OECD: The Funding Models of Development Finance Institutions

The drum beat of reform is increasing for the development system and particularly for the Multilateral Development Banks (MDBs). While the reform is looking to address a number of areas, there is a repeated call for the mobilisation of the private sector. Multilateral organizations are the primary actors, accounting for 74% of total private finance mobilised in 2018-20. MDBs played a leading role, with USD 33.8 billion mobilised per year (accounting for 69% of the three-year total). Bilateral providers were also significant actors, representing 25% of the total private finance mobilised (USD 12.4 billion).

[caption id="attachment_26509" align="aligncenter" width="900"] Summary of the three DFI’s business models[/caption]

According to the OECD report Private Finance Mobilised by Official Development Interventions, the United States’ DFC is clearly the primary mobiliser amongst Development Finance Institutions (DFIs) (USD 4.7 billion). This is followed by France’s Proparco, the United Kingdom’s BII, the Netherlands’ FMO and Denmark’s IFU, which were among the DFIs with the largest volumes of mobilised private finance in 2018-20, with annual averages of USD 1.8 billion, USD 0.7 billion, USD 0.6 billion, and USD 0.5 billion respectively.

However, could more mobilisation occur at the bilateral DFI level? The OECD, together with the Centre for Development Finance Studies, sought to answer this question among others. DFIs have contrasting funding models, resulting in differences in their ability, incentives, optimisation of their balance sheets and mobilisation of private capital, with implications on development impact. A comparative analysis was undertaken of the funding models of three of the largest European bilateral DFIs: France’s Proparco, the Netherlands’ Financierings-Maatschappij voor Ontwikkelingslanden (FMO) and the United Kingdom’s British International Investment (BII). What is clear from the analysis is that he ratios of the leveraged DFI’s portfolio to the equity held, either by the government or by an entity wholly owned by government (in which case it is adjusted for this entity’s sources of funding) deliver considerable differences.

What became clear through the research is that bilateral DFIs have built up capabilities, expertise and networks that increasingly position them as major actors in the development finance space, alongside multilateral development banks. The mobilisation agenda is increasingly on the minds of policymakers, with that focus likely to also shift to bilateral DFIs.

[caption id="attachment_26510" align="aligncenter" width="900"] The GSS bond market in the case of AFD and FMO[/caption]

Meanwhile, public funding is looking increasingly constrained, and so the mobilisation of private capital and the optimisation of DFI’s balance sheets are indeed increasingly necessary to ensure the potential of bilateral DFIs is realised in full and in line with agreed development targets.

In this mobilisation context, it is both difficult and ultimately important, to understand why the debt capital markets issuance programmes of DFIs and MDBs have to date not been recognised as a legitimate mobilisation instrument by development actors. The reality is that leverage has always been at the core of financial institutions business models, and that those tasked with the delivery of just and sustainable economic development for all should, as their purely commercial counterparts do, seize its opportunity.

A funding model that leverages taxpayer-funded equity by providing investors with simple instruments they have always used as the building blocks for their portfolios may be seen as a straightforward and time-efficient way to mobilise private capital. Green, Social and Sustainability bond market dynamics could provide DFIs with an opportunity they are uniquely positioned to seize, as demand from the private sector investors for these labelled financial instruments increases.

Leverage does, however, of course increase the risk taken on by shareholders and cannot be ramped up in infinitum. Here again, financial institutions have long resorted to risk transfer techniques in support of an ‘originate to distribute’ model, which focusses on their core value proposition rather than solely on their capital. And this DFIs must also consider.

Reflections on the policy implications of the report should inform decisions pertaining to the optimal model for equity investment programmes. Off-balance sheet solutions should be explored and their potential to deliver a combination of regulatory capital benefits and mobilisation efficacy analysed. Private equity investing and lending are fundamentally different endeavours and thus are seldom found under the same roof. It may in fact be argued that the teams responsible for their delivery should be equipped with differentiated frameworks and incentives.

However, it should be recognised that there is an inherent risk to a wider adoption of a leveraged model by bilateral DFIs. The frameworks that guide the activities of financial institutions were designed to channel behaviours towards alignment with desired objectives, and so the ‘laws’ of leveraged finance are as a result normative. In a context where the scarcity of bankable opportunities is already flagged as a key issue, converging funding paths delivering higher volumes of available financing risk leading to the same, already overcrowded pipeline.

Our analysis is therefore not suggesting that there exists a single optimal funding model, or that leverage should be universally or uniformly applied. It rather proposes that a greater level of coordination amongst DFI shareholders needs to be introduced, to ensure there is complementarity across the offering of individual DFIs.

Ultimately, it is through ever-closer collaboration that DFIs can reap the rewards of the successful harnessing of capital markets. Together, their combined portfolios can offer the size and diversification that efficient risk transfer transactions require. Together, small institutions can hope to gain from the very tangible benefits of large-scale, regular issuance programmes. Together, they can tap an investor universe beyond their own ‘turf’ that is vast enough to provide the basis for a successful market-building exercise. Together is of course easier said than done, and civil society must continue to investigate, challenge and support DFIs on the path to greater collaboration, ensuring we are greater than the sum of our parts.

By Paul Horrocks & Thomas Venon


‘The Madman’ Takes Charge: Javier Milei Inaugurated President of Impoverished Argentina

In his inaugural address to the nation on Sunday, delivered on the steps of the Argentina’s domed neoclassical congress, President Javier Milei (53) repeatedly reminded the crowd that “all the money” has gone and austerity looms. His message was met with roars of applause even as he warned the nation to brace for massive cuts in public spending. Milei supporters from all parts of Argentina had travelled to Buenos Aires by the tens of thousands to witness an historic turning point in the chequered history of the country.

[caption id="attachment_26513" align="aligncenter" width="900"] President Javier Milei[/caption]

Whilst short on specifics and details, President Milei promised to heal the ailing economy with shock therapy and drag the country into a new era of “peace and prosperity.” He also swore to end corruption in all layers of government and fight organized crime. President Milei took a leaf out of former US President Donald Trump’s 2017 inaugural speech when he vowed to return power to “the people.”

Amongst the foreign dignitaries present in Argentina for the inauguration were King Felipe VI of Spain, Ukrainian President Volodymyr Zelensky, and Hungarian Prime Minister Viktor Orbán who could resist not posting on X that “the right is winning everywhere!” Brazilian President Luis Inácio Lula de Silva was noted for his absence.

Dismissed by the political establishment as a radical libertarian, mercurial eccentric, or even far-right extremist, Javier Milei unexpectedly cruised to victory in the decisive second round of the presidential election in mid-November. He secured almost 56 percent of the vote and delivered a knock-out blow to the ruling Peronist coalition Unión for la Patria.

Visibly annoyed and shaking with anger over insults hurled at her, outgoing Vice-President Cristina Fernández de Kirchner was caught on camera flipping her middle finger at the crowd of Milei fans as she entered the stately congress building. Mrs De Kirchner was widely considered the power behind (ex-)President Alberto Fernández’ throne and the de facto ruler of Argentina over the past four years.

Crisis Supreme

With inflation expected to hit an annualised 200 percent before the end of the year, and over 40 percent of Argentines living in poverty, the job awaiting the incoming administration is nothing short of “titanic” as noted by the incoming president. In his first official act, Mr Milei halved the number of government ministries to nine.

However, his plan to shutter the central bank and replace the long-suffering peso with the US dollar has been shelved - for now - due to an acute lack of forex. Although Argentina is awash in US dollars, and home to an estimated ten percent of all greenbacks in circulation worldwide, precious few of them are in state coffers. The country’s net currency reserves have dipped an estimated $7 billion into the red. Early next year, Argentina must somehow come up with $40 billion to pay its financial obligations with the International Monetary Fund (IMF) and other creditors.

In a largely symbolic gesture, the new president did order the central bank to stop minting fresh pesos. He also shaved five percent off the federal budget as a first step towards reestablishing fiscal discipline. Earlier, Mr Milei had promised to take a chainsaw to the budget and slash expenditure across the board by fifteen percent or more.

Known as ‘El Loco’ (The Madman) for his often extravagant behaviour and outlandish ideas, Milei is difficult, if not impossible, to pigeonhole. A self-described anarcho-capitalist, he believes that the state is the problem rather than the solution. “Taxation,” Milei says, “is nothing more than armed robbery by the government.”

A somewhat esoteric ideology, anarcho-capitalism revolves around stateless societies, free of government, and held together by contracts and private agencies. The name of the fringe movement was coined by the American libertarian economist Murray Rothbard in 1971. Rothbard argued that the power of the state restricts individual rights and dampens prosperity by creating social and economic problems.

However, since his surprise election win, Milei has toned down considerably and cautioned his followers that many decades of “Peronist-socialist” rule cannot be instantly undone. He also no longer brands climate change as a “Marxist plot.”

