Leading the Field in Services for the Indonesian Financial Market

IDClear — aka PT Kliring Penjaminan Efek Indonesia — was established in 1996 as a clearing and guarantee institution, or central counterparty (CCP), for the Indonesian capital market.

Its vision is to become the leading clearing and guarantee institution known for reliably providing the best services in Indonesia. Under the leadership of President-director Iding Pardi, the firm’s stated mission is to make the country’s capital and financial market safer and more efficient, while delivering value-added services.

Another objective is to be the trusted CCP for exchange-traded, OTC, and bilateral transactions by providing best-in-class infrastructure for clearing, risk management, and collateral management services.

IDClear provides services for securities exchange transactions, such as clearing for equity transactions, clearing and settlement for derivative transactions, and clearing for bonds transactions.

It also provides clearing services for regulated over-the-counter transactions, guarantees and credit-, liquidity-, and market risk-management, securities borrowing and lending, and collateral management.

Other services include institutional delivery, account operator, triparty repo, IPO settlement and distribution as provider of electronic Initial Public Offering System (e-IPO), member interface, mobile clearing and guarantee system (m-CLEARS), and clearing member/participant portal.

IDClear has a strong and sustained synergy with Indonesian FSA to support its role to regulate and to supervise Indonesia’s financial industry activities. This helps IDClear to perform its strategic mission that rests on the principles of securities regulation.

Those principles are based on three objectives:

Protection for investors

Ensuring that markets are fair, efficient and transparent

Reducing systemic risk.

For more than two decades, IDClear has responsibly carried out its role by providing a best-in-class service for the domestic capital market. It has effectively managed the risks that may arise from any transaction or transaction-settlement process.

Backing these services are innovations in technology, including the development of clearing and settlement systems accompanied by increased system capacity to support e-IPOs.

The development of Indonesia’s industry and economy has enabled IDClear to expand its activities to cover other financial supporting services, with the approval of the Indonesian FSA and in accordance with all laws and regulations. In 2020, IDClear marked another milestone by expanding its role as CCP of the OTC Derivative market to support the government’s programme to develop integrity, efficiency, and transparency on the money market.

This proven track record has been strengthened with the appointment of IDClear by the Central Bank of Indonesia as the clearing organiser for the transactions of all government bond instruments, and implementation of a clearing system connected to the BI-SSSS system.

In addition, Bank Indonesia has given in-principle approval for IDClear to act as a CCP for over-the-counter interest- and exchange-rate derivatives transaction; this expands IDClear’s services in capital and financial markets.

IDClear always prioritises best practice in the principles of good corporate governance, including the achievement of ISO 37001: 2016 (certification on Anti-Bribery Management System — GCG).

With its commitment to the development of shariah capital markets, IDClear obtained a fatwa from Indonesia Ulama Council (MUI) on the Application of Sharia Principles in the clearing and guarantee mechanism of exchange transactions settlement on equity securities.

IDClear plays an active role in encouraging the development of sustainable capital markets by prioritising the green economy and ESG practices. It drives paperless reporting and collaborates with all stakeholders to accelerate green economy programmes.

IDClear continues to improve the quality of its services and products, and strives to innovate services and products to meet, and exceed, market expectations. As an institutional developer, IDClear strives to improve infrastructure, research and development, and implement international standard best practices as a central counterparty.

IDClear is wholly owned by PT Bursa Efek Indonesia. In accordance with capital market law, the Indonesian government designated IDClear as a self-regulatory organisation (SRO), together with IDX and Indonesia Central Securities Depository (KSEI).


Nazca: Meet the Team Keeping Entrepreneurs on Track

Nazca professionals have the qualifications and verve to keep things moving in Latin America.

Héctor Sepúlveda

[caption id="attachment_24193" align="aligncenter" width="500"] Héctor Sepúlveda[/caption]

Co-founder and Managing Partner
Hector Sepúlveda co-founded Intangible, the first Mexican "company builder" in 2013, and went on to co-found venture capital firm Nazca a year later.

His experience in the entrepreneurial ecosystem dates back to 2001. He has founded six companies (with two successful exits) in the pharmaceutical, retail, real estate, manufacturing, and technology sectors.

Since 2014, Nazca has supported talented founders including Kavak, Jüsto, Albo, Luuna, Ubvan, Crehana, Momentus Space, Urbanic, and Vest. Hector Sepúlveda is an Endeavor entrepreneur, an industrial engineer who graduated from Universidad Iberoamericana. He completed the Owner President Management (OPM) programme from Harvard Business School.

Jaime Zunzunegui

[caption id="attachment_24195" align="aligncenter" width="500"] Jaime Zunzunegui[/caption]

Co-founder and Managing Partner
Jaime Zunzunegui is an asset manager, entrepreneur and investor. He has raised more than $300m in equity and debt in sectors including renewable energy, financial institutions, technology, and real estate.

Zunzunegui has overseen 10 successful exits since 2004, including two IPOs. He has been a key agent in the growth and consolidation of Nazca since he joined in 2018 as managing partner.

He is a founding partner and former member of the board of Grupo Financiero Actinver ($20bn AUM). He is a director and member of the audit committee of Seguros Atlas (the seventh-largest insurer in Mexico), and founder of Impulsa Generación Renovable. That firm, which developed hydro-electric, solar and wind power, was sold in 2014.

Zunzunegui was previously the head of mergers and acquisitions (M&A) for CIE B, closing some 30 transactions in Latin America, the US and Europe. He has also worked as an investment banking analyst for M&A at UBS in Mexico City and New York.

Jaime Zunzunegui holds a BA degree from ITAM, an MBA from IESE School, and completed an OPM (Owner President Management Programme) at Harvard Business School.

Andrea Navarro

[caption id="attachment_24196" align="aligncenter" width="500"] Andrea Navarro[/caption]

Head of Legal & Environmental and Social Officer
Andrea Navarro joined Nazca’s legal team in 2017, and has been involved in Environmental and Social (E&S) procedures since June 2020.

In March 2021, she was appointed as Nazca’s E&S officer, and completed IFC’s E&S courses on Sustainability Training and E-Learning Program-STEP and Managing Environmental and Social Performance.

Navarro received E&S training from IFC when conducting Environmental and Social Due Diligences (ESDDs) in 2020/2021. She led the development and implementation of Nazca’s Environmental and Social Risk Management System and the Disclosure Statement and verification summary for the Operating Principles for Impact Management.

Each principle is incorporated into Nazca’s investment process and aligned with its impact management system and processes. Andrea Navarro has a Law degree from Universidad Iberoamericana in Mexico City, where she graduated with honours.

Natalia Sánchez

[caption id="attachment_24197" align="aligncenter" width="500"] Natalia Sánchez[/caption]

Associate
Natalia Sánchez is an investment associate at Nazca, after serving the firm as an investment analyst. She has supported the implementation of E&S standards within portfolio companies.

Sánchez has worked closely with many founders and C-suite executives in the review and development of the basis for E&S management systems. She also supports the entire deal flow and opportunity analysis processes, as well as portfolio management of existing investments.

Prior to joining the Nazca team, Natalia Sánchez worked in equity research at Morgan Stanley, where she was part of the team covering telecom, media, and technology companies across Latin America.

She has worked as a business tax advisor at Ernst & Young, and holds a BA in Public Accounting and Financial Strategy from ITAM in Mexico City.


IDClear ‘Captain’ Has Strategies Ready for Future of Company

Iding Pardi, appointed as IDClear president-director for 2022-2026 last June, is armed with strategies to ramp-up the company’s performance and navigate challenges.

[caption id="attachment_24202" align="aligncenter" width="900"] President-director: Iding Pardi[/caption]

He aims to focus on providing effective and efficient clearing, guarantee-, and risk-management services, as well as providing services that add value. To raise the attractiveness of capital market and financial markets, he intends to make IDClear a trusted central counterparty (CCP) for exchange, OTC, and bilateral transactions. This will be achieved by providing the best infrastructure for clearing, guarantee, risk management, and collateral management services in the capital market, as well money markets.

The Indonesian Financial Services Authority (FSA) advised directors to anticipate an increase in transactions on the stock exchange by preparing a reliable system and infrastructure.

“This is in-line with IDClear’s main functions and priorities, and has become the task of the new board of directors,” Pardi said. In the short term, he will focus on development strategies, including implementing CCP for over-the-counter interest rate and exchange rate derivative transactions, clearing development for carbon trading, and developing an integrated collateral management system for bilateral and triparty repo transactions.

With regard to the expansion of services in financial markets and infrastructures, IDClear ensures conformity with a variety of market best practices and international standards, as well as risk management, and efficiency.

