Dame Zaha Mohammed Hadid: Never an Understatement - Design Rooted in Nature

[caption id="attachment_6143" align="alignright" width="239"] Dame Zaha Mohammed Hadid[/caption]

The work of Dame Zaha Mohammed Hadid, one of today’s most accomplished and celebrated architects, has always been ambitious. To her many admirers she is the Queen of the Curve – a big-picture visual thinker with an impressive record of producing some of the world’s most exciting and gorgeous modern buildings. Her detractors, however, accuse Dame Zaha Hadid of creating futuristic fantasies in which experimentation prevails over functionality. As such, she may be an heiress to the celebrated Brazilian architect Oscar Niemeyer who passed away last year, aged 104.

Dame Zaha Hadid was born in Bagdad and, growing up, spent some of her holidays in the ancient Sumerian cities of southern Iraq. She credits the local scenery of rivers and dunes with providing her an inspiration for life: “The beauty of the landscape, in which sand, water, reeds, birds, buildings and people all somehow flowed together, has never left me.”

There were, however, lapses in her memory: “For many years I hated nature. As a student I refused to put a plant anywhere – a living plant that is. Dead plants were OK.”

When Dame Zaha Hadid was awarded the prestigious Pritzker Architecture Prize in 2004, she was the first woman to receive the honour and the first Muslim to boot. She went on to claim the Stirling Prize in 2010 for the Maxxi National Museum of 21st Century Arts in Rome, and in 2011 for the Evelyn Grace Academy in London.

“I am equally proud of my architectural projects. It’s always rewarding to see an ambitious design become reality.”

Dame Zaha Hadid is responsible for over forty of the world’s most talked-about buildings, including the wave-like Salerno Ferry Terminal; the sensually curved Heydar Aliyev Centre in Azerbaijan; the eclectic collection of shard-like walls that comprise the Serpentine Gallery Pavilion in London; the fear-inducing Innsbruck Bergisel Ski Jump; the purposeful BMW Central building in Leipzig; the Abu-Dhabi Sheikh Zayed Bridge evoking the undulating sand dunes of the desert; and the “double-pebble” Guangzhou Opera House in China.

Her first commission, awarded in 1994, was the design of the German Vitra Furniture factory’s fire station. What might have seemed a rather mundane job to some was a rallying call for artistic exuberance to Dame Zaha. Though widely considered an architectural triumph, the building did not quite suit its original purpose and now houses a museum of chairs. Dame Zaha wasn’t at all fazed and happily paid a visit to the museum.

More recently in Japan, Dame Zaha has met with fierce criticism over her design for the 2020 Summer Olympics Stadium. Her detractors argue that the proposed structure is far too large for its surroundings that include the iconic 1964 Olympic Stadium. The building, however, is sure never to go unnoticed.

Dame Zaha has perhaps surpassed herself with the sensual and intoxicating design for Qatar’s 2022 World Cup Stadium. Here, her inspiration was derived from the traditional dhow.

Dame Zaha Hadid graduated in mathematics from the American University of Beirut before moving to London where she pursued studies in architecture. Over the last few decades, Dame Zaha has in turn taught at the Harvard Graduate School for Design, the Chicago School of Architecture and at both Columbia University and Yale. In 2006, the New York Guggenheim Museum honoured Dame Zaha with a major retrospective spanning her career.

Dame Zaha Hadid brings together East and West as she creates brave, new urban landscapes of splendid futuristic buildings whose shapes are often rooted in memories of a far different environment and of the innocence of days gone by.


Perry Chen: Unleashing the Power of Collective Funding, Getting Bright Ideas to Fruition

[caption id="attachment_6149" align="alignright" width="168"] Perry Chen[/caption]

In the spring of 1885, publisher Joseph Pulitzer launched a fundraising campaign in his newspaper New York World to raise the last $100,000 needed to build a pedestal for the Statue of Liberty. The statue – a gift from the people of France – was in storage, disassembled, and had no place to go.

Within six months, the paper had raised over $102,000 ($2.3m today’s money). Most donations amounted to less than a single dollar. Thus, the Statue of Liberty was erected – or at least in part – through crowd-funding. Today, Joseph Pulitzer might just have used Kickstarter.

Perry Chen is CEO and co-founder of Kickstarter – a New York company which offers artists, creators and others an online crowd-funding platform to bring their projects to life. Since its launch in 2009, Kickstarter has helped raise over $870m for some 50,000 projects. More than five million people contributed with donations.

This success has brought Mr Chen wide acclaim. Time Magazine recently included him in its list of the world’s hundred most influential people.

“There are billions of projects in people’s heads right now. And however they happen, I just can’t wait to see them.”

Mr Chen got his idea in 2001 while living in New Orleans. He had wanted to stage a music event during the city’s jazz festival. He found artists willing to perform and even a perfect venue. In the end though, the event never took place due to a dearth of funds.

Analysing the debacle, Mr Chen hit upon an idea: What if people could pledge to buy tickets? Once enough interest had been sparked, the pledges could be monetized, enabling the organisers to proceed. Should things turn out differently, the proposed event would just not take place and nobody would have lost any money.

This idea was developed into the business model of Kickstarter which Mr Chen co-founded with Charles Adler and Yancey Strickler. Kickstarter projects are not investments; funders do not get a return on their money. Projects must attain a set volume of pledges within a previously determined timespan. Those who pledge funds are only charged once all conditions have been met. Kickstarter projects range from debut albums and comic books to Academy Award winning movies and 3D printers.

Kickstarter has the feel of the Internet making good on one of its promises: Bringing people together to make great things happen. Whereas Internet piracy was perceived to herald the demise of the creative arts, it in fact contributed to a change in the balance of power between producers and consumers. It seems news of the arts’ death had been greatly exaggerated.

Through social media, artists now have more power than ever before to get their ideas to fruition. The industry’s gatekeepers have been shoved aside. Though perhaps not the embodiment of evil, these gatekeepers dispose of finite resources. This imposes caution - a disposition often at odds with creativity.

Kickstarter and other copycat crowd-funding sites have now changed the equation yet again: Audiences are no longer mere consumers and instead may become part of any given creative process by backing it financially. Kickstarter’s users are decidedly not in it for the money, nor particularly concerned with sales’ potential, profits and whatnot: They just fancy an artist’s creative idea and may even have fallen in love with it to the point of wanting to see that idea take shape and become a tangible reality.


Tobias Preis: Beating the Stock Market with Google’s Big Data

[caption id="attachment_6153" align="alignright" width="225"] Tobias Preis[/caption]

Google your way to riches: It can be done and Tobias Preis has proved it. Search query data on publically traded corporations, as available from Google Trends, bear a close correlation to transaction volumes of the corresponding stock. The number of views generated by relevant financial entries on Wikipedia can also predict significant stock market moves.

Associate Professor of Finance and Behavioural Science at Warwick Business School, Tobias Preis is into big data: He aims to spot trends in collective human behaviour by crunching vast volumes of numbers, mostly as they relate to online activities. This enables Mr Preis and his associates in academia to better understand decision-making processes and indeed predict their outcome.

Earlier this year, the German associate professor, unveiled a method to predict stock market fluctuations through the analysis of Google Trends search data on 98 relevant financial topics. Far from being the digital equivalent to the dark arts, the premise of Mr Preis’ research is rather straightforward: People make decisions based on information and in today’s world, that information is gathered online.

By studying, in real time, the data on search queries it should be possible to determine the outcome of any decision-making process. The exciting part is that, when it comes to stocks, Mr Preis’ model offers specific patterns and trends long before actual trading decisions are made.

"He aims to spot trends in collective human behaviour by crunching vast volumes of numbers, mostly as they relate to online activities."

Using historical data from the Dow Jones Industrial Index (DJIA) and Google Trends, Mr Preis and his team of computational scientists found that decreases in search engine queries on a given corporation’s stock warrant a buy-and-hold strategy. Conversely, query increases usually precede a drop in stock prices, suggesting a short position would yield best results.

As reported by the online journal Scientific Reports, the research conducted by Tobias Preis and his colleagues at Warwick Business School is not just of an esoteric value: When compared to a random stock trading strategy, Mr Preis’ model using Google Trends offers a stunning 297% return and even his findings on Wikipedia page views as a predictor of market moves result in an impressive yield of 141%.

While caveats abound and caution remains mandatory, Mr Preis and his analysis of big data and complex systems offer a fascinating insight in the human psyche as we dwell online for an increasingly larger part of our time. How we behave in this virtual world of near limitless data is recorded and hence may be analysed. Insights thus gained are not just of interest to intelligence agencies, but now – thanks to Mr Tobias Preis – to stock traders as well.


DEG: Germany Eyes Future Markets Beyond the BRICS

[caption id="attachment_6157" align="alignright" width="212"] Author: Alexander Klein[/caption]

In the light of weak economic activity, growth forecasts for the major emerging nations in 2013 and 2014 are being revised downwards. The so-called BRICS states (Brazil, Russia, India, China and South Africa) – which constitute the key foreign markets for German companies – are particularly affected. Dynamic, second-in-line countries are now coming to the fore. Although these countries are not without their challenges, it is worth taking a glance at the opportunities they offer.

Instead of expecting that the BRICS states will continue to experience a never-ending boom, disillusion has now set in: In China, GDP and export figures are weaker than expected, and the risks from the real estate and financial sectors are being brought into focus to an even greater extent by unusually drastic measures from the Chinese central bank.

For a good few years, it has been generally acknowledged that China needs to change its growth model to make it more sustainable. Yet current developments highlight the fact that business-as-usual is not an option. In this respect, the recently announced measures to promote the economy differ to those of 2009. A considerably smaller package with fiscal incentives has been put together. Additionally, the minimum growth targets, previously 7.5%, have been lowered to 7%.