The backpedaling coincides with the first signs of Argentina’s powerful labour unions and social movements mobilising against the plans of the new government to end all subsidies (on energy, transportation, and food staples), dismiss untold thousands of civil servants and sell state assets such as oil company YPF and Aerolineas Argentinas.

President Milei repeatedly warned that he will not be swayed by protests even though anger on the streets prematurely ended the careers of three presidents since Argentina’s return to democracy in 1983.

Heaping Praise on a Former Foe

The post election moderation of Milei’s views was welcomed by investors concerned about his ability to govern without a congressional majority. The president seems to have abandoned the idea of cutting ties with China - “ruled by a regime of assassins” - and other communist countries. Mr Milei did, however, firmly decline the invitation for his country to join the BRICS group. The invite was extended by Chinese President Xi Jinping.

In foreign policy, president Milei is determined to align his country with the United States, Israel, and the West. He also said that he will not “push or promote relationships with dictatorships, communists; those who have no regard for peace or don’t hold democratic values.” Whilst keeping relations with China as-is, Argentina will no longer toe the Beijing line as it had done to secure soft loans and trade and investment perks.

Though invariably described as a rightwing extremist, Javier Milei is better placed amongst conservative free marketeers. During the election campaign, he heaped much praise on the empowering policy formulas of the late Margaret Thatcher, the British prime minister who in 1982 dispatched a sizable expeditionary force to recover the Falkland Islands after the invasion and annexation of the South Atlantic archipelago by Argentina. The mentioning of the former foe on the stump was seen as particularly gutsy in a country still bearing the psychological scars from the humiliating defeat suffered four decades ago.

President Milei does not seem to lack in bravado or courage. He has a plan for Argentina to rise Phoenix-like from the ashes and reclaim its destiny, manifest or otherwise, as a regional power. That plan - hare-brained and far-fetched though it may seem - is more than the previous administration could offer voters: more of the same, embellished with a few good intentions and adorned with a great many empty promises.

With almost nothing left to lose, Argentine voters chose hope over experience.


Judges Approve use of ChatGPT in Legal Rulings, Despite Its Tendency to Fib — and ‘Invent’ False Cases

Fallible AI gets the go-ahead in Britain to summarise lengthy texts and perform ‘administrative’ court tasks.

UK judges will be allowed use ChatGPT to help write legal rulings — despite warnings that the technology can “invent” cases that never happened.

The Daily Telegraph newspaper reports that the Judicial Office has issued new official guidance to judges in England and Wales: AI can now be used to summarise screeds of text.

It can also be used in administrative tasks, but the Judicial Office has admitted that chatbots are “a poor way of conducting research” — and prone to making up fictitious cases or legal texts.

The guidance expects bots such as ChatGPT to be used by members of the public when bringing legal cases — and warns that deepfake technology could be used to create phony evidence.

Sir Geoffrey Vos, the Master of the Rolls, said that AI “offers significant opportunities in developing a better, quicker, and more cost-effective digital justice system”.

He said the technology would “only move forwards”, and the judiciary had to understand what was going on. “Judges, like everybody else, need to be acutely aware that AI can give inaccurate responses as well as accurate ones,” he said.

Senior judge Lord Justice Birss recently described ChatGPT as “jolly useful”, admitting he had used the bot to summarise an area of law with which he was familiar — and deployed the copy-paste function in a court ruling. He said he had used ChatGPT as “a test”, and that he had not entered any secret or confidential information into it.

Vos said that lawyers were potentially subject to perjury charges and criminal sanctions if submissions penned by a chatbot produced false evidence. “Nothing changes just because they may have got what they said falsely from an AI chatbot instead of out of their own head.”

Suid Adeyanju, CEO of cyber company RiverSafe, said the use of AI in legal rulings brought with it “great opportunities” — but opened the door to cyber risks. “Hackers have already proven adept at infiltrating and exploiting security loopholes to steal data,” he said, “and in this scenario could also lead to widespread evidence-tampering.

“It’s vital that organisations using this technology tread carefully, and ensure they have the necessary security systems in place.”

Josh Boer, director at tech consultancy VeUP, said this was the most recent example of AI reshaping critical functions. The technology would save time and money by managing administrative tasks, he said. “(It) has huge potential to turbocharge the next generation of UK SMEs,” he said, “providing crucial support in the back office. Yet far too many companies lack the skills and support to embrace it.

“That’s why it’s crucial that organisations get to grips with the latest generative AI capabilities, by embracing AWS and other key platforms, to boost growth through the cloud for the long term.”


The Cornflake Revolution: How Breakfast TV Became a Staple of Britain’s Mornings

The race for ‘bright and early’ viewers began 40 years ago, and changed the way Britain woke up.

Asign on the wall of the BBC’s Lime Grove offices of Breakfast Time, the UK’s first morning television show, read: “Today is the tomorrow that worried you yesterday — and all’s well”.

The epigram was aimed at calming corporate nerves as the Beeb prepared for a foray into the unknown, and a bitter battle with its commercial rivals. The mood in the lead-up to the first broadcast in January 1983 was anything but calm. The launch was a soap opera of back-stabbing, scandals, and giant egos — a stormy melodrama played out as a rapt audience tucked into their cornflakes, tea and toast.

Britain in the 1970s had been in economic turmoil, frequently derided as “the sick man of Europe” as successive governments struggled to control the power of the trade unions. When Margaret Thatcher became Conservative prime minister in 1979, nothing illustrated her vision for Britain more vividly than these early broadcasts: a brash, vibrant throwing-off of the Old Order.

In the US, breakfast TV had been around since 1952. The Brits deemed the phenomenon too brash and vulgar for their taste, and seemed prepared to stare down the test card until tea-time. Urged on by a new government keen to break down barriers, the Independent Broadcasting Authority decided in 1980 to put a specific breakfast franchise up for grabs. It sparked an entrepreneurial scramble.

Broadcasting legend David Frost joined forces with Peter Jay, a former ambassador to the US. The pair recognised the commercial potential afoot, and within a few months had founded TV-am, based in a converted car showroom in Camden Town. They put together a strong bid for the franchise, with Frost leading a team of television heavyweights: newsreaders Angela Rippon and Anna Ford, chat show host Michael Parkinson, and journalist Robert Kee. The “Famous Five”, as they were dubbed by the tabloids, stirred up the hype in the months before the launch in February 1983.

The BBC management had been rattled, and quickly moved to spike the guns of its rivals. It devised plans for its own contender — which turned out to be more successful than anyone imagined. The team was led by the avuncular Frank Bough, a veteran of live television, and bolstered by novice newsreader Selina Scott and journalist Nick Ross. The BBC rushed its own launch — and two weeks before the TV-am launch of Good Morning Britain, unveiled its own version, Breakfast Time.

Red sofa television was born.

In another shock for the TV-am team, which had assumed the BBC would produce a sober, highbrow, news-heavy programme, Breakfast Time turned out to be a relaxed, magazine-style show. Celebrity guests were brought in to chat on the sofa, and it was all held together by the unflappable Bough, dressed in a comfy pullover. It was an instant hit. By the time TV-am got to air, Breakfast Time was already pulling in more than a million viewers each morning.

TV-am’s campaign had been muddled. Its first chief executive, Peter Jay, had invented the phrase “mission to explain” as the guiding mantra. Not everyone on the team seemed to understand the nebulous message. Parkinson, who died recently aged 88, was later to describe it as “gibberish”.

Jayne Irving, a regular TV-am presenter, said “the place was run on this ‘mission to explain’ thesis, which of course was really a mission to condescend and bore the back legs off everybody”. David Frost’s attempt to introduce some “sexual chemistry” on the sofa wasn’t helped by the stiffness of the presenters, or behind-the-scenes ructions. An administrative error saw the Famous Five receive each other’s contracts — and the women discovered they were being paid considerably less than their male counterparts.

The launch was a disaster. In the first weeks, TV-am’s viewers numbered fewer than 300,000, while Breakfast Time — with its popular mix of news, horoscopes with Russell Grant and aerobics with Diana Moran, the Green Goddess — was attracting two million. TV-am was spending an estimated £2m a month, but pulling in barely £300,000 in advertising revenue. With alarm bells ringing, Peter Jay was ousted and replaced by businessman Timothy Aitken, who set about restructuring.

Rippon and Ford publicly supported Jay, giving emotional interviews and accusing the TV-am management of “treachery”. Aitken sacked them both for breach of contract, leading to a lengthy and embarrassing legal wrangle. At a drinks party a few days after her sacking, Ford came face to face with Aitken and threw a glass of wine in his face. “It was the only form of self-defence left to a woman when she has been so monstrously treated,” she said. The tabloids gleefully splashed the incident across their front pages.