IDClear will also adjust the operational system in response to changes in client code, develop settlement shortcuts (settlement flows acceleration), and increase its core system (e-CLEARS) capacity by implementing phase scale-out in the new data centre.

Pardi says the board of directors will follow strategic guidelines and refer to the company’s Strategic Business Masterplan 2021- 2025. The growth strategy has been prepared via an analysis of developments in the capital and money markets, aligned with Indonesia FSA’s strategic plan as the supervisory agency, Indonesia Stock Exchange as the shareholder, and principles, standards, global trends, and inputs from capital and financial market participants.

Pardi is optimistic about navigating IDClear’s future with market and product development initiatives, increasing system processing capacity, and improving co-ordination between financial market authorities. IDClear will continue to build connections with other FMIs on expanding financial market services and participants, harmonising with market best practices and international standards, infrastructure investment, and human resources.

Pardi has held several positions in the organisation over the years. He was director from 2018-2022, head of research and development from 2013- June 2018, head of the Research and Development Unit (2005-2013), and risk-monitoring officer from 1999-2005.

Iding Pardi earned a Bachelor of Business Administration in 1998, and a Master’s Degree in Management from the University of Indonesia in 2006.


Wesco International Leading B2B Supply Chain

Wesco International has structure, strategy, sustainability and vision — with international recognition flooding in and a place on the elite Fortune 500 list.

Wesco International was established in 1922 as the distribution arm of Westinghouse Electric and Manufacturing Corporation, a bold new venture by visionary inventor, George Westinghouse.

Today, Wesco (NYSE: WCC) specialises in supply chain and logistics solutions for communications, security, electrical, utility and broadband markets.

With a dedicated team of more than 18,000 associates, Wesco is a supply chain partner to many Fortune 500 companies. With $18.2bn of revenue in 2021 and a 2022 revenue forecast of $21.3bn, the company is number 200 on the 2022 Fortune 500 list. With access to more than a million products from an expansive network of suppliers, as well as dozens of complementary services, Wesco enables its 140,000 customers to be more efficient, productive, and profitable.

Bold Mission and Vision

In 2020, Wesco acquired Anixter, a comparably sized peer with complementary capabilities and more than $8bn in revenue. The Anixter acquisition was transformational. It provided Wesco a broader portfolio of products and services— and enabled it to become an even more significant channel partner for its suppliers. Wesco’s expanded global footprint unlocked new possibilities for the company and its customers.

“When we combined the two companies, we took the best from each, providing a foundation for us to be the leading, most comprehensive supply chain solutions provider for our customers around the world,” says Wesco chairman, president, and CEO John Engel. “This isn’t just another acquisition story; we built a completely new company. We looked front-to-back across the business, took a best-of-the-best approach, and literally reengineered the entire enterprise.”

[caption id="attachment_24209" align="aligncenter" width="900"] CEO: John Engel. Photo: Elliot Cramer[/caption]

The new Wesco adopted a bold mission – to build, connect, power and protect the world, and set its sights on becoming the best tech-enabled supply chain solutions provider in the world.

As a B2B solutions provider, Wesco occupies a critical part of the supply chain for customers and suppliers. And while digitalisation emerged as a disruptor, B2B supply chains have lagged. Engel knew that the new Wesco would need to modernise to keep a competitive advantage. Now, combined with Anixter, Wesco has the size and scale needed to drive sales and margins not previously possible.

With a focus on digital investment, Wesco is building new capabilities and leveraging big data in fresh new ways.

British mathematician Clive Humby coined the phrase “data is the new oil.” His analogy conveys the idea that data, like oil, needs refinement to create real value.

Analytics, then, is key to unlocking the power of the Internet of Things (IoT). Insights, or refined data in the form of descriptive analytics, can give historical context. Diagnostic analytics can explain why it happened, enabling reaction and new solutions. One step beyond lies an even higher level of refinement: predictive analytics, which can foresee customer needs in the future, providing a critical advantage.

“Our digital transformation is well under way and we're innovating across our entire technology landscape,” says Engel. “We are developing and implementing a new technology stack and digital IT architecture. It includes best-in-class digital applications, products, and services that are integrated with our proprietary architecture. It's important to note this is not an out-of-the-box ERP implementation, but a scalable solution of best-in-class applications,” he said.

Engel says this proprietary architecture is built on the foundation of a world-class data lake. “We have a new Master Data Management construct, which is foundational to how we're going to leverage digital. The result will be improved business processes across the enterprise, as well as customer and supplier solutions that we're building. AI and machine-learning are operating against our big data set. This is a breakthrough for our industry and the overall B2B distribution value chain.”

Continuous Improvement Culture

Continuous improvement is a hallmark of John Engel’s leadership and central to how Wesco runs its business. “Wesco was among the first B2B supply chain companies to implement lean and we’ve been at it for nearly two decades,” says Engel. “We have seen tremendous improvements in our operations, and it’s also helped us create a safe environment and one in which people can achieve their maximum potential,” he said. Wesco has reduced its total recordable injury rate by 10.6% since 2020 and consistently performs 6 to 8 times better than its peer group when it comes to safety.

Wesco is making strides on its Environmental, Social, and Governance (ESG) programs, with a commitment to diversity, inclusion, equity, and sustainability. This year and last, Wesco was recognised by Forbes as one of the World’s Best Employers and, in 2021 as one of America’s Best Employers for Women. The firm has been included in Bloomberg’s Gender Equality Index for the past four years. It launched five Business Resource Groups for employees; highly engaged teams developing programmes and providing opportunities for all employees to be heard and supported.

“When you are successful in as many businesses and markets as we are, it requires diverse experience, backgrounds and perspectives,” says Engel. “Because we’re interacting with a diverse set of customers, we are laser-focused on nurturing an inclusive, team-oriented, collaborative environment — every day.”

To advance diversity, the company joined the National Minority Supplier Development Council to work with businesses that bring unique ideas and capabilities to help meet customer needs. This brought recognition within Vibrant Pittsburgh’s cohort of Vibrant Champions for 2022.
“Succeeding here really requires people to co-operate,” says Christine Wolf, Wesco’s chief human resources officer. “That’s the only way to ensure that we are able to deliver on-time, and with all the right materials — particularly given the challenges in the supply chain right now.”

[caption id="attachment_24210" align="aligncenter" width="900"] Wesco distribution center in Alsip, IL. Photo: Wesco[/caption]

Supply Chain Solutions for a Changing World

Engel sees six trends driving Wesco’s strong financial results; trends that are reshaping the industry — and the world. Electrification; Automation and IoT; Green energy and grid modernisation; 24/7 connectivity and security; Supply chain consolidation, and Digitalisation require complex solutions and a higher degree of expertise than ever before.

“We see really exciting opportunities with these secular growth trends,” says Engel. “The pandemic has been an accelerant, and it’s making permanent changes to businesses, and how we all live and work.”

Wesco is uniquely positioned to address these needs with a leading portfolio of products, services, and solutions, its leading positions in all three strategic business units, and its global footprint, all powered by digital investment in advanced capabilities.

With decades of experience, Wesco offers consultative supply chain optimisation services for material management, electronic invoicing and vendor managed inventory systems, integrated supply management, and more. It designs and implements cost-reduction programmes while improving supply operational efficiency and resiliency.

“We’re a distributor and a supply chain solutions company, so we sit right in the middle of the value chain between customers and our supplier partners,” says Engel. “Our technical expertise is unrivalled. We partner with suppliers, then we collaborate with customers to understand their needs and create solutions specifically for them. The key ingredient for our continued success has been our intense focus on the customer.”

Wesco’s portfolio of solutions includes:

Automation to increase efficiency, reduce downtime, improve capacity utilisation, quality and maximise Overall Equipment Effectiveness (OEE) in manufacturing.

Communications and network infrastructure to support technology and operational applications in businesses, schools, hospitals and other facilities.

Electrical, lighting, wire and cable: Wesco offers a broad electrical portfolio and unequalled expertise, helping its customers to operate more efficiently and profitably.

Maintenance, Repair, Operations (MRO) and Safety: Wesco’s diverse, expert teams analyse inventory and safety programmes, design strategies to improve those processes, and partner with customers to implement the solutions.

Power generation and distribution: Wesco is the supplier of choice for Investor-Owned Utilities (IOUs), public power municipalities and co-ops, and contractors seeking solutions for electrical, transmission and distribution (T&D), and communications product requirements.

Renewable energy consultation to help customers meet and exceed sustainability goals, drive efficiencies and results, and cut operational expenses.