Many banks are moving in the same direction and are also revising their GDP growth forecasts downward. In this way, it is clear that China could maybe afford a further credit glut and economic stimulus package as in 2009, if needed, but it is no longer in a position to justify one in the light of the misallocation of funds, for instance, in the real estate sector.

“For a good few years, it has been generally acknowledged that China needs to change its growth model to make it more sustainable.”

The picture is not much rosier in the other BRICS countries. Growth is also hitting the limits of the catching up process. Negative side-effects – such as growing social inequality and damage to the environment – are increasingly taking centre stage. Necessary structural reforms and a rethinking of economic policy in India and Brazil, as well as oil dependency in Russia which urgently needs to be reduced, underline that the outlook for success in these countries cannot be taken as set in stone.

South Africa, once Africa’s economic role model, has also been recording lower growth rates since the start of the financial crisis in 2009. It is likely that unfavourable investment conditions – high unit labour costs, low growth in productivity, and higher political risks – will lead to the economy underperforming again in the coming year.

Beyond the BRICS there are, however, a number of countries with growth rates of over 5%, and which also show comparatively positive investment conditions, relatively good political stability and significant market size.

Just as in the largest emerging economies, the main potential in these countries lies within their demographic development. Today, around half of the world’s population already lives in cities, and it is assumed that by 2030, urban population growth will almost entirely take place in emerging and developing countries. In this respect, primarily populations in smaller cities – comprising a million inhabitants or more – will increase greatly. The necessary expansion of these cities offers a huge potential for the private sector, as does the growing middle class with its changing patterns of consumer behaviour. Examples of sectors with potential for accelerated growth are environmentally friendly transport solutions, water and sewage treatment, waste management, renewable energies and a wide range of service industries.

If the BRICS are removed from the equation, the emerging and developing countries have recorded economic growth of around 5% per year since 2009. Again, on average, almost 5% is forecast for the next four years. The investment framework conditions are often better than commonly assumed: In the Doing Business Index of the World Bank – an indicator of these framework conditions – countries such as Peru, Rwanda and Ghana are, in part, ranked well above the BRIC countries. Indonesia, Peru and East Africa in particular demonstrate market potential.

Indonesia’s GDP has grown by between five and six percent annually, over the past ten years. A process of opening up to the wider world, initiated after the Asia crisis in 1997, coupled to prudent economic policies, has furthered this development. The 2009 crisis proved the country’s economy to be comparatively robust. While the economy stagnated in other Asian countries, Indonesia’s managed to grow at a rate just 1.5 percentage points shy of pre-crisis levels.

Strong domestic demand is the main driver for growth in Indonesia. High import bills for fuel and machines, as well as weak export earnings due to a lower demand for raw materials that make up around half of exports, are nevertheless having a negative impact on the external trade balance. The country’s main export markets include the US, Japan and China.

The anticipated positive economic developments in the US, and the recovery taking root in both Japan and the Eurozone countries, should offset weak demand from China. Following a short-term negative impact on private consumption, a significant lowering of fuel subsidies should have a positive effect over the coming years. With this growth model, Indonesia seems less susceptible to exogenous demand shocks in the medium term than many other states, particularly in Asia. Accordingly, a growth rate of almost six percent is again forecast for the upcoming years.

Indonesia’s domestic and external trade potential, which businesses can harness by setting up local production sites, is particularly attractive to investors. With approx. 240m inhabitants, Indonesia is the fourth largest nation in the world. As a member of the Association of Southeast Asian Nations (ASEAN), it also has access to an increasingly integrated economic area comprising around 600m inhabitants. A rapidly rising middle class and an increasing number of bilateral free trade agreements round off the external and domestic trade potential of this economy.

Direct investments also reflect this. Despite challenging circumstances such as insufficient infrastructure, Indonesia was ranked fourth after China, the US and India in the UN World Investment Report’s most recent survey for 2013-2015. The report provides information on the most attractive locations for direct investment according to the largest multinational companies.

And yet the proportion of German direct investments is relatively low. While Chinese companies, for example, are especially active in the Indonesian infrastructure sector, German companies consider that country’s economy more trade-related and, even so, only on the periphery. From an Indonesian perspective, German products make up less than 2% of total imports. Japanese goods, on the other hand account for 12%. German exports include machinery and chemical products, as well as motor vehicles and automotive parts.

In South America, Peru is one of the fastest growing economies. GDP growth over the past ten years amounted to an average of about 6%. Peru benefits from its participation in bilateral and multilateral free trade agreements, in addition to prudent economy policies and continuous improvements to the investment climate, which is reflected in the country’s high ranking on the Doing Business Index.

Peru is a member of the Andean Community and an associate member of Mercosur. The country also signed a free trade agreement with the EU earlier this year. Private consumption and investments, particularly in the extractive industries, will probably continue to be the main drivers for growth over the coming years.
In contrast to weak growth in neighbouring Brazil, Peru’s GDP is set to increase between 5-6% annually in both 2013 and 2014. Direct investments have developed very positively over the past five to six years. Even in the 2009 crisis year, investment levels dipped only marginally. Due to a good outlook for the economy, direct investments are expected to continue rising. This is also a result of the country’s excellent location in the centre of the continent and its increasingly important role as a point of entry for trade and direct investment in the region.

However, from a German perspective, little attention has been paid to the Andean nation until now. German products account for less than 3% of Peru’s imports. As is the case with Indonesia, these imports are predominantly machinery and chemical products, as well as motor vehicles and automotive parts.

East Africa is another good example of a region that defies all the common prejudices which have shrouded Africa for years. The countries of Burundi, Rwanda, Uganda, Tanzania and Kenya belong to the East African Community (EAC). This community of states demonstrates significant economic potential with its 140 million inhabitants, a joint economic output of around $85 billion – in part high volumes of raw materials – and a continually growing integration of trade relations.

Alongside the raw materials sector, the areas of infrastructure and services seem to be particularly promising. But there are also positive developments in the manufacturing sector. And still, only approx. 0.1% of German exports are destined for East African countries, and German direct investment is almost negligible.

In view of only moderate economic growth in the largest emerging economies, it appears to make sense for German companies to expand their overseas activities with the inclusion of additional investment and export destinations. The countries mentioned here are examples of places where successful activities could be carried out – when supported by experienced partners.

About DEG

DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH – is an experienced financing partner for investments in future markets and an organisation which has accompanied companies in these countries for over fifty years. As such, DEG is thoroughly familiar with their political, cultural and legal backgrounds.

About the Author

Mr Alexander Klein is the senior macro economist in the Corporate Strategy and Development Policy Department at DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH.


Princess Ameerah Al-Taweel: Saudi Princess at Forefront of Women´s Lib - “We Want Change”

[caption id="attachment_6168" align="alignright" width="141"] Princess Ameerah Al-Taweel[/caption]

It is quite difficult to introduce Ameerah Al-Taweel without mentioning the fact that she is the wife of Saudi Prince Walid Ibn Talal – founder of Kingdom Holding, billionaire some twenty times over, and one of the most successful and high-profile investors in the world.

This detail now having been dispatched, Princess Ameerah may rightfully claim hero status in her own right. Aged thirty, she is vice-chair of two of the family’s foundations that do good works all around the world and give strong focus on the empowerment of women. The princess is also a board member of Silatech which operates in another area of critical concern to the Arab world: The tackling of unemployment and the promotion of economic opportunities for young people.

Princess Ameerah is not one to stand in the shadow of her husband. As the British TV host and journalist Piers Morgan concluded: “You do get the sense that they are in this together.”

The Saudi princess has repeatedly spoken out on television and in the western press in support of women’s right to drive in Saudi Arabia. The ban on female driving has been kept in place by a perhaps overly conservative society. Princess Ameerah makes it clear that the issue is being debated within the royal family itself and particularly so by its more forward looking members.

“If you truly believe in what you’re doing, work really hard for it and don’t let criticism get you down, you can make your dreams come true.”

Simply put, Princess Ameerah dedicates her life to the advancement of women´s rights in a place where these are still rather limited. She does so with the full backing of her husband. The princess has become a role model for women throughout the Middle East and something of a shop steward for her more liberal-minded family members. She is fortunate in that Prince Walid is himself such a committed champion of women’s rights. However, if this is all to make sense, there must be a woman standing out front: That woman is Princess Ameerah Al-Taweel.

The young and attractive Saudi princess spoke at the 2011 Clinton Global Initiative Voices of Change in the Middle East and North Africa where she called for evolution rather than revolution. At home, she has propelled herself into a position from which she can be instrumental in breaking down societal barriers to women’s rights as part of a generation that is bi-lingual, globalised and well-connected.

Still, she is not going to tell her daughters to wait: “My grandmother told my mom that we move forward step by step. My mother told me the same thing. But there is no way on earth that I will tell my daughters to go step by step. We are impatient, we want change.”


A Grateful World Mourns Nelson Mandela

1918 - 2013

On the evening of Thursday December 5th a clearly shaken President Jacob Zuma announced to South Africa and the world that Nelson Rolihlahla Mandela was dead.

Nelson Mandela's death was not abrupt and the news of his passing was not met with shock. Great sorrow certainly but not shock. His death was one not usually afforded to those who struggle for freedom.

Mandela found in South Africa a nation of hate, a nation divided against its own. He fought this hatred, rallying comrades to take up arms against injustice and for this was imprisoned. For twenty seven long years he remained behind bars, broken but unbowed, and in his confinement became a symbol of the struggle against the apartheid regime. He would emerge a champion, a leader, and a president. He remains a symbol not only of the struggle for freedom but also for magnanimity and love in victory.