Greg Dyke, later to become the director-general of the BBC, was recruited to rescue TV-am. He brought in a brace of provincial presenters, Anne Diamond and Nick Owen, whose on-screen chemistry actually worked. And the introduction of a glove puppet called Roland Rat, intended as a children’s segment, proved to be a hit with all ages. Newspaper wags quipped that it was the first time a rat had joined a sinking ship.

When Australian media tycoon Kerry Packer was persuaded to take a minority stake in TV-am, Dyke left the company. He was replaced as editor-in-chief by Aussie broadcaster and businessman Bruce Gyngell, who cut costs to such an extent that the unions walked out. Gyngell sacked them, too.

With the tacit support of Margaret Thatcher, who had described broadcasting as “the last bastion of restrictive practices”, Gyngell’s anti-union crusade led to a slimmer, more efficient operation. By 1988, TV-am was making annual profits of £25m — and winning the ratings war.

Broadcasting rules introduced by the Tory government meant that when the franchise came up for renewal in 1990, it was allocated not by operational ability, but via blind bids. Despite its success, TV-am lost the franchise. Thatcher, now out of office, was so dismayed that she wrote a personal letter of apology to Gyngell. “I’m only too aware that I was responsible for the legislation,” she wrote.

The breakfast TV experiment has been fodder for several books, including Morning Glory: A History of British Breakfast Television, by Ian Jones, and a 1992 documentary, Storm in an Egg Cup, in which the late Michael Parkinson reflected: “God knows how we got on air. We floated in on a cloud of bullshit, apparently.”

From the 1990s, the battle for morning viewers gradually became irrelevant; technological advances were opening a Pandora’s Box of cable, satellite, and internet options. A new age was ushered in, an age in which a blurring of news and celebrity gossip led to a kaleidoscopic merging of media. The BBC’s bon mot from the 1980s could perhaps be rewritten: “Yesterday it was tomorrow that worried you — and today isn’t what you were expecting.”

By Tony Lennox


Workers are Shunning Companies That Fail to Address Climate Issues

Concern about climate change has become so extreme that some people feel unable to perform at work because of “eco-anxiety”.

And some are becoming unwilling to join companies that have no ESG measures in place — and there are significant economic costs. According to Deloitte, mental health issues among staff cost UK employers £42bn–£45bn each year. The World Health Organisation puts the figure even higher: £70bn.

It may not yet be a medically recognised condition, but eco-anxiety’s growing prevalence is impacting all aspects of life, and affecting all age groups. Force of Nature, a non-profit organisation, advises that over 70 percent of young people feel “hopeless” due to the climate crisis — and 56 percent believe humanity is doomed. Just 26 percent feel that they can contribute to solving the problem.

Absenteeism due to stress, depression and anxiety is at record highs. Sustainability consultant SaveMoneyCutCarbon (SMCC) is advising employers how to tailor their approach and build strategies.

The Force of Nature report found that 93 percent of employees say that workplace action on climate change would ease their symptoms. But SaveMoneyCutCarbon’s research found that only 18 percent of UK businesses address sustainability in their operations.

The crisis requires a social and relational solution, with an effective collaborative approach that encourages positive behaviour change.

In the British Medical Journal, university researchers advise that one of the best routes to alleviating rising levels of climate anxiety is to increase optimism by improving awareness. Giving employees access to reliable information on mitigation and adaptation measures can help.

Companies could follow pioneering work by mental health charities. sUStain is a climate anxiety project supporting adults and young people. It’s organised by Norfolk & Waveney Mind, in partnership with the University of East Anglia (UEA), the Climate Psychology Alliance (CPA), and the Resilience Project.

Practical steps include reducing energy use, recycling, using less plastic, and conserving water — as part of a wider group making effective changes. Simple reappraisal strategies — such as recognising eco-anxiety as a helpful motivator — have been found to reshape fears.
Other steps could include outdoor working days, giving support to volunteering, installing facilities to encourage cycling to work, or setting up a swap shop where employees can trade “pre-loved” items.

SMCC’s seven-point plan addresses Scope 1-4 emissions created by a business (Scope 4 argued by SMCC as the carbon literacy of employees).

Steps include:

Assigning a dedicated carbon mentor to get to grips with the situation within a business, and address decarbonisation ambitions

Creating an easy-to-understand Scope 1, Scope 2 baseline carbon footprint and guidance on Scope 3 and Scope 4

SMCC’s team then audit buildings to identify potential savings in money, energy, water, and carbon

Creation of investment-grade proposals and tailored finance

Design, supply and installation of proven products and solutions

Staff engagement via SMCC’s EcoWise app and programme for measured and rewarded learning

Aggregated data: SMCC’s platform measures all these criteria with detailed data sets at each stage.


The CEO's message is explicit: True passion is a prerequisite for success in this sector

CFI.co in conversation with PHILIP ENGEL CARLSSON, CEO of alternative fund-management firm Calculo Capital...

[caption id="attachment_26535" align="alignright" width="350"] CEO: Philip Engel Carlsson[/caption]

Philip Engel Carlsson's journey into the world of commodities was serendipitous, if not entirely accidental.

Despite the unusual path to discovering his professional passion and raison d'être, Engel Carlsson quickly developed his talents for uncovering value and opportunity in an intricate and complex world.

The allure of commodities, with their global benchmarks and regional nuances, became a driving force, injecting each day at the office with a blend of challenge and opportunities.

He acknowledges the challenges faced by commodity traders lacking the safety net of an index. In a market where alpha is derived directly from market fluctuations, a deep understanding of commodity intricacies is paramount.

CFI: What excites you about the business world in general?

PEC: I ended up in commodities by a coincidence, while working for a Danish investment bank. I fell in love with the product range and the fundamentals of commodity trading. It’s an amazing asset class, with global benchmark price-function while being anchored regionally. This makes for exciting days at the office.

CFI: What lessons have you carried forward from the early years of your career?

PEC: As a commodity trader, getting involved in speculative trading to capture up and down movements, you don’t have an index to hang onto. We truly succeed in deriving alpha from the market.

While working for a tech-driven bank, and later co-founding a power-trading company, I knew that technology was key. And that great stuff can be archived via automation.

CFI: What motivates and enthuses you about the business you now lead?

PEC: I’ve been able to tailor my career and job around the things that most interest me: technology and commodity markets. I haven’t had to make any compromises. I’ve designed and built the trading technology used to harness opportunities.

My emphasis is on automation of tasks to derive the best opportunities the market has to offer. This is best done by delivering alpha, low correlation, and keeping potential drawdowns to a minimum.

CFI: What is special about your organisation’s management style? Can you share any professional secrets?

PEC: We don’t need a large team; we’re driven by technology. Calculo people are seasoned professionals with long experiences in their fields — all of which are centred on financial markets. I’m very proud of our team, and its pedigree.

Philip Engel Carlsson is CEO of alternative fund-management firm Calculo Capital


Navigating the Future: Calculo's Journey in Complex World of Commodity Trading

The challenges, requirements, and joys of the sector keep Calculo Capital’s CEO focused...

In the rapidly evolving landscape of commodity trading, Danish firm Calculo Capital, under the leadership of chief executive Philip Engel Carlsson, has charted its own course.

Its progress has been marked, and propelled, by innovation, resilience, and a commitment to excellence.

[caption id="attachment_26542" align="aligncenter" width="1000"] Charlottenlund Castle, Calculo Capital HQ. Photo: https://charlottenlundslot.dk/[/caption]

Calculo Capital is a specialist asset manager, and — its own five-year track record notwithstanding — Engel Carlsson concedes that raising assets can be a challenge for newcomers to the sector.

“Most of the allocation of capital goes to the larger managers,” the CEO explains, “while the data show that emerging managers tend to deliver higher alpha. There should be more willingness to support the talent and innovation that lies within an often-overlooked part of the industry.”

To encourage these entrepreneurial sections of asset management, Engel Carlsson believes that more should be done to ease access to the market — and to open opportunities to smaller funds around the world.

He has some advice for newcomers to the industry: “Be careful with overhead costs. Professional investors allocating larger sums of capital often require target funds to have a five-year track record, and substantial AUM, before they are willing to take a serious look at the fund. It often takes longer than anticipated to gain traction.”

[caption id="attachment_26551" align="alignleft" width="350"] CEO: Philip Engel Carlsson[/caption]

His time with Calculo Capital has been something of a whirlwind, with industry recognition starting early in his career. “In my first year, I was nominated as Newcomer of the Year by HedgeNordic (a media company focusing on alternative investments and hedge funds in the Nordic region).”

He didn’t bring home the award that time, but the accolades that followed showed him that he was “onto something” at Calculo Capital.

“AUM growth remains the single most important parameter, in terms of mid- to long-term challenges,” he says. “The commodity markets continue to produce opportunities. Investor understanding of the business model and the fluctuations of commodity markets is key.”

Calculo Evolution Fund is, at its heart, “a truly global product” rather than a regional Danish one, Engel Carlsson believes. “Danish investors don’t have a long history of trading commodities or a history of maintaining allocations towards this asset class. Combining this ‘exotic’ asset class with AI technology — and the ability to profit from both rising and falling prices — can be challenging in the Danish market.”

