[/caption]

Secretary-General Ban Ki-moon on Sunday 22nd September condemned in the strongest terms the terrorist attack at a shopping mall in the Kenyan capital, Nairobi, and urged the perpetrators to be brought to justice as soon as possible. In a televised statement from the United Nations Headquarters in New York, Mr. Ban said the premeditated act targeting defenceless civilians was “totally reprehensible.”

He extended his condolences to the scores of families of those killed and injured in the attack at Westgate Mall in the Westlands neighbourhood of the capital.

Nairobi hosts the UN's main headquarters in Africa, with a wide-ranging presence and hundreds of national and international staff. The deceased include a retired staff member of the UN Children's Fund (UNICEF), Mr. Ban noted.

“This is a time of shock for all Kenyans and all - including the UN family - who are proud to call Nairobi home. I express my solidarity with them at this moment of grief and loss,” the UN chief said.

Mr. Ban spoke to President Uhuru Kenyatta yesterday and said he remains in close contact with the Executive Director of the UN at Nairobi, Sahle-Work Zewde, as the emergency continues to unfold.

The UN Security Council also strongly condemned the attack and reiterated their determination to combat all forms of terrorism in accordance with their responsibilities under the UN Chart


Cityscape Global 2013: Dubai Property Boom Set to Resume

[caption id="attachment_5320" align="alignright" width="220"] Dubai[/caption]

After the clobbering it received during the Great Recession, the Dubai real estate market is now fully set to surge ahead. Tower cranes are once again swinging their long jibs leisurely through the city’s airspace while underneath apartment buildings, malls, hotels and office blocks take shape.

The continuing uncertainties in Europe and the Cyprus banking crisis turned jittery investors to the city state which saw capital inflows increase to pre-crisis levels. Stock brokers in both Dubai and nearby Abu Dhabi are reporting a return to daily trade volumes of around $1.5bn, up from barely $100m at the height of the recession.

“It also helps that Dubai is perceived as a safe haven. We have been spared the upheavals of the Arab Spring. This political stability drives inward investment,” says Rohit Walia of Alpen capital.

Real estate is doing particularly well with rents for prime office space recovering steadily. Demand for residential and retail property is picking up as well. However, the market is experiencing a “flight to quality” which sees secondary and older buildings struggle to recover rental yields.

A number of eye-catching new developments offer solid proof that investors have regained their confidence. The hugely ambitious Mohammed Bin Rashid City – MBR City for short – is about to take off and keep developers busy. No less than a hundred new hotels will be erected together with a theme park by Universal Studios and the world’s largest shopping mall. A 40 acre swimming pool – another “world’s largest” – is to complete the picture.

"No less than a hundred new hotels will be erected together with a theme park by Universal Studios and the world’s largest shopping mall."

On an only slightly more modest scale is the $1.6bn Bluewaters Island Project announced by Meraas Development. Just opposite the famed Jumeirah Beach Residence complex, a man-made island is to accommodate villa’s, apartment towers, hotels, shopping arcades and a veritable plethora of entertainment facilities including the Dubai Eye which is to become the world’s largest Ferris wheel standing a full 210 metres tall and costing well over $200m to build.

Against this backdrop of confidence regained and a crisis overcome that the 12th edition of Cityscape Global is to take place at the Dubai World Trade Centre from October 8-10. Over 200 local and international exhibitors are taking part. This strong demand has necessitated an expansion of the event’s premises to include two additional exhibition halls.

Cityscape Global director Wouter Molman confessed to being “rather overwhelmed” by the strong demand for exhibition space: “The event is now back to where it was before the crisis struck.

This year’s event is not limited to the showcasing of real estate developments. Three other conference programmes run parallel to Cityscape Global: the Global Real Estate Summit, Future Cities and the MENA Mortgage and Affordable Housing Congress. By joining these exhibits and congresses, the Dubai Land Department aims to have the city state host one of the world’s premier and most momentous real estate events.

Construction-driven growth is not just a luxury for Dubai and the other Gulf Cooperation Council (GCC) countries. According to a recently published United Nations report, by 2020 Arabian Gulf cities will house fully 85% of the regional population. The GCC will boast over 45 million city dwellers in seven years’ time, an increase of almost 25% over the 2010 numbers.


Global Interconnections and Spillovers

Extracts from a Speech By Christine Lagarde, Managing Director, International Monetary Fund

U.S. Chamber of Commerce, September 19, 2013

I. The Global Economy Today

[caption id="attachment_5324" align="alignright" width="218"] Christine Lagarde[/caption]

I recently returned from the G-20 Summit in St. Petersburg—where I know that the Chamber was represented as well. So, let me begin there.

Going into the Summit, some were anticipating a strong difference of views between the advanced and emerging economies about the gradual withdrawal—or ‘tapering’—of unconventional monetary policy in the U.S. and its potential spillover effects for other nations. Instead, countries had constructive discussions. G20 members recognized the need to ensure that exit from this exceptional monetary support, when it comes, should be orderly and clearly communicated. There was also a clear recognition that the emerging market economies, for their part, need to address their domestic challenges to manage any spillovers effectively.

I also had the opportunity in St. Petersburg to meet with business and labor leaders—the B20 and L20. Their consecutive presentations at a joint meeting with heads of state underlined the importance of business, labor and government working together to secure sustainable and inclusive growth.

"G20 members recognized the need to ensure that exit from this exceptional monetary support, when it comes, should be orderly and clearly communicated."

The Summit took place in the context of a challenging—and changing—global economic environment. The IMF will release its updated forecasts in a few weeks. For now, let me say that while we are seeing some signs of recovery, global growth remains subdued.

However, the story is more complex than that. More and more economies are moving at different speeds. We also know that the fruits of growth are far from being shared widely—this is true for the U.S. and for many other countries.

Certainly, the advanced economies are in a better place than they were six months ago. We see that with growth picking up here in the United States—a point I will come back to a bit later. For the first time in a long time, the Euro Area is also beginning to grow, although there is still much to be done. And while Japan’s reform efforts are ongoing, it is also doing better thanks to aggressive policy support.