Physical security and hardware: Wesco provides full-line solutions of touchless access, mechanical door hardware, physical security, access control and video surveillance. Its experts successfully manage projects from concept to execution, applying end-to-end product, service and technology solutions to satisfy customers’ project needs.

Capital Investments Fuelling Growth

Several of the secular growth trends are being catalysed by public and private partnership investments in projects like rural broadband, resilience and modernisation of utility grids, and a greater need for data centres thanks to IoT. Various studies indicate that electrification, grid modernisation, and the shift to renewables is driving utility Capex increases as aging grid assets will require $1.5-2.0 trillion of investment just to keep the current North American power grids functional, while usage is projected to grow at a rate of five times by 2040.

The US and Canadian governments will deliver $100+ billion for broadband infrastructure deployment to help close the digital divide, boost affordable internet access, and support IoT.

And with the recent Infrastructure Investment and Jobs Act, Inflation Reduction Act of 2022, and CHIPS Act in the US there is an expected $1.5 trillion of investment from the American government into sectors where Wesco is well positioned to participate.

Wesco is also participating in the global rise of cloud data centres that enable new ways of working and power 24/7 connectivity for security systems. Industry experts predict the hyperscale data centre segment will grow at a compounded annual rate of more than 20 percent over the next five years. This was a key driver for the business decision to acquire Rahi Systems, a leader in hyperscale data centres - a deal the company closed in November.

A Sustainable Future

While the increase in demand for electrification and broadband is expected to push electrical grids to capacity, the global climate crisis is demanding more renewable energy sources. From electric vehicle charging stations to remote work, Wesco is ready to meet the rising demand for electrification and broadband in this new post-pandemic economy.

In the US, various studies forecast increasing adoption of electric vehicles will change the flow of energy. Utilities will need to ensure the distribution network in the service area can handle the power load precipitating the need to upgrade power lines, increase live voltage capacity, replace transformers, and add new transmission lines.

Wesco has the drive and opportunity to participate in the decarbonisation and renewable energy sectors, as well. According to a McKinsey study, meeting the goals of NGFS Net Zero 2050 will require massive global investment. Capital spending on physical assets for energy and land-use systems will need to rise by $3.5 trillion (about $11,000 per person in the US) per year for the next 30 years, the study reports. McKinsey also expects capital spend to be frontloaded with the highest spend during the next 10 to 15 years.

The study shows that to reach power decarbonisation goals, the global power sector would need to phase-out fossil fuel-based generation and add capacity for low-emissions power.

Wesco is expanding its capabilities to meet growing demand for energy efficiency and management, renewable energy, sustainable maintenance, repair, and operations. Each sector of the business has the opportunity for growth by providing customers with products and services in support of their ESG goals.

“We continuously evolve to address the needs and challenges of our customers, our suppliers, and the communities we serve,” says Engel. “Our approach to sustainability is twofold. We aim to minimise the environmental impacts of our own operations while we assist our customers and suppliers in achieving their sustainability goals through the products and services we provide.”

Wesco has an established governance structure for sustainability strategy and activation. The board of directors, through its Nominating and Governance Committee, oversees the firm’s material ESG focus. Wesco has set new sustainability goals for 2030, including:

Reduce absolute Scope 1 and Scope 2 greenhouse gas emissions by 30 percent from a 2019 baseline by 2030.

Reduce landfill waste intensity by 15 percent across our US and Canadian locations from a 2020 baseline by 2030.

Achieve a 15 percent reduction in Total Recordable Incident Rate (TRIR) by 2030 from 2020 baseline.

Provide 425,000 hours of safety training and development to employees by 2030.

Powered By People

This October, Wesco was named among the 50 best workplaces for career growth in the inaugural 2022 American Opportunity Index. The index assessed the 250 largest US public companies based on the real-world experience of more than three million of their employees. It is unprecedented in its focus on worker outcomes, rather than corporate policies or practise. Wesco ranked #12 overall in the report.

Through a partnership between The Burning Glass Institute, Harvard Business School’s Managing the Future of Work Project and the Schultz Family Foundation, the American Opportunity Index is a first-of-its-kind corporate scorecard using big data to study the progress of workers in jobs that are open to those without university education.

Wesco has recently focused on expanding opportunities for employees and recruits. It implemented policies geared to bolstering retention, including raising wages and diversifying the workforce. Once entry-level employees prove their aptitude, Wesco exposes them to less obvious opportunities for career advancement. This dedication to talent-development is unusual in wholesaler environments — and has proven successful.

“The employees on our warehouse floor are critical to our business,” says Wolf. “We wouldn’t exist without them.”


Full Steam Ahead: MTR Boss Jacob Kam Chak-pui Puts Company Right on Track

When Jacob Kam Chak-pui joined MTR Corporation in 1995, the company operated three railway lines serving the major population centres of Hong Kong.

[caption id="attachment_24215" align="aligncenter" width="900"] CEO: Jacob Kam Chak-pui[/caption]

The total length of the route was around 40 km. Over the course of his career, Kam has seen the MTR rail network reach more than 270km, covering all 18 districts in Hong Kong and including a high-speed rail connection to mainland China.

The company has also expanded — it now has operations in London, Melbourne, Sydney, Stockholm, Shenzhen, Beijing, Hangzhou, and Macao. Add all those up and you have a combined route length of over 3,300km.

Kam has guided this impressive growth story from various positions. He joined the company as a safety specialist, and held management posts in operations, projects, and the Mainland China and International Business divisions. Before his appointment as chief executive in 2019, he served as operations director from 2011-2016 and managing director of operations and Mainland business from 2016 to 2019.

Looking back, he says the Airport Railway project in the 1990s played a pivotal role in the company’s development. The new service almost doubled MTR’s route length and demonstrated how a railway can build a city. “Building above and around the stations on this line, we expanded Hong Kong’s CBD, we also extended the CBD across the harbour to Kowloon,” he said. “We redeveloped and revitalised several areas in the western part of Kowloon, and we brought the line to Lantau to serve the new airport that was built there.”

The line also went to the new town of Tung Chung, a former fishing village. With the rail connection, Tung Chung was able to grow and accommodate up to 300,000 residents.

Therein lies the secret of MTR’s success. It builds and operates railway lines to world-class standards, and creates attractive communities that contribute to city development. The company calls this the “Rail plus Property” (R+P) business model — and with network expansion since the Airport Railway project, R+P has contributed to Hong Kong’s growth.

Under the R+P model, property development supports railway construction as well as upgrades and renewal of infrastructure and assets. In a nutshell, it has kept the company profitable since it was listed on the Hong Kong Stock Exchange in 2000 (apart from a loss in 2020 after the outbreak of Covid-19).

MTR returned to profit despite the continuing pandemic, once again proving how railway funding has given the company financial stability. MTR has ridden out the challenges hand-in-hand with the community, offering a fare reduction and extending a special rebate of 3.8 percent until the start of 2023. And it has continued to invest in rail and introduce new technologies.

Kam believes the benefits of R+P are greater than a simple funding model. “R+P forces railway development to be city-friendly,” he says. “For our projects to succeed, we have to be more concerned about ensuring their smooth integration with the surrounding areas rather than just building a railway.”

MTR’s stated mission is to Keep Cities Moving. “That is not only about mobility, but also about advancing and progressing as a city.”


As If on Rails: The Innovation Driving the MTR Corporation

MTR Corporation’s mission is to keep cities moving — and it lives up to that promise.

With a business stretching from its Hong Kong base to cities in Europe, Australia and mainland China, the company is one of the world’s leading railway operators. And that means leading in safety, reliability, customer service, and cost-efficiency.

Despite the challenges of a globally unstable economic climate, and reduced patronage and farebox revenues (all revenues collected from fare-paying passengers) due to the pandemic, the company is moving ahead and achieving new milestones.

Major achievements in 2022 included the successful opening of the Cross-Harbour Extension of Hong Kong’s East Rail Line. This extends a line first built over a century ago, from Kowloon across to the city’s CBD on Hong Kong Island, via a tunnel beneath Victoria Harbour. MTR has also launched services on the Elizabeth Line, London’s new east-to-west network, which it operates on behalf of Transport for London.

The innovative Rail Plus Property (R+P) business model provides a foundation for the generation of diversified revenue streams. As well as building new rail lines, MTR plans and creates fully integrated commercial and residential communities above, or adjacent to, stations along the track alignment.

This has led to a transit-oriented development (TOD) pattern of city growth. Along with a train service reaching all 18 districts in Hong Kong — with an on-time performance of 99.9 percent — the company has 14 shopping malls and manages 120,000 residential apartments. Globally, MTR carries nine million passengers daily, and employs more than 50,000 staff. With revenues from its transport services within and beyond Hong Kong, as well as property development, property rental and station commercial businesses including advertising, the company has strong and sustainable foundations.