That requires something of a visionary approach to the entire field of portfolio management; that is something that Calculo Capital, as a corporation, and Engel Carlsson, as an executive, both possess.

He applies the wisdom he has learned over the years — and it could equally apply to any industry or sector. “Work hard, never give up, and follow your dreams,” he advises. “This might sound like a cliché, but there is constant pressure around profit loss, raising assets, the global economy, and investor relations.

“If you don’t love what you are doing, a life spent running a hedge fund would not be your thing.”


Magic Happens — at Least in Your Head — but Should it Hold Sway in the Modern Day?

Despite the modern triumph of rational thought and the emergence of technological marvels, superstition, magic, and the search for spiritual meaning persist.

Some still think it prudent to salute a single magpie to ward off bad luck, toss spilled salt over a shoulder, or wear a lucky charm to a job interview. Modern life is crammed with such behaviour — not walking under ladders, or calling Shakespeare’s Macbeth by its name when in a theatre (it must be referred to as “the Scottish play”). Many of us appear to still be in the thrall of the other-worldly forces that led peasants or yore to suspect their neighbour of being a witch because the milk had turned.

Sports stars often go through obsessive rituals before a match or game, believing that deviating from a set pattern would bring ill-luck. The football world is particularly vulnerable: English league club owners have, over the years, brought in priests, bishops, druids, exorcists, and even witch-doctors in a bid to improve the scoring rate. The same is true for the political world. Former US president Ronald Reagan and his wife Nancy famously employed an astrologer to help guide American policy. Even Donald Trump is said to have engaged a spiritual advisor (though many suspect it was a ploy to attract fundamentalist voters).

Since the time of ancient Babylon, movements in the night sky have provided prophecies to plan harvests, wars, or warn of pestilence. Today, many people check their daily horoscope for the fun of it — while others see even this as dangerous dabbling in the occult. A recent survey found that 73 percent of Britons believed in astrology. The findings so alarmed the scientific community that a justification was suggested: perhaps those canvassed were confusing astrology with astronomy?

Many of our mystical leanings were driven by the search for meaning in a baffling world. The ancients — quite logically for the era — assumed the stars above were placed on a giant dome by unseen deities. We now know that the patterns in the firmament are driven by gravitational forces, rather than gods. And yet astrology is the biggest pseudoscience of them all, and still holds sway.

“We are perfectly justified in rejecting astrology as irrational,” said the late British philosopher Edward W James. “It simply fails to meet the multifarious demands of legitimate reasoning.” Haley Nahman, a New York-based writer on popular culture, adds: “The mainstreaming of astrology seems, if not an ill portent, at least representative of a broader intellectual apathy. Some might generously call it a deeper spiritual yearning, but I could also, less generously, call it a pseudo-existential branding exercise.”

US author and academic Eugene Subbotsky describes the persistent belief in magic as a fundamental property of the human mind. “Individuals can consciously consider themselves to be rational people and deny that they believe in magic, or God, despite harbouring a subconscious belief in the supernatural.” Subbotsky says these beliefs goes back 30,000 years to when our ancestors first began to populate nature with “spiritual agents” from whom to beg favours — good weather, or luck in hunting. He argues that belief in the supernatural can, and often does, co-exist with rational thought. Fortune tellers, tarot card readers and astrologists are still making a living; even today, magic is part of everyday life.

‘If a black cat crosses your path, it signifies that the animal is going somewhere’

— Groucho Marx

Those who study the subject suggest that the key lies in the mind, the human brain, which instinctively searches for patterns — even where none exist. And we strive for certainty, predictability, and order in times of doubt and fear.

According to the US market-research group Allied, the global astrology industry was worth $12.8bn in 2021. There was a surge in its popularity — partly because of ease-of-access, thanks to the internet, and partly due to the isolating effects of the pandemic. Philadelphia-based astrologer and life coach Tracey L Rogers says people are “reaching out and wanting some guidance”. In a 2023 interview with The Washington Post, the Cambridge University professor of history and science, Lauren Kassell, said people were using astrology as a tool to make sense of their lives.
“Good for them,” she concluded, “so long as they aren’t being exploited in the process. Some of the explanations for why astrology is on the rise now are deeply tied to scepticism about science and individualistic thinking.”

Millennials and Gen Z are said to be seeking comfort in connection with others. Forecasting agency WGSN estimates that more than 60 percent of them believe that their zodiac sign accurately represents their personality, and many turn to the stars for major decisions — from finding life partners to making career choices. The link between turbulent times and mystic belief hit the high-tide mark in the late 1960s, when the Hippy generation celebrated the dawning of the Age of Aquarius — despite astrologers being unable to agree on when it would actually begin.

There was a similar swelling of interest in the fey in the 1930s, coinciding with the Great Depression, post-World War I anxiety, and the rise of communism and fascism. The heinous policies of the Nazi party in the 1920s and 30s were heavily influenced by an esoteric doctrine which prophesied the coming of a new Aryan civilisation. Adolf Hitler and his henchman Heinrich Himmler, the “architect of the Holocaust”, were obsessed with the occult.
It wasn’t an isolated fixation; in that time of economic uncertainty and social upheaval, millions of Europeans began searching for a new “science of the soul”. Eric Kurlander, an American history professor and author of Hitler’s Monsters: A Supernatural History of the Third Reich, believes that the Reich would have been “highly improbable without a widespread penchant” for supernatural thinking. “Today,” he writes, “a renaissance in border scientific, faith-based, conspiracy-driven reasoning has begun to correlate with illiberal political and ideological convictions, influencing national elections, domestic social policies, and matters of war and peace. This phenomenon is evident globally.

“Every culture has its own supernatural imaginary that can, in times of crisis, begin to displace more empirically grounded, nuanced arguments about the challenges that define reality.” Kurlander believes that it is only by acknowledging the historical consequences of supernatural thinking that its influence can be countered.

For those tempted to delve into mystical realms in a search for meaning or happiness, let’s turn back to Groucho Marx, this time in full philosophical mode: “I, not events, have the power to make me happy or unhappy today. I can choose which it shall be. Yesterday is dead, tomorrow hasn’t arrived yet. I have just one day, today, and I’m going to be happy in it.”

By Tony Lennox


Otaviano Canuto: Growth Implications from a Fractured Trading System

To understand the implications of a fractured trading system, let’s use the period known as hyper-globalisation, or globalisation 2.0, as a benchmark.

In the 1980s and ‘90s, we saw the consequences of a tectonic shift deep beneath the global economy. This was due to a combination of factors.

First, a cluster of technological innovations in IT and transport. Containerisation allowed manufacturing processes to be broken down to new levels of detail.

Second was the widespread adoption of trade liberalisation policies. In most countries, there was a move in favour of reducing tariffs and non-tariff trade barriers.

Lastly, the incorporation of a billion workers with lower wage aspirations into the global supply of labour for market economies. Not only the collapse of eastern European communist regimes, but also Chinese President Deng Xiaoping's creation of special economic sones to boost exports and imports as a share of national GDP.

[caption id="attachment_26572" align="aligncenter" width="900"] Chart 1: Growth of GDP and trade, 1995-2014. Average annual change in real GDP per capita vs. average annual change in exports as % of GDP. Source: Aiyar, S. et al (2023). Geoeconomic fragmentation and the future of multilateralism, IMF Staff Discussion Notes SDN/2023/001.[/caption]

There was substantial growth in GDP per capita in emerging markets and developing economies. The correlation between trade insertion in exports and increases in GDP per capita can be seen in Chart 1. And there was a change in the composition of the global economy and trade, involving China and other emerging markets and economies.

This resulted in significant reductions in poverty rates. At the same time, there was a two-way trend with respect to inequality. There was more balance in per-capita income, and a simultaneous rise in within-country inequality, particularly in advanced economies, as depicted in Chart 2.

These were direct results of trade integration.

[caption id="attachment_26571" align="aligncenter" width="900"] Chart 2: Global inequality, 1988-2013. Source: World Bank (2016). Poverty and shared prosperity 2016: taking on inequality.[/caption]

Along with higher foreign trade came the transfer and local absorption of knowledge and technology in the form of machines, equipment, and less tangible things, accompanying the formation of global value chains. This is evident in International Monetary Fund estimates of how foreign knowledge contributed to labour productivity growth among advanced economies and in emerging market economies. As shown in Chart 3, the IMF estimates that from 2004 to 2014, foreign knowledge accounted for about 0.7 percentage points of labour productivity growth per year, corresponding with 40 percent of sectoral productivity growth. This is substantial after a decade in which that contribution reached 0.4 percentage points annually.

Before anyone thinks these results are due only to China, they are robust — even when one excludes that country from the analysis. China is a unique case because of its sise and growth rates, but this is an observation that can be generalised to cover the transfer of knowledge.