For now we shall mourn alongside our South African brothers and sisters, but after we mourn we shall rejoice. Rejoice in the fact that this freedom fighter, this leader of men, died with his battle won and in his home surrounded by those he loved.

"He remains a symbol not only of the struggle for freedom but also for magnanimity and love in victory."

In his announcement, Jacob Zuma said that the nation had lost its greatest son but we respectfully disagree. South Africa has lost not a son but a father. The final gift any father bestows on their children is that of leaving them to stand on their own. All that can be hoped is that when this day comes the child is prepared. South Africa is well prepared.

No longer can Madiba be counted on to be custodian of all that is just, the righter of wrongs, the conscience of a nation. But South Africa lives on, matured by the painful yet indispensable final rite of passage, the death of a father. The Rainbow nation shines on. Nelson Mandela’s legacy lives on and may we all struggle to follow his shining example.


Grant Thornton: Islamic Finance - What’s In It For Me?

Grant Thornton United Arab Emirates (UAE) Audit Partner, Khurram Bhatti talks about the key aspects related to Islamic Finance.

[caption id="attachment_6186" align="alignright" width="169"] Khurram Bhatti[/caption]

There is much to both venerate and praise about Islamic Finance. Its stated philosophy and principles are probably as close to a model for truly ethical and moral banking as has yet been developed and actually implemented on a wider scale.

“Investor” or “Depositor”

The vital difference between Islamic “investors” and “depositors” within a conventional bank is that the former agree to share profits and losses whereas the latter do not. This holds especially true when it comes to the loss part.

In theory, therefore, a loss-making Islamic bank could and should pass on these losses to its investors who would see their investments reduced as a consequence. So far, this has not been put to the test in a major way and it is debatable whether an Islamic bank would actually be able to pass on its losses on a large scale, given that most investors regard their stake as a one way bet.

"There is much to both venerate and praise about Islamic Finance."

However, wary investors would perhaps find the more prudent nature of Islamic financing attractive. Considering the fact Islamic banks suffered only a few scratches during the 2008 downturn, investors – usually a conservative lot – may now have more faith in asset backed banking.

Promise Me This Is an Islamic Bank

Few investors are not fully satisfied by the character and performance of the existing Islamic financial institutions. However, most express dissatisfaction that some banks are not Islamic enough, particularly those institutions featuring an “Islamic Window” or “Islamic Branch” only. However, the basic principle of backing up Sharia compliant products with underlying assets offers comfort to investors as far as the security of their funds is concerned. To overcome these perceptions, Islamic banks would have to create more awareness in the market and back their claims up with admissible rulings from Sharia scholars.

Am I Getting the Right Return?

This is a very thought-provoking and imperative question to be answered before making a careful decision on one’s investment. At times, there is a perception that Islamic banks are inefficient when compared to their conventional counterparts. Islamic banks sit on slightly higher outlays to cover the cost of Sharia compliance and the design of Islamic products. Therefore these banks usually offer slightly lower returns in comparison with conventional financial products.

However, investors expect a higher return from Islamic banks since there is an element of risk involved with Islamic products that, after all, can result in losses unlike a fixed and guaranteed return offered on the conventional products. Investors asking for better returns – “the higher the risk, the higher the reward” – is not unusual; however it seems that Islamic banks have a long way to go to meet these expectations considering practical challenges on their way.

Net Return for Muslims

Islamic finance is not just for Muslims. In fact, the attractions of Islamic banking have led to a proliferation of Sharia-compliant banks in non-Muslim communities. However, based on the majority opinion of contemporary Sharia scholars, Muslim investors have to pay Zakat on funds deposited in Islamic investment accounts along with the profit these funds generated.

At the time of Zakat calculation, the total deposit amount will be added to Zakat assets together with the profit available at that time. However, if the profit or part of it has been already spent it will not be added.

Zakat is an obligatory charity for wealthy Muslims. Its rate is 2.5% p.a. on Zakat-able assets whereas the return on typical short-term Islamic investment accounts barely reaches to 2% annually. Instead of turning a healthy profit, Muslim investors often pay from their principal the amount of Zakat due. Though it is binding on affluent Muslims to pay Zakat from their wealth to eliminate inequality, they also expect to generate decent net returns to grow their investments.

In a Nutshell

Although Islamic financial institutions have to address the negative perceptions around the gap between the expectations and delivery, overall there still prevails a mind-set of security when dealing with Islamic financial products. To answer the question, “What is in it for me?” Islamic financial institutions would have to become more competitive and strive for more innovation as well.

About the Author

Khurram Bhatti is an Audit Partner at Grant Thornton, UAE with experience that stretches well over ten years. Mr Bhatti has in-depth knowledge of ethics, corporate governance and best practices, IFRS (International Financial Reporting Standards) and IPSAS (International Public Sector Accounting Standards).

Mr Bhatti specializes in auditing firms that are amongst the key industries. His expertise also includes special agreed-upon procedures, outsourced accounting, business advisory, feasibility studies, internal audit function, project valuations and forensic audits. Mr Bhatti is an expert in Islamic finance consultancy and possesses a thorough knowledge of Islamic commercial ethics, Islamic corporate governance, Islamic financial techniques and assets and fund management.

He is an associate member of Institute of Chartered Accountants of Pakistan and of the Pakistan Institute of Public Finance Accountants. Mr Bhatti is also a member of the Chartered Institute for Securities and Investment-UK for Islamic Finance Qualification. He has a Master’s Degree in Business Administration with a major in Marketing.


World Bank Reports on Affordable Housing in Egypt

[caption id="attachment_6214" align="alignright" width="255"] Cairo, Egypt[/caption]

Hamada Mohamed, a taxi driver, is married with a 3 -year-old boy, and expecting a new baby in the coming months. Like 75 percent of young families he has not been able to afford a house and has had to rent. Many others in this large group either buy houses in informal settlements or simply squat.  However, early next year, Hamada will move into a new home he bought, an approximately 60 square meters house with a small backyard.

Explaining why he has to move out from his current residence in Cairo, Hamada says, “I pay LE 750 (US$107) a month for a rented apartment. My lease will expire at the end of this year. The landlord asked for almost a 50 percent  increase in rent to renew the lease. I simply cannot afford to pay LE 1100 (US$157) a month for rent.”

But how can he afford to buy a new two-bedroom house in Haram City? Hamada answers, “I couldn’t have done it without the subsidized mortgage. I hope all young Egyptians have the same opportunity I did, so they too can actually buy their homes.”

"Hamada was able to move to Haram City thanks to the Affordable Mortgage Finance Program Development Loan (DPL), a US$300 million project co-financed by the World Bank."

Haram City, located in 6th of October district, 32 Km west of Cairo, is a housing project designed for middle and low income earners. Upon completion, it is expected to host 50,000 to 70,000 units with a population of approximately 300,000 inhabitants. It will include schools, a shopping centre, sporting clubs and other service facilities.

Hamada was able to move to Haram City thanks to the Affordable Mortgage Finance Program Development Loan (DPL), a US$300 million project co-financed by the World Bank. It aims to reform the existing system of subsidies for  low income housing, by shifting the current inefficient and poorly targeted supply-side subsidies (going to the developers) to a transparent and economically efficient demand-side  system (going directly to low income households).

Sahar Nasr, The Lead Financial Economist for the Middle East and North Africa Region, explains that “the project applies new mechanisms that were put in place after consultations with Egyptian investors, low income beneficiaries, and banks.”

The programme targets middle and low income households, earning between LE 1,000 and LE 2,500 per month. The subsidy amount varies according to the beneficiary’s income.  The amount of the subsidy is inversely proportional to the beneficiary’s monthly income.

An added benefit, Nasr explains, is that “the project will alleviate pressure on the government to subsidize housing for middle and low income households by tapping into the banks’ liquidity. It will also play an instrumental role in addressing high unemployment problem by creating job opportunities for the growing young labour force in the building of new houses.”


Wangari Maathai: Attaining Peace that Endures, One Tree at a Time

A young Kenyan girl named Wangari Maathai was sent by her mother to fetch some fresh water. As she reached the stream at the end of a pleasant walk, Wangari paused for a moment to quench her thirst drinking from the stream. As she did so, the girl marvelled at the countless tiny frogs’ eggs and tadpoles so clearly visible. She would never forget the taste of that pure water; her playful companions in the stream; and, the boundless and natural luxury of being part of a pristine environment.

Half a century later, Wangari Maathai (1940-2011), founder of the Green Belt Movement, was awarded the Nobel Peace Prize. She marked the occasion sharing her childhood memories and noting with a touch of sadness that the stream had since dried up. “The challenge now is to restore the tadpoles’ home and give back a world of beauty and wonder to our children.”

Ms Maathai took up that challenge a great many years ago. She grew up seeing trees and entire forests uprooted to make way for commercial plantations. As progress arrived for some, women in rural areas would still often go without fuel or clean drinking water. Their diets remained poor and incomplete while concerns over the lack of shelter and money was the order of the day, and indeed of every day.

“It’s the little things citizens do. That’s what will make the difference. My little thing is planting trees.”

Over the years, commercial farming has seriously degraded the environment. Global trade patterns and practices kept crop prices low. As a result, wages remained depressed and would, more often than not, be insufficient to cover even the most basic needs. Poverty endured and would frequently erupt into conflict.

The founding of the Green Belt Movement, attesting to an understanding of the links between human activity and environmental well-being, marked the start of an attempt to empower communities through education and awareness. The Nobel laureate pointed out: “I believe the committee understands that a world at peace is a world that protects and restores the environment.”