MTR is on a transformation journey which has innovation at its heart. Mobility shapes cities, societies and quality-of-life, and high-capacity railways, coupled with extensive digitalisation and integration with last-mile connections, serves as the backbone of smart cities of the future.
By using smart technologies more widely, MTR aims to remain a global leader in the mobility sector by enhancing customer service, improving asset management, and providing an efficient and reliable service. Customer-service robots deployed in some Hong Kong stations and shopping malls are an example of this corporate focus on innovation. Robots were also deployed for cleaning duties on trains and MTR premises during the pandemic.

A Vision of Smart Mobility

The integrated MTR mobile app provides customers with real-time service information, useful transport-related functions, and news of special offers from MTR malls and station shops. It includes a loyalty programme: customers earn points which can be redeemed for discounts or other rewards when they buy a train ticket or make purchases at stations or malls.

To keep a busy city moving smoothly, train service performance must be at world-class standards. MTR aspires to Smart Maintenance and Smart Asset Management. Image- and data analytics, supported by AI, monitor railway infrastructure to detect any potential problems before they arise.

Innovation and technology have been embedded into MTR’s corporate strategy. Engine 2, a new growth engine, is one of three strategic pillars along with the Hong Kong core, as well as mainland China and international business. It enables systematic innovation for business growth and the development of new ventures including smart city, railway technology, new retail, mobility-as-a-service, financial and data services, and new mobility modes.

To tap into promising new technologies and talent, the company partners with universities on research and joint investment in technology start-ups. Its established subsidiary, MTR Lab, steers innovation and co-operation with outside parties to commercialise technology breakthroughs. Staff are encouraged to pursue their own ideas, and can apply for funding support to achieve proof-of-concept.

This drive to embed new technology extends to railway projects. With the extended East Rail Line commissioned this year, the company is moving ahead on five new projects in Hong Kong. It has committed over HK$100bn (£11.04bn) in project investment over the next few years, as well as the Oyster Bay property development creating 20,000 residential units. New railway projects will be designed with building information modelling (BIM), and use modular and precast construction to conserve energy and minimise disturbance to nearby communities.

Beyond Hong Kong, MTR has operations in London, Stockholm, Melbourne, Sydney, Beijing, Hangzhou, Shenzhen and Macao. The company continues to connect and build communities with an innovative, inclusive and sustainable approach. MTR aims to create value for all stakeholders, and its transformation journey includes principles of social inclusion, advancement and opportunities, and greenhouse gas emissions-reduction. The company has a target of 2050 to achieve carbon neutrality.

For MTR, setting social targets and creating shared value with customers, staff and the broader communities that it serves are a vital part of the vision to sustain high quality services and achieve long-term sustainability.

See here for the magazine version.


Challenging World, Capable Bank: CBBH has Thrived Despite Litany of Disorder on International Stage

The Central Bank of Bosnia and Herzegovina (CBBH) started operating in 1997 as the sole institution responsible for issuing currency and monetary policy in the country.

[caption id="attachment_24224" align="aligncenter" width="900"] Governor: Senad Softić[/caption]

Its objective is to maintain the stability of the domestic currency, the convertible marka, which is backed by the euro. The CBBH has operated under complex conditions, within the country and internationally, but has managed to maintain that monetary stability. It has also contributed to the macro-economic and financial stability of the country as a whole.

Challenge is nothing new to the CBBH, starting with the introduction of the single currency, the reform of the payment system and the banking sector, the exchange of DEM for EUR and the fixed exchange rate for KM. Factor in the financial crisis of 2008/2009, and the implementation of projects with the European Central Bank and the central banks of the Euro system until the introduction of European central banking standards and it is plain that there have been hurdles to overcome.

Recent years have also been marked by turbulence in Europe and worldwide. Under the leadership of its governor, Senad Softić, CBBH has thrived despite the pandemic and geopolitical events. It has ensured the stability and convertibility of the domestic currency, the maintenance of cash circulating, and the increase of foreign exchange reserves. The CBBH ended 2021 with the highest-ever amount of foreign exchange reserves.

It also managed to implement projects that have improved business processes.

Foreign exchange reserve investment is one of the main tasks of the CBBH. Investments are adjusted for safety, liquidity, and maximum profitability. Complex conditions mean that has not been a painless process — but it was necessary. Although it is a non-profit institution, the CBBH has seen a positive result. It has upgraded its diagnostic tools. Since 2021, it has been publishing nowcasts of economic activities, the dynamics of real GDP and inflation in Bosnia Herzegovina on a quarterly basis.

The stats been improved and harmonised with European standards. In the area of statistics, a lending survey has been introduced, enabling more detailed analyses of credit market trends, aiding analytic and research tasks. This research in methodological terms has been significantly adjusted, with a similar survey conducted for the euro area.

Following up with the trends and modernisation of payment systems is another objective. In 2019, a new giro-clearing system adjusted with the ISO 20022 i SEPA standard was put in operation. There are ongoing preparations for innovative payments methods in line with modern EU and international trends. This encourages financial inclusion, decreases costs, simplifies payments, and improves the infrastructure of domestic financial markets.

Rating agencies mention the CBBH as an important economic anchor in the country, with activities and policies in line with the best global practices.

In the area of financial education and inclusion, the CBBH has taken a leading role, devoting special attention to younger population groups. In focus are users of financial remittances from foreign countries, with the advantages of official channels for fund transfers and instruction on how best to send funds.

These efforts have required intensive, timely, and clear communication with the public. Stability is a key reference in the messages CBBH sends out. It has kept public confidence as an independent institution, with the stability of marka a key factor.

The replacement of treasury machines in all vaults with state-of-the-art equipment was successfully completed. According to the Transparency International Corruption Perception Index (CPI) for 2022, Bosnia Herzegovina takes a low position in Europe. By developing compliance and raising the level of business ethics and integrity, the CBBH has the safe, protected and anonymous reporting of any irregularities. This applies in conflict-of-interest situations, corruption, and other irregularities.

The CBBH has always contributed to the country's international obligations. It has earned a reputation as a credible source of data, information and analyses. The institution is considered to be a public good, and the effects of its activities have always been communicated to the public.

International financial institutions such as the International Monetary Fund, the European Central Bank and the European Commission have also stressed the achievements of the bank, and acknowledged the significance and role of the monetary policy and currency board. It has been recommended to continue its role in protecting the integrity of currency board, and its independence.

The future will hold new challenges. The fact that the CBBH is considered to be one of the most stable and successful institutions is an acknowledgement of everything done over the past 25 years. It is seen, too, as an obligation to constantly improve.

Central Bank Governor has Reams of Acknowledgements to his Name

The governor of the Central Bank of Bosnia and Herzegovina, Senad Softić, is a full-time professor at the Faculty of Economics of the University of Sarajevo.

He is the chairman of the management board of the country’s Deposit Insurance Agency, and a member of the Advisory Group of the European Fund for Southeast Europe (EFSE).

Softić is the author and co-author of 16 books and monographs. In his many years of consulting and research practise, working at the Institute for Organisation and Economics in Sarajevo (1987-1995), and the Economic Institute in Sarajevo (1995-2007), he participated, as author, co-author or manager in the preparation of more than 130 studies, projects and papers from various micro- and macro-economic areas.

During his professional career, he has been the deputy chairman of the supervisory board of the Investment Bank, later the Development Bank of the Federation of Bosnia and Herzegovina.

For his work on preserving monetary stability and his contribution to maintaining the financial stability of BH, Senad Softić has won much recognition. He was BiH — European Person of the Year in the Field of Finance, an award by the European Independent Agency Sarajevo Secretariat of the Regional Directorate for the Selection and Promotion of Managers of BH, Southeast and Central Europe (2022).

He received the Golden BAM for his contribution to the stability of the country’s financial system of (2020), Večernjakov pečat for the person of the year in the Public Administration category for 2020, the Best Manager in the Field of Finance (2017), and recognised for the best university textbook for his book Symptoms and Causes of the Crisis of Companies in BH (2011).

Softić has rich international experience, and is a member of several international bodies in the field of monetary policy and management, including the Advisory Group of the European Fund for South-Eastern Europe. Since 2015, he has participated as an opening speaker, speaker, and panellist in numerous international conferences organised by international financial institutions including the International Monetary Fund, World Bank, European Central Bank, and European Bank for Reconstruction and Development.

He is a permanent participant in the Economic and Financial Dialogue between the European Union and the Western Balkans, Turkey, and Brussels (2016-2022).