Emerging market countries are the other side of the story. In large part, they helped keep the global economy afloat during the crisis. Now, while still dynamic, their momentum is slowing. For some, this may be a shift toward more balanced and sustainable growth. For others, it reflects the need to address imbalances that have made them more vulnerable to the recent market turbulence.

We all talk about global interconnections and spillovers. I certainly came to appreciate this as Trade Secretary for France. What has struck me most since coming to the IMF is their size and significance.

Some examples: since 1980, the volume of world trade has increased fivefold. And trade has grown in importance for global production. World exports relative to output grew from 20 percent in 1995 to 30 percent in 2008, before falling during the Great Recession, and recovering somewhat since.

There has also been the rapid acceleration of financial integration. By the time of the crisis, global capital flows were more than triple their level in 1995.

The IMF’s recent ‘spillover’ analysis—how what happens in one country affects others—reinforces the importance of this interconnectedness. It suggests, for example, that if the world’s five major economies were to work together to adopt a more rigorous, comprehensive and compatible set of policies, it would increase global GDP by about 3 percent over the longer run.

We all have a large stake in these interconnections. What happens elsewhere in the world—be it the success of recovery in Europe or the continued smooth functioning of supply chains in Asia—matters increasingly for the United States. The converse is also true. What happens here matters increasingly for the global economy.

II. The Role of the United States in the Global Economy

This brings me to my second main theme: the critical role of the United States, and American business in particular, in our increasingly interconnected world.

The recovery gaining strength here is good news for America—and good news for the world. Admittedly, U.S. growth will be more modest this year than we would want—still well below 2 percent. Even so, it should accelerate significantly next year, by about one percentage point.

Indeed, the fundamentals of the U.S. economy have been improving gradually. Households are in better shape—they have lowered their debt and benefited from the recovery in house prices and the strong performance of the stock market. The housing sector is looking brighter, with ample potential for construction activity to pick up further. The private sector is yet again proving to be the primary engine of growth and job creation—and the main reason for weak growth this year is the very large ongoing fiscal adjustment, a theme I will return to shortly.

Job creation is the key ingredient of any economic recovery, domestic or global. The latest U.S. jobs data present a mixed picture. The unemployment rate has declined to 7.3 percent in August, but the participation rate has continued to decline, and employment remains well below pre-crisis levels. So the issue of jobs remains paramount.

Jobs and growth is an increasingly important component of the IMF’s policy advice. I know that it is very much on your minds here at the Chamber too.

Business—including the people in this room—have a key role to play. At the same time, policymakers also have an important responsibility to help shape the environment in which businesses and citizens can thrive—and jobs can be created.

So what should U.S. policymakers do? Here are a few points from our most recent assessment of the U.S. economy in July:

First, fix public finances. I have characterized this as a case of “slow down, but hurry up.” While we think it would have been more advisable to have a slower pace of fiscal consolidation in the short run—without using the blunt instrument of sequester—more action is needed to reduce long-run pressure on the budget. This includes addressing entitlement spending and higher revenues. In addition, the ongoing political uncertainty over the budget and the debt ceiling does not help. It is essential to resolve this—and the earlier the better—for confidence, for markets, and for the real economy.

Second, appropriately calibrated monetary policy, our advice is that exit from unconventional monetary policies should be gradual, linked to progress in the recovery and employment, and that it should be clearly communicated and in a dialogue.

Third, finish reforming the financial sector. There has been progress on this agenda— for example, the new capital and liquidity requirements for banks under Basle III—but the system is still not safe enough. Policymakers need to turn their attention to the outstanding danger zones, especially derivatives and shadow banking. The ultimate goal is clear: to have a financial system that is less prone to instability and better able to serve the real economy.

Financial sector reform, of course, is not the sole responsibility of the United States. It needs to be tackled in many countries and regions, ideally in a coordinated and consistent way to ensure the healthy function of the entire global financial system. I am thinking here for instance of the resolution of international financial institutions.

This brings me back to the point of global connections.

The United States plays a unique role in the global economy. I am thinking, for instance, of global trade—of which the U.S. accounts for 11 percent. The U.S. also represents 20 percent of global manufacturing value-added. I know that you recognize the potential of an even bigger market. Tom and others at the Chamber have often referred to 95 percent of your potential customers living “outside the U.S.”

America’s global financial ties are even deeper. Foreign banks hold about $5½ trillion of U.S. assets, while American banks hold about $3 trillion of foreign claims. Meanwhile, close to half of the S&P500’s sales originate from foreign operations.

These interconnections have great benefits for the United States. But they are not without risks—two-way risks—and we saw some of these play out during this crisis.

We all remember, five years ago, how the collapse of one U.S. bank ushered in a harsh new reality across sectors, across countries, and across the world. As those tensions traveled across the Atlantic, for example, they exposed tensions in Europe.

Considering that 20 percent of U.S. exports are destined for Europe, and that more than half of U.S. overseas assets are held in Europe, you clearly have a large stake in the recovery there.

And yet, despite the risks, I know that you are also deeply aware of how much can be gained from engaging with the rest of the world.

President Taft, who helped establish the Chamber, captured this when he said: “I am in favor of helping the prosperity of all countries because, when we are all prosperous, the trade with each becomes more valuable to the other.”

What was true in President Taft’s day is even more true in today’s interconnected world: a strong U.S. economy and a strong global economy are two sides of the same coin.

III. The Role of the IMF

This brings me to my final point: the role of the IMF in the global economy—and why an effective IMF is important for our global membership and for the United States.

Earlier I spoke of the broad goals that the IMF and the Chamber share. We have something else in common. In 1914, on the eve of World War One, the Chamber’s first president, Harry A. Wheeler, said: “This is a new day when our methods are being reorganized, and the organized forces of labor and of agriculture and of commerce meet here in Washington, not for war, but for peace…”.

In much the same way, the IMF was born from the ashes of the Great Depression and World War Two, and grounded in the principle of good global citizenship: if countries work together to serve our common interests, everybody wins.