That translates into better results when accompanied by domestic endeavours. As the World Bank has highlighted in many studies, technological capabilities are usually idiosyncratic and local. They are necessary to effectively use foreign knowledge. This has been the case for countries like South Korea and China, evidenced by patent filings and R&D expenditures.

[caption id="attachment_26570" align="aligncenter" width="900"] Chart 3: Contribution of Foreign Knowledge to Labor Productivity Growth. Annual percent growth, cross-country averages.
Source: World Economic Outlook, April 2018.[/caption]

Now we come to the phase of “slowbalisation”. Note, in Chart 4, that cross-border flows of goods, services, and capital slowed after the global financial crisis. There are several hypotheses about this. One is that the major wave of fragmentation associated with manufacturing had reached a plateau. For it to continue as a driving force, we would need to see what happened in China replicated in other countries. This started to happen to an extent in Vietnam; India remains the significant absentee.

Another hypothesis is that advanced countries transitioned more towards service-based economies. Services are less trade-intensive, and the internationalisation of services hasn't occurred to the same degree as with manufacturing.

The average industrialised country saw an increase in the Gini Index from 30 to 33 between 1988 and 2008, marking greater inequality. It must be clear that globalisation cannot alone be held responsible for the rise in economic inequality in advanced economies.

Technological change had more to do with that, combined with a lack of appropriate social-protection systems. It also caused a worsening of working conditions in the US and UK. Globalisation cannot be made the scapegoat for imports from Mexico and China creating doldrums in blue-collar US; nor can labour immigration be seen as a reason for Brexit.

[caption id="attachment_26569" align="aligncenter" width="900"] Chart 4: Global flows of goods, services, and finance (US$ trillion, unless indicated otherwise). Source: Aiyar, S. et al (2023). Geoeconomic fragmentation and the future of multilateralism, IMF Staff Discussion Notes SDN/2023/001.[/caption]

The global economy has gone through multiple shocks, the perfect-storm combination of a pandemic, war, climate change, the emergence of the “new Washington consensus”, and ongoing technological rivalry.

The permanent impacts of the pandemic will be limited. It led to a trade-off between resilience and efficiency, but that doesn’t necessarily lead to reshoring. If you bring back everything, then you'll remain as exposed to potential risks as you were when relying on global supply chains.

This logic could lead to some costly diversification or duplication of links, depending on the sectors, but not to a full reversal of globalisation. As some colleagues and I showed in a policy brief for the T20 this year, the recovery of manufacturing output, particularly in technology sectors, was really nothing commensurate with the stigma established with the pandemic.

The danger lies in the rise of national security as a determinant of economic policies.

[caption id="attachment_26568" align="aligncenter" width="900"] Chart 5: Long-term losses from global trade fragmentation (percent of GDP).
Source: Aiyar, S. et al (2023). Geoeconomic fragmentation and the future of multilateralism,IMF Staff Discussion Notes SDN/2023/001.[/caption]

National security has been a justification for trade restrictions in those sectors where dual use of technologies and goods and services for civil and military reasons. If one looks at trade and FDI restrictions, the rise has often been justified for national-security reasons.

The transmission channels of the fragmentation will be a reversal of the path by which we attained the gains. Any estimate of costs is based on simulations from different models. Chart 5 displays the results of some studies presented in a recent IMF seminar assessing various aspects of trade fracturing.

One can conclude:

The deeper the fragmentation, the greater the cost

Reduced knowledge diffusion due to technological decoupling is a powerful negative amplifier

Emerging markets and low-income countries are most at risk from fragmentation.

Transition costs exceed the final trading impact

Estimates are not the upper limit

The G20 might not directly address national security, but there's much it can do, especially on the trade-off between resilience and efficiency, discussing policies that avoid resorting to discretionary measures.

Substantial growth in GDP per capita in emerging markets and developing economies, as well as reductions in poverty rates and per-capita GDP inequality.

The transmission channels of the trade fragmentation will be a reversal of the path by which those gains were attained.

A previous version was published by the Policy Center for the New South.


Keeping the Flame of Fascination Alive

Getting inside Emad Shahin’s work ethic at Ethra Invest

The dynamic nature of the business world is of continual fascination for Emad Shahin, investment director at Dubai’s Ethra Invest.

[caption id="attachment_26584" align="alignright" width="350"] Investment Director: Emad Shahin[/caption]

The rapid evolution of industries, technological advancements, and the ever-changing global economic landscape present endless opportunities and challenges, he says. “This constant flux demands innovation, strategic foresight, and an unwavering commitment to delivering value, which I find exhilarating.”

From a long and illustrious career, Shahin has gleaned some invaluable lessons. Chief among them are the significance of integrity, the need to build — and maintain — robust relationships, and the importance of adaptability. “Recognising that each challenge is an opportunity for growth has been a guiding principle,” he says, “reinforcing the need for continuous learning and resilience in navigating complex scenarios.

Ethra Invest has established itself in the UAE as an esteemed investment company — and leading it from the front has provided Shahin with responsibility and opportunity in equal measure. “The ability to shape strategies in private equity, asset management, and wealth management — while spearheading ventures like our recent acquisition in the maritime shipping sector — is genuinely motivating.

“Witnessing tangible impact, fostering growth, and creating value for stakeholders remain paramount in enduring terms.”

Ethra Invest prides itself on a collaborative management style that emphasises transparency, innovation, and inclusivity — something of which Shahin is rightly proud. “Our approach fosters an environment where diverse perspectives converge, enabling holistic decision-making.

“A secret to our success lies in nurturing talent, promoting a culture of continuous improvement, and maintaining unwavering integrity in all endeavours.

“The team I lead exemplifies dedication, expertise, and a shared vision for excellence. Their proficiency in navigating intricate financial landscapes, coupled with a client-centric approach, distinguishes them. The support team's pivotal role cannot be understated; their commitment ensures seamless operations, facilitates innovation, and reinforces our organisational objectives.”

CFI.co wanted to know what, in Emad Shahin’s opinion, made a modern business leader an exceptional one. “A good corporate leader embodies visionary leadership, strategic acumen, empathy, resilience, and impeccable integrity,” he said. “Effective communication, fostering collaboration, and empowering team members are essential traits.” Shahin adds to that list “a focus on ethics, continuous learning, and adaptability”.

While those traits apply across industries, the financial sector necessitates some additional nuances. “In the investment realm, a leader must possess deep industry knowledge, a keen understanding of market dynamics, risk-management expertise, and the ability to navigate regulatory frameworks.

“Balancing strategic foresight with a client-centric approach is paramount: ensuring sustainable growth while mitigating risks.”


Modern ‘Alchemy’: No Spells and Incantations, Just a Focus on Integrity — and Excellence

CFI.co in conversation with Emad Shahin, investment director at Ethra Invest...

Investment and private equity are facets of the financial universe that call for an understanding of a sort of modern alchemy: creating value through strategic investment in diverse industries. Ethra Invest, based in Dubai in the United Arab Emirates, has perfected the spell to become a leader in the field. It has a strong track record of successful partnerships across the global market, and is committed to delivering exceptional returns.

CFI.co spoke with investment director Emad Shahin...

CFI: What are your hopes for the future of your sector?

Emad Shahin: Ethra Invest’s vision is anchored in consistent growth, fostering innovation, and upholding unparalleled standards in private equity, and the management of assets and wealth. We foresee strengthened partnerships and technological integration, and our inclusive strategy amplifies investment avenues. The aim is to cultivate broader economic vitality and fortify resilience across sectors.

CFI: What changes to legislation or regulation would you like to see?

ES: We support frameworks that prioritise transparency, safeguard investor interests, and encourage innovation. Enhanced clarity on cross-border investment protocols and unified regulatory standards will significantly enhance investor trust and foster seamless international co-operation.

CFI: Can you pinpoint any pitfalls to help newcomers to the industry?

ES: It's crucial to emphasise meticulous due diligence, adopt a client-focused strategy, and exhibit flexibility in response to market dynamics. Potential pitfalls include excessive leveraging, inadequate attention to risk management, and non-compliance with regulatory requirements. Cultivating strong relationships, nurturing trust, and strictly adhering to ethical guidelines are pillars for sustainable success.

CFI: Do you have any anecdotes to illustrate your progress over the years?

ES: Over the years, Ethra Invest's strategic moves, such as our recent foray into the maritime shipping sector, exemplify our commitment to diversification and growth. The accolade from CFI.co underscores our dedication, innovation, and client-focused approach.

CFI: How do ESG parameters and sustainability principles affect the way your industry is run?

ES: They resonate deeply within our operations. We prioritise responsible investing, the integration of ESG, and promoting the sustainability of business practices. Aligning financial objectives with environmental stewardship and social responsibility enhances long-term value creation, mitigates risks, and fosters stakeholder trust.