How Do Credit Cards Work

Ingenious evolution of the modern bankcard

Every time a bank card is swiped data points are transferred, analysed and an authorisation decision is made within the blink of an eye. Within 300 milliseconds to be precise.

Rajat Taneja, the president of technology at Visa, says that happens on an average day nearly 700 million times.

In the modern banking system, a person’s hard-earned cash is translated into a series of ones and zeros. The bank card is the digital key that unlocks it.

A bank card is made up of four physical components: a pocket-sized piece of plastic, a microchip, a magnetic stripe and a contactless antennae.

The stripe encodes the ones and zeros as a series of magnetic and nonmagnetic spaces. Sprinkling some iron filing onto the magnetic stripe and tapping away the excess will reveal a barcode pattern which contains all the information needed to complete a transaction. The first bit would spell out a person’s card number, followed by their name and prefix, the card’s expiration date and a security code.

Bank of America and the Fresno Drop

In mid-September 1958, Bank of America (BoA) launched a promotional campaign that would revolutionise the financial system. The bank mailed all of its 60,000 customers in Fresno, California one of the first all-purpose credit cards issued in the US. At that time, cash and cheques still reigned supreme, and so BoA incentivised customer participation by preloading the cards with $300 in credit.

The trial was a resounding success. Consumers began to pay on plastic for the first time, and within a year, over two million cards had been sent out all over California. The BankAmericard programme set BoA up as a precursor to one of the largest credit card issuers and payment networks worldwide: Visa.

Consumers couldn’t tap or swipe to make purchases with those early prototypes of the credit card. Merchants had to place the card into a device, stack a carbon-paper sales slip over it and slide a bar over the card to copy the embossed account information. One copy of the sales slip went to the customer, and the merchant sent the other copy to the bank to begin the process of receiving payment. But the process was time consuming and prone to error. A more reliable system was needed before the credit card became the modern fixture that it is today.

The solution came from an unlikely source: the American CIA.

Magnetic Stripes

In 1961, during the midst of the cold war, the agency was preparing to move into its new headquarters in Langley, Virginia. The sprawling building posed a major security issue, as posted security guards were expected to recognise all the people with the clearance to enter. The CIA tasked computer engineers at IBM with creating a secure ID card. Magnetic tape was already being used at the time to record and store digital information, so the engineers only had to figure out how to permanently attach the tape to a plastic card. IBM engineer Forrest Parry is credited with inventing the magnetic stripe card, but his wife, Dorothea, provided the cinching solution. Parry was attempting to adhere the stripe to the plastic with glue, which warped the tape and distorted the encoded information. He recounted his struggles to his wife while she was ironing clothes. She suggested using an iron to bond the tape to the card — and the solution stuck. The magnetic stripe remains a common fixture among credit and debit cards, gift and stored-value cards, hotel keycards and ID badges.

But scammers quickly realised that the magnetic stripe had some fundamental security flaws. The information isn’t encrypted and can be easily copied with the proper device.

Tony Sales, dubbed “Britain’s greatest fraudster”, stole £30m over the course of his criminal career. Now, he shares trade secrets in an attempt to protect companies and consumers from fraud.

Sales committed his first credit card fraud at age 13. He would ask friends working in retail to put a card skimmer behind the counter, away from customer eyes, and swipe the card to steal their information. Then he could use the details to commit identity fraud or sell their info to other criminals.

“I was young, foolish, full of ego and wanted to be someone,” he told the Mirror. “I’ve spent the rest of the time trying to prove myself.”

The reformed con artist recently staged a street campaign to demonstrate how easily someone can be tricked into divulging personal information. A hidden film crew recorded him asking passers-by to sign up for anti-scam tips from an organisation called MACs (“scam” spelled backwards). An alarming percentage of the people questioned gave up sensitive personal information, including their full name, address, phone number, email address and date of birth. After revealing his background to those who were overly forthcoming, he warned them about the consequences of letting their personal data fall into unscrupulous hands.

“Fraud causes poverty, and some people never recover from it,” he said.

Microchip security upgrades

The bank card has evolved over time to incorporate stronger security measures. US inventors Jack Kilby and Robert Noyce patented the technology for the microcomputer chip in the late ‘50s. French inventor Roland Moreno pioneered the use of smart cards in the mid ‘70s.

Moreno originally wanted the technology to be worn as a ring, providing digital authentication similar to the individual authority granted by signet rings throughout the ages. The chipped ring idea didn’t catch on, but Moreno simplified the design by converting it into a card format. He created the world’s first chipped card and reader requiring a secret code, or PIN, to access. He even added a James Bond touch to early iterations, where the chip would self-destruct after three incorrect code attempts.

The banks were hesitant to adopt the technology, as the chipped card was much more expensive than the magnetic stripe standard. But in 1983, France Télécom incorporated the smart card across its network of pay phones. French banks followed suit in 1992, launching the national debit card system, Carte Bleue.

Moreno’s chip-and-PIN technology didn’t reach the US until 1999; the UK was even further behind, with its first trial run in 2003.

By the time Moreno died in 2012, his company, Innovatron, had collected around €150m in royalties. He is hailed as a French hero, although he never received the global name recognition of similar tech entrepreneurs. According to his friends, if he were more organised, he could have been “a billionaire, the French Bill Gates.”

Chip and PIN technology dramatically reduced card fraud — but criminals evolve just as swiftly as technology. Hackers have proven capable of capturing the data conversation between cards and terminals, while a new generation of skimmers and spy-cams are being installed on ATMs and pay-at-the-pump stations to harvest account information and PIN numbers.

Tap for contactless payments

The technology behind contactless card payments relies on radio frequency identification (RFID) — and can be traced back to the Cold War between the US and the Soviet Union.

Russian physicist Lev Sergeyevich Termen, known as Leon Theremin in the West, invented the first passive RFID listening device. He is more widely known as the inventor of one of the first electronic musical instruments to be mass-produced — the theremin. The instrument is controlled without physical contact by the performer. The theremin produces an otherworldly sound as the performer moves their hand around metal rods, interrupting the electromagnetic field and changing the frequency of the sound. It’s a common feature among sci-fi soundtracks. Theremin invented his namesake instrument in 1919 and patented it in 1928.

In 1938, the musician was accused of being a counter revolutionary, arrested and sent to a Gulag labour camp. Within two years, Theremin was transferred to a secret research and development laboratory in the Gulag system, where his physics expertise aided the country’s espionage efforts.

In 1945, Soviet-era Russia gave the American ambassador a gift — a carved wooden replica of the Great Seal of the US. The sculpture was presented by a group of school children as a symbol of friendship and goodwill between the nations. The ambassador prominently displayed the seal in his office, but hidden within the sculpture was a small, sophisticated bugging device. The unpowered passive listening device was only discovered by accident, seven years and four ambassadors later. The device consisted of a monopole antenna connected to a resonator with a flexible sound-sensitive membrane and relied on a transmitter outside the embassy to create modulated backscatter of conversations within the room. The device was essentially the first long-range passive ultra-high-frequency RFID tag, and modern RFID variants operate along those same basic principles.

Back to the modern bank card, this technology now powers contactless payments. Deconstruct a contactless-capable bank card, and the loop of cooper wire that serves as the antenna will be revealed. The wires power the microchip within the card by picking up the signal transmitted by the payment processing device and converting it into electricity. Barclays introduced contactless payments in the UK in 2007.

Enhanced security for card-not-present transactions

Anyone who’s ever purchased something online will be familiar with the three- or four-digit code on the back of the card, the CVV, or card verification value. Unlike the card account number, the CVV isn’t stored in online merchant databases, making it similar to the signature or PIN required for in-person purchasing. The CVV was introduced in the ‘90s to combat fraud as online shopping became more prevalent.

The innovation starts with an unlikely source — the porn industry. Richard Gordon was hired by a small company to investigate the disproportionately high number of credit card chargebacks in the adult entertainment industry. Chargebacks result when a customer successfully disputes a transaction on their account statement to receive a refund.

Gordon found that 25 percent of customers claimed they’d never called a phone-sex line. This meant that a quarter of the business’ monthly income was being disputed, most of which ruled in the favour of the clients, not the company. Dispute claims were costly for the porn companies and the banks that processed the payments. In the early ‘90s, it cost around $12 just to resolve a dispute, not to mention the lost charges, so the banks began to pressure the industry to come up with a solution.

“We built something called electronic authorisation systems, which basically analysed every transaction in real time to see if there were other calls from the same number,” said Gordon. “There were a series of algorithms that we had that analysed the transactions.”