The activities of the Green Belt Movement are mostly carried out by women who understand that the best answers do not necessarily come from outside. The movement’s participants realise that it is they that must find and implement home-grown solutions to common problems. In this spirit, more than thirty million trees have been planted by some 4,000 community groups. More than helping to protect and nourish public spaces, these groups work both at grassroots level and on the international scene as advocates for peace.

In Africa, the tree is a traditional and potent symbol for peace. It has been used as such by the Green Belt Movement. In Kenya, the tree came to symbolize conflict resolution and the struggle for democracy. Ms Maathai and her Green Belt Movement were instrumental in plotting Kenya’s return to democracy in 2002. Their efforts, and those of countless others, ushered in a much more stable society.

With a doctorate degree in biology, obtained pursuing studies in Kenya, Germany and the United States, Ms Maathai chaired the National Council of Women of Kenya during most of the 1980s. In 2004, she was the first African woman to be awarded the Nobel Peace Prize.


Sir David Frost: Well Done Frostie! Playing Nice in the Quest for the Truth

Earlier this year, Sir David Frost suffered a heart attack while aboard the QE2 and passed away, aged 74. He had been hired as a speaker on the cruise ship and was, at the time of his death, busy planning several other projects including an interview with British premier David Cameron.

That was the satirist that was. Well, perhaps not a satirist of a calibre comparable to Swift, Orwell or Voltaire and also not a satirist for very long. Sir David Frost was part of the satirical movement of early 1960s Britain, and went on to become one of the most successful and entertaining television personalities of the country. He also earned a strong reputation in the United States.

Sir David Frost, an English graduate, edited Cambridge student publications Varsity and The Granta and was secretary of Footlights – the university’s drama club. He had a knack for being in the right place at the right time. He was also a contemporary of many of the satire-boom heroes to arrive on the scene, including Peter Cook who was to become publisher of Private Eye.

“On the surface, the television interview is a simple format - two people sitting across from one another having a conversation. But underneath it is often a power struggle - a battle for the psychological advantage.”

In 1962, TV producer Ned Sherrin hired Frost to head up the That Was the Week That Was team. This programme was to have a profound impact on young people as well as on the not-so-young. Audiences, perhaps for the first time, were seeing establishment figures ridiculed and held to account by some very sharp minds.

Around this time Peter Cook – described by Stephen Fry as “the funniest man who ever drew breath” – took issue with Frost over some material and promptly branded him “the bubonic plagiarist”.

Sir David was an ambitious man and took no pains hiding this fact. He also was a man of great charm and kindness.

In 1967, tough interviewing on The Frost Programme resulted in wide criticism. Some perceived the show as “trial by television”. The outcry was provoked by Frost’s merciless on-air handling of international swindler Emil Savundra who had caused untold misery to policy holders duped by his fraudulent insurance company.

In short order, David Frost made mincemeat of the hapless Mr Savundra with his persistently aggressive style of questioning that, at the time, was a novelty on British television. A perhaps slightly over-excited member of the audience called out “Well done, Frostie!” at the close of the show and so put almost everyone’s feelings into words.

By the late 1960s, Sir David Frost was working in the film industry and appearing three times a week on American television. His most enduring legacy may be the ground-breaking series of interviews with Richard Nixon. After some prodding and suffering the full assault of Sir David’s vast armoury of interviewing techniques, the former president succumbed and offered the American people an apology for the Watergate Affair.

Again, critics grumbled. This time, their ire was directed at Sir David’s use of “chequebook journalism”. Indeed, the disgraced former US president was handsomely rewarded for the interviews but there is no doubt that Sir David got his money’s worth and viewers a show of historical importance.

Always busy and on the lookout for an opportunity or challenge, Sir David Frost was part of a group of entrepreneurs that launched a UK breakfast television channel in the 1980s. He also hosted a Sunday interview programme for most of the next decade.

More recently (1997-2008), he amused himself by presenting Through the Keyhole – a programme in which a celebrity home is visited for clues to its owner’s personality. From 2006 up to last year, Sir David presented Frost over the World for the Al Jazeera news network.

Sir David Frost was considered unrivalled at prying the truth out of just about anyone. Speaking to the London Daily Telegraph upon hearing of Sir David’s death, British Liberal Democrat Member of Parliament Sir Menzies Campbell noted that, “His scrupulous and disarming politeness concealed a vice-like mind. Sir David could do you over without you realising it until it was too late. He was a peerless broadcaster.”


Otaviano Canuto, World Bank Group: Walking on the Wild Side - Monetary Policy and Prudential Regulation

Global financial integration and the linkages between the financial and the real sides of economies are sources of huge policy challenges. This is now beyond doubt, after what we saw in the run-up to and the unfolding of the 2008 global financial crisis. As a consequence, the established wisdom regarding monetary policies and prudential regulation has been subject to a deep critical review, including a demise of the belief that they should be maintained as fully independent functions.

The issue is particularly relevant in the case of emerging markets (EMs), where those policy challenges associated with macro-financial linkages are even greater than in advanced economies (ACs). At the same time, the circumstances of the post-2008 global financial setting have forced emerging markets to navigate through uncharted territories, by combining monetary policies and prudential regulation in ways about which there is still a gap of missing knowledge and cumulative experiences.*

Asset price dynamics matters, especially for emerging markets

Asset prices and leverage by financial institutions are at the center of the interaction between finance and the real economy, and the main conduit through which booms and busts are generated or amplified. Banks and other financial intermediaries can easily extend their balance sheets when asset prices are rising, further fueling asset price booms, with a corresponding feedback loop on those balance sheets. Banks resort to funding with non-core liabilities -- different from those on which banks draw during normal times, such as retail deposits by households -- increasing exposure to balance-sheet weaknesses or mismatches on liquidity, maturity, and/or foreign exchange (Hyun Song Shin).

Systemic risks are also cross-sectional, arising from the growing interconnectedness of financial institutions and markets during booms (Viral V. Acharya). Financial innovation, growth of non-regulated "shadow banking" activities, and complex chains of financial intermediation facilitate the build-up of an increasingly vulnerable pyramid of assets-liabilities. This can potentially drag down the real-side economy once that pyramid starts to crumble.

“Emerging market economies have to cope with even greater challenges when it comes to managing the implications of macro-financial linkages.”

One may think that these challenges are the domain of advanced economies and their sophisticated financial systems. After all, that is where the recent global financial boom-bust originated. Think twice. As shown by Claessens and Ghosh, emerging market economies (EMs) have to cope with even greater challenges when it comes to managing the implications of macro-financial linkages, particularly due to their propensity to heighten booms and busts.

[caption id="attachment_6251" align="aligncenter" width="574"] Chart 1 - Cumulative Output Losses Associated with Different Adverse Financial Events.
Source: Canuto and Ghosh, based upon Claessens and Ghosh[/caption]

This is due to two reasons. First, EMs are more likely to suffer shocks, such as commodity-price and terms-of-trade shocks, as well as surges and sudden stops in capital flows. It is not only a matter of frequency, but also of magnitude relative to domestic economies and the size and depth of their financial markets. As Swati and I remark:

“On average, total net private capital flows relative to M2 [a measure of the quantity of money in an economy] over 2000-10 has been some factor 100 times that for advanced countries (ACs). As a share of local capital markets, financial flows in EMs are thus much larger than in ACs, and certainly more volatile. Also foreign bank presence is greater -- more than double -- in EMs than in ACs. Unsurprisingly, therefore, shocks to capital flows and foreign banks' operations can have significant impacts on EMs' domestic financial and real sectors. Perhaps more importantly, the amplification of shocks tends to be larger in EMs.”

Second, structural and institutional features typical of most EMs tend to amplify and propagate shocks. Despite substantial progress since the 1990s, the overall quality of regulatory institutions, the strength and enforceability of legal regimes, market discipline upon financial institutions, levels of information disclosure and transparency, corporate governance arrangements, the width of investor bases, the availability of hedging instruments, and other financial-sector supporting factors still have room to grow. In such a context, investor confidence is prone to fluctuate more violently before and after shocks.

Claessens and Ghosh identify capital inflows and their potential for sudden stops as main sources of risk and shock for emerging markets. They also empirically show that the interaction of real and financial cycles tends to be sharper in EMs than in advanced economies, with both recessions and recoveries more often overlapping with financial events. Furthermore, the real-side impact is much larger. From1960 to 2012, cumulative GDP losses associated with different adverse financial events were typically higher in EMs (Chart 1). Even when asset price-led cycles are not generated within EMs, they tend to be affected the most due to capital flows.

Should monetary policy react to asset prices?

Before the crisis, the policy paradigm used to look like this: central banks around the world would focus on inflation-targeting and on setting interest rates, while financial regulation would be left to specialized, ad hoc agencies. Central banks' primary role would be enough to maintain price stability and economic growth. On their side, financial regulators, through prudential rules, would ensure the soundness of financial institutions and protect depositors.

Asset price cycles had been a concern for many years but were seen as a separate issue that was not a monetary policy concern. Even when the frequent appearance of asset price bubbles started to be acknowledged, the belief was – “the Greenspan-Bernanke approach” (Greenspan (2002) and Bernanke (2002)) – that attempts to detect and prick them at an early stage would be impossible and potentially harmful. If necessary, mopping up after the burst of a bubble through interest rate cuts to help economic recovery would be safer.