The IMF’s founders—an Englishman, John Maynard Keynes, and an American, Harry Dexter White—had a plan. A vision of a global economic “club” where countries could cooperate with a clear objective: global economic and financial stability.

Like a credit union for the world, the IMF’s member countries pool resources that can provide a lifeline to members in need. In fact, the first country to draw on IMF assistance was my home country, France.

A couple of decades later, the IMF helped the newly independent countries during decolonization. When the Berlin Wall fell, the Fund supported Eastern Europe’s efforts to transform from centrally-planned economies into market economies. In between, the IMF has helped its members to overcome economic crises—in Latin America in the 1980s, Asia in the 1990s and, most recently, in the Eurozone.

These actions might seem far removed from what happens in your business or in your economy, but they have very real implications. Our policy advice, for example—including in core areas like exchange rates or external imbalances—has helped to prevent or to ease the hardship of crises around the world. That, in turn, has helped reduce the possible negative fallout for the U.S. and for all countries.

And as the needs of our member countries have changed over time, so too the IMF has refined, repurposed and restocked its toolkit.

During this crisis, this has included a significant increase in our financial support, with over $300 billion in loans in over 50 countries—not just in Europe, but also in many other parts of the world, including in Africa and other low-income nations. We also introduced more flexible types of support that act as insurance for crisis prevention and have helped countries like Colombia, Mexico, and Poland.

Above all, the IMF has given much greater emphasis to global interconnections in its analysis—in particular, economic spillovers between countries, and also the critically important financial sector. To be effective into the future, we must continue to evolve and anticipate what lies ahead.

In this context, the IMF is currently working toward a set of governance reforms that will strengthen further our capacity to prevent and resolve crises; and at the same time, will help broaden our representation to better reflect the changing dynamics of the global economy. These “quota” reforms need the support of all our member countries—including the United States.


WTO Forecasts Gradual Recovery Despite Cut in Trade Forecasts

World trade growth in 2013 and 2014 is likely to be slower than previously forecast. WTO economists now predict 2013 growth of 2.5% (down from the 3.3% forecast in April) and 4.5% in 2014 (down from 5.0%), but they say conditions for improved trade are gradually falling into place. “There is a message for the WTO in this,” said WTO Director-General Roberto Azevêdo. “The past two years of sluggish trade growth reinforce the need to make progress in the multilateral negotiations.”

Main points:

World merchandise trade is set to grow 2.5% in 2013, very close to the 2.3% rate seen in 2012.

Trade growth should accelerate to 4.5% in 2014, still below the average rate of 5.4% for the last 20 years (1982-2012).

 Imports of the EU from the rest of the world fell 2% in the first half of 2013 compared to the same period in 2012, hitting the exports of its trading partners.

Imports of Developing economies and CIS have continued to grow strongly in 2013 (up 5% for the year to date), partly cushioning the drop in the EU and stagnation in the US.

Risks to the forecast are more balanced than in the past, since world trade growth could be higher than forecast if the EU rebounds relatively quickly from its recession. The most conspicuous downside risk is the phasing out of unconventional monetary policy in the US.

The demand for imports in developing economies is reviving but at a slower rate than expected. This hindered the growth of exports from both developed and developing countries in the first half of 2013 and was the reason for the lower forecasts, they said.

“There is a message for the WTO in this,” said WTO Director General Roberto Azevêdo. “The past two years of sluggish trade growth reinforce the need to make progress in the multilateral negotiations.

“Although the trade slowdown was mostly caused by adverse macro‑economic shocks, there are strong indications that protectionism has also played a part and is now taking new forms which are harder to detect,” he went on. “Fortunately, there is something we can do about this. Negotiations under way in Geneva can address these problems, facilitating greater trade and opportunities to spur economic growth.

“I am encouraged at the level of commitment shown by WTO members. But much hard work remains in the coming weeks if we are to deliver a successful outcome at the ministerial conference in Bali,” he said.

Some short-term prospects are improving with encouraging data coming from Europe, the US, Japan and China. Reports on private sector activities from purchasing managers (purchasing managers’ indices, which give some indication about future activity), shipping rates, automobile production and other leading indicators, suggest that the economic slowdown has bottomed out and that a tentative recovery is underway. This is expected to be reflected in rising quarterly growth in the months ahead, WTO economists say.

The European sovereign debt crisis has eased significantly since last year, unemployment in the United States has fallen to 7.3% from a post-crisis high of 10%, and growth of GDP (gross domestic product, a measure of a country’s output) in Japan has accelerated since the adoption of new fiscal and monetary policies.

Although large developing economies have slowed appreciably in recent months, the latest figures from China on industrial production suggest that the country may be regaining some of its dynamism. On the other hand, India’s economy is still in the midst of a sharp contraction according to composite leading indicators calculated by the Organisation for Economic Cooperation and Development (OECD).

However, since the European Union consumes roughly one third of the world’s traded goods (including shipments between member countries within the EU) and the EU unemployment rate is likely to remain at or near record levels for some time, growth in trade can be expected to be below average — that is, below the 20-year average of 5.4% — in the coming quarters.


CBI: Great Expectations on the UK High Street But Not Out of The Woods Yet

[caption id="attachment_5338" align="alignright" width="275"] Kensington High Street[/caption]

High-street sales continued to grow strongly in the year to September, at the fastest pace since June 2012, and exceeded already solid expectations, according to the CBI’s latest monthly Distributive Trades Survey of 111 firms.

This was the third consecutive month of growth, which was broad-based across a number of sectors. Retail sales are expected to grow robustly again in October.

Elsewhere, the pace of growth in wholesaling picked up markedly, whereas growth continued in the motor trade sector, but at a slower pace than in the previous two months.

Barry Williams, Asda Chief Merchandising Officer for Food, and Chair of the CBI Distributive Trades Survey Panel, said:

"It’s encouraging to see the high street on the road to recovery, with particularly strong growth from furniture & carpet retailers, department stores and recreational goods retailers."

“But the retail sector is not out of the woods yet with consumer confidence still fragile despite the rise in spending.”