His system was able to cut down fraud by proving the calls had been made. The banks encountered a similar issue as adult entertainment shifted online.

“Banks didn’t want to be associated with anyone that was involved in the adult industry,” he said. “So, part of my job was to break that firewall down and open up the banking to the industry. As we developed into the online world, we had to continuously upgrade and monitor the systems so that they could stay ahead of the fraud.”

By the mid ‘90s, internet shopping was gaining in popularity, and the banks were seeking new methods to make consumers feel more secure. A security code for card-not-present transactions was developed by UK Equifax employee Michael Stone in 1995. The CVV was originally an eleven-character alphanumeric code comprising cardholder information, but which was prohibited from being stored online by merchants. The CVV quickly evolved into the short numerical code that is now used worldwide.

Criminals evolve in-step with financial innovations

Natalie Kelly, the chief risk officer at Visa Europe, heads the department tasked with analysing anomalies to prevent fraud. She says enumeration bots are often behind the high data spikes that can flag an attack.

She likens the verification process to a locker requiring a three-digit code for access. “You could roll those numbers a thousand times, and you’re eventually going to get it right. Enumeration is the same thing, but with a bot.”

The bots can generate millions of account numbers, expiration dates and CVV numbers, until they chance upon the correct combination. The bots work autonomously, and after acquiring the card number and verification codes, they’re programmed to make high-value purchases that can be quickly sold for cash on the black market.

“It’s basically our AI against their AI,” Kelly explained from Visa’s fraud war room. “They’re getting more sophisticated every day.”

She demonstrated how easily a criminal can find a hacker for hire, opening a page on the dark web reminiscent of Amazon’s marketplace. Vendors proudly display customer ratings alongside listings of stolen credit numbers. Criminals are paying each other in bitcoin, which uses super-secure three-factor authentication — leaving zero room for fraud amongst the fraudsters.

Biometrics could make the bankcard obsolete

Fingerprinting has been around since the 1800s. Primitive voice recognition machines first showed up in the ‘50s, followed by early versions of face and iris recognition. These technologies are now common security features on smart phones and are moving steadily into the world of payments processing.

Facial recognition payments are under development at Visa’s Innovation Centre. Richard Tomsett, a senior applied scientist at Onfido, and Charlotte Hogg, the CEO of the Visa Europe, met with Hannah Fry, the mathematics professor who hosts BBC’s The Secret Genius of Modern Life, to explore how the future of spending is shaping up.

Hogg points out how people are unique in many different ways — face, voice, fingerprints or even the way someone types. “If you move to a world where we’re increasingly using biometrics, you can begin to take out the steps that we probably don’t realise are quite clunky today.”

Hogg and Tomsett walked the mathematician through the facial recognition software they’re developing for the payments system. Frey uploaded her driver’s license to the system then used the app to video-verify her identity, slowly turning her face so the system’s AI could match axis points between the driver’s license photo and video.

Tomsett says that the AI might have issues if a serious change to a person’s face occurred. Getting glasses, growing a beard or wearing makeup wouldn’t phase the AI. A nose job might, though, as the model plots elevated and recessed points on the face.

They test the AI with a print-out of Frey’s face. As it’s turned, the model becomes increasingly confident that the face isn’t genuine. Tomsett tugs on a 3D-printed full-head mask and tops it off with a wig. The AI easily flags the impersonation attempt, as it doesn’t pass the liveness check.

The more examples of spoof faces that the team feeds the model, the more confidently the AI can spot a fake.

But the technology does raise some ethical questions about privacy.

Onfido says that the system only stores videos of people who have given explicit permission for it to do so. The world is increasingly teeming with Big Brother technology, and regulatory protections are lagging far behind.

In May 2022, the UK's privacy and data watchdog fined a facial recognition company for collecting 20 billion online images of people from social media platforms and other web sources for its global database. The Information Commissioner's Office also ordered the US company, Clearview AI, to delete the data of UK residents from its systems.

Consumers should question big tech about their own data and privacy rights. Who has access to the data? How secure is it? How is it being used now and how could it be potentially used in the future?


Lord Waverley: New Thinking in the UK

New Thinking in the UK, Commonwealth Advantage and the Electronic Trade Documents Bill

Whilst it is undeniable that we are all going through challenging times in the UK, there is recognition in certain quarters that we cannot carry on in ways of old; and that innovation and thinking outside the box have become the imperatives. Now is the time to venture forth with fresh ideas and new concepts.

Determining the purposeful role and contribution of government is a necessary start, with government ideally understanding what its principal role should be; and I venture that of being an enabler, creating a conducive environment, but then stepping aside to let professionals run with the ball. I leave the dire questions on tax levels, the levelling-up strategy, the planning approvals environment, housing needs and general social conditions and focus for the moment on international trade and export promotion. Trade is often derided but is an integral component, as is the relentless need to attract inward investment to enable funding of essential infrastructure.

The BREXIT debate rumbles on with the new administration reflecting on the best model for our relationship with the European Union, with the Norwegian or Swiss models being scrutinised. Hardline Brexiters are seemingly holding firm with the possibility of further acrimonious internal political debate being reopened. That is in no-one’s interest. There is a sense of exasperation by the business community that politicians are over-complicating the whole question, and that friendly frictionless bilateral relations are all that counts in the national interest. Pragmatic initiatives are on the horizon. One of the essential ingredients to make progress with the global trading community is to combine innovation, build efficiency and create sustainability and to do so by putting the jigsaw into place, if you will. Currently there are excellent different components that could usefully be harnessed into a unified approach; however, none is dependent on the other.

"A number of trade documents with which domestic and cross-border trade would become significantly more efficient and affordable for all are listed, but small and medium-sized entities would benefit the most."

I point to three initiatives. The first lends itself well as the Commonwealth is fertile ground given the commonality of common law and language, which should be viewed as the bedrock of a Global Britain. It is a free trade agreement template initially targeting Commonwealth member states, excluding the two that are members of the EU as they are responsible to internal protocols, that can be adjusted by country to address any specific anomalies. I was originally approached some time back by a well-meaning US interest to stitch together a US/Commonwealth agreement, including the UK, of course, that would unlock the UK/US circumstance, given that the bilateral free trade agreement is moribund. This Commonwealth approach would consist of making a template of what is expected to be covered in a trade agreement with language options built in.

The launch of the Institute for Free Trade (IFT) analysis on a model commonwealth free trade agreement (FTA) last month. The “core” deal can be added to or subtracted from in order to meet the individual requirements of each commonwealth nation. The designers have crafted an agreement which can serve the needs of every Commonwealth nation from India to the Solomon Islands.

The “Commonwealth Advantage” reflects cultural and historic ties, complementary geostrategic interests as well as compatible legal and administrative systems. Accepting as equivalent health, sanitary and phytosanitary standards which aim at equivalent levels of evidence-based protection (defined by the UN Codex Alimentarius) will also liberate Commonwealth agricultural products for free global export. The variety and heterogeneity of the nations of the Commonwealth will lower food prices year-round at a time of inflation, as well as offering developing countries the opportunity to compete in profitable developed markets around the world.

This “trade, not aid” approach has arguably been the driving force behind decades of growth in free trading nations such as Taiwan, South Korea, Singapore, and post-war Japan, as well as export-driven success stories China and Indonesia. Unfortunately, many Commonwealth nations have faced large tariff and non-tariff barriers to trade, denying developing nations the income to improve domestic value-chains and leaving them particularly reliant on foreign aid, and geopolitical rivals such as the PRC, for their development objectives. These areas are the bedrock of modern trade agreements, and serve the growing opportunities in internet, in research and development, as well as financing of infrastructure projects within the Commonwealth.

While these deep trade agreements are to the advantage of smaller commonwealth nations, who would likely have no opportunity to negotiate such a degree of cooperation with larger Commonwealth nations such as the UK until “priority” talks with the US, India and others are completed, there are some important benefits for larger nations, too. Having modern trade agreements with a diverse set of economies, complete with an implementation of electronic trade documents and digital trade provisions, creates an immense dataset vital both to supply-chain management, private sector investment as well as governmental industrial strategy.

Flexibility would allow nations to reap the benefits of agreement where they find it, on an opt-in basis, rather than negotiate themselves into a stalemate by withholding agreement until everything is agreed; a moment which may never arrive.