CFI: What are challenges are faced by your business?

ES: Navigating geopolitical uncertainties, evolving regulatory landscapes, and technological disruptions remain pivotal challenges. We maintain a focus on ensuring sustainable growth, retaining talent, and adapting to shifting consumer preferences. That necessitates strategic foresight, innovation, and agility.

CFI: What is the single most important requirement to become a global business?

ES: Establishing a global footprint necessitates comprehensive market research, cultural competence, adaptability, and fostering strategic partnerships. Embracing diversity, leveraging technological advancements, and maintaining operational excellence are foundational.

CFI: How do you see as the short- to mid-term prospects for your industry?

ES: They remain promising, driven by technological innovation, evolving consumer demands, and strategic investments. Leveraging data analytics, embracing fintech solutions, and prioritising client-centricity will shape the trajectory, fostering growth and resilience.

CFI: What excites you about the business world in general?

ES: The business world's dynamism, innovation, and transformative potential continue to inspire me. Collaborative endeavours, fostering growth, and navigating challenges — while fostering sustainable development — epitomise the inherent excitement and opportunities in our industry.

CFI: What lessons have you learned along the way?

ES: My professional experiences have underscored the significance of integrity, resilience, continuous learning, and fostering robust relationships. Embracing challenge as opportunity, prioritising innovation, and upholding ethical standards remain foundational principles.

CFI: What motivates and enthuses you?

ES: Leading Ethra Invest and navigating multifaceted investment landscapes, fostering growth, and creating value for stakeholders all remain profoundly motivating. Witnessing tangible impact, empowering teams, and fostering innovation fuels my enthusiasm, as well as driving excellence and client satisfaction.

CFI: What is special about your management style?

ES: Ethra Invest embraces a collaborative, client-centric approach of transparency, innovation, and inclusivity. Fostering a culture of trust, nurturing talent, and promoting continuous improvement ensure alignment with stakeholder objectives.

CFI: Can you share some management or organisation secrets?

ES: Our success stems from prioritising client needs, fostering innovation, maintaining integrity, and nurturing that culture of excellence. Embracing technological advancements, fostering strategic partnerships, and upholding ethical standards remain pivotal secrets that underpin that.

CFI: What are the key strengths of the team?

ES: Expertise, dedication, and a shared vision for excellence. Their proficiency, strategic insights and collaborative spirit drive Ethra Invest to deliver unparalleled value.

CFI: How important is your support team?

ES: Our support team's pivotal role cannot be understated; their commitment ensures operational excellence, facilitates innovation, and reinforces Ethra Invest's organisational objectives. Their dedication amplifies our own.

CFI: What are the key traits of a good corporate leader?

ES: Effective corporate leaders exhibit visionary leadership, strategic acumen, integrity, resilience, and a commitment to fostering growth. Empowering teams, embracing diversity, fostering innovation, and maintaining ethical standards are essential traits.

CFI: What is the most important question people should ask about your business?

ES: Stakeholders should inquire about Ethra Invest's commitment to excellence, innovation, and client-centricity. Our dedication and ambition remains that of fostering growth, leveraging opportunities, and upholding ethical standards.


Peace-of-Mind for Financial Services Industry in 2024

In an industry where compliance is crucial, misplaced security ‘can be an operational death sentence’.

Digital workspace solutions firm Espria is hosting a series of IT industry conversations this year, covering security, document solutions, communications, and automation.

It will work with key IT partners to discuss a variety of topics, driven by webinar attendees, to help businesses across sectors to find suitable tech solutions.

The first webinar — with insights from Xerox, Ikonic, and Sophos — took place on January 18, with the ongoing goal of providing peace-of-mind to the financial and professional services industries.

Espria CTO Dave Adamson said the outreach marks the start of direct communication with business leaders via screens. Following the challenges of 2023, organisations were feeling the need for security, safety and reassurance that their infrastructure is well maintained, he said — with the company’s best interests at heart.

“We’re looking forward to collaborating with industry experts in a range of discussions, led by our audience, aimed at providing perspective and insights about the future of IT solutions,” he said. “We’re aiming to facilitate discussion on modern business problems, tailored to a variety of key sectors.

A sense of security is a critical factor for business leaders: knowing their security posture is robust, their system and tools optimised, and their team is able to focus on the core needs of the business.

“With 2024 marking the start of further business expansion and upscaling, ensuring IT systems are ready and able to face the challenges ahead is vital,” said Adamson.

“For the financial services industry, where compliance is critical, misplaced security can be an operational death sentence.”

Maintaining confidence that a business is safe from attack is a constant struggle for business leaders and their tech teams. They are looking for “quality, trustworthy providers”, Adamson added. Outsourcing, AI and automation could provide the reassurance that a team of experts, equipped with the right technology, “have their eye on what’s coming over the horizon”.


Swiss Can’t Miss with an Attitude like This — CEO’s Dedication Shines Through

Commercial property sector’s many facets polished to a lasting shine by PSP Swiss Property’s chief executive.

PSP Swiss Property is a major player in Switzerland’s commercial property market, with offices and buildings from Zurich to Geneva — and a portfolio value of some CHF10bn (£9.19bn). Giacomo Balzarini is the man at the helm of this empire; he took the chief executive’s position in April 2017 after 10 years as CFO. Under his guidance and leadership, PSP Swiss Property has delivered solid performances year after year — with steady increases in dividend payments and share price.

[caption id="attachment_26596" align="alignright" width="400"] CEO: Giacomo Balzarini[/caption]

PSP has always put great emphasis on sustainability, Balzarini and his team have taken that commitment to new levels by linking the company’s overall debt financing to a green asset portfolio.

In terms of management style, Giacomo Balzarini has always understood the value of strong teams. The co-operative and creative teamwork he has fostered form the cornerstone of the company’s enduring success. His informed and fact-based decision-making combines with excellent communication at all levels.

Balzarini has created a working environment based on mutual trust and respect. He has full confidence in his staff, and that allows him to delegate — not just tasks, but responsibility. He wants his people to be critical as well as creative, constantly striving to drive the company forward. Balzarini’s input and leadership were decisive factors when PSP secured a coveted “Great Place to Work” award.

Giacomo Balzarini’s vision for the commercial property sector goes beyond bricks, mortar, steel and concrete; he wants the company’s buildings to be tangible sources of inspiration and innovation. He sees that state-of-the-art, future-orientated spaces as optimal working environments that inspire people. His focus is always on the long term, considering stakeholder ambitions — and that means all stakeholders, from co-workers and tenants to bond- and shareholders, as well as the needs of society and the environment.

It's an attitude and a work ethic that have proven a winning formula for PSP Swiss Property over the years — and one that promises to take it from strength to strength in the future.

Giacomo Balzarini, who studied economics at the University of Zurich and earned an MBA from the University of Chicago, considers all aspects of his sector — not just profit. He is more than just “a company man” — and is active on the board of a charitable foundation. His drive and enthusiasm extend beyond the PSP Swiss Property brief to concern for the world about us.

His professionalism has not gone unnoticed: he was named CFO of the Year by the CFO Forum Switzerland, an association of more than 500 CFOs, in 2015. He focuses on capital management and corporate finance, having held senior positions at Union Bank of Switzerland and Swiss Re. Balzarini is active at an international level as chair of the Best Practices Committee of the European Public Real Estate Association EPRA (Brussels), and holds the same position at the EPRA Accounting and Reporting Committee.


Whither China’s Belt and Road Initiative?

The Belt and Road Initiative (BRI), launched by Xi Jinping, passed its tenth anniversary in 2023. It has entered a third phase.

The initiative added a label to China’s financing and construction of infrastructure abroad, which had already totaled more than $400 billion in the previous 10 years. In addition to the use of investment projects as part of Chinese ‘soft power’, the BRI has served to increase levels of usage of the country’s excess installed capacity.

China’s economic rebalancing beyond its overinvestment-based growth model of the decades before the global financial crisis has been implemented gradually, with real estate and infrastructure construction bubbles allowing it to go through a very gradual slide in growth rates, from double-digit GDP growth rates to 6% in 2019, the last year before the pandemic. BRI fit like a glove.

In addition to offering a source of investment for developing countries in dire need of infrastructure, the BRI was set out as a platform with rapid implementation and without much due diligence in relation to environmental, social, or governance standards. Furthermore, the BRI would reinforce what we called at the time an “overlapping” or “parallel” globalization to existing globalization, based on Chinese industry in this case.

Indeed, China has become the largest bilateral source of international development financing. By 2018, mainly directed towards infrastructure and the energy sector, China’s development loans to Latin America and the Caribbean reached levels greater than the sum of loans from the World Bank, the Inter-American Development Bank (IDB), and the Bank of Development of Latin America (CAF). The presence of such operations in the region came to be seen as a “competition for influence”. Something similar happened in Africa.