Low and stable inflation was considered to be a necessary and sufficient condition for stable growth with moderate unemployment. It could be pursued, inter alia, through an inflation targeting framework, using interest rates and clear communication rules to achieve a pre-defined inflation objective, as the single focus for monetary authorities. Stable inflation would also result in low risk premiums, which together with competition and prudential rules in financial markets would help to achieve financial stability. The “Great Moderation” in developed economies, with relatively low inflation rates and small output fluctuations from the mid-80s onward, seemed to vindicate that confidence.

As we now know, this world of presumed stable monetary and financial conditions was severely shaken by the global financial crisis. With the benefit of hindsight it is easy to draw lessons.  Asset price booms and busts were acknowledged to be both pervasive and harmful: real estate and stock-market booms contributed to excess US household debt and to fragile asset-liability structures; the interconnectedness of financial firms’ balance sheets, and the danger of too-big-to-fail institutions.  The rapid global transmission of an asset price bust pushed the world economy to the edge of quasi-collapse (Canuto, 2009). Definitely, monetary policy makers can no longer neglect – or belittle - the dynamics of asset prices.

But was it lax monetary policy that led to the creation of such bubbles and then to financial instability? Some say yes (Taylor, (2009)); others say no. For S vensson (2010), for example, the financial crisis was caused by factors other than monetary policy; monetary policy and financial-stability policy are distinct–it was the latter that failed.

But if financial stability is indeed a legitimate concern for a central bank, then should we integrate a “financial variable” (e.g., an asset price indicator) into the monetary policy framework? More specifically, should policymakers incorporate indicators of financial stability into the central bank’s reaction function? Should they react automatically to variations in asset prices – or some associated variable, such as credit expansion - as they do under inflation targeting regimes in the case of variations in output gaps and inflation?

The emerging consensus seems to be that credit-fueled bubbles (e.g., real estate) should be differentiated from equity-type bubbles. While the former frequently carry with them the seeds of systemic crises, the latter often undergo a more bounded process of correction and price adjustment.  Blinder (2010), for instance, argues that “a distinction should be drawn between credit-fueled bubbles (such as the house price bubble) and equity-type bubbles in which credit plays only a minor role (such as the tech stock bubble)”. In this view, the “mop-up-afterwards” approach is still appropriate for equity bubbles not fueled by borrowing, but the central bank should try to limit credit-based bubbles—though probably more with regulatory instruments than with interest rates. This attitude may eventually become the new consensus on how to deal with asset-price bubbles; indeed, Bernanke (2010) comes close to endorsing it.

On the other hand, in any case it is often recommended not to treat asset prices on the same footing as the other components of monetary-policy decision rules, like output gaps and expected inflation of goods and services. After all,

“(…)even the best leading indicators of asset price busts are imperfect – in the process of trying to reduce the probability of a dangerous bust, central banks may raise costly false alarms. Also, rigid reactions to indicators and inflexible use of policy tools will likely lead to policy mistakes. Discretion is required (our emphasis)” (IMF, 2009:116).

How to implement monetary policy and prudential regulation in a complementary way?

Neglect of asset prices by monetary-policy makers was not the only established practice to be over-ruled. Prior to the global financial crisis, financial stability was taken for granted provided that individual financial institutions adopted sound prudential rules, maintaining adequate levels of capital commensurate with types and levels of risks they faced. In that context, the responsibility for such prudential regulation was left independent and isolated from monetary policy making.

The crisis has shattered this view. Prudential tools concerned with ensuring the soundness of individual institutions and the protection of depositors have not sufficed for financial stability and the avoidance of financial crises. Sound risk management of individual financial institutions is not enough to guarantee sound management of system-wide risk.

Why? Despite well-designed prudential rules at the level of individual institutions, there might be spillovers and externalities across institutions that affect the financial system as a whole (e.g., bank panics, fire-sale of assets and credit crunches). Either because of inter-linkages among balance sheets of financial institutions and/or of contagion in terms of confidence, risks taken by single financial institutions may end up affecting the entire financial system.

That might come, for example, from the system’s characteristics: a financial system composed of large, interconnected firms is likely to produce moral hazard in the face of the (now) standard too-big-to-fail dilemma for policy-makers. Even if all firms are soundly regulated, the possibility of one failure in this inter-connected system creates contagion and negative externalities to the whole system. But this can also happen in a very different context, say in a system composed of small, and independent, perfectly regulated and unconnected financial firms. It suffices that all firms use the same identical risk-assessment model that might be flawed by not considering a specific tail event. If this event materializes, the whole system could collapse, regardless of its apparent robustness and lack of connectedness.

Other examples of why institution-level prudential tools are insufficient can be found in the mortgage industry. Despite a number of consumer protection rules to limit over-borrowing and guidelines for the industry to scrutinize a borrower’s willingness and ability to pay, the extension of mass lending for real estate has been an almost universal feature of credit booms in all countries.

Asset-price cycles - and the corresponding likelihood of full-blown financial crises – may well establish a feedback loop with pro-cyclical risk assessments present in traditional prudential rules. Suppose, for example, that there is a widespread increase in house prices, due to a demand shock. The rise in the value of real estate as collateral tends to raise the repayment probability for housing loans, which reduces the lending rate charged by credit suppliers. Additionally, if financial institutions follow their own assessment of risks when estimating appropriate ratios between capital and risk-weighted assets to be held, capital costs associated with such credits decline. Reduced borrowing costs stimulate borrowing for investment purposes in the economy at large, most likely leading to further bouts of house price hikes. If house price bubbles develop, there will be a whole network of larger interlinked balance sheets, dependent on overvalued collateral, although individually balance sheets (including those of individual home owners) may look sound.

Therefore, there is a need for a macroprudential regulation (concerned with ensuring the stability of the financial system as a whole and the mitigation of risks to the real economy). Macroprudential regulation aims to make the overall incentive structure for financial firms coherent and consistent so that the above mentioned externalities are internalized by the system.  The idea is to design a set of principles and rules that can reduce each institution’s contribution to systemic risk and that smooth the financial cycle (i.e., reducing the systemic risk that inherently builds up in booms and has damaging consequences in slumps since leverage, risk-taking, credit and asset prices are pro-cyclical and crises typically follow booms).

In fact, prudential regulation and monetary policy are now seen as complementary. Neither one can replace the other on its own. The combined use of both tends to be more effective than a standalone implementation of either. After all, financial risks are now seen as important enough for macroeconomic management to deserve a stronger regulation going beyond that of specialized agencies. If an economy is to pursue macroeconomic and financial stability, monetary policy makers should at least coordinate with financial supervisors to ensure financial regulation and monetary policies are consistent, and implemented in an articulated way.

Reflecting the two distinctive types of macrofinancial risks illustrated above, macroprudential instruments can either assume a time series or a cross-section dimension. When systemic behavior over time is considered, the key issue is how risks can be amplified by interactions within the financial system and between the financial system and the real economy. On the other hand, the cross-section dimension relates to the common exposure of institutions at each point in time. Correlated assets, or even counterparty interrelations, create such a link among financial institutions.

In the time series dimension of macroprudential issues, monetary policy and macroprudential tools can clearly be complementary in reducing pro-cyclicality. However, the scope for joint calibration may be less obvious in the case of cross-sectional macroprudential regulation, in which the calibration must be conducted using a top down approach.

A rule of thumb for integrating monetary policy and macroprudential regulation may be to retain some division of labor, even if a more direct combination is considered the best way to go. Fine-tuning via monetary policy should be favored when stability issues are of a homogeneous and reversible nature. Moreover, macroprudential instruments tend to be more demanding in terms of implementation lags and transaction costs to financial institutions, whereas movements in short-term interest rates are faster, simpler to carry out and easier to communicate to the general public.

Emerging markets and other capital-receiving economies face an additional challenge: compared to purely domestic asset price cycles, do cross-border capital flows and the potential transmission of asset price booms and busts impose additional layers of complexity? The answer is yes based on overwhelming evidence. Not by cance, as already mentioned, capital inflows and their potential for sudden stops are clearly main sources of risk and shock for emerging markets.

Capital flow management policies can be an item for regulators to use in their toolkit when looking to address macroeconomic and financial instability risks. This is particularly the case in economies subject to significant spillovers from asset price cycles and policies from abroad, and in which the macroprudential and monetary policies are insufficient to ring-fence the economy. However, given the short life and usually low effectiveness of capital controls, more conventional policies should be explored first before considering this remedy.

Brazil, Korea: Two Tales of a Macroprudential Regulation

Let’s summarize up to here. The pervasiveness and relevance of asset price booms and busts in modern economies has now been fully acknowledged. The case for combining prudential regulation and monetary policy in a complementary pursuit of financial and macroeconomic stability, rather than their use in isolation, is now firmly grounded. This is a key issue particularly for policy makers in emerging markets, where the interaction of real and financial cycles tends to be sharper than in advanced economies, with both recessions and recoveries more often overlapping with financial events and much larger real-side impacts.

The devil is in the details, however. As we illustrated in the previous items, there are still serious questions on how to proceed with the complementary use of prudential regulation and monetary policy. While there are already lessons from emerging markets’ use of the macroprudential toolkit, more experience and analysis, particularly on its interaction with monetary policy is needed.

To this point, recent experiences of Brazil and Korea, as reported in two chapters of a newly released book - Canuto and Ghosh (2013) - help fill that gap. They offer complementary examples of the learning-as-you-go process, by which the various components of macroprudential regulation are put in place. This contrasts with the advanced stage of policymaking and blueprints that have been attained on the monetary-policy front.

Furthermore, those country experiences also illustrate how both time-series and cross-section dimensions of macrofinancial risks must be on the radar of policy makers. Brazil and Korea present seemingly opposite but complementary examples of the relevance of taking both dimensions into account.