Retailers

Key findings:

46% of respondents reported that sales volumes were up on a year ago, while 12% said they were down, giving a balance of +34% - the strongest since June 2012 (+42%) and exceeding expectations (+26%)

Retailers expect sales volumes to grow at a similarly strong pace next month (+31%)

There was a broad-based increase in sales across many sub-sectors with furniture & carpets, department stores, recreational good retailers and grocers performing strongly:

A balance of +100% of furniture & carpets retailers said business volumes were up – the strongest since August 1996.

52% of department stores said business volumes were up, while 0% said they were down, giving a balance of +52%

65% of recreational goods retailers said business volumes were up, while 0% said they were down, giving a balance of +65%

50% of grocers said business volumes were up, while 17% said they were down, giving a balance of +33%.

Chemists were the only sub-sector to report a fall in business volumes (-72%)

Overall, 22% of retailers said that sales volumes were above average for the time of year, while 10% said they were below average, giving a balance of +12% - the highest survey balance since December 2010 (+18%)

36% placed more orders with suppliers than they did a year ago and 22% placed fewer, with the resulting balance of +14%.

Wholesalers

50% of wholesalers said sales volumes were up while 10% said they were down, giving a balance of +40% - the strongest pace of growth since June 2013 (+45%). Most sub-sectors saw growth, with building materials (+100%) and clothing, textiles & footwear (+56%) in the lead. Only food & drink saw a decline in sales (-13%), marking the first year-on-year fall since May. Overall, sales are expected to rise solidly again in the year to October, but at a slower pace than this month (+28%).

Motor traders

64% of motor traders said sales volumes were up while 36% said they were down, giving a balance of +28%, a slower pace of growth than in the previous month (+93%).


IPPC Report on Global Warming: Formidable Effort in Juggling with Fuzzy Numbers

In about 25 years the world will have used up its remaining “carbon credit” for the current century. Additional emissions will contribute to global warming beyond the tipping point of two degrees (C), the safety threshold used by most scientists of the Intergovernmental Panel on Climate Change (IPCC). Even if carbon emissions are somehow kept within the permissible range, the world still only has a 50% chance of limiting the temperature increase to less than the maximum allowed.

The long-awaited fifth IPCC report on climate change, released last Friday in Stockholm after a last round of feverish and secretive negotiations, is blunt in its warnings. One of the panel’s co-chairs, Thomas Stocker of the University of Bern, concluded that the global community is “clearly not” on the path to keeping rising temperatures in check. Meanwhile, another co-chair, glaciologist Qin Dahe of China, said that any calculation based on a drastic reduction of his country’s dependency on fossil fuels is destined to be in “gross error”.

The IPCC report is hailed as a miracle of creation. Thousands of top scientists from nearly all countries of the world contributed their formidable intelligence and knowledge to write a detailed assessment of the global climate and the changes it is expected to undergo over the next century.

It is hard to argue with such an unprecedented body of specialist knowledge. However, taking a step back from the brouhaha surrounding the release of IPCC report and applying a pinch of healthy scepticism, one cannot but conclude that most scientists seem ever so slightly confused about the course global climate is expected to take.

"But the degree to which our planet is heating up remains much of a mystery."

Global warming is not a figment of their collective imagination. There is even a large degree of consensus that humankind is the cause of this warming. But the degree to which our planet is heating up remains much of a mystery. The IPCC assessment concludes that by the end of the century, temperatures will have increased anywhere between 0.3 and 4.8 degrees.

This is much like saying global warming can be anything from a non-issue to a catastrophe of unimaginable proportions. With that much brain power being applied to the burning question at hand, one would expect a number perhaps somewhat more specific.

The IPCC seems to employ not just a great many scientists but a fair number of statisticians as well. For all its vagueness on the actual rise in temperatures now brewing, the panel is 66% certain that the past three decades have been the warmest of the last 1,400 years. The panel is 90% certain that over the next hundred or so years, heat waves will become longer, more frequent and more sever. The IPCC can also ascertain with 90% certainty that sea levels will continue to rise. By 2050 there is a 66% likelihood that the Arctic ice sheet will completely disappear in the late northern summer.

With both the Chinese and Indians already cautioning against too much optimism when it comes to their ability to foster economic growth without a corresponding rise in carbon emissions, the IPCC’s attempt to make a point becomes moot or at best and exercise in futility. The frantic negotiations taking place in Stockholm on the eve of the report’s release also seem to undermine the IPCC’s effort. Science is not usually subject to negotiation but based on verifiable and falsifiable facts derived from objective observation.

While investigating trends in the climate of the earth is most definitely a worthwhile exercise, it now has become too much of a hot potato to actually carry significant scientific weight. While a shining example of cooperation on a truly global scale, the IPCC is no stranger to controversy: In the recent past its scientists have been found to massage the numbers to fit their politically expedient conclusions. The public has been fed a depressingly long series of lies and half-truths about global warming.

The IPCC has become a powerful body that sets the green agenda. Its findings, however inconclusive, determine government policies and often help drive up taxation levels. This power, as much as any, corrupts. As an exceedingly well-funded bureaucracy, the IPCC has a vested interest in promoting its agenda. It is not above reproach and does not represent the ultimate truth upon which the fate of humanity rests.

Solutions to global warming based on global consensus and acceptance of imprecise numbers are bound to fail. Any diplomat will admit to this when the cameras and mikes are turned off and reporters are out of earshot. Decisions get made based on economic considerations. If tangible and immediate results can be obtained, countries act. If not, they make soothing noises and muddle on as before.

The world’s scientific community might consider throwing its massive intellectual weight at developing cheap renewable energy sources that can compete with fossil fuels in a free market. Oil, coal and even natural gas are so last century. The global community needs revolutionary new ways of generating plentiful power. Now, that’s a challenge worth of a global effort.


World Bank Initiative for a Low Carbon Future

The World Bank has announced a new Low-Carbon Liveable Cities (LC2) Initiative to support developing country cities around the world in their efforts to plan low-carbon, climate-smart development and get finance flowing. The initiative – which aims to reach 300 of the largest developing country cities in the next four years – offers a comprehensive suite of tools and activities tailored to cities’ specific needs and level of progress on their climate-smart development path, ranging from greenhouse gas inventories and assessments to low-carbon investment planning and financing solutions.