 According to data collected by Boston University’s Global Development Policy Center (Figure 1), the volume of loans from Chinese public development banks—Exim and China Development Bank—surpassed those from the World Bank in the period from 2008 to 2021, in areas including oil extraction and pipelines, transport, energy, and telecommunications. The World Bank maintained its lead only in health, education, governance, and agriculture, in addition to direct budgetary support. In total for the period, loan commitments made by the two Chinese public development banks reached $498 billion, or 83% of the World Bank’s total ($601 billion).

However, from 2018, there was a change. Volumes fell and the BRI entered a phase that can be called a “correction” (Parks et al, 2023; Miller, 2023). A brake was applied by imposing more demanding approval standards and shifting financing from Chinese official development banks to state-owned commercial banks. The downside of the laxity of standards with respect to environmental, social, and governance risks became increasingly clear, and the number of canceled or suspended infrastructure projects rose significantly (Figure 2).

With many borrowing countries entering ‘debt distress’ situations, China’s central bank also opened emergency lines of credit. Strictly speaking, most of the resources since 2020 went to emergency loans to prevent several low- and middle-income countries from having to default on the service debt of previous projects, rather than to the financing of new projects (Figure 3, left panel).

Total debt owed to China by low- and middle-income countries is between $1.1 trillion and $1.5 trillion (Figure 3, right panel). About 80% of China’s loan portfolio is in countries currently experiencing financial difficulties.

In 2021, 58% of Chinese loans were bailouts, with less than a third for new infrastructure projects. More than half of the loans to low- and middle-income countries took the form of currency swap lines with China’s central bank or from the external reserve manager: the State Administration of Foreign Exchange Reserves. This year Argentina avoided defaulting with the International Monetary Fund thanks to the credit line between its central bank and the Chinese central bank.

More than half of China’s official BRI loans have already entered their principal repayment periods, with the share expected to reach 75% by 2030. This means that China’s debtors are beginning to make large repayments at a time when interest rates have risen, the U.S. dollar has appreciated, and global economic growth is slowing. As Parks et al (2023) put it, China is now transitioning from being the world’s largest bilateral development creditor to “the world’s largest official debt collector”.

China’s emergence as the world’s largest bilateral creditor and its insistence on bilateral debt restructuring processes on its own terms (which rarely include repayment of principal), without fully participating in multilateral processes, means that the resolution of the debt distress that developing countries are grappling with is expected to drag on for several years.

But after the ‘peak’ (2014-17) and ‘correction’ (from 2018) phases, the BRI seems to have entered a third phase, judging by the statements made by Chinese authorities during the Third BRI Forum in Beijing in October 2023. The focus will now be on “smaller, smarter” projects, in coordination with the country’s clean-energy industrial policies.

The BRI will now want to expand markets for Chinese solar and wind-energy manufacturers, in addition to ensuring access to critical minerals for its battery production value chain. Given the context of technological rivalry—including in clean energy—between China and the United States and its allies, a comparable reaction to the BRI in its third phase, if any, has yet to be seen.

By Otaviano Canuto

This article first appeared in Policy Center for The New South


The Strongest Link in Global Supply Chains: Swiss Firm on its Way to Sector Supremacy

CFI.co in discussion with Charles Vincent, CEO of Arviem

Founded in 2008 and headquartered in Baar, Switzerland, Arviem provides accurate and independent location- and condition-monitoring of cargo.

The firm collects data and uncovers supply chain blind spots by installing automated, IoT-enabled locating and sensing technology on multimodal containers.

CFI.co: What are your hopes for the future of your business, and for the industry as a whole?

Charles Vincent: Our vision is multifaceted. At the core lies one ambition. Arviem pioneered IoT supply chain solutions; we now aim to become the global leader in the field.

[caption id="attachment_26557" align="alignleft" width="350"] CEO: Charles Vincent[/caption]

We provide solutions through our IoT device-agnostic software platform. The year 2023 has been a sigificant one for us. We’ve made substantial progress in bringing our ambition to reality. In response to client needs, we set out to identify, select, and test new MaaS (monitoring-as-a-service), digital SaaS (software-as-a-service), and data and analytics solutions for container monitoring and cargo security.

We’ve recorded a threefold expansion of our MaaS portfolio. This is a strategic milestone, equipping Arviem with a more comprehensive range of solutions. An expanded portfolio plays a pivotal role in providing tailored solutions for our clients. The new MaaS offerings contribute to enhanced supply chain visibility, which has business and financial benefits for our clients.

This has given a boost to Arviem's pipeline: it’s seven times larger than it was 17 months ago — and over 70 percent of it is comprised of the new MaaS solutions. Our ambition is unwavering. We aim to continue this trajectory of growth and innovation to meet the needs of an ever-evolving market. Our commitment to staying at the forefront ensures that Arviem is more than a solutions provider; it’s a committed partner in our clients' success stories.

The sheer range of MaaS solutions reflects our dedication — and positions us to lead the way in shaping supply chain visibility.

What are the challenges your business faces?

Navigating the short- and long-term landscape presents challenges and opportunities for Arviem. The relentless pace of tech advancement, particularly in the IoT device-suppliers market, demands continuous adaptation. Arviem's commitment to R&D, coupled with our culture of innovation, positions us well. We proactively anticipate future demands, ensuring that our technology remains cutting-edge.

Arviem is actively engaged in solving cargo quality issues via strategic partnerships with companies that specialise in cargo protection and packaging. This collaborative approach tackles problems and demonstrates our ability to provide tangible benefits.

Tell us more about enhanced data analytics and AI Integration...

Arviem recognises the transformative power of these technologies, and our strategic partnerships are aimed at harnessing them.

And Arviem’s sustainability initiatives?

Sustainability is integral to our vision. We understand the importance of ramping up environmental responsibility in global supply chains, and we’re committed to leading the charge. We develop and implement sustainable technologies, contributing to the industry-wide shift towards eco-friendly practices. We recognise that in the near future society and government will demand stricter, more data-based and transparent reporting on supply chain carbon footprints.

Arviem's long-term challenge involves transforming real-time supply chain data into auditable ESG certifications. We’re contributing to a more environmentally conscious and responsible future, and we already surpass industry expectations for transparent reporting.

We’ve heard that data-ownership dynamics is another challenging factor...

A potential data-ownership conflict between transport companies and cargo owners is something we recognise. Arviem navigates this complex issue by fostering transparency and clear communication. We aim to ensure that data-ownership disputes don’t hinder the flow of information that’s so critical to supply chain visibility.

Arviem is well positioned to tackle the long-term challenge of maintaining operational resilience and strategic agility. As the global business landscape evolves, Arviem is proactively shaping the future. This involves a corporate culture that embraces change, and instils adaptability at all levels. Arviem leverages its challenges as opportunities. We don’t just confront issues; we look beyond them to the future.

What motivates and enthuses you?

The opportunity to drive positive change through innovation. Knowing that Arviem's solutions contribute to enhanced global supply chain efficiency, reduced environmental impact, and improved sustainability fuels our mission to make a meaningful impact.

What are the key strengths of your team?

It’s a powerful blend of multicultural talent, representing 14 nationalities. That factor alone brings diverse perspectives to the table and fosters a dynamic and inclusive work environment.

It also provides valuable insights for navigating the complexities of global markets. Our commitment to customer-centricity is a guiding force, and each and every team member is dedicated to addressing customer needs. This philosophy permeates every aspect of our operations, allowing us to deliver tailored solutions across regions and industries.

Every team member is equally important to us. If any person fails to effectively perform their role, the entire team will be affected. Everyone has a role to play, and the commitment to excellence is a shared responsibility. This ethos, combined with our profound expertise in IoT solutions, is a cornerstone of our success.

The synergy of multicultural dynamics, customer-centricity, and IoT proficiency remains pivotal. Our expertise allows us to stay abreast, or ahead, of industry trends.


The Swiss Never Miss When it Comes to Perfecting Trade Finance Solutions

Over three decades of experience in developing solutions for the trade finance community.

MIT Make Intuitive Tech SA (MITech) is a Swiss-based fintech firm specialising in the development of banking software solutions for the trade finance community.

Founded in 1984 with clients in Europe, Asia, the Middle East and US — small, middle and top-tier banks. The family-owned business has a unique success story, a perpetual innovation cycle, high customer loyalty and low staff turnover.

And — lest we forget — 100 percent integration success.

It features three main products: Credoc 5G, TRAC, and MITrade Portal powered by Komgo’s Konsole. Credoc is a user-friendly back-end trade finance solution application for trade finance and document business departments. TRAC (Trade and Risk Active Control) is a middle-office commodity trade finance collateral management system, while the MITrade Portal offering is a front-end customer connect trade finance solution.

“Intuitiveness” is the company mantra, and the MITech team has over 30 years of experience. It is comprised of banking professionals and software engineers who contribute to the development of turn-key solutions for the banking industry.