Consider that after the 2008 global financial crisis, Brazilian policy makers deployed macroprudential policies in articulation with monetary policy when jointly pursuing anti-inflation and financial stability objectives. The economy had over-rebounded and started to exhibit signs of overheating in 2010 as a result of fiscal and monetary policies implemented after the global shock. Global liquidity, high commodity prices and strong capital inflows further fueled aggregate demand expansion through domestic credit - which had been rising already at high rates since 2005. It was clearly an opportunity when monetary and prudential instruments could appropriately be combined in unidirectional retrenching, avoiding simultaneous build-up of both inflation and financial fragility. After all, any use of either monetary or prudential policies on their own under those circumstances might have led to contradictory and self-defeating impacts on those two objectives: simply hiking interest rates would attract more capital inflows; and restraining credit supply with no policy interest rate increase would lead to channeling demand for credit to other intermediation vehicles.

Instead there was a combination of policy interest rate hikes and an announced fiscal tightening along with several macroprudential policies. These included: higher bank reserve requirements to curb the transmission of excessive global liquidity to domestic credit markets; stronger terms for specific segments of the credit market to stem the deterioration in the quality of loan origination; reserve requirements on banks’ short spot foreign exchange positions; and taxes applied to specific types of capital inflows to correct imbalances in the foreign exchange market and to dampen intensified, volatile inflows of capital.

Those measures succeeded in slowing the growth of household credit to a more sustainable pace. Nevertheless, partly as a consequence of a second dip of the global financial crisis associated with political and policy stalemates in the US and the Euro zone – Canuto (2013) - and partly because of domestic developments, Brazilian policy-makers were pushed to not only suddenly reverse its monetary-policy stance in 2011, but also felt the need to rapidly fine-tune its macroprudential toolkit, given the unevenness of results.  Reflecting on this time, Pereira da Silva and Harris (2013) note that:

“Most of the macro prudential measures applied in Brazil since 2010 related to the time dimension of systemic risk, in other words to “leaning against the wind” and dealing with the cyclicality of the financial system. However, experience gained from the 2008 crisis has illustrated that, as the financial system becomes more complex and sophisticated, risks can arise not only in a single sector but also as an interlinked, system-wide issue. In fact, the Brazilian financial system is characterized by a high degree of conglomeration and concentration. (…) Therefore, another challenge is to develop effective indicators and to monitor cross sectional risks related to the interconnectedness of the financial system and the real economy.”

Korea in turn, had acquired some experience with several macroprudential policy instruments much prior to the 2008 global financial crisis. Liquidity ratio regulations had long been in place in response to the 1997 financial crisis. Furthermore, as signals of euphoria in the housing market became clear in the 2000s, loan-to-value and debt-to-income control ratios were also enacted. But unlike Brazil, Korea lacked specific measures aimed at the time-series risk dimension. This left loopholes for banks to raise excessive leverage through funding with “non-core liabilities” - i.e. instruments banks would  not draw on during normal times, such as retail deposits by households – leading to a round of crisis-like events in 2008. As Jong Kyu Lee (2013) points out regarding the focus of Korea’s regulation on ratios:

“(…) a liquidity ratio is unable to fully and flexibly reflect all aspects of structural changes in the related financial markets, and cannot prevent accumulation of financial imbalance. Reliance on a few ratios, (…) even though applied from the [macroprudential policy] perspective is not sufficient for securing financial stability.”

Let me highlight three of many lessons stemming from Brazil’s and Korea’s recent experiences.

First, while some division of labor between monetary policy and macroprudential regulation may be maintained in their combined application as suggested in the previous item, policy-makers need to make sure that prudential policies are mutually consistent and comprehensive enough to avoid regulatory arbitrage and exploration of loopholes. Second, a balance must be struck between the need for policies to be ahead of the curve, and the fact that learning-as-you-go is unavoidable.

Finally, communication by policy makers becomes trickier as they move from the clarity of rule-based monetary policy to its combination with macroprudential regulation. In the case of Brazil, for example, markets required an extraordinary effort from the Central Bank to clarify that macroprudential regulations were being implemented as a complement – rather than a substitute – to monetary policy.

Walking on the wild side

The global financial crisis has obliged policy-makers to leave the comfort zone previously established, one in which monetary policy making and prudential regulation tended to be seen as purely rule-based and isolated. Now not only a higher degree of discretion is acknowledged as inevitable, but also a complex articulation of the two sides is seen as necessary. Furthermore, given the dearth of available benchmarks and empirical references, a learning-as-you-go groping process cannot be avoided. What an unconventional territory for policy makers to cross, as compared to the pre-crisis orthodoxy…

About the Author

Otaviano Canuto is Senior Advisor on BRICS Economies in the Development Economics Department, World Bank, a new position established by President Kim to bring a fresh research focus to this increasingly critical area. He previously served as the Bank’s Vice President and Head of the Poverty Reduction Network (PREM), a division of more than 700 economists and other professionals working on economic policy, poverty reduction, gender equality and analytic work for client countries. He also served as an Executive Director of the Board of the World Bank from 2004-2007. Outside of the Bank he has held leadership positions at the Inter-American Development Bank where he was Vice President for Countries, and for the Government of Brazil where he was Secretary for International Affairs at the Ministry of Finance. He also has an extensive academic background, serving as Professor of Economics at the University of São Paulo and University of Campinas (UNICAMP) in Brazil.

* This article delves substantially on Canuto and Ghosh (2013), Canuto and Cavallari (2013a) and Canuto (2011).


Sudan Cabinet Shake-Up Boosts Conciliation Efforts

[caption id="attachment_6266" align="alignright" width="169"] Princeton Lyman[/caption]

Former US special envoy to Sudan Princeton Lyman has made yet another appeal for the resumption of the political dialogue in the country with a view to establishing a lasting peace. Earlier this month, Mr Lyman called on rebel forces to shift the emphasis of their efforts from military to political action and dangled the proverbial carrot: “Should the Sudanese Revolutionary Front better articulate its willingness to commit to a political solution, international assistance in the form of training and capacity building might be forthcoming.”

The former US diplomat deplored the Front’s insistence on military action and said its actions complicate the search for a peaceful solution to the civil strife in Sudan. Mr Lyman suggested a series of confidence building measures be put in place that would lead to a cessation of hostilities in trouble spots such as Darfur, Blue Nile and South Kordofan. This would entail the Sudanese government allowing the Sudanese Revolutionary Front (SRF) to freely operate as a political party. “Such a policy would encourage the SRF to focus on the political process,” says Mr Lyman.

In Khartoum, the newly-appointed Presidential Assistant Ibrahim Ghandour assured that the administration of President Omar al-Bashir is committed to promoting and enabling “an open dialogue” between all political forces. Mr Ghandour, who was also made vice-chairman of the ruling National Congress Party, said that the government is willing to sit down with representatives of armed groups to negotiate a broad settlement of grievances. The presidential assistant called on opposition forces to work out a comprehensive agenda for the talks as well as present a programme containing their proposals.

There is renewed optimism that the lingering Sudan crisis might be moving toward a solution now that President al-Bashir has reshuffled his cabinet. On Sunday, December 8, the president replaced no less than 26 ministers and both vice-presidents in a shake-up that is widely seen as a move to align the full cabinet behind a sustained effort to restart the political dialogue and deal with the challenges at hand.

"The presidential assistant called on opposition forces to work out a comprehensive agenda for the talks as well as present a programme containing their proposals."

Minister of Information Yasir Youssef admitted as much when he noted that the new team was put in place at “a critical time” in Sudan’s history: “The cabinet faces significant political, economic and security challenges that need be addressed in new ways. Sudanese people have been clamouring for this.”

Meanwhile, Vice-President Hassabo Mohamed Abdalla announced that the government wishes to continue and deepen the dialogue with opposition parties, rebel groups and the wider civil society as a preliminary step to the drafting of a new constitution that better equips the country to deal with its future. Mr Abdalla also called on all rebel groups to join the peace process.

On the economic front, the new minister of finance emphasised that “huge difficulties” notwithstanding, the government was able to register positive growth rates that in 2013 will reach 2.2%. Minister Badr al-Deen Mahmoud Abas called this no “mean feat” especially since the country lost over 75% of its oil revenues with the secession of South Sudan in July 2011. Mr Abas also said that inflation, currently running at close to 36%, remains an issue. The new minister recognized that a well-performing economy – underpinned by the country’s still vast natural resources – is vital to maintaining political and social stability.

The cabinet reshuffle is also seen as President’s al-Bashir’s answer to the comments made by former South African President Thabo Mbeki in his capacity as leader of the African Union High Level Implementation Panel (AUHIP). Earlier this year, Mr Mbeki noted that high levels of mistrust between parties and stakeholders in Sudan undermine efforts to organise “an open and frank encounter” to discuss national challenges.This now may have changed for the better.


Dick Costolo: Capitalizing the Lure of Future Profits

You have got to be doing something right if your losses surge to almost $65 million, while your corporation’s stock shoots up 73% on the first day of trading. Perhaps it’s all a joke, albeit a rather expensive one; after all, in a former life Twitter CEO Dick Costolo used to earn a living as a stand-up comedian.

Mr Costolo’s avidly followed tweets attest to the presence of a funny bone or two. Upon joining the company as COO, in September 2009, he set his agenda in a tweet: “First Task: Undermine CEO, Consolidate Power.” He then went on to do just that. In 2010, Mr Costolo replaced his boss Evan Williams who had taken up paternity leave. Mr Williams’ temporary absence turned into a permanent one.