"Climate change poses one of the toughest challenges facing us today. It’s an economic issue that has the potential to put prosperity out of the reach of millions of people," said World Bank Group President Jim Yong Kim. "Cities offer a unique opportunity to tackle climate change. There are many cities in the developing world that want to take a climate-smart development path, and that is where our new initiative comes in.

“Climate change poses one of the toughest challenges facing us today. It’s an economic issue that has the potential to put prosperity out of the reach of millions of people. Cities offer a unique opportunity to tackle climate change. “

When it comes to planning, the first step is to understand the problem at hand. A recent analysis by World Bank staff found that only about 20 percent of the world’s 150 largest cities have even the basic analytics needed for low-carbon planning.

"Climate change poses one of the toughest challenges facing us today."

A critical part of the Low-Carbon Liveable Cities Initiative is to build that evidence base, together with partners including the C40 network, ICLEI, WRI and others, by rolling out the Global Protocol for Community Scale Emissions, a new and comprehensive methodology that quantifies the greenhouse gas emissions associated with economic activity and consumption occurring in a city.

The World Bank and its partners are developing an accreditation program to train city officials and private sector professionals to conduct greenhouse gas inventories using this methodology. Those inventories will provide cities with a snapshot of their emissions profile and enable them to identify the mix of policies and investments that will help them achieve their full emissions reduction potential.

Unlocking private sector financing for low-carbon development

Smart planning is only one part of the solution. In order for those plans to be implemented, cities need to access the necessary financing. Over $1 trillion a year is needed to finance the infrastructure gap between what is needed and what is being built in low- and middle-income countries. Official development aid alone is only about $125 billion today. The initiative offers tools that can leverage that aid to get other sources of financing flowing to cities.

An analysis by World Bank staff of the 500 largest cities in developing countries shows that only a small percentage are deemed creditworthy – about 4 percent are creditworthy in international financial markets and 20 percent are creditworthy in local markets. The first step to get finance flowing for low-carbon planning is to make municipalities more attractive to private investors and help them access markets.

In this context, the World Bank and its partners have designed a City Creditworthiness Program to help city financial officers conduct thorough reviews of their municipal revenue management systems and take the first steps to qualify for a rating. The inaugural session of the City Creditworthiness Program is planned for Oct. 14-19 in Nairobi, Kenya, and additional trainings are planned in Korea, India, and Colombia.

Helping cities access private financing is a smart investment. Internal estimates from the World Bank indicate that every dollar invested in the creditworthiness of a developing country city is likely to mobilize more than US $100 in private sector financing for low-carbon and climate-resilient infrastructure.

Getting a rating is a long-term process and takes on average three to five years. The city of Lima, for example, took about four years to achieve creditworthiness. To jump-start the process and address immediate financing needs, the initiative will also leverage the World Bank’s experience with innovative financing solutions to develop mechanisms to attract more private capital to the sub-sovereign market. One example is a mechanism to pool financing opportunities. Connecting cities that want to finance the same type of investment, the initiative will help them access the market together at better financing terms.

Low-carbon development: A question of competitiveness

"For municipal governments, finding their way to a low-carbon development path is a question of competitiveness, growth and public health," said World Bank Vice President for Sustainable Development Rachel Kyte.

Applying a climate lens to cities’ development plans means that energy savings will free up budget for other investments, resilient infrastructure will withstand the forces of nature, and citizens will have cleaner air to breathe.

The new initiative has the potential to improve the lives of over 700 million people in the cities it will help, and billions globally as emissions are reduced.


Islamic Banking: London’s City Finds New Calling

[caption id="attachment_5388" align="alignright" width="216"] Sir Edward Lister[/caption]

In a bid to attract a new category of investors and to become a leading centre of Islamic finance, the City of London has assembled a task force to spread the word on Sharia-compliant banking. “The aim of our task force is to make it easier for banks in London to offer Islamic products. To most this is still quite a new concept,” says the city’s Deputy Mayor Sir Edward Lister.

The stakes are significant. The Islamic finance sector is expected to be worth around $2.6 trillion by 2017. Over the past decade, Sharia-compliant banking has been booming with growth rates of up to 30% annually. The UK consultancy firm Oliver Wyman expects room for around 150 Islamic finance institutions in Britain by 2020 to meet demand.

Sir Lister has no qualms about London’s calling: “The objective is to put up a challenge to the current financial hubs of Islamic banking and to boost the city’s status the world’s premier financial centre in the process.”

Last month the deputy mayor visited Kuala Lumpur in order to discover the ins and outs of Islamic banking first-hand. The task force set up to acquaint British banks with Islamic banking services spans various government ministries and has the active participation of a number of finance industry heavyweights.

"The Islamic finance sector is expected to be worth around $2.6 trillion by 2017."

There are presently 22 banks and other financial institutions offering Sharia-compliant products in Britain. Big names like HSBC and RBS were among the earliest to respond to the growing demand for Islamic banking services. However, only three banks feature Sharia-only services.

According to Saadat Khan, founder and director of Ethical Asset Management (EAM), London stands to capture a trillion pounds or more of Islamic investors’ money that is currently looking for a suitable home. “Much of what is currently on offer does not meet the requirements of strict Islamic Law. The structured nature of most products described as Sharia-compliant or Sharia-inspired is such that they resemble conventional products in all but name.”

Mr Khan has been advising the task force on how to design financial products that spread risk and reward fairly as is mandated by Islamic Law. “Sharia investments are not at all like bonds that see borrowers pay a disproportionate amount of their profits to investors. Just doing away with coupons will not get you a Sharia-compliant bond.”

According to Mr Khan for a financial product to be Sharia-compliant there can be no guaranteed return on investment. Instead, investors are invited to share in all risks by becoming part owners of any given venture. Both profit and loss are shared equally between the partners. “The purpose of Sharia Law is to seek for the benefit of self but for the betterment of all. People come before profit. Operating on this basis has the potential to make huge improvements to society as a whole.”