The second is a dedicated, big-data analytics platform be made readily available to encompass advanced data analytics and modelling for foreign trade data relating to supply chains to consolidate multiple datasets already used by the International Trade Council. These datasets, with additional overlays into a single database, could be used for analysis of markets and supply chains, forecasting and predicting market behaviour. This would enable corporates to validate their supply chains, understand market pricing, monitor competitors, forecast the market and would allow governments seeking to assist their exporters to find new markets, identify priority investment FDI targets and model future market demand, growth, customers and suppliers. The good offices of the International Trade Council are making this available resulting from its agreement with 39 countries that will be packaged electronically and presented via newly branded ADAM; Advanced Data analytics & Modelling for Foreign Trade data.

Thirdly, and this brings me to a major piece of legislation that has started its parliamentary passage in the United Kingdom. The magic of the Electronic Trade Documents Bill is that it is all the more beneficial for being an enabler process, free for the world to join up to—just follow the provisions. If the answer to today’s ails is in the timing, this initiative hits the spot with the legal enactment necessary to a more competitive world for the benefit of all.

Allowing businesses to use electronic trade documents when buying and selling internationally, making it easier, cheaper, faster and more secure for them to trade, to remove an obstacle to progress and to pave the way for international trade and trade law to be brought up to date is the objective.

Passing this law would be a victory for global trade and for the United Nations, as the legislative work is led through the UN Model Law on Electronic Transferable Records—MLETR. By allowing electronic documents and physical documents to be used in parallel, the transition to paperless trade can be made an evolutionary process where the adoption of electronic trade documents will take place when different stakeholders in trade and trade finance are ready to take the step to paperless trade.

Radical change in removing paper-based trading documents will make for a faster, lower-cost, more resilient and more liquid world of trading, leading towards transparent digital supply chain management. It will be especially good for small businesses. While not all problems can be solved at once, recognising a practical step-by-step approach to solve one would be an excellent beginning.

This will allow for the use in electronic form of certain trade documents, such as bills of lading and bills of exchange, which currently must be on paper and physically possessed. The Bill is not mandatory: it is a permissive and facilitative piece of legislation and although only small in content, its impact will be huge. It will help to boost the UK’s international trade, already worth more than £1.4 trillion, by providing benefits to UK businesses over the next 10 years of £1.1 billion.

Business-to-business documents such as bills of lading, which are contracts between parties involved in shipping goods, and bills of exchange, which are used to help importers and exporters complete transactions, currently must be paper-based. Digital trade documents will be put on the same legal footing as their paper-based equivalents, giving UK businesses more choice and flexibility in how they trade.

The provisions cannot be overstated. Whether it is lowering transaction costs associated with trade by reducing resourcing and operational costs and increasing productivity; whether it is increasing efficiency and encouraging business growth by facilitating the development of digital products and services; whether it is delivering environmental benefits through a reduction in paper documents and emissions from couriering the paper documents; or, critically, whether it is increasing the security, transparency, traceability and transactional data of the flows of goods and finance—the Bill has the potential to revolutionise UK businesses’ ability to trade across borders and lay the foundations for the future digitisation of global trade approach and ambitions.

Improving logistical flow that will address the impediment to the speed of payments, and the current need to move paper to discharge goods and receive payments, bringing more opportunities as we align with the MLETR and benefit from digital trade corridors and individual country compliance. This will allow for documents that carry value and promises to be drawn up and signed in digital form, provided that the system or document fulfils the listed requirements.

A number of trade documents with which domestic and cross-border trade would become significantly more efficient and affordable for all are listed, but small and medium-sized entities would benefit the most. This will create significant opportunities for smaller importers and exporters globally, one reason being that the law of England and Wales is often used when parties have difficulties agreeing on the jurisdiction in which to settle disputes.

The following are issues that need to be reconciled: that international digital identities and digital signatory laws are sufficiently harmonised; that international freight tracking systems with a lack of interoperability is a hurdle that needs to be overcome and that legal entity identifiers are accepted universally.

Significant work is being done and progress is being made in these areas by industry organisations, but this needs to be supported by Governments to pave the way for international harmonisation and adoption. It will be a balancing act to create international standards in such a way that creates legal certainty on the one hand without hampering further adoption of new technologies or innovation on the other.

The United Nations Model Law on Electronic Transferable Records is a very well-designed framework, balancing the need for commercial certainty, relying on current and internationally well-harmonised substantive laws, with allowing for electronic trade documents, providing that the provisions in the MLETR are met.

The Bill does not change the function of the instruments listed. All the safety mechanisms these instruments have and cater for remain intact. Allowing them to be in electronic format means that they will become more efficient and significantly safer. I underline, however, that the Bill does not address the quality of signatures or how to establish identities, other than to say that they need to be “reliable”. The European Union has a list of trusted digital signature sites and for trade it is important that different parties can use simple verification processes to trust the documents coming from another party, but it is up to the contracting parties to define the method to ensure reliability.

What is reliable today, however, will differ tomorrow as new technology evolves. Legislation that is principles-based rather than technically prescriptive is more favourable. The adoption of the EU regulation for eID and other electronic trust services has been slow in cross-border trade, the main reason being that these have not been readily available and easily accessible as technical solutions. The result has been paper-based trade rather than electronic. Although not perfect, in some cases a lower standard is the stepping-stone for adoption, especially in cross-border dealings, provided that the parties have agreed on where to settle disputes.

These are early days, with much to do but no time to lose. All that I have drawn attention to however is the beginning of an exciting journey that ticks the boxes and I commend it accordingly.

About the Author

Lord (JD) Waverley
House of Lords, UK Parliament
Crossbench Member

Co-chair
All Party Parliamentary group: Trade & Investment
All Party Parliamentary group: Future UK’s Freight & Logistics sector

Founder
www.eChamber.global


IFC’s Alfonso García Mora: On the Frontlines of Climate Change and War

To mitigate the harmful effects of climate change requires the mobilisation of trillions of dollars. IFC Regional Vice-President for Europe, Latin America, and the Caribbean Alfonso García Mora is encouraged by the outcome of COP27 where it was decided – after three decades of discussions – to set up a Loss and Damage Fund: “However, the public purse cannot provide the volume of funding needed. Only the private sector can rally the required levels of funding.”

[caption id="attachment_24268" align="aligncenter" width="900"] Regional Vice-President for Europe, Latin America, and the Caribbean: Alfonso García Mora[/caption]

By 2030, climate related financing needs to deploy up to $3.5tn – or about four to five times the volume available at present: “The money exists and is mostly in the hands of institutional investors. In fact, they hold about a thousand times more funds than those available to development finance institutions. What we need to do is to create the conditions that make projects bankable.”

Mora is convinced that blended finance is key. Part of the World Bank Group, the International Finance Corporation (IFC) is, arguably, the most successful catalyst of private investment. Its seal of approval usually unlocks private capital to the tune of $11 for each dollar the IFC co-finances. “A few years ago, the role and use of multilateral institutions was being questioned but now the realisation has dawned that we need to coordinate our efforts to get the outcomes desired.”

More Than Just Cash

The IFC provides much more than just financing: “Our environmental, social, and governance [ESG] framework is exceptionally strong. Once our borrowers comply with that framework, they also comply with the ESG framework of any other financial institution. This opens a world of possibilities.”

"In Ecuador the IFC recently reached an agreement to subscribe up to $40m in blue bonds out of a total of $79m placed by the Banco Internacional."

Mora points out that, in a way, the IFC does the due diligence “free of charge” for other investors. This “additionality” can be leveraged to boost the development of the private sector in nearly any market.

The IFC sees a world of opportunity In Latin America where its strategy rests on three pillars: inclusion, sustainability, and productivity. In Chile, the bank helped finance the largest electric bus programme outside China. It also plans to assist local power utility Engie Chile to decarbonise by changing its energy mix and replacing coal-fired power plants with solar and wind generation. Next, the IFC is exploring ways to encourage the production of green ammonia by exploiting the intermittency of renewables.

Though the IFC doesn’t work with country-based targets, it expects to deliver about $1bn in (blended) financing to Chilean businesses and projects over the course of 2023 – a threefold increase over the 2021 volume: “Chile needs to support inclusive growth and sustainability. Moreover, the macro-economic and fiscal situation of the country is better than that of others in the region which means that Chile has the right fundamentals to deal with what is coming and take the necessary actions.”

Agribusiness

Mora would like to see the IFC pick up the pace when it comes to agribusiness: “Our investments in this space have so far been tiny. However, there is an urgent need to improve operational efficiencies and reconfigure wasteful business models particularly as they relate to water use. Water scarcity is real and getting worse with time. Water is going to become a huge issue and may spark conflict.”

The blue economy – defined by the United Nations as the sustainable use of ocean resources for economic growth, improved livelihoods, and jobs – is another area that merits attention: “In Latin America, already 25 percent of the populations lives on the coast. In some Caribbean island nations that is 100 percent.”