Notwithstanding some rather questionable fundamentals, of which an uncertain earning model is but one; Mr Costolo exceeded all expectations when he took Twitter public. The company’s IPO (Initial Public Offering) was a resounding success and raised $2.1bn in new capital. Twitter’s current market value stands north of $22bn.
The Twitter debut on the New York Stock Exchange (NYSE) contrasts sharply with the botched IPO of its social media competitor Facebook whose stock took a nosedive after launch and has only recently recovered. Early on, Mr Costolo had decided to give the Twitter IPO as low a profile as possible. The roadshow preceding the stock’s launch was a distinctly muted affair. Also, the stock was conservatively priced at $26 and, in yet another attempt to create some distance from Facebook, was offered not on the tech-heavy NASDAQ exchange but on the much more staid NYSE.

"Mr Costolo’s strategy paid off handsomely with Twitter cashing in over double the one billion dollars it expected to raise."

Mr Costolo’s strategy paid off handsomely with Twitter cashing in over double the one billion dollars it expected to raise. Trading at around $42 in mid-November, market analysts are beginning to wonder out loud how long Twitter can keep up the hype and hoopla that followed its successful IPO. Though boasting well over 200 million users, who collectively send some half billion tweets around the globe each day, Twitter so far remains unprofitable.

The company does rather poorly in collecting user data when compared to social media giants as Facebook en LinkedIn. Earning models based on ‘promoted tweets’ and plain online ads have so far failed to produce a profit, or even the promise of one. The company has now set its sight on reaching the one billion users mark but failed to indicate how it would attain that goal.

Still, having almost a quarter billion users is nothing to sneer at. Twitter has a few things going for it that Facebook lacks: It is easily adaptable to the not-so-smart-phones prevalent in emerging markets; new users need navigate only a minimal amount of hurdles to join; and, the service doesn’t claim vast amounts of time from those who wish to propagate their thoughts. Twitter is nimble while Facebook is everything but.

Self-deprecating Twitter CEO Dick Costolo is uniquely equipped to make the most of these advantages and steer his company toward lasting profitability. At least the market seems to think so.


Sir Alex Ferguson: The Formula of Success as Told by an Endearing Control-Freak

Becoming the most successful and admired manager in the history of British football is no mean feat by any standard. Sir Alexander Ferguson (71) instilled the players of Manchester United with his trademark winning mentality and went on to propel the team to no less than thirteen Premier League titles in addition to a vast collection of other coveted trophies.

On May 8, Sir Alex announced his retirement as the longest serving manager ever of Manchester United. After almost 27 years at the helm of the team, he now may rest on his many laurels as his unique management skills are dissected in academia.

Some of Sir Alex’s secrets for success are revealed in a thorough case study – Ferguson’s Formula – published earlier this year in the Harvard Business Review. Based on a series of eagerly attended lectures at the Ivy League university, the study has become mandatory reading for managers in most fields of business.

“I tell the players that the bus is moving. This club has to progress. And the bus wouldn’t wait for them. I tell them to get on board.”

According to Sir Alexander Ferguson, the critical key to success is for the manager to be solidly in charge: “If the coach lacks control, he will not last.” Sir Alex elaborates: “A position of comprehensive control is an absolute requirement. Players must recognise that as the manager you are in charge of events and, indeed, control them. Before I came to Manchester United, I promised myself that nobody on the team was going to be stronger than I am. Your personality has to be bigger than theirs. That is vital.”

Sir Alex revealed that during his entire career, he considered the well-being and success of the club of paramount importance at all times. Anything and anybody standing in the club´s way must be resolutely and swiftly eliminated: “There are occasions when you have to ask yourself whether certain players are affecting the dressing-room atmosphere; the performance of the team; and, your control of the players and staff. If they are, you have to cut the cord. It doesn’t matter if the troublemaker is the best player in the world. The long-term view of the club is always more important than any individual.”

While famous for the dreaded “hairdryer treatment” he would regularly mete out to players, Sir Alex Ferguson readily recognizes that positive reinforcement, such as “Good Job!”, will often yield the best results. In his bestselling new book My Autography, he gives great insight into his thoughts on the strategies that help build winning teams as well as his experiences in wheeling and dealing and handling competition.

Sir Alex’ track record in repeatingly overhauling and rebuilding trophy-winning teams – which includes buying the right players – stands in stark contrast to that of some of his oldest and fieriest competitors. Liverpool FC, the primary and oldest of rivals, has for years outspent Manchester United, but all this while suffered from severe managerial ineptitude on the transfer market. As a consequence, the club has enjoyed but limited, and even disappointing, results.

Arsenal FC, afflicted by a drought of trophies now lasting almost a decade, has been busy purchasing “good value”, but that ultimately did not produce any mega-star players the club could hold on to, or players equipped with the requisite experience and winning attitude.

Another trick up Sir Alex Ferguson’s sleeve is to poke a contender squarely in the eye by poaching its best player – a performance he has repeated time and again. This trick never failed to deliver a double whammy: Manchester United’s gain came at the detriment of its competitor, tipping the balance of power.

Manchester United’s success, as impressive as it is enduring, is the product of a mind-set geared to winning: Self-confident players resolved to claim trophies for the club and a manager firmly and – most of all – comprehensibly in control.


CFI.co Meets Lavrynovych & Partners: Don’t Go to the Ukraine without Your Lawyer - The Protection of Business

[caption id="attachment_7253" align="alignright" width="204"] Managing Partner: Maksym Lavrynovych[/caption]

Foreign colleagues often ask what kind of corporate law services are currently being sought most by clients in the Ukraine. Today, businesses are interested in matters associated with property structuring and redistribution. Earlier this area of law was only relevant to large enterprises. Bitters wars have been fought over the state-owned property. Now, legislation on property redistribution is becoming important to medium-sized business as well. Corporate disputes between major Ukrainian business groups have moved to an entirely new level and are now taking place in the courts of London or those of other jurisdictions.

Our firm’s clients need guidance and advice on how to structure their businesses and ventures, starting with creation of a corporate structure – how to organize such a structure; through which companies this is to be done; how to register the nominal or legal owner(s); and, how to appoint, remunerate and incentivise management.

Now even large holdings, boasting a rich and long corporate history, have come to recognise the necessity and benefits of creating a vertically integrated structure. These clients will often order the due diligence of existing models and structures, and the development of new ones as well along with the optimization of management teams.

Within the frameworks of such projects, we provide extensive counselling and give valuable recommendations that will facilitate the shaping of well-adjusted management and business models. In this light, we may perhaps mention our experience in preparing companies for their IPO (Initial Public Offering) as they move from privately-owned to publically-owned. In this case, different principles and requirements apply to the structuring of a business. Even entrepreneurs who built their businesses with great care and paid close attention to the most minute of legal details will find that restructuring is called for.

However, the end result usually offers full satisfaction to all parties involved since there now is truly transparent and straightforward corporate and management structure in place that allows for efforts to be concentrated on business expansion and other dynamics. In the course of this restructuring process, already public businesses gain protection from attempts at unfriendly acquisitions.

When creating corporate structures in the Ukraine, the business owners tend to make two grave mistakes. The first one is that they often act without the benefit of proper legal support, in the erroneous assumption that structures may be improved upon and / or adjusted at a later date if the circumstances so require. The second mistake concerns the signing of agreements which then are not legally executed.

Experience has proven that in these cases, our national legislation does not guarantee a sufficient level of protection to business owners. When thing go awry, affected businesses seek legal succour – including that offered within the framework of international and bilateral agreements on the protection of investments.

Today, the Ukraine raises a significant volume of investment from Great Britain, the Netherlands, Hungary, Cyprus, and other countries. Money flows to the Ukraine through these countries for they have solid legal frameworks – such as treaties – in place that offer both investors and businesses a sense of protection from hostile actions of state authorities, corporate raiders, courts, and other unfriendly entities.

In case of a conflict, the investor has the opportunity to seek redress from, say, the International Centre for Settlement of Investment Disputes. Investors may also invoke the provisions of the Washington Convention. From a business perspective, property owned by foreign entities is awarded more protection than assets owned by nationals of the Ukraine or companies resident in the country.

To create a protected business structure without the use of trans-border ownership schemes is flat-out impossible even when foreign ownership structures are used. We can only talk about greater or lesser levels of protection of assets held in the Ukraine.

With regard to the above mentioned, medium-sized and big business may recoup the cost of creating a corporate structure that involves foreign companies by making use of tax shelters. In relation to certain aspects of asset protection, if it comes to a trial in the Ukraine, there will be a necessity to include the foreign owner in the proceedings in which case it is possible to apply the protectionism mechanisms of the Washington Convention.

However, in practice some judges manage to adjudicate even when the owners – both foreign and Ukrainian – are absent. Judges then resort to sending summons by common letters through the mail, conveniently – or not – forgetting to have postage stamps affixed. There have also been cases where summons were not mailed at all and no discernible effort was made by the courts to have the documents reach the parties involved in the dispute. Conducting business in the Ukraine without proper legal counselling is rife with peril and not something for the faint-of-heart or even those registering the strongest of pulses.


CFI.co Meets the Chairman of Ezentis: Manuel García-Durán

A Corporate Turnaround from Rags to Riches.

In Spanish business circles, corporate trouble-shooter Manuel García-Durán is gaining quite the reputation. A man of expansive yet focused thinking and subsequent decisive action, Mr García-Durán in September 2011 took over command at the ailing corporate icon Avánzit to have it reborn as a nimble and formidable player – and a profitable venture to boot – in the infrastructure maintenance services sector. To underscore the break with its past, Avánzit became Ezentis.