London’s push into Sharia-compliant banking comes at the eve of the 9th World Islamic Economic Forum set to take place later this month. This year’s theme Changing World, New Relationships is particularly suited to the host city which prides itself as the financial and cultural gateway between the Muslim and non-Muslim worlds.

The forum’s chairperson Tun Musa Hitam – former Deputy Prime Minister of Malaysia – reaffirmed his staunch belief that whenever people come together to conduct business, “political, religious and ideological differences are set aside to make way for the compelling commonality of being both peaceful and prosperous.”


What Really Spurred the Great Recession?

Based on the research of Ravi Jagannathan, Mudit Kapoor and Ernst Schaumburg

Globalization and the U.S. dollar are as much to blame as banks

Many people would no doubt like to forget all about the great recession. The blame has been pinned, squarely and often, on inadequate oversight of U.S. financial institutions, which created ever more complex and risky mortgage instruments, lured people to buy homes they could not afford, and brought the economy crashing to the ground.

But Ravi Jagannathan, a professor of finance at the Kellogg School of Management, believes this is only part of the story. And if we do not acknowledge the true cause of the financial crisis, he says, we do so at our own peril: “Solutions based on inadequate understanding of the issues involved,” Jagannathan says, “will likely lead to even bigger problems down the road.”

Jagannathan, along with Mudit Kapoor of the Indian School of Business and Ernst Schaumburg of the Federal Reserve Bank of New York, argues that the financial crisis that gripped the U.S. was primarily a symptom of ongoing major changes afoot in the world. Globalization has created massive shifts in the labor supply in developing countries—and the inadequate responses to these shifts are the real culprits behind the recession.

“We are in an open economy subject to global forces,” Jagannathan says. “We have to adjust to that.”

The reasoning goes like this: Technological advances and globalization sparked “a huge and rapid increase” in the labor supply from workers in the developing world, especially in China. But without any domestic financial markets capable of absorbing the new wealth these workers generated, large amounts of money flowed into the U.S. For its part, the U.S. had no controls in place to prevent financial institutions from finding creative new ways to accommodate the influx of cash.

A Bubble Fueled by Foreign Wealth

In 1980, China made up barely 2% of the world’s GDP. Just 30 years later, the country had become the world’s second-biggest economy, surpassing Japan. During the period from 1990 to 2007, China’s urban population more than doubled, growing by nearly 300 million people—most of whom effectively became part of the Western world’s labor force. At the same time, per capita income in urban areas tripled.

Ordinarily, the researchers write, increased labor supply in developing countries should resulted in "significant sections of the population in developed countries experiencing a decline in their living standards as more and more manufacturing and service jobs are outsourced.”

But thanks to a combination of factors—including a frugal culture and no social security system—these new urban Chinese workers saved their earnings instead of spending them. And because the dollar “remains the effective reserve currency of the world,” their savings flowed straight to the U.S., making us the beneficiaries of China’s newfound wealth. “The foreign reserve holdings of U.S. Dollars,” the researchers write, “which had been at less than 11% of U.S. GDP prior to 2000, grew rapidly after 2002; in fact they almost doubled over the 5-year period from 2002 to 2007.”

Meanwhile, here in the U.S., a combination of Wall Street behavior, low interest rates, safe-harbor rules for investing in high-risk debt, and implicit government guarantees to Freddie Mac and Fannie Mae sent investments gushing into real estate. A bubble market ensued, and Americans suffered under the illusion that we could buy whatever our hearts desired. Municipalities’ pockets swelled from real estate taxes. Spending, and borrowing, spun out of control. In other words, the researchers write, cash flowing to the U.S. from overseas helped obscure “the real structural changes that were taking place in the world economy.”

The bubble eventually burst, Jagannathan and his colleagues assert, when economic growth in developing countries caused commodity prices to rise. U.S. wages grew modestly, but the price of food and energy grew more quickly. “By mid 2007,” the researchers write, “many subprime households were effectively left with the choice between filling their trucks and fridges or paying their mortgages.” Homeowners began defaulting; foreclosures skyrocketed; housing prices plummeted. And then, as interest rates on adjustable-rate mortgages began resetting, homeowners who were counting on housing prices to continue appreciating so that they could refinance and take advantage of low teaser rates, were not able to do so. People were priced out of their homes, and the situation snowballed. The U.S. economy sputtered.

Regulation Not Enough

[caption id="attachment_5396" align="alignright" width="340"] Ravi Jagannathan and Ernst Schaumburg[/caption]

Subsequent fixes, such as they were, focused mainly on attempting to reform Wall Street. But according to Jagannathan’s reasoning, simply “fixing” Wall Street is a Band-Aid. “We are in an open economy subject to global forces,” he says. “We have to adjust to that. Policymakers will have to keep an eye to potential triggers and happenings taking a global view, not just focus on what is happening locally in markets.”

Real recovery, Jagannathan argues, requires policies in the U.S. and abroad that take account of the new global reality. These will include increasing capital flow into developing countries, perhaps by transitioning to alternate reserve currencies so that the dollar is not the sole repository for the world’s savings. China will have to grow its domestic consumption, and Western economies may have to come to terms with costlier commodities. Ultimately, Jagannathan concludes, the future will depend on “the development of improved risk management in the broadest sense in order to ensure financial stability and prosperity going forward.”

For Jagannathan, the analysis shows that in an interconnected world with an open economy, Keynesian policies will no longer be as effective as they were in the past. “[For] any policy that stimulates demand, the benefit will be to other countries in the world, so the effect will be dissipated,” he says. “That’s an implication of the fact that we’ve become more of an open economy.”

Reproduced with permission of the Kellogg School of Management and Kellogg Insight, http://insight.kellogg.northwestern.edu. © Kellogg School of Management at Northwestern University


The World Bank: Calling for an End to Poverty

[caption id="attachment_5403" align="alignright" width="259"] Jim Yong Kim[/caption]

With more than a billion people in the world living on less than $1.25 per day, World Bank Group President Jim Yong Kim today said this week that extreme poverty was “the defining moral issue of our time,” and he described how a new World Bank Group strategy would realign the global institution to help end poverty by 2030 and boost shared prosperity.