In Ecuador the IFC recently reached an agreement to subscribe up to $40m in blue bonds out of a total of $79m placed by the Banco Internacional. The bonds will help the country’s efforts in climate change mitigation and adaptation. The IFC’s participation paved the way for the first private sector blue bond issue in Latin America.

Rebuilding Ukraine

In Europe, the IFC is determined to underwrite the rebuilding of Ukraine’s battered private sector. “. According to UkraineInvest, 86% of private sector companies completely or partially shut down in March while almost all of them resumed work in September. Our support program will leverage blended finance and will prioritize investments to ensure supply of critical goods and services, such as food and fuel, support business preservation and reallocation, and address immediate logistics and energy threats. Right now, we are providing working capital to a few companies but most of the attention of multilateral finance institutions has, understandably, gone to the public sector which suffers a fiscal deficit of between three and four billion dollar every month.”

Mora foresees a “huge role” for the IFC and points out that the Marshall Plan was, in essence, a form of blended finance avant-la-lettre: “We need something similar for Ukraine whereby multilaterals supply seed financing that mobilises the vast volumes of private capital required to get the Ukrainian economy up and running.”

The IFC is set to launch a financing facility to help Ukraine and neighbouring countries redirect supply chains away from Russia. Another programme involves the setting up of a global food security platform – like the bank’s global health platform – to support commodity traders, farmers, food processors, and fertiliser companies.

Strategic Advisor

In December 2022, García Mora announced that the IFC is to serve as the strategic advisor to the Ukrainian government on the creation of optimal conditions to boost private sector investment in reconstruction.

“The war will have a long-lasting macroeconomic and social impact on Ukraine and its people. The financing needs to rebuild Ukraine’s infrastructure and support its economic recovery are immense and keep rising. As one of Ukraine’s largest private sector investors, the IFC is committed to help leverage much needed private capital for Ukraine’s rebuild. We will start working with the Government of Ukraine on strengthening the enabling environment for private investment in infrastructure, as well prioritising and developing projects. This will help mobilise private investors as soon as Ukraine’s conditions allow to start the full-fledged reconstruction.”

In a policy statement on Ukraine, the IFC pledged to support the country’s existing private sector and provide direct support to Ukrainian suffering from Russia’s invasion, including refugees. The institution is determined to prioritise investments that ensure the supply of critical goods and services such as food and fuel and seek to address immediate logistics and energy threats.


Singapore — the leading financial centre in the Asia-Pacific region

Hear the Merlion roar. Singapore is the case study for a DIY global financial centre. It punches above its weight both in terms of financial services and lifestyle. But can it maintain its global and regional importance with the continued rise of Chinese cities likes Shanghai and Shenzhen?

Singapore is the leading financial centre in the Asia-Pacific. It ranks third in the Global Financial Centre Index 2022, trailing only New York and London. It also has overtaken Hong Kong in the last year, with recent changes in Hong Kong hurting its rank.

[caption id="attachment_23709" align="alignright" width="500"] The financial centre of Singapore with a merlion statue in the foreground[/caption]

Singapore’s high ranking is based on being well-rounded across several categories. It is ranked third in terms of forex turnover by country (BIS), fourth in terms of the number of ultra-rich residents (Henley), third in terms of financial secrecy (Tax Justice Network), tenth in terms of fintech (Findexable), and has a highly competitive top corporate tax rate of 17 percent, which is almost 9 percent lower than the US rate. It also has the largest REIT market in the region outside of Japan.

Being a city-state, it isn’t the headquarters for many multinationals and its stock market capitalisation ranks only 21st (WFE), but it is home to 2,492 subsidiaries, and stakes a claim to be a leading location for regional headquarters in the Asia-Pacific.

Singapore has long enjoyed being a natural entrepôt based on its location linking the Strait of Malacca in the west and the South China sea in the east. It has also acted as a gateway to resources in the region, particularly petroleum, tin, and rubber.

Sir Thomas Stamford Raffles discovered a small fishing village and recognising the potential of its location, he established a trading post there in 1819. As the trading post grew, it attracted the attention of the British authorities and it became a crown colony in 1867, along with Malacca and Penang. Trade greatly increased after the establishment of Suez Canal in 1869.

With the growth of trade, financial services began to develop to support the trade. Currency services, maritime insurance, and trade finance companies grew along Singapore’s waterfront, which now comprises the city’s financial district.

However, it was not until after its independence from Malaysia in 1965 and the commencement of the government of Lee Kuan Yew and the People’s Action Party (PAP), that Singapore began to emerge as a leading global financial centre.

Lee successfully implemented a series of industrial plans that attracted foreign investment and turned the country into a regional manufacturing and free-trade hub. In its first ten years of independence, the city averaged real GDP growth of 11.4 percent and was soon called an economic miracle. This economic growth was a spur to the city’s financial sector.

Lee also made key strategic decisions to leverage this natural growth to grow financial services. For example, the Asian Dollar Market was established in 1968 with the aim of taking advantage of a gap in global trade from the close of the American markets to the opening of the European markets. The local pension fund, the Central Provident Fund (CPF), established in 1955, has also been adapted at certain points to top up local capital markets, including during the severe 1986 recession. The Singaporean dollar was floated in 1973 and exchange controls were liberalised in 1978, long before most other countries. Another example is the selling of government securities to banks from 1987 to aid their liquidity needs, even though the Singaporean government maintains a regular surplus and has no need to issue securities for funding.

The government was also key in establishing world-class institutions to regulate and run financial services, including the Monetary Authority of Singapore (MAS) in 1971, and the Stock Exchange of Singapore in 1973, which later became the Singapore Exchange (SGX) after merging with the derivatives exchange, the Singapore International Monetary Exchange (SIMEX).

The late 1980s marked the internationalisation of Singaporean finance. The 1984-85 recession and financial liberalisation in competing financial centres like Tokyo and Sydney, led to review and reforms in Singapore. Foreign banks were given greater scope and stockbroking was opened to domestic and foreign banks. An asset management industry was also developed. Local banks were also encouraged to combine so they could compete against the foreign banks. Secondary listing of foreign stocks also bolstered the local market.

In the 1990s, the city cultivated the private wealth market and positioned itself as an attractive destination for a growing number of Asian millionaires. This included the adoption of banking secrecy laws and the establishment of the privately-owned Le Freeport, a high-security vault service for the storage of physical valuables, including gold, gems, and artwork.

In recent years, the government and MAS have been investing in digital financial infrastructure and regulations to promote financial innovation, including the development of fintech hubs. It has also bolstered its anti-money laundering monitoring.

On 15 September 2022, MAS launched its “Financial Services Industry Transformation Map 2025” to take Singapore’s financial services into the next century. Emphasis is given to the further development of the insurance, private capital, and fintech sectors.

The development of Singapore’s financial centre has also been spurred by the country’s investment in local education and the targeting of immigrants with key financial skills and networks. In the latest PISA report by the OECD, Singaporean high school students ranked second in the world in reading, science, and mathematics.

Singapore is however more than a financial centre. It has also transformed itself into a top tourist destination and a destination for expats. Attractions include Sentosa Island, Marina Bay Sands, Orchard Road for shopping, and the Singapore Zoo. Singapore airport is also among the biggest and best in the world.

Despite its high-rises, 47 percent of its land area is covered by trees, and it plans to have a 1,300km cycle path network by 2030.

It is ranked fifth in the region for its quality of living (Mercer) but boasts the second most efficient healthcare system in the world (Bloomberg), the second-best high school education, and the top urban mobility. It also regularly voted the safest city in the world. Living in Singapore is perfect for families. Singapore lifestyle is also unique with its mix of regional cuisines and cultures.

Singapore is however an expensive city. It ranks eight on Mercer’s cost of living index. Property is not cheap with prime rentals lagging only Monaco, Hong Kong, London, and New York. It also has the second-longest working hours in Asia after Hong Kong. It does however have the 11th highest average monthly salaries in the world.

It is a good thing that Singapore keeps reinventing itself as a city and financial centre as it is facing strong competition from the Chinese state who has invested heavily in cities such as Shanghai and Shenzhen. These cities are unrecognisable compared to how they looked and what they offered in the 1980s. COVID-19 and the continued strict measures in China, has perhaps given Singapore a reprieve. Singapore’s clean environment and rule of law is also an advantage. But if Singapore wants to maintain its advantage it needs to continue to innovate.

Singapore can also benefit from the growth of its ASEAN neighbours. The growth of a middle and wealthy class in Indonesia and Vietnam can only benefit Singapore as a financial centre. The merlion should continue to roar well into the future.

By Brendan Filipovski