“When I arrived at the company, the situation was such that one felt like running for the nearest exit. The business was deeply in debt, haemorrhaging cash and stood at the verge of filing for bankruptcy.” Mr García-Durán also recalls that the company’s stock had lost 96% of its value over the four years prior to his arrival. Not lacking in self-confidence, Mr García-Durán took a personal stake in the challenge he was about to accept and bought 9% of the company’s stock.

A firm believer in doing rather than talking, Mr García-Durán and his new management team ruthlessly took the company out of its many unprofitable ventures so as to concentrate business on the high-growth markets of Latin America where it had been active for over half a century.

At heart Mr García-Durán is a marketing professional: He knows how to position a brand for take-off and how to plot a strategy for success. With a degree in strategic marketing from the London Business School and another one from the International Marketing School in Lausanne, Switzerland, Mr García-Durán honed his skills at Spanish telecom giant Telefónica. Here he reigned over both the marketing and corporate communications departments. Later, Mr García-Durán took over as executive vice-president at the Antena 3 TV network.

A polyglot fluent five languages, Mr García-Durán’s professional career has been marked by a slant toward technology-driven business. A nerd, however, he is not: “At Ezentis it was our team that made the turnaround possible and, indeed, ensured its success. Without the right people at the top and on the work floor, little can be accomplished although having a sound business plan in place helped a bit as did having a sense for timing.”
Now the darling of investors who expect “great things” to happen, the company Mr García-Durán and his team rebuilt is cashing in on its experience of managing and servicing “last mile” infrastructure. “We know how to best get telecom, power and water services from utility providers to end-consumers. This is our company’s job and we can now do that job in markets that hold great promise, mostly those of Latin America and the Caribbean.”

“With an infrastructure stretched to capacity and unable to deal with continuously growing demand, the countries of Latin America are now beginning to invest wholesale in the upgrading and expansion of their utility networks. This is the place Ezentis wants and needs to be in order to prosper.”

Mr García-Durán is decided to expand Ezentis’ footprint in Latin America through the consolidation of its current activities and strategic acquisitions in key markets. “We are now looking to obtain a well-balanced mix of operations in the region so as to maximise synergies and position the company in such a way that we may promptly seize any of the many opportunities that will arise.”

As far as challenges go, Mr García-Durán again goes back to the importance of getting and keeping the right people for the jobs at hand: “We are doing our utmost to attract the young and bright to our company. We need to have the most talented come work for us in order that the company may answer its calling in Latin America and successfully implement our strategy for growth in that region. Once again, human capital will be the decisive factor.”

To critics who question Mr García-Durán´s early decision to shift corporate focus away from the company’s home market Spain, the Ezentis executive chairman answers that both the economic downturn, now thankfully bottoming out, and the existence of an already well-developed infrastructure forced him to look overseas for business. “We are now seeing the first promising signs of economic recovery. Also, Spain is at the receiving end of international capital flows which justifies guarded optimism. The country’s capital markets are now very liquid and companies with exposure in high growth market such as Ezentis are becoming increasingly attractive to investors. Current developments at home and in Latin America prove that the choices made and the path chosen by Ezentis were the correct ones to ensure sustained growth.”


CFI.co Meets the CEO of CORE Securities: George Fumbuka

Tanzania’s pioneering brokerage and consultancy firm CORE Securities is being led by one of the country’s top chess players. George Fumbuka knows, as few others do, how to plot a winning strategy and outsmart the competition. Mr Fumbuka holds a Master of Business Administration (MBA) degree from the UK’s famed Strathclyde University Business School. His specialized studies were directed at Finance and Security Analysis.

Mr Fumbuka started out his professional career in business as finance manager at the Tanzania Electric Supply Company (TANESCO). He later climbed the corporate ladder to become TANESCO’s director for supply and transport. However, prior to joining corporate life, Mr Fumbuka worked for five years on the academic staff of Tanzania’s highly respected Institute of Finance Management which for over forty years has supplied trained personnel in accountancy, finance, banking, insurance and taxation to the nation and the countries of the surrounding region.

With over 25 years’ worth of experience in line management and consulting under his belt, Mr Fumbuka is a prolific corporate trainer and the author of a number of authorative textbooks and monographs on accounting and finance. Mr Fumbuka lead a team of consultants from Tanzania’s National Board of Accountants and Auditors (NBAA) who rewrote and updates all the country’s accounting and auditing standards in order to achieve conformity with, and compliance to, international standards and criteria. This project received financing from the World Bank.

Mr Fumbuka has been closely involved in nearly all aspects of Tanzania’s much-lauded financial reforms and the development of its capital markets. He has provided advice and guidance to the Parastatal Sector Reform Commission (PSRC), the Bank of Tanzania, the Tanzania Investment Centre, the National Board of Accountants and Auditors, the Capital Markets and Securities Authority and the government.

George is one of Tanzania’s leading chess players. He has won numerous trophies and tournaments and was the bronze-medallist in the 1993 national championships.

Key People at CORE Securities

Yona Killagane is a founding director of CORE Securities. He is another well-respected and experienced accountant who was instrumental in the development of the finance and accountancy professions in Tanzania. Mr Killagane is currently managing director of the Tanzania Petroleum Development Corporation, which he joined after having served for three years (1975-1977) on the academic staff of Institute of Development Management at Mzumbe University. He is a chartered accountant with an MSc degree in finance from the University of Strathclyde in the UK. Mr Killagane currently sits on the Board of the Bank of Tanzania and its audit committee.

Eva Fumbuka, an engineer by trade, is another founding director of CORE Securities. She is a professional with extensive experience in the operation and management of electric power utilities and as such provides the firm with technical expertise and direction in its business advisory services for the utilities sector. Mrs Fumbuka followed technical studies at the TANESCO Training Institute and graduated from the Dar es Salaam Technical College. She has attended specialist certification and professional development courses in Ireland, Sweden, Japan, South Africa and the USA. Mrs Fumbuka is currently managing director of Pomy Engineering Limited, a firm of electrical engineers and building contractors.

Bonaventura Mlunde is a CORE Securities director with special responsibility for fixed income securities. He is a seasoned banker who took early retirement after 24 years of work in various capacities - including senior positions as director of project supervision & appraisal, head of business and, just before his retirement, head of finance & administration at the Tanzania Development Finance Company and Capital Finance. Mr Mlunde is a fellow of the UK’s Chartered Institute of Management Accountants.

Mary Kessy is an associate director at CORE Securities. A graduate of the Institute of Finance Management in Dar es Salaam and with an advanced diploma in accountancy, she is also a holder of an MBA degree in finance and a certified public accountant (CPA). Mrs Kessy bears responsibility for CORE Securities’ money market products. As overall head of finance, she ensures assignments are delivered on time and cost estimates are properly drawn up following liaison with bankers, regulatory authorities and outsourced services. Mrs Kessy is a fully qualified broker and an authorised dealer’s representative (ADR).


CFI.co Meets the CEO of State Bank of Mauritius: Jairaj Sonoo

Mr Jairaj Sonoo, Chief Executive Banking (Indian Ocean Islands) of the State Bank of Mauritius (SBM), boasts no less than 35 years of experience in finance. At SBM, Mr Sonoo has enjoyed a fruitful career, spanning 32 years, during which he held various positions, including those of Executive Vice-President (Indian Operations) and Head of Retail Banking.

Since his appointment as Chief Executive Banking (Indian Ocean Islands) in 2012, after a short two-year sojourn at a local commercial bank, Mr Sonoo also became an executive director of the bank. He considers his recent appointment as the highest achievement attained over the course of his professional career.

Mr Sonoo places particular emphasis on dialogue and proximity. He believes these concepts to be the cornerstones of all relationships and expects his collaborators to pursue a similar simple, direct and transparent mode of interaction. Mr Sonoo’s leadership style is more akin to that of a facilitator, especially as he thoroughly understands the day-to-day operations of each and every one at SBM as a result of having himself experienced the various aspects of the banking business. Mr Sonoo is also a people-oriented executive who appreciates the value of participative leadership and trusts that his approach will lead to successful teamwork and collaboration.

The aim of the SBM executive is to offer services that closely match the needs of the bank’s clients. This is of paramount importance to Mr Sonoo. Being part of the service industry, the bank’s team of professionals is continuously called upon to demonstrate the highest standard of services – delivered with a human approach – in all dealings.

Promoting a Sustainable Economy

SBM believes in the promotion of a sustainable economy by facilitating access to banking services to Mauritians at large. It also acts in the interest of its stakeholders by catering to their ever changing needs through its innovative range of products and services – tailored to enable these stakeholders to reach their objectives in life.

SBM Group has registered excellent financial results over the past years despite the challenging global economic conditions the bank faced. Mr Sonoo considers it a personal mandate to contribute in helping the SBM brand shine on both the local and regional banking landscapes. He puts special emphasis on the group’s international operations and the implementation of its expansion plans in the years to come. Much attention is also paid to enhance and further improve customer experience, transformation, innovation and proximity, all of which are believed to be the key drivers and strategies for the enduring success of banks in general and those engaged in retail banking in particular.

SBM is also mindful of its corporate social responsibility and the attendant endeavour for equality and diversity. Both these operational philosophies are moulded in SBM’s cherished corporate tradition.

Mr Sonoo is a strong believer in, and promoter of, corporate social responsibility which he sees as a significant contributor to the development of any country and especially those less fortunate. As such, SBM will continue its endeavour and initiative of providing funds for development projects, focusing on the empowerment of vulnerable social groups through education. Going forward, Mr Sonoo intends to steer the bank yet closer to the surrounding community through the organisation of more proximity events.