Speaking at George Washington University on the eve of the World Bank Group/IMF Annual Meetings, Kim said the Bank must be bold and not be afraid to take “smart risks” to support projects that have the potential to transform a country or a region.

Kim pledged that he would direct more funding to fragile and conflict-affected states. He said it his hope to increase the share of IDA core financing – the Bank’s fund for the poorest – to fragile and conflict-affected states by about 50 percent in the next three years. He also said that the IFC, the Bank’s private sector arm, also would increase funding by 50 percent over three years for low-income and fragile states. The IFC increase could amount to more than an $800 million increase over three years; the IDA amount could not be determined until countries made pledges later in the year.

Kim specifically called on the international community to give greater support to Lebanon, which has allowed more than 760,000 Syrian refugees to settle since fighting broke out in Syria more than two and a half years ago. “We need to do much more or we risk catastrophe in Lebanon,” Kim said.

In his speech, Kim said the new World Bank Group strategy – the first ever to bring together the entire organization, which includes the Bank, IFC, and the Multilateral Investment Guarantee Agency, or MIGA, which provides political risk insurance — would work toward a common purpose.

“For the World Bank Group, our strategy is based on the entire organization working and pulling together,” said Kim. “Our strategy also forces us to be selective – first, choosing our priorities and then, abandoning those activities that are not.”

Kim highlighted three elements of the strategy:

“First, we will partner with the private sector to use their expertise and capital to fight poverty. This is particularly important to create good jobs for the poor.

Second, we will increase our commitment to fragile and conflict-affected states, which will require us to be bolder, take more risks, and commit more resources.

And third, we will be as ambitious as possible on issues that are of global importance, including investing in women and girls and climate change. Our response to climate change, for instance, must be bold enough to match the scope of the problem.”

Kim called for a social movement to end poverty, and he noted that interest in the issue was coalescing around the globe.

“Just six months ago, the board of governors for the World Bank Group laid a foundation for a social movement by endorsing our two goals and declaring that we can end extreme poverty by 2030. Now we are seeing interest from all corners. Political leaders, including President Obama and UK Prime Minister David Cameron, are calling for an end to poverty. Faith-based leaders are calling for an end to poverty. The One campaign, Oxfam, Save the Children, and RESULTS and many other civil society groups are calling for an end to poverty. And young people – people like yourselves here at George Washington University -- are calling for an end to poverty,” said Kim.

Kim described his attendance at the Global Poverty Project’s Global Citizens Festival in New York’s Central Park on September 28, and he encouraged listeners to his speech to log on to the Global Poverty Project website -- www.zeropoverty2030.org -- and sign a petition to end poverty in a generation.

“This is the defining moral issue of our time. Our goals are clear. End extreme poverty by 2030.  Share prosperity with the bottom 40 percent, and share it with future generations. We have an opportunity to bend the arc of history and commit ourselves to do something that other generations have only dreamed of,” Kim said.


UN: Towards a Rights-based Approach to Migration

[caption id="attachment_5406" align="alignright" width="259"] Ban Ki-moon[/caption]

The General Assembly High-level Dialogue on Migration and Development opened on Thursday 3rd October in New York with a call from United Nations Secretary-General Ban Ki-moon to implement measures that protect the rights of millions of migrants as well as recognize their contributions to society.

“It is our collective responsibility to make migration work for the benefit of migrants and countries alike,” Mr. Ban told the High-level meeting. “We owe this to the millions of migrants who, through their courage, vitality and dreams, help make our societies more prosperous, resilient and diverse.”

Indeed, the UN chief said, one need look no further than this morning’s headlines – reporting that scores of African migrants may have been killed or gone missing when their boat capsized off the coast of Italy – to see the great importance of this dialogue. “I offer my deep condolences and hope that we all take this as another spur to action.”

The two-day Dialogue seeks to identify concrete measures to strengthen cooperation and enhance the benefits of international migration for migrants and countries, while reducing its negative implications. The event will feature presentations by Member States and a slate of panel discussions on specific issues such as the links between migration and sustainable development, and labour mobility and its impact on development.

“I offer my deep condolences and hope that we all take this as another spur to action.”

Delegations began their work with the unanimous adoption of the Declaration by which the 193-member Assembly decided to work towards an effective and inclusive agenda on international migration that integrates development and respects human rights by improving the performance of existing institutions and frameworks. They also pledged to partner more effectively with all stakeholders involved in international migration and development at the regional and global levels.

The Declaration also emphasizes the need to respect and promote international labour standard and respect the rights of migrants in their workplaces. The Assembly strongly condemned “the acts, manifestations and expressions of racism, racial discrimination, xenophobia and related intolerance against migrants and the stereotypes often applied to them.” It also reiterated its commitment to prevent and combat trafficking in persons, protect victims of trafficking, prevent and combat migrant smuggling, and protect migrants from exploitation and other abuses.

In his remarks, Mr. Ban presented his report on International Migration and Development, which makes eight key recommendations to “make migration work” for all. They include: protecting the human rights of migrants who are frequently the subject of abuse and exploitation, lowering the cost of migration, and changing public perception of migrants, as many face discrimination on a daily basis.

The report also stresses the need to find ways integrate migration in the development agenda, improve data collection on migrants and the impact they have on development, and enhancing migration partnerships so governments, the private sector and civil society can share ideas and knowledge on mobility.

According to the UN, there are some 232 million international migrants. The day prior, the World Bank released its latest global remittance figures, which show that migrants from developing countries alone are expected to send home $414 billion in 2013, a 6.3 per cent increase from the previous year. This is projected to rise to $540 billion by 2016.

In his remarks, Mr. Ban noted that given the complex realities countries face – including the recent global economic crisis – it is essential for nations to “work together, with courage and vision, recognizing that our actions will have an impact on the lives of millions of women, men and children across the globe.”

General Assembly President John Ashe said Member States should learn from their experiences from the past seven years – when the first high-level meeting on the issue occurred – and move from dialogue to action.