Credoc and TRAC are available on several platforms with an open and modular architecture allowing their implementation in all types of financial institution.

Range of Services

Consultancy

Integration with bank IT infrastructure

Project management

Analysis and development

Training

Maintenance and support

The firm has won recognition from financial institutions around the world, says President Paul Cohen-Dumani. “Our product line automates every layer of a trade commodity finance organization’s operations.”

For the back-office, Credoc is the complete trade finance package. The MITrade portal is a “white-labelled” web solution that connects clients and banks via the web. Also, for the middle-office is TRAC, supporting transactional commodity finance and structured trade finance.

Credoc covers all the aspects of the sector: Import and export documentary credits (including international and domestic stand-by L/C’s, outward and inward guarantees, import and export document collections, reimbursements (confirmed and unconfirmed), loans and advances, and discounts.

Based on MITech’s 5G proprietary framework, Credoc relies on a service-orientated architecture using adaptable workflow, layout, and rules-based engine components. It can run on various market standard operating systems, application servers, and databases.

Credoc incorporates full telecommunication environment, such as SWIFT (in and out), , email, and remote customer access.

The comprehensive and fully automatic accounting facility includes contingent liabilities and financial accounting based on “Report Of Event”, a clear and open concept.

There is automatic calculation of fees, charges, interest rates for discounts (including to-yield rates). A step-by-step security concept covers all aspects of the business, and validation may be applied at any step of the process.

Flexibility allows any bank or institution to deal with document and trade finance business.

An advanced MIS engine enables the personalization of statistics and reports, corporate-to-bank messaging, and widget capability.

MITech features true multi-bank, multi-branch, multi-time-zone, multi-language and multi-currency software architecture.

Credoc’s open and modular architecture allows it to be implemented in any financial organisation, and enables seamless integration with all financial infrastructure. Communication is via FTP, MQSeries to webservices, and APIs.

Several implementation scenarios can be envisaged from a “model bank” to toolkit deployment.

TRAC is aimed at trade commodity finance relationship managers, credit risk managers, and top managers who want to track and monitor risks and collaterals. The software replaces the Excel worksheets so widely used in the sector.

The application covers transactional and borrowing-base follow-up of portfolios of active customers’ credit facilities, monitoring of credit limits, sub-limits, covenants, and deviations for individual and group customers.

Account balances per customer and integration is within margin calculation, with collateral follow-up and management related to the lifecycle of a transaction.

Risk assessment and monitoring of credit facilities allow multiple purchases and sales per transaction, the management of vessel information, and control — all based on a bank’s specific standards.

There is follow-up of storage facility per transaction with relevant locations: Built-in BI/reporting facility, multi-commodity applications, risk price monitoring “mark-to market”, with possibility to combine several prices (fixed, floating, hedge, alloy, and complex formulae).

There are graphic chronometers per category of risk (storage inland, prefinancing, transit, B/L), and hedge monitoring at credit facility level with a breakdown at transaction level.

The built-in workflow transaction approval system has a dashboard view for easy, real-time management, a warning management facility per customer (credit limits override, collateral due-date expiry, documentation follow-up, and margin management).

All formats of imaging capability such as jpeg, pdf, Word and Excel are supported. There are also:

Diary per transaction or customer’s position

Price charts per commodity

True multi-branch and multi-bank architecture.

Solutions can be hosted or installed in any type of organization.

The MITrade portal allows bank customers to deal in documentary business from any location. It has the features one would expect from such a tool, as it can be activated via the Internet.

MITrade portal can with integrated to Credoc or any other back-office system.

MITrade portal includes:

Openings requests of import/export documentary credit

Amendment requests/acceptance/refusal of import/export documentary credit

Openings requests of guarantees

Amendment requests/acceptance/refusal of guarantees

Openings requests of import/export collections and direct collections

Amendment requests/acceptance/refusal of import/ export collections and direct collections

Discrepancy advice

Query on the status of documents (processed/unprocessed, issued/not issued…)

Statistics on files between customer and bank

User profiles (password and language management)

Template management (creation of reusable templates)

Security (Visa and access rights management)

Visualisation of sent and received messages

Two-way communication facility

Query on documents choosing multiple criteria

Clause management


Major Tech Boost for Logistics Sector

How 5G technology will keep the supply chain moving...

PwC predicts that wide-scale development of 5G communication networks will contribute an additional $1.3tn to global GDP by 2030.

With logistics and transport among the primary target sectors for the technology, what are the key benefits it could bring?

With speeds comparable to home broadband and low latency, 5G is set to revolutionise homes and industries. Logistics has historically struggled with labour shortages, rapid changes in demand, and poor tracking information. And, say experts, 5G could provide the solution to these issues.

Real-time Tracking

More advanced than barcodes and RFID tags, which can have problems during scanning, 5G-enabled tracking does a better job. An enabled device doesn’t need to be scanned and can report its location independently and in real time, allowing for more precise tracing.

It’s possible to track the product right to the shelf it’s stored on, enabling transparent and accurate tracking throughout the supply chain.

Complete Network

One of the factors previously holding back the adoption of Internet of Things (IoT) devices has been capacity. A 4G cell tower can only handle around 2,000 devices at a time. Highly populated areas often suffer with performance issues.

A 5G tower can support far more — up to a million devices at any one time. This boost means businesses will be able to have far more devices on the network. That includes product inventory, delivery vans and lorries, on-site forklifts, and other tools essential to day-to-day operations. Precise planning becomes faster and easier, minimising unscheduled delays and maximising use of available equipment.

Security is enhanced too, with a reduced risk of goods being lost or stolen.

Comprehensive View

It will also be possible to gather more comprehensive information. Where you might previously receive only location information, developments in sensor technology mean that more parameters can be measured.

Temperature and humidity sensors and live video feeds are just a few possibilities. These sensors will allow logistics companies to guarantee the quality of their service. This is particularly relevant for the transport of perishables such as medicines or chemicals, which require special storage conditions.

Staff Shortages

Lastly, the development of 5G-enabled autonomous vehicles could help to tackle skills shortages. With a lack of qualified drivers, others have had to take on extra pressure. This can lead to longer hours on the road, sometimes without proper breaks.

A 5G vehicle could drive autonomously for certain periods, such as on motorways, giving the driver more time to rest without losing time on the road. It’s even possible that drivers won’t be needed at all. Lorries could be remotely controlled, thanks to low latencies.

It's clear that 5G isn’t just a gimmick — it can offer real benefits for logistics companies. With improved visibility across all operations, 5G could be the key to a truly robust supply chain.

About the Author

Kristian Torode is director and co-founder of business broadband provider Crystaline.


Is it Time to Put AI in Charge of Pricing Strategies? Most Firms Seem Hesitant to Take the Leap

Despite corporates enthusiasm for AI, its use in pricing strategies — using algorithms to determine optimal prices for goods and services — is yet to gain the approval of many.

More than half of those canvassed by data and technology consulting firm Valcon do not harness any form of AI for business purposes — and only 27 percent deploy AI-based pricing.

The study surveyed 1,500 European, Asian, and American SMEs and corporates; 40 percent had over 10,000 employees. It was found that 53 percent don’t believe their internal data is mature enough for AI-based pricing. That renders them unable to benefit from a practice that experts say can help maximise margins at a time when they are facing headwinds from inflation, volatile market conditions, and fluctuating customer loyalty.

In terms of the risks and barriers associated with AI-based pricing, respondents — who included CEOs, CFOs, CSOs and CPOs (chief pricing officers) — believed the loss of control or a lack of understanding was the key risk (34 percent), followed by a lack of internal acceptance (23 percent), high maintenance costs (13 percent) and compliance and regulatory issues (11 percent).

Key statistics from the AI-based pricing study:

76 percent of respondents consider AI-based pricing relevant or highly relevant

27 percent reported regular use of AI to optimise promotions

19 percent regularly review and optimise prices via Chat GPT, while eight percent use specific applications like dynamic pricing

53 percent say their internal data is not sufficiently robust for AI-based pricing

67 percent say their IT infrastructure is not mature enough.

46 percent use historical transactional data for pricing, 21 percent use internal cost data, and 11 percent use customer demographic data.

Study author Danilo Zatta said that while most respondents recognise the transformative potential, adoption rates are lagging. More than half of respondents reported an increase in profitability in 2022, despite inflation and market volatility.

As economic growth continues to stagnate, Zatta says the use of AI will become critical for corporates to drive top-line profitability. “It capitalises on machine learning and data analytics techniques to analyse large volumes of data, making pricing decisions that maximise profits, spur revenue growth or fulfil other objectives, such as increasing market share or customer satisfaction.”

Data quality and IT architecture are seen as the biggest inhibitors to AI-based pricing, and Zatta urges companies to start with small pilot projects. The perceived enormity of big data projects can put some organisations off. “It’s pricing and data evolution, not revolution,” he says. “But time is of the essence.”