“This means setting realistic targets, committing to implementation and monitoring progress. In short, we must hold ourselves accountable in following up our dialogue,” he said.

“We need to redouble our efforts to ensure that the contributions of migration are not only apparent to us, but also to the public at large. We have an important responsibility to get the message right.”

In a press briefing today, the Special Rapporteur on the protection of migrants, François Crépeau, highlighted the human dimension of migration, stressing migrants should not be seen as agents of global remittances only.

“Migrants are human beings with human rights, not simple agents of economic development remittances,” he said. “All migrants, by virtue of their human dignity without discrimination are protected by international human rights law, on the same footing as citizens regardless of their administrative status or situation.”

Mr. Crépeau urged countries to ratify all international human rights treaties including those pertaining migrant rights such as the Convention on Decent Work for Domestic Workers.

The member and former Chair of the Committee on Migrant Workers, Prasad Kariyawasam, told reporters a rights-based approach is essential to stop the abuse many migrants are currently experiencing.

“Although migrant workers are contributing in economic and social terms […] their rights are often violated,” he said, expressing hope that this meeting will address this discrepancy.


CFI.co Meets Nuno Amado

A Determined Leader for Challenging Times.

In February 2012, Nuno Amado was elected Chief Executive Officer of Portugal’s largest private bank, Millennium bcp (Banco Comercial Português).

Since then, Mr Amado has led the bank through a complex and challenging restructuring program designed to return Millennium to profitability and ensure it remains a market leader in Portugal. Prior to joining Millennium bcp, Nuno Amado was CEO of Banco Santander Totta in Portugal.

The restructuring program designed by Mr Amado and his management included a rights issue to reinforce the bank’s capital ratios, as well a request for temporary capital strengthening via contingent convertible bonds issued to the Portuguese State. In all, Millennium bcp raised EUR 3.5 billion, lifting its core tier 1 capital above 12%, fully compliant with the new regulatory requirements set by the Bank of Portugal and the European Banking Authority.

This capital reinforcement was central to Mr Amado’s effort to strengthen Millennium bcp’s fundamentals, part of his team’s ambitious strategic vision built on three pillars: Strengthening capital and liquidity, creating the conditions to ensure growth and profitability both at home and abroad, and delivering sustainable growth.

The strategic plan also sets out a timetable for repayment of the EUR 3 billion received in temporary capital support through 2017.

“In 2012, Mr Amado and his management team were able to cut costs significantly, a process that continued in the first half of 2013.”

To date, the efforts made by Millennium bcp – and the results obtained – show that the strategic path developed by Mr Amado and his management team is the correct one.

With capital and liquidity levels restored and now at historic highs, and with a restructuring program underway in Portugal to adjust the bank’s activity to the challenging economic environment, the prospects for a return to sustainable and profitable growth over the medium term are steadily improving.

In 2012, Mr Amado and his management team were able to cut costs significantly, a process that continued in the first half of 2013.

With demand for banking services declining in Portugal because of the overall negative economic backdrop, Millennium’s adjustment has involved the resizing of its branch network as well as a headcount reduction. Both processes were implemented without affecting employee morale or disrupting the high quality customer service for which Millennium bcp is known.

International operations are key to Millennium bcp’s outlook. The bank provides universal financial services under the Millennium brand in a number of European and African markets that have great potential. In Poland, Bank Millennium is the sixth largest bank in terms of assets. The bank is also listed on the Warsaw Stock Exchange. In Mozambique, Millennium bim is the market leader, with a nearly 30% share of the banking and insurance markets. In Angola, Banco Millennium Angola is a strong and growing presence on the local market, with nearly 100 branch offices ensuring nation-wide coverage, and contributing to a remarkable growth in both customer base and deposits.

These international operations have delivered consistent profitability and solid growth, and remain essential factors in the overall strategic approach that Millennium bcp is taking under Mr Amado.

The bank’s management team also prepared the sale, in June 2012, of Millennium’s bank in Greece; another key strategic step. The sale reduces Millennium’s exposure to the risk of that market and eliminates a loss-making operation that weighed heavily on the bottom line in recent years. As a result of the sale, Millennium took a near-5% stake in Piraeus Bank, the acquirer of its Greek operation. These shares will be sold off gradually after an initial lock-up period.

In addition to the strategic plan now being implemented, Mr Amado and his team have renewed Millennium’s emphasis on customer service, promoting meetings all across the country that bring together customers, potential customers and senior bank directors. These meetings aim to ensure the bank’s continued awareness of local realities and challenges, enhancing its ability to swiftly and effectively provide solutions.

Mr Amado’s election as CEO heralded a significant shift in Millennium’s corporate governance model: A new structure was adopted with a single Board of Directors that includes independents, shareholder representatives and non-executives as well as the Executive Committee. Under this system, the oversight of management activity is carried out by the full board, of which Mr Amado is Vice-President. A number of committees were instituted to provide oversight for crucial areas including risk management, corporate governance, nominations and evaluations and remuneration.

In addition to being Millennium bcp’s CEO, Mr Amado is also a member of the Millennium bcp Foundation’s Council of Curators, while in Poland he is Vice-President of Bank Millennium’s Supervisory Board.

Outside Millennium, Mr Amado holds various non-executive positions in other Portuguese companies and organizations. He is currently a member of the Portuguese Banking Association’s board; a member of the Insititut International D’Études Bancaires; and sits on the BIAL Foundation’s Audit Committee as well as on EDP’s (Energias de Portugal) Supervisory Board.


CFI.co Meets Emídio Pinheiro

BFA CEO Dr Emídio Pinheiro (52) was born in Lisbon and obtained a degree in economics at Universidade Católica de Lisboa. He pursued his studies at the Universidade Nova de Lisboa where he received an MBA in collaboration with Wharton University.

In 1990 Dr Pinheiro joined Banco BPI. Here he soon was given several top management positions and responsibilities; initially in pension funds and investment funds management and life insurance. Later, he was appointed as General Manager of BPI’s operations in France. He held this position for four years. After this period he developed several commercial activities in retail banking. He is BFA’s CEO since April 